Cutter & Buck reported fourth quarter results that showed a 5.8% increase in net sales from $36.3 million last year to $38.4 million in 2004. The company also celebrated a very solid return to profitability for the quarter, posting a net income of $5.6 million, or 49 cents per diluted share, compared to a net loss of $1.0 million, or a loss of nine cents per diluted share last year.

CBUK also announced that Fran Conley has decided to start the process of transitioning out of her CEO role.

“When the board asked me to lead Cutter & Buck some two years ago, I was immediately faced with leading a turnaround,” said Fran Conley, Chairman and CEO. “With the results we have announced today, and with the resolution of most of the fallout from the 2002 restatement, I have accomplished more than what I set out to do. It's time for a transition. I'm working with the board of directors on a national search for my successor as CEO. I plan to remain the Chairman and CEO until this successor is in place, after which time the board has asked that I continue to serve as Chairman of the Board.”

“Two years ago we were in real trouble and were extremely lucky to have had someone of Fran's remarkable experience and talents already on our board,” said Larry Mounger, former CEO of Pacific Trail and a founding board member. “She was able to step right in and astutely identify and resolve the seemingly insurmountable problems we faced. And her efforts are reflected in the results the company is announcing today.”

The fourth quarter of the year demonstrates continued progress towards our objective of improving our core business to generate good profitability. Sales are up, the gross margin continues above 45%, expenses are under control, and the balance sheet remains very strong.

We have also been investing in key areas to enable future growth. We have invested in design staff, merchandising and product development, and we are concentrating on producing product lines that meet the specific needs of our target consumer — upscale men and women who want sportswear with style, comfort, and durability. We are orienting all our processes around our retail customers and our consumers, and we believe that this will result in even stronger brand loyalty.

Recent independent market research findings, based on surveying our most prestigious golf accounts, supports the vitality of the Cutter & Buck brand and reinforces our belief that on key product attributes, the lines are very well-positioned compared to our competitors.

The “Annika by Cutter & Buck” line will be in golf shops within a few weeks.

We are today announcing our first knit shirt made of 100% organic cotton. We are proud to be at the forefront of the trend towards sustainable products for the upscale market. We believe this move is in keeping with market trends and with our company's values.

The $7.9 million net income for the year ended April 30, 2004 includes $13.4 million pre-tax profit from our ongoing wholesale business. Net income also includes $5.0 million of pre-tax expenses related to the 2002 restatement of prior years' earnings.

The $13.4 million pre-tax profit from the ongoing wholesale business compares favorably to the $6.5 million pre-tax profit in fiscal year 2003.

We achieved a gross margin of 45.6%, which compares favorably to the 41.6% gross margin in fiscal year 2003. We continue to emphasize making profitable sales, intensively managing our product allowances and returns, and improving our product sourcing and pricing.

Our selling, general and administrative expenses and depreciation expenses decreased $2.1 million, or 4.5% from fiscal year 2003. We continue to realize the cost savings from our restructuring, our operational improvements and our internal cost-cutting measures.


Our effective tax rate for fiscal 2004 was 10.8%. During fiscal 2003, we established a valuation allowance for our deferred tax assets. Based on our recent losses and estimated future taxable income, management believed at that time that it was more likely than not that we would not realize the full benefit of our deferred tax assets. Based on our fiscal 2004 results and estimated future taxable income, management has determined that we will realize the benefit of these assets. Therefore, in fiscal 2004 we reversed the allowance of $1.2 million. We also made an $0.8 million adjustment related to the reconciliation of the tax provision to the income tax return as filed for fiscal 2003.

For Fiscal Year 2005, CBUK said they continue to be cautious about sales levels. Our markets seem more robust and our brand is strong, but we are not currently anticipating significant growth this year. We do believe, however, that we are laying a foundation for future sales growth.

We plan to upgrade and replace some computer systems. Accomplishing this initiative while complying with the Sarbanes-Oxley Act of 2002, particularly Section 404, will be challenging. We will also incur additional expenses to support and manage our planned sales and marketing efforts for the coming year.

Under the previously announced stock repurchase program, we repurchased 56,826 shares of our common stock during the quarter at an average price of $10.21.

The Board of Directors approved a dividend of $0.05 a share, payable on July 16, 2004 to holders of record on July 8, 2004.

                               Cutter & Buck
                                 Table A
             Condensed Consolidated Statements of Operations
                   (unaudited, unless otherwise stated)

                                  Three Months Ended       Year Ended
                                  April 30, April 30, April 30, April 30,
                                    2004      2003      2004      2003
                                                                (audited)
  In thousands, except share
   & per share amounts)
  Net sales                        $38,350   $36,305  $128,374  $131,699
  Cost of sales                     20,751    20,205    69,784    76,912
  Gross profit                      17,599    16,100    58,590    54,787
  Operating expenses
  Depreciation                         836     1,175     3,988     5,109
  Selling, general &
   administrative                   11,337    10,617    41,376    42,400
  Restructuring and
   asset impairment                   (284)      (39)     (349)    3,806
  Restatement expenses                 446     5,640     4,968     8,169
  Total operating expenses          12,335    17,393    49,983    59,484
  Operating income (loss)            5,264    (1,293)    8,607    (4,697)
  Interest income (expense)
    Interest expense                   (21)      (99)     (155)     (627)
    Interest income                     84        34       277       241
    Net interest expense                63       (65)      122      (386)
  Income (loss) from continuing
   operations before taxes           5,327    (1,358)    8,729    (5,083)
  Income tax expense (benefit)        (272)      730       944       (65)
  Net income (loss) from
   continuing operations             5,599    (2,088)    7,785    (5,018)
  Income (loss) from discontinued
   retail operations, net of tax         0     1,096       146    (6,980)
  Net income (loss)                 $5,599     $(992)   $7,931  $(11,998)

  Diluted earnings (loss) per share:
  Net Income/(Loss) from
   continuing operations             $0.49    $(0.19)    $0.70    $(0.47)
  Net Income/(Loss) from
   discontinued retail operations    --         $.10     $0.01    $(0.66)
  Net Income/(Loss)                  $0.49    $(0.09)    $0.71    $(1.13)

        Table C: Summary of Net Sales by Strategic Business Unit:

  Quarter Ending April 30,

                          2004      2003     $ change  % change
  In thousands
  Golf                  $13,903   $13,722      $181      1.3%
  Corporate              14,894    13,254     1,640     12.4%
  Specialty Retail        5,327     5,835      (508)    (8.7)%
  International             816       738        78     10.6%
  Other                   3,410     2,756       654     23.8%
  Total                 $38,350   $36,305    $2,045      5.6%

  Fiscal Year Ending April 30,

                          2004      2003    $ change  % change
  In thousands
  Golf                 $39,699   $42,706   $(3,007)   (7.0)%
  Corporate             53,942    54,584      (642)   (1.2)%
  Specialty Retail      22,517    22,193       324     1.5%
  International          2,687     4,140    (1,453)  (35.1)%
  Other                  9,529     8,076     1,453    18.0%
  Total               $128,374  $131,699   $(3,325)   (2.5)%

Note: International sales for the year ended April 30, 2003 included $750,000 of direct sales in Europe.