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U.S. SECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549

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Form 10-Q

|/x/ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15() OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | --------------------------------------------------------------------------------------

For the quarterly period ended January 31, 2001

or

|/ / | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15() OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ---------------------------------------------------------------------------------------

For the transition period from  to

Commission File No. 0-26608

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CUTTER & BUCK INC.(Exact Name of Registrant as Specified in Its Charter)

Washington(State or Other Jurisdiction of
Incorporation or Organization)

91-1474587(I.R.S. Employer
Identification No.)


2701 First Avenue, Suite 500
Seattle, WA 98121(Address of Principal Executive Offices, Including Zip Code)

(206) 622-4191(Registrant's Telephone Number, Including Area Code)

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Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes /x/  No / /

The
number of shares of Common Stock of the registrant outstanding as of March 16, 2001 was 10,457,270.

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CUTTER & BUCK INC.
Quarterly Report on Form 10-Q
For the Quarter Ended January 31, 2001

Index

|                             |         |    |                                                                                       |  | Page
|---------------------------- | ------- | -- | ------------------------------------------------------------------------------------- |  | ----
|PART IFINANCIAL INFORMATION |         |   
|                             | Item 1. |    | Financial Statements (unaudited):                                                     |  |     
|                             |         |    | Condensed Consolidated Balance Sheets                                                 |  | 3   
|                             |         |    | Condensed Consolidated Statements of Operations                                       |  | 4   
|                             |         |    | Condensed Consolidated Statements of Cash Flows                                       |  | 5   
|                             |         |    | Notes to Condensed Consolidated Financial Statements                                  |  | 6   
|                             | Item 2. |    | Management's Discussion and Analysis of Financial Condition and Results of Operations |  | 9   
|PART IIOTHER INFORMATION    |         |   
|                             | Item 1. |    | Legal Proceedings                                                                     |  | 15  
|                             | Item 2. |    | Changes in Securities and Use of Proceeds                                             |  | 15  
|                             | Item 3. |    | Defaults Upon Senior Securities                                                       |  | 15  
|                             | Item 4. |    | Submission of Matters to a Vote of Security Holders                                   |  | 15  
|                             | Item 5. |    | Other Information                                                                     |  | 15  
|                             | Item 6. |    | Exhibits and Reports on Form 8-K                                                      |  | 15  
|SIGNATURES                   |         | 16

2

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PART IFINANCIAL INFORMATION

Item 1. Financial Statements

CUTTER & BUCK INC.        Condensed Consolidated Balance Sheets

|                                                |                                                                                                                                                  | April 30,
2000                             |            | January 31,
2001 |            
|----------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------ | ---------- | ---------------- | -----------
|
|ASSETS                                          |                                                                                                                                                  |                                            |            |                  |            
|Current assets:                                 |                                                                                                                                                  |                                            |            |                  |            
|                                                | Cash                                                                                                                                             |                                            | $          | 7,366,612        |            
|                                                | Accounts receivable, net of allowances for doubtful accounts and returns of $2,351,024 at April 30, 2000 and $2,729,012 at January 31, 2001      |                                            |            | 50,462,713       |            
|                                                | Inventories                                                                                                                                      |                                            |            | 36,739,933       |            
|                                                | Deferred income taxes                                                                                                                            |                                            |            | 2,178,165        |            
|                                                | Prepaid expenses and other current assets                                                                                                        |                                            |            | 3,447,789        |            
|                                                |                                                                                                                                                  |                                            |            |                  |            
|                                                |                                                                                                                                                  | Total current assets                       |            |                  | 100,195,212
|Furniture and equipment, net                    |                                                                                                                                                  |                                            | 17,813,391 |                  |            
|Deferred income taxes                           |                                                                                                                                                  |                                            | 136,090    |                  |            
|Other assets                                    |                                                                                                                                                  |                                            | 401,992    |                  |            
|                                                |                                                                                                                                                  |                                            |            |                  |            
|                                                |                                                                                                                                                  | Total assets                               |            | $                | 118,546,685
|                                                |                                                                                                                                                  |                                            |            |                  |            
|LIABILITIES AND SHAREHOLDERS' EQUITY            |                                                                                                                                                  |                                            |            |                  |            
|Current liabilities:                            |                                                                                                                                                  |                                            |            |                  |            
|                                                | Short-term borrowings                                                                                                                            |                                            | $          | 3,036,551        |            
|                                                | Accounts payable                                                                                                                                 |                                            |            | 12,086,335       |            
|                                                | Accrued liabilities                                                                                                                              |                                            |            | 3,129,393        |            
|                                                | Income taxes payable                                                                                                                             |                                            |            | 3,423,068        |            
|                                                | Current portion of capital lease obligations and long-term debt                                                                                  |                                            |            | 1,418,828        |            
|                                                |                                                                                                                                                  |                                            |            |                  |            
|                                                |                                                                                                                                                  | Total current liabilities                  |            |                  | 23,094,175 
|Capital lease obligations, less current portion |                                                                                                                                                  |                                            | 2,259,505  |                  |            
|Long-term debt, less current portion            |                                                                                                                                                  |                                            | 4,285,714  |                  |            
|Commitments                                     |                                                                                                                                                  |                                            |            |                  |            
|Shareholders' equity:                           |                                                                                                                                                  |                                            |            |                  |            
|                                                | Preferred stock, no par value, 6,000,000 shares authorized; none issued and outstanding                                                          |                                            |            |                 |            
|                                                | Common stock, no par value: 25,000,000 shares authorized; 10,344,672 issued and outstanding at April 30, 2000 and 10,483,512 at January 31, 2001 |                                            |            | 62,645,047       |            
|                                                | Deferred compensation                                                                                                                            |                                            |            | (210,484         | )          
|                                                | Retained earnings                                                                                                                                |                                            |            | 26,804,933       |            
|                                                | Accumulated other comprehensive loss                                                                                                             |                                            |            | (332,205         | )          
|                                                |                                                                                                                                                  |                                            |            |                  |            
|                                                |                                                                                                                                                  | Total shareholders' equity                 |            |                  | 88,907,291 
|                                                |                                                                                                                                                  |                                            |            |                  |            
|                                                |                                                                                                                                                  | Total liabilities and shareholders' equity |            | $                | 118,546,685
|                                                |                                                                                                                                                  |                                            |            |                  |            

See
accompanying notes.

3

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CUTTER & BUCK INC.        Condensed Consolidated Statements of Operations        (Unaudited)

|                                  |                                                                | Three Months Ended                |            | Nine Months Ended |           
|--------------------------------- | -------------------------------------------------------------- | --------------------------------- | ---------- | ----------------- | ----------
|
|Net sales                         |                                                                | $                                 | 31,785,889 |                   | $         
|Cost of sales                     |                                                                |                                   | 17,539,704 |                   |           
|                                  |                                                                |                                   |            |                   |           
|Gross profit                      |                                                                |                                   | 14,246,185 |                   |           
|Operating expenses:               |                                                                |                                   |            |                   |           
|                                  | Design and production                                          |                                   |            | 849,465           |           
|                                  | Selling and shipping                                           |                                   |            | 8,625,398         |           
|                                  | General and administrative                                     |                                   |            | 2,665,214         |           
|                                  |                                                                |                                   |            |                   |           
|                                  |                                                                | Total operating expenses          |            |                   | 12,140,077
|                                  |                                                                |                                   |            |                   |           
|Operating income (loss)           |                                                                |                                   | 2,106,108  |                   |           
|Other income (expense):           |                                                                |                                   |            |                   |           
|                                  | Factor commission and interest expense, net of interest income |                                   |            | (21,779           | )         
|                                  | License and royalty income, net of other expense               |                                   |            | 51,468            |           
|                                  |                                                                |                                   |            |                   |           
|                                  |                                                                | Total other income (expense)      |            |                   | 29,689    
|                                  |                                                                |                                   |            |                   |           
|Income (loss) before income taxes |                                                                |                                   | 2,135,797  |                   |           
|Income taxes (benefits)           |                                                                |                                   | 768,891    |                   |           
|                                  |                                                                |                                   |            |                   |           
|Net income (loss)                 |                                                                | $                                 | 1,366,906  |                   | $         
|                                  |                                                                |                                   |            |                   |           
|                                  | Basic earnings (loss) per share                                |                                   | $          | 0.13              |           
|                                  |                                                                |                                   |            |                   |           
|                                  | Diluted earnings (loss) per share                              |                                   | $          | 0.13              |           
|                                  |                                                                |                                   |            |                   |           
|                                  | Shares used in computation of:                                 |                                   |            |                   |           
|                                  |                                                                | Basic earnings (loss) per share   |            |                   | 10,329,348
|                                  |                                                                |                                   |            |                   |           
|                                  |                                                                | Diluted earnings (loss) per share |            |                   | 10,483,642
|                                  |                                                                |                                   |            |                   |           

See
accompanying notes.

4

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CUTTER & BUCK INC.        Condensed Consolidated Statements of Cash Flows        (Unaudited)

|                                                                              |                                                       | Nine Months Ended                         |           
|----------------------------------------------------------------------------- | ----------------------------------------------------- | ----------------------------------------- | ----------
|
|Operating activities                                                          |                                                       |                                           |           
|Net Income                                                                    |                                                       | $                                         | 4,835,716 
|Adjustments to reconcile net income to net cash used in operating activities: |                                                       |                                           |           
|                                                                              | Depreciation and amortization                         |                                           |           
|                                                                              | Deferred income taxes                                 |                                           |           
|                                                                              | Deferred gain on sale and leaseback of capital assets |                                           |           
|                                                                              | Amortization of deferred compensation                 |                                           |           
|                                                                              | Changes in assets and liabilities:                    |                                           |           
|                                                                              |                                                       | Receivables, net                          |           
|                                                                              |                                                       | Inventories                               |           
|                                                                              |                                                       | Prepaid expenses and other current assets |           
|                                                                              |                                                       | Accounts payable and accrued liabilities  |           
|                                                                              |                                                       | Income taxes payable                      |           
|                                                                              |                                                       |                                           |           
|Net cash used in operating activities                                         |                                                       |                                           | (3,222,735
|Investing activities                                                          |                                                       |                                           |           
|Purchases of furniture and equipment                                          |                                                       |                                           | (7,946,792
|Proceeds from sale and leaseback of capital assets                            |                                                       |                                           |          
|Increase in trademarks, patents and marketing rights                          |                                                       |                                           | (116,366  
|                                                                              |                                                       |                                           |           
|Net cash used in investing activities                                         |                                                       |                                           | (8,063,158
|Financing activities                                                          |                                                       |                                           |           
|Net proceeds from (repayments of) short term borrowings                       |                                                       |                                           | (8,149,975
|Principal payments under capital lease obligations                            |                                                       |                                           | (244,326  
|Proceeds from issuance of common stock                                        |                                                       |                                           | 29,346,179
|                                                                              |                                                       |                                           |           
|Net cash provided by financing activities                                     |                                                       |                                           | 20,951,878
|Effects of foreign exchange rate changes on cash                              |                                                       |                                           | (10,177   
|                                                                              |                                                       |                                           |           
|Net increase (decrease) in cash                                               |                                                       |                                           | 9,655,808 
|Cash, beginning of period                                                     |                                                       |                                           | 4,760,259 
|                                                                              |                                                       |                                           |           
|Cash, end of period                                                           |                                                       | $                                         | 14,416,067
|                                                                              |                                                       |                                           |           
|Noncash financing and investing activities:                                   |                                                       |                                           |           
|Equipment acquired with capital leases                                        |                                                       | $                                         | 382,072   
|                                                                              |                                                       |                                           |           
|Deferred compensation for the issuance of restricted stock                    |                                                       | $                                         | 252,016   
|                                                                              |                                                       |                                           |           

See
accompanying notes.

5

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CUTTER & BUCK INC.        Notes to Condensed Consolidated Financial Statements

Note 1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by Cutter & Buck Inc. (the "Company") in accordance with generally
accepted accounting principles for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and
disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of the Company's management, all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation have been included. The Company's revenues are seasonal, and therefore the results of operations for the nine months ended January 31, 2001 may not
be indicative of the results for the full fiscal year. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended April 30, 2000, included
in the Company's filing on Form 10-K.

Note 2. Earnings (Loss) Per Share

Basic earnings (loss) per share is based on the weighted average number of common shares outstanding. Diluted earnings (loss) per share is based on the
weighted average number of common shares and equivalents outstanding. Common share equivalents included in the computation represent
shares issuable upon assumed exercise of outstanding stock options except when the effect of their inclusion would be antidilutive.

The
following table sets forth the computation of basic and diluted earnings (loss) per share:

|                                                                        |                                                                                            | Three Months Ended
January 31, |         | Nine Months Ended
January 31,
|----------------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | ------------------------------ | ------- | -----------------------------
|
|Numerator:                                                              |                                                                                            |                                |         |                              
|                                                                        | Numerator for basic and diluted earnings (loss) per sharenet income (loss)                |                                | $       | 1,366,906                    
|                                                                        |                                                                                            |                                |         |                              
|Denominator:                                                            |                                                                                            |                                |         |                              
|                                                                        | Denominator for basic earnings (loss) per shareweighted average common shares outstanding |                                |         | 10,329,348                   
|Effect of dilutive securities stock options (excluded for loss quarter) |                                                                                            |                                | 154,294 |                              
|                                                                        |                                                                                            |                                |         |                              
|                                                                        | Denominator for diluted earnings (loss) per share                                          |                                |         | 10,483,642                   
|                                                                        |                                                                                            |                                |         |                              
|Basic earnings (loss) per share                                         |                                                                                            | $                              | 0.13    |                              
|Diluted earnings (loss) per share                                       |                                                                                            | $                              | 0.13    |                              

6

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Note 3. Comprehensive Income (Loss)

The components of the Company's total comprehensive income (loss) were:

|                                         |  | Three Months Ended
January 31, |           | Nine Months Ended
January 31, |  
|---------------------------------------- |  | ------------------------------ | --------- | ----------------------------- | -
|
|Net income (loss)                        |  | $                              | 1,366,906 |                               | $
|Foreign currency translation adjustments |  |                                | (11,667   | )                             |  
|                                         |  |                                |           |                               |  
|Comprehensive income (loss)              |  | $                              | 1,355,239 |                               | $
|                                         |  |                                |           |                               |  

Note 4. Debt

The Company had a $40 million line of credit with Washington Mutual Bank d/b/a Western Bank ("Western Bank") which expired on August 1, 2000. The
Company renegotiated the line of credit and on July 28, 2000 entered into a new loan agreement for a $55 million line of credit. The line of credit may be increased to $65 million during fiscal 2002
providing the Company meets certain performance criteria in fiscal 2001. Western Bank has included Bank of America, N.A. in the arrangement as co-lender. The revolving line of credit is to be used for
general corporate purposes. Interest on borrowings is charged and payable monthly at either the Prime rate or the LIBOR rate plus 1.75%, each as defined in the loan agreement, at the borrower's
election. The line of credit expires on August 1, 2002 and is collateralized by a security interest in the Company's inventory, accounts receivable, furniture and equipment, contract rights and
general intangibles. The loan agreement contains certain restrictive covenants covering minimum working capital and tangible net worth, as well as a maximum debt-to-equity ratio and maximum capital
expenditures. The Company was in compliance with these covenants at January 31, 2001. At January 31, 2001, letters of credit outstanding against this line of credit totaled approximately
$28.8 million and working capital advances totaled $3 million, of which $2 million was at an interest rate of 7.3% and $1 million was at an interest rate of 9%.

The
Company's Dutch subsidiary had a loan agreement with Cooperatieve Rabobank "Huizen" B.A. ("Rabobank") for a $3.8 million line of credit, which was used for international letters
of credit and working capital advances. Interest on borrowings was charged and payable quarterly at a variable rate. The line of credit expired on September 30, 2000. On November 3, 2000, the
Company amended its $55 million line of credit agreement with Western Bank to allocate $5 million for use solely by the Dutch subsidiary. The allocated amount is to be used by the subsidiary for the
same purposes and is subject to the same terms and performance criteria described above. At January 31, 2001, letters of credit outstanding against this line of credit totaled approximately
$0.2 million and working capital advances totaled approximately $3.9 million at an interest rate of 6.1%.

The
Company also has a $5 million term credit facility with Western Bank. As of January 31, 2001, $4.3 million remained outstanding against the term credit facility. The term
loan bears interest at a fixed annual rate of 6.6% with interest payable monthly and remaining annual principal payments of
$714,286 due on August 1 of years 2001 through 2004. The final principal payment of $1,428,570 is due in August 2005. The term loan is also collateralized by a security interest in the
Company's inventory, accounts receivable, furniture and equipment, and contract rights.

7

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Note 5. Commitments

On January 24, 2001, the Company entered into a sale and leaseback agreement for approximately $6.7 million of capital assets. The resulting commitment
is accounted for as a capital lease, with terms between three and five years. The Company deferred a gain on the sale of approximately $0.4 million which is being amortized in proportion to the
amortization of the leased assets.

Note 6. Shareholders' Equity

The Company sold 20,338 shares of common stock under its employee stock purchase plan.

On
June 30, 2000, the Company granted an additional 84,075 shares under its Restricted Stock Plan and recorded deferred compensation relating to this grant of approximately $667,000
on June 30, 2000 and approximately $167,000 on September 30, 2000.

Note 7. Income Taxes

Income taxes are provided at an effective rate of 38%, which exceeds the expected Federal statutory rate of 35%, primarily due to state income taxes.

Note 8. Litigation

The Company is party to routine litigation incidental to its business. Management believes the ultimate resolution of these matters will not have a material
adverse effect on its financial position and results of operations.

8

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Statements made in this filing that are not historical facts are forward looking information that involve risks and uncertainties.
Forward-looking statements typically are identified by the use of such terms as "may," "will," "expect," "believe," "anticipate," "estimate," "plan" and similar words, although some forward-looking
statements are expressed differently. Forward-looking statements reflect our current expectations and are inherently uncertain. You should be aware that our actual growth and results could differ
materially from those contained in any forward-looking statements due to a number of factors, which include, but are not limited to the following: style changes and product acceptance, relations with
and performance of suppliers and independent sales representatives, the ability of the Company to control costs and expenses, the ability of the Company to carry out successful design and planned
product and brand messaging/extension activities and to penetrate its chosen distribution channels, competition, access to capital, foreign currency risks, risks associated with opening and operating
retail locations, the efficacy of the warehouse management system as it relates to the Company's operations, technological change, political and trade relations and general economic conditions in the
U.S. and Europe. Additional information on these and other factors, which could affect the Company's financial results, are included in its Securities and Exchange Commission filings. Finally, there
may be other factors not mentioned above or included in the Company's SEC filings that may cause actual results to differ materially from any forward-looking information. You should not place undue
reliance on these forward-looking statements.

Overview

Cutter & Buck is a lifestyle brand with broad demographic appeal, targeted to men and women who seek updated classic American styles with the latest
textile and fashion innovations. We sell our distinctive sportswear, fashion and outerwear products primarily through golf pro shops and resorts, corporate accounts, specialty retail and selected
department stores, international, and other channels including Company-owned retail stores.

We
have grown sales over the last five years through an increase in the number of accounts and an overall increase in the average annual net sales per account. The increase in the
number of accounts is primarily due to the growth in the size of our direct sales force. We have increased the overall average annual net sales per account by offering more product styles and
increasing the average annual net sales per style. We believe the increased purchasing levels by our customers also reflect strong cooperative working relationships in the area of fixturing and
merchandising our coordinated product line, and growing consumer recognition of our brand. We recognize our revenue at the time the product is shipped to the account, and there is no right to return
other than for defective products.

As
our sales volume has increased, we have continued to invest in management and systems to strengthen our sales and marketing efforts. We have also expanded our customer support,
embroidery services and distribution center operations. These actions have resulted in an increase in operating expenses as a percentage of net sales. With the increase in our sales volume, our
negotiating leverage to purchase product at lower unit costs has increased, while sales through our retail stores and sales of our higher margin women's line have also grown. As a result of these
factors, we have experienced annual improvements in gross margin.

Our
flagship retail store is located in Seattle, Washington and we have ten additional stores in Denver, Mission Viejo, Orlando, Atlanta, Portland, Las Vegas, West Palm Beach, Palm
Desert, Chicago and Wrentham. We expect to open one additional store in Scottsdale, Arizona during the remainder of fiscal 2001.

9

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Results of Operations



Net SalesDuring the third quarter of fiscal 2001 net sales increased $0.6 million or 1.8% to
$32.4 million from $31.8 million in the same period of the prior year. The detail of net sales by distribution channel is as follows:

Three Months Ended January 312000

2001

Increase/
(Decrease)

Percent
ChangeIn Thousands, except percent changeGolf

$
12,399

$
7,392

$
(5,007
)
(40.4
)%Corporate


11,078


12,756


1,678

15.1Specialty retail


4,017


5,133


1,116

27.8International


2,152


2,108


(44
)
(2.0
)Other


2,140


4,980


2,840

132.7$
31,786

$
32,369

$
583

1.8
%


Net
sales to the golf distribution channel in the third quarter of fiscal 2001 decreased $5.0 million, or approximately 40.4%, to $7.4 million from $12.4 million
in the third quarter of fiscal 2000. Golf sales represented approximately 22.8% of our net sales in the quarter. The decrease in golf sales during the third quarter of fiscal 2001 was primarily
attributable to the timing of shipments from the end of our third quarter into our fourth quarter in an effort to be responsive to our customers' needs, and unusually cold weather in the Southern
United States. This decrease was partially offset by an increase in the number of golf pro shops purchasing Cutter & Buck products. The increase in the number of our
golf pro shop customers was primarily due to the growth in the size of our golf sales force, including an increase in the number of sales representatives that exclusively showcase our women's golf
line.

Net
sales through the corporate distribution channel increased $1.7 million, or approximately 15.1%, to $12.8 million in the third quarter of fiscal 2001 from
$11.1 million in the third quarter of fiscal 2000. Corporate sales represented approximately 39.4% of our net sales in the quarter. This increase was primarily attributable to the increased
size and effectiveness of our corporate channel sales force, increases in product styles and inventory levels of our CLASSICS products, relationships with a greater number of promotional products
companies that resell Cutter & Buck apparel to corporate accounts and our growing brand strength.

Specialty
retail sales increased $1.1 million or approximately 27.8% to $5.1 million in the third quarter of fiscal 2001 from $4.0 million in the third quarter of
fiscal 2000. Specialty retail sales represented approximately 15.9% of our net sales in the quarter. This increase was primarily attributable to the increase in the number of specialty stores
purchasing Cutter & Buck products and an increase in the average annual net sales per specialty store account. International sales, which include our wholly-owned European subsidiary,
distributors and licensees, decreased slightly over the same period last year. Sales to our other distribution channel, which includes company-owned retail, e-commerce and liquidation,
increased from $2.1 million in the third quarter of fiscal 2000 to $5.0 million in the third quarter of fiscal 2001. As a percentage of net sales, sales to our other distribution channel
increased from approximately 6.7% in the third quarter of fiscal 2000 to approximately 15.4% in the third quarter of fiscal 2001.

Cost of SalesIn the third quarter of fiscal 2001, our cost of sales was 54.2% of net sales, compared to 55.2% in the
third quarter of fiscal 2000. The decrease in cost of sales as a percentage of net sales is due to higher production volumes which has given us the ability to expand our international

10

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sourcing and has enhanced our negotiating leverage to purchase product at lower unit costs. Additionally, our sales mix has changed as a result of the growth in sales from company-owned retail stores
and increased sales in our women's line, which both have higher margins.

Design and Production ExpenseDesign and production expenses were up approximately $0.3 million in the third
quarter of fiscal 2001 compared to the third quarter of fiscal 2000, and increased as a percentage of sales from 2.7% to 3.4%. The increase was primarily attributable to increased personnel, quality
control and travel costs, and costs associated with the strengthening of our embroidery development organization to support our growing embroidery business. Design expenses reflect the additional
personnel, sample development and travel costs to support our expanding sportswear collection, including our women's line and footwear and accessories products.

Selling and Shipping ExpenseSelling and shipping expenses increased by $3.0 million, or 34.8%, to
$11.6 million in the third quarter of fiscal 2001 from $8.6 million in the third quarter of fiscal 2000, and increased as a percentage of net sales to 35.9% from 27.1%. The increase in
selling expenses was attributable to increased salaries and commissions, travel and training costs associated with the increase in our sales force, trade advertising and fixturing, showroom costs, and
customer service staffing. The increase in shipping expenses was due to increased warehouse staffing expense, facilities costs, depreciation and packaging supplies. Warehouse staffing costs increased
as a result of having a more highly skilled workforce and stronger distribution center management. Facilities costs and equipment depreciation expense increased due to the new distribution center and
the warehouse management system. Packaging supplies costs increased with higher levels of inventory. The store level operating expenses associated with the company-owned retail stores are also
included in selling and shipping expenses and reflect expenses associated with eleven retail locations during the third quarter of fiscal 2001 compared to four in the third quarter of fiscal 2000.

General and Administrative ExpenseGeneral and administrative expenses increased by approximately $0.8 million,
or 29.5%, to $3.5 million in the third quarter of fiscal 2001 from $2.7 million in the third quarter of fiscal 2000, and increased as a percentage of net sales from 8.4% to 10.7%. The
increase was attributable to increased management and staffing, including costs associated with our retail operations and e-commerce initiative, increased depreciation and rent expense
associated with information technology initiatives and corporate facilities, increased insurance costs, legal and communications expense, and our corporate social responsibility initiative.

Operating IncomeAs a result of the above items, operating income decreased by approximately $3.5 million, or
165.2%, to an operating loss of $1.4 million in the third quarter of fiscal 2001 from operating income of $2.1 million in the third quarter of fiscal 2000.

Income TaxesWe recorded approximately $0.6 million of income tax benefit in the third quarter of fiscal 2001
compared to income tax expense of $0.8 million in the third quarter of fiscal 2000, as a result of the net operating loss realized during the quarter. Income taxes are recorded at an effective
rate of 36% and 38% for the third quarters of fiscal 2000 and fiscal 2001, respectively. The increase in the effective tax rate is to provide for state income taxes.

11

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Results of Operations



Net SalesDuring the first nine months of fiscal 2001 net sales increased $19.6 million or 20.0% to
$117.5 million from $97.9 million in the same period of the prior year. The detail of net sales by distribution channel is as follows:

Nine Months Ended January 312000

2001

Increase/
(Decrease)

Percent
ChangeIn Thousands, except percent changeGolf

$
39,324

$
35,437

$
(3,887
)
(9.9
)%Corporate


34,282


46,066


11,784

34.4Specialty retail


11,361


17,271


5,910

52.0International


6,428


7,122


694

10.8Other


6,470


11,576


5,106

78.9$
97,865

$
117,472

$
19,607

20.0
%


Net
sales to the golf distribution channel decreased $3.9 million, or approximately 9.9%, to $35.4 million in the first nine months of fiscal 2001 from
$39.3 million in the first nine months of fiscal 2000. Golf sales represented approximately 30.2% of our net sales for the period. The decrease in golf sales during the first nine months of
fiscal 2001 was primarily attributable to the timing of shipments from the end of our third quarter into our fourth quarter in an effort to be responsive to our customers' needs, and unusually cold
weather in the Southern United States. This decrease was partially offset by an increase in the number of golf pro shops purchasing Cutter & Buck products and increasing brand awareness.
The increase in the number of our golf pro shop customers was primarily due to the growth in the size of our golf sales force, including an increase in the number of sales representatives that
exclusively showcase our women's golf line.

Net
sales through the corporate distribution channel increased $11.8 million, or approximately 34.4%, to $46.1 million in the first nine months of fiscal 2001 from
$34.3 million in the first nine months of fiscal 2000. Corporate sales represented approximately 39.2% of our net sales for the period. This increase was primarily attributable to the increased
size and effectiveness of our corporate channel sales force, increases in product styles and inventory levels of our CLASSICS products, relationships with a greater number of promotional products
companies that resell Cutter & Buck apparel to corporate accounts and our growing brand strength.

Specialty
retail sales increased $5.9 million or approximately 52.0% to $17.3 million in the first nine months of fiscal 2001 from $11.4 million in the first nine
months of fiscal 2000. Specialty retail sales represented approximately 14.7% of our net sales in the period. This increase was primarily attributable to the increase in the number of specialty stores
purchasing Cutter & Buck products and an increase in the average annual net sales per specialty store account. International sales, which include our wholly-owned European subsidiary,
distributors and licensees, increased approximately $0.7 million over the same period last year. Sales to our other distribution channel, which includes company-owned retail,
e-commerce and liquidation, increased from $6.5 million in the first nine months of fiscal 2000 to $11.6 million in the first nine months of fiscal 2001. As a percentage of
net sales, sales to our other distribution channel increased from approximately 6.6% for the first nine months of fiscal 2000 to approximately 9.9% for the first nine months of fiscal 2001.

Cost of SalesIn the first nine months of fiscal 2001, our cost of sales was 55.0% of net sales, compared to 55.9% in
the first nine months of fiscal 2000. The decrease in cost of sales as a percentage of net sales is due to higher production volumes which has given us the ability to expand

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our international sourcing and has enhanced our negotiating leverage to purchase product at lower unit costs. Additionally, our sales mix has changed as a result of the growth in sales from
company-owned retail stores and increased sales in our women's line, which both have higher margins.

Design and Production ExpenseDesign and production expenses were up approximately $0.5 million in the first
nine months of fiscal 2001 compared to the first nine months of fiscal 2000. These expenses remained constant as a percentage of net sales at 2.6% in the first nine months of fiscal 2000 and fiscal
2001. Production expenses reflect personnel, quality control and travel costs, and costs associated with the strengthening of our embroidery development organization to support our growing embroidery
business. Design expenses reflect personnel, sample development and travel costs to support our expanding sportswear collection, including our women's line and footwear and accessories products.

Selling and Shipping ExpenseSelling and shipping expenses increased by approximately $9.2 million, or 37.4%, to
$33.9 million in the first nine months of fiscal 2001 from $24.7 million in the same period in the prior year, and increased as a percentage of net sales to 28.9% from 25.2%. The
increase in selling expenses was attributable to increased salaries and commissions, travel and training costs associated with the increase in our sales force, trade advertising and fixturing,
showroom costs, and customer service staffing. The increase in shipping expenses was due to increased warehouse staffing expense, facilities costs, depreciation and packaging supplies. Warehouse
staffing costs increased as a result of having a more highly skilled workforce and stronger distribution center management. Facilities costs and equipment depreciation expense increased due to the new
distribution center and the warehouse management system. Packaging supplies costs increased with increased sales volume and higher levels of inventory. The store level operating expenses associated
with the company-owned retail stores are also included in selling and shipping expenses and reflect expenses associated with eleven retail locations during the first nine months of fiscal 2001
compared to four in the first nine months of fiscal 2000.

General and Administrative ExpenseGeneral and administrative expenses increased by $1.9 million, or 23.1%, to
$10.1 million in the first nine months of fiscal 2001 from $8.2 million in the first nine months of fiscal 2000. The increase during the third quarter of fiscal 2001 was attributable to
increased management and staffing, including costs associated with our retail operations and e-commerce initiative, increased depreciation and rent expense associated with information
technology initiatives and corporate facilities, increased insurance costs, legal and communications expense, and our corporate social responsibility initiative.

Operating IncomeAs a result of the above items, operating income decreased by $1.9 million, or 24.4%, to
$5.9 million in the first nine months of fiscal 2001 from $7.7 million in the first nine months of fiscal 2000. Operating income as a percentage of net sales decreased to 5.0% for the
nine months ended January 31, 2001 from 7.9% for the nine months ended January 31, 2000.

Income TaxesWe recorded approximately $2.1 million of income tax expense in the first nine months of fiscal
2001 compared to $2.7 million in the first nine months of fiscal 2000 reflecting the decrease in the Company's net income. Income taxes are recorded at an effective rate of 36% and 38% for the
first nine months of fiscal 2000 and fiscal 2001, respectively. The increase in the effective tax rate is to provide for state income taxes.

Liquidity and Capital Resources

Our primary need for funds is to finance increased working capital to support sales growth and to fund capital expenditures.

Net
cash used in operating activities for the nine months ended January 31, 2001 was approximately $1.9 million compared to net cash used in operating activities of
approximately

13

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$3.2 million for the nine months ended January 31, 2000. Net cash used in operating activities for the nine months ended January 31, 2001 was due to increases in inventory of
$24.1 million, increases in prepaid expenses and other current assets and income tax payments. This was partially offset by cash generated from profitable operations, a reduction in accounts
receivable of $17.2 million, an increase in accounts payable and accrued liabilities, depreciation, amortization and a deferred gain from the sale and leaseback of capital assets. Approximately
$8.1 million of the increase in inventory relates to FASHION merchandise and $11.5 million relates to CLASSICS merchandise. The balance of the increase relates primarily to embroidery
work in process, our footwear product category and retail store locations. Inventory in Europe increased by approximately $0.5 million. The overall increase in inventory was greater than
planned due to the unexpected sales shortfall during the third quarter of fiscal 2001. For the nine months ended January 31, 2000, net cash used in operating activities resulted from an
increase in inventory of $15 million and income tax payments of $1.6 million, which were partially offset by cash generated from profitable operations, a reduction in accounts receivable
of $3.6 million, and increases in accounts payable and accrued liabilities and depreciation and amortization.

Net
cash used in investing activities was approximately $2.1 million for the nine months ended January 31, 2001 and was primarily due to purchases of capital equipment
of approximately $8.7 million. These purchases were partially offset by proceeds of approximately $6.7 million from the sale of certain capital assets in a sale and leaseback
transaction. Capital expenditures, including equipment acquired under capital lease, during this period included $0.9 million for in-store fixtures and concept shops,
$3.3 million for equipment and leasehold improvements associated with Company-owned retail stores, $1.7 million for the distribution center and warehouse management system and
$2.8 million for computer hardware and software, leasehold improvements, and other furniture and equipment. For the nine months ended January 31, 2000, net cash used in investing
activities was approximately $8.1 million. Capital expenditures during the first nine months of fiscal 2000 included $2.3 million for in-store fixtures, concept shops and a
new trade show booth, $2.1 million for equipment and leasehold improvements associated with company-owned retail specialty stores, $1.7 million for the distribution center and
$1.8 million for computer hardware and software, leasehold improvements and other furniture and equipment.

Net
cash provided by financing activities for the nine months ended January 31, 2001 was approximately $2.8 million and was primarily due to net borrowings under the
Company's line of credit of approximately $3.1 million and approximately $0.3 million from the exercise of stock options and the purchase of common stock under the employee stock
purchase plan. This was partially offset by capital lease payments of approximately $0.6 million. During the nine months ended January 31, 2000, the Company generated approximately
$29.3 million through the sale of common stock, the exercise of stock options and the purchase of common stock under the employee stock purchase plan. This was partially offset by the repayment
of approximately $8.3 million of short-term borrowings and capital lease payments.

We
have a loan agreement with Washington Mutual Bank d/b/a Western Bank for a $55 million line of credit. This line of credit is more fully described in footnote four ("Debt")
to the Company's financial statements.

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PART IIOTHER INFORMATION

Item 1. Legal Proceedings

The Company is party to routine litigation incidental to its business. Management believes the ultimate resolution of these matters will not have a material
adverse effect on its financial position and results of operations.

Item 2. Changes in Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Submission of Matters to a Vote of Security Holders

None

Item 5. Other Information

We provided guidance with regard to the balance of fiscal 2001 and fiscal 2002 in our press release dated March 9, 2001 which was filed on Form 8-K.

Item 6. Exhibits and Reports on Form 8-K



| |  | Exhibit
Number |  | Description                                                                                      
| |  | -------------- |  | -------------------------------------------------------------------------------------------------
| |  | 10.18          |  | Lease dated November 13, 2000 between University Street Properties VI, LLC and Cutter & Buck Inc.



The
Company filed a Form 8-K on March 19, 2001 announcing earnings for the third quarter of fiscal year 2001 and guidance for the fourth quarter of fiscal year 2001 and
the fiscal year 2002.

15

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

|                      |  | CUTTER & BUCK INC.
|--------------------- |  | ------------------
|                      |  | (Registrant)      
|Dated: March 19, 2001 |  | By:               

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