<PAGE>
                                                            
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                      U.S. SECURITIES AND EXCHANGE COMMISSION
                               Washington, DC  20549
                                          
                                          
                                     FORM 10-Q
                                          
                                          
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

For the quarterly period ended July 31, 1998

                                         or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

    For the transition period from ______________ to ______________ 


                            Commission File No. 0-26608


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



                 Washington                          91-1474587
         (State or Other Jurisdiction of          (I.R.S. Employer
         Incorporation or Organization)           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)


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
                        September 10, 1998 was 5,517,937.
                                          
                                          
                                    Page 1 of 12


<PAGE>
                                 CUTTER & BUCK INC.
                                          
                           Quarterly Report on Form 10-Q
                        For the Quarter Ended July 31, 1998
                                          
                                          
                                       Index
<TABLE>
<CAPTION>

                                                                          Page
                                                                          -----
<S>                                                                        <C>
PART I - FINANCIAL INFORMATION     

     Item 1.   Financial Statements (unaudited):

               Condensed Balance Sheets                                     3

               Condensed Statements of Operations                           4

               Condensed Statements of Cash Flows                           5

               Notes to Condensed Financial Statements                      6

     Item 2.   Management's Discussion and Analysis of Financial            8
               Condition and Results of Operations


PART II - OTHER INFORMATION

     Item 1.   Legal Proceedings                                           11

     Item 2.   Changes in Securities                                       11

     Item 3.   Defaults Upon Senior Securities                             11

     Item 4.   Submission of Matters to a Vote of Security Holders         11

     Item 5.   Other Information                                           11

     Item 6.   Exhibits and Reports on Form 8-K                            11

SIGNATURES                                                                 12
</TABLE>

                                    Page 2


<PAGE>

PART I - FINANCIAL INFORMATION                          

Item 1.  Condensed Financial Statements

                              CUTTER & BUCK INC.
                                BALANCE SHEETS

                                    ASSETS

<TABLE>
<CAPTION>
 
                                                                 April 30,      July 31,
                                                                   1998           1998
                                                                -----------    -----------
                                                                               (unaudited)
<S>                                                              <C>           <C>
Current Assets:
   Cash                                                          $ 7,589,731   $10,077,775
   Accounts receivable, net of allowances for doubtful
       accounts and returns and allowances of $1,187,813 at
       April 30, 1998 and $1,532,486 at July 31, 1998            20,216,721     15,960,849
   Inventories                                                   13,247,892     16,278,519
   Deferred income taxes                                            782,545        782,545
   Prepaid expenses and other current assets                      1,502,634      2,406,091
                                                                -----------   ------------
           Total current assets                                  43,339,523     45,505,779

Furniture and equipment                                           4,568,515      5,018,813
Other assets                                                        236,329        291,291
                                                                -----------   ------------
           Total assets                                         $48,144,367    $50,815,883
                                                                -----------   ------------
                                                                -----------   ------------

                            LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Accounts payable                                              $5,110,405     $5,227,114
   Accrued liabilities                                            1,606,994      2,057,999
   Income taxes payable                                           1,498,720        679,684
   Loan payable to bank                                             486,913        992,283
   Current portion of capital lease obligations                     194,040        216,709
                                                                -----------   ------------
           Total current liabilities                              8,897,072      9,173,789

Capital lease obligations                                           626,682        843,511

Shareholders' equity:
   Common stock, no par value: 25,000,000 shares
       authorized; 5,250,796 issued and outstanding at
       April 30, 1998 and 5,427,756 at July 31, 1998             30,577,648     31,951,691
   Retained earnings                                              8,168,003      8,962,156
   Currency translation adjustment                                 (125,038)      (115,264)
                                                                -----------   ------------
           Total shareholders' equity                            38,620,613     40,798,583
                                                                -----------   ------------
           Total liabilities and shareholders' equity           $48,144,367    $50,815,883
                                                                -----------   ------------
                                                                -----------   ------------
</TABLE>


                            See accompanying notes.

 
                                     Page 3


<PAGE>

                              CUTTER & BUCK INC.
                           STATEMENTS OF OPERATIONS
                                 (Unaudited)

<TABLE>
<CAPTION>

                                                                    Three months ended
                                                                --------------------------
                                                                  July 31,       July 31,
                                                                    1997           1998
                                                                -----------    -----------
<S>                                                             <C>            <C>
Net sales                                                       $12,378,031    $17,763,495
Cost of sales                                                     7,417,669     10,151,185
                                                                -----------    -----------
Gross profit                                                      4,960,362      7,612,310
Operating expenses:
   Design and production                                            418,473        601,928
   Selling and handling                                           2,684,957      4,024,375
   General and administrative                                     1,139,171      1,825,592
                                                                -----------    -----------
       Total operating expenses                                   4,242,601      6,451,895
                                                                -----------    -----------

Operating income                                                    717,761      1,160,415

Other income (expense):
   Factor commission and
       interest expense, net
       of interest income                                           (11,081)           (33)
   License and royalty income,
       net of other expense                                          13,590         80,771
                                                                -----------    -----------
       Total other income                                             2,509         80,738
                                                                -----------    -----------

Income before income taxes                                          720,270      1,241,153
Income taxes                                                       (245,000)      (447,000)
                                                                -----------    -----------

Net income                                                         $475,270       $794,153
                                                                -----------    -----------
                                                                -----------    -----------

   Basic net income per share                                         $0.09          $0.15
                                                                -----------    -----------
                                                                -----------    -----------

   Diluted net income per share                                       $0.09          $0.14
                                                                -----------    -----------
                                                                -----------    -----------

   Shares used in computation of:
       Basic net income per share                                 5,208,822      5,335,291
                                                                -----------    -----------
                                                                -----------    -----------

       Diluted net income per share                               5,461,373      5,654,530
                                                                -----------    -----------
                                                                -----------    -----------
</TABLE>


                            See accompanying notes.

                                     Page 4


<PAGE>

                              CUTTER & BUCK INC.
                           STATEMENTS OF CASH FLOWS
                                 (Unaudited)

<TABLE>
<CAPTION>

                                                                    Three months ended
                                                                 --------------------------
                                                                   July 31,       July 31,
                                                                     1997          1998
                                                                  ----------     ----------
<S>                                                               <C>            <C>
OPERATING ACTIVITIES
Net Income                                                        $  475,270     $  794,153
Adjustments to reconcile net income to net
   cash provided by (used in) operating activities:
       Depreciation and amortization                                 388,879        437,879
       Changes in assets and liabilities:
           Receivables, net                                        3,105,649      4,909,407
           Inventories                                            (1,215,623)    (3,030,627)
           Prepaid expenses and other current assets                 (21,676)      (903,457)
           Accounts payable and accrued liabilities               (2,324,740)       567,714
           Income taxes payable                                     (327,000)      (819,036)
                                                                  ----------     ----------
Net cash provided by operating activities                             80,759      1,956,033

INVESTING ACTIVITIES
Purchases of furniture and equipment                                (365,481)      (602,312)
Increase in trademarks and patents                                   (60,611)       (61,977)
                                                                  ----------     ----------
Net cash used in investing activities                               (426,092)      (664,289)

FINANCING ACTIVITIES
Proceeds from loan from bank                                               0        505,370
Payments under capital lease obligations                             (37,290)       (39,352)
Net increase (decrease) in advances from factor                     (102,536)      (653,535)
Issuance of common stock, net of offering costs                      136,644      1,374,043
                                                                  ----------     ----------
Net cash provided by (used for) financing activities                  (3,182)     1,186,526

Effects of foreign exchange rate changes on cash                     (46,970)         9,774

Net increase (decrease) in cash                                     (395,485)     2,488,044
Cash, beginning of period                                          7,441,717      7,589,731
                                                                  ----------     ----------
Cash, end of period                                               $7,046,232    $10,077,775
                                                                  ----------     ----------
                                                                  ----------     ----------

SUPPLEMENTAL INFORMATION:
Cash paid during the period for interest                             $27,749        $86,638
                                                                  ----------     ----------
                                                                  ----------     ----------

Cash paid during the period for income taxes                        $572,000     $1,266,036
                                                                  ----------     ----------
                                                                  ----------     ----------

Noncash financing and investing activities:
   Equipment acquired with capital leases                            $48,976       $278,850
                                                                  ----------     ----------
                                                                  ----------     ----------
</TABLE>

                            See accompanying notes.

                                     Page 5


<PAGE>

NOTES TO CONDENSED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

     The accompanying unaudited financial statements have been prepared by
Cutter & Buck Inc. ("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 three months ended
July 31, 1998 may not be indicative of the results for the full fiscal year. 
For further information, refer to the financial statements and footnotes thereto
for the year ended April 30, 1998, included in the Company's filing on Form 
10-K.

2.   NET INCOME PER SHARE

     Basic net income per share is based on the weighted average number of
common shares outstanding.  Diluted net income 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 and warrants except when the
effect of their inclusion would be antidilutive.  All income per share amounts
for all periods have been presented, and where necessary, restated to conform to
SFAS 128 requirements.

3.   ACCOUNTS RECEIVABLE

     Pursuant to the terms of factoring agreements, the Company assigns a
portion of its qualifying accounts receivable to factors on a preapproved, non-
recourse basis and a portion on a recourse basis.  The Company is permitted to
receive advances from the European factor against uncollected amounts factored. 
Accounts receivable consisted of the following:

<TABLE>
<CAPTION>

                                                      April 30, 1998      July 31, 1998
<S>                                                   --------------      -------------
Unmatured receivables:                                <C>                 <C>
   Nonrecourse                                        $ 2,622,705         $ 1,370,992
   With recourse                                        1,945,238           1,160,880
Matured receivables                                       290,112             198,829
Advances                                                 (751,214)            (97,679)
                                                      -----------         -----------
   Due from factor                                      4,106,841           2,633,022
Non-factored receivables                               17,297,693          14,860,313
Allowance for doubtful accounts and reserve                              
    for sales returns and allowances                   (1,187,813)         (1,532,486)
                                                      -----------         -----------
                                                      $20,216,721         $15,960,849
                                                      -----------         -----------
                                                      -----------         -----------
</TABLE>

4.   LINE OF CREDIT

     The Company has a loan agreement with Washington Mutual Bank d/b/a Western
Bank ("Western Bank") for a $30.0 million revolving line of credit and a $5.0
million term credit facility.  The Western Bank revolving line of credit is to
be used for international letters of credit, working capital advances of up to
$25.0 million and fixed asset purchases of up to $5.0 million.  Interest on
borrowings is charged and payable monthly at The Wall Street Journal Prime rate
or an alternative fixed rate of Libor plus 2.0%.  The first $10.0 million of
direct debt is granted on an unsecured

                                     Page 6


<PAGE>

basis.  Direct debt in excess of $10.0 million is secured by a first lien
perfected security interest in the Company's inventory and accounts receivable. 
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 a maximum ratio of long term funded debt to earnings.  Western Bank
and Republic Business Credit Corp., the Company's factor in the United States,
have entered into an intercreditor agreement allocating between them priority as
to the Company's assets in which both financial institutions have a security
interest.  At July 31, 1998, letters of credit outstanding against this line of
credit totaled $13,514,202 and there were no working capital advances.

The Company's European subsidiary has a loan agreement with Cooperatieve
Rabobank "Huizen" B.A. ("Rabobank") for a $1.8 million line of credit.  The line
of credit with Rabobank is to be used for international letters of credit and
working capital advances.  Interest on borrowings is charged and payable
quarterly at a variable rate (4.95% at July 31, 1998).  The line of credit is
secured by the Company's European inventory, an irrevocable standby letter of
credit issued by Western Bank of $1.6 million and subordination of $2.2 million
of intercompany debt.  At July 31, 1998, letters of credit outstanding against
this line of credit totaled $385,657 and working capital advances totaled
$992,283.


5.   SHAREHOLDERS' EQUITY

     The Company has four stock incentive plans that provide for the granting of
options to employees, officers and directors of the Company to purchase up to
875,313 shares of Common Stock and the granting of shares of restricted stock to
these individuals as well as consultants or advisors of the Company.  Options
granted under the 1991 plan provide for 50% vesting on the first anniversary
from the date of grant and 25% vesting on each of the second and third
anniversaries.  Options granted under the 1995 employee plan generally provide
for vesting over a four-year period with vesting at 25% each year.  Options
granted under the 1995 director plan become exercisable six months after the
date of grant.  Options or shares granted under the 1997 stock incentive plan
are subject to terms established by the Compensation Committee of the Board of
Directors and generally provide for vesting of options over a four-year period
with vesting at 25% each year.  Options granted under these plans expire after
10 years and have been granted at fair market value on the date of grant.  At
July 31, 1998, options to purchase 521,554 shares of common stock were
outstanding under these plans, of which options to purchase 188,464 shares were
exercisable.  As of July 31, 1998, no shares of restricted stock have been
granted.  At July 31, 1998, 163,649 shares under these plans remained available
for future grant.

6.   REPORTING COMPREHENSIVE INCOME

     As of May 1, 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income."  SFAS No. 130
establishes new rules for the reporting and display of comprehensive income and
its components; however, the adoption of this statement had no impact on the
Company's net income or shareholders' equity.  SFAS No. 130 requires unrealized
gains or losses on the Company's foreign currency translation adjustments to be
included in comprehensive income.  For quarterly reporting purposes, the
following table sets forth the components of comprehensive income:

                                                  Three months ended July 31,
                                                  ---------------------------
                                                        1997           1998  
                                                    ---------       ---------
     Net income                                     $ 475,270       $ 794,153
                                                    ---------       ---------
                                                    ---------       ---------
     Foreign currency translation adjustments         (46,970)          9,774
                                                    ---------       ---------
     Comprehensive income                           $ 428,300       $ 803,927
                                                    ---------       ---------
                                                    ---------       ---------

                                     Page 7


<PAGE>

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.  ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN ANY
FORWARD LOOKING INFORMATION.  SPECIFICALLY, THERE ARE A NUMBER OF IMPORTANT
FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
ANTICIPATED BY ANY FORWARD LOOKING INFORMATION.  THOSE FACTORS INCLUDE, BUT ARE
NOT LIMITED TO, STYLE CHANGES AND PRODUCT ACCEPTANCE, INCLUDING THE CONTINUED
ACCEPTANCE OF CASUAL DRESS IN THE OFFICE ENVIRONMENT, RELATIONS WITH SUPPLIERS
AND INDEPENDENT SALES REPRESENTATIVES, PRODUCT OR DELIVERY DELAYS, 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 EXTENSION ACTVITIES
AND TO PENETRATE ITS CHOSEN DISTRIBUTION CHANNELS, COMPETITION, FOREIGN CURRENCY
RISKS, RISKS ASSOCIATED WITH OPENING AND OPERATING A RETAIL LOCATION, POLITICAL
AND TRADE RELATIONS AND GENERAL ECONOMIC CONDITIONS.  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.

OVERVIEW

     The Company designs, sources and markets updated, traditional sportswear
and outerwear.  It distributes its products primarily through golf pro shops and
resorts, corporate sales accounts and better specialty stores.  The Company
continues to emphasize the golf distribution channel because it believes this is
an effective venue to build brand identity and to reach its target consumers who
are sports-minded and want high-quality casual clothing that reflects an active
lifestyle.  The Company has found golf pro shops to be receptive to its
distinctive product, merchandising approach and sales support.  The Company
continues to leverage a growing awareness of the Cutter & Buck brand and its
expanded product line by selling into the corporate channel, which is targeted
to Fortune 1000 companies.

     Historically, the Company has experienced its lowest level of net sales and
profitability in its first and third quarters, ending July 31 and January 31,
respectively.  Correspondingly, the Company's highest level of sales and
profitability have been achieved in its second and fourth quarters, ending
October 31 and April 30, respectively.  This seasonality has resulted primarily
from the timing of shipments to golf pro shops and specialty stores due to
seasonal fluctuations in consumer demand, the timing and amount of orders from
key customers, the timing of sales of seasonal remainder merchandise and
availability of product.  This pattern of sales affects working capital
requirements and liquidity, as the Company generally must finance higher levels
of inventory during the first and third quarters in advance of sales taking
place in the second and fourth quarters.

RESULTS OF OPERATIONS

     THREE MONTHS ENDED JULY 31, 1998 COMPARED WITH THREE MONTHS ENDED JULY 31,
     1997

     NET SALES increased 43.5% in the three months ended July 31, 1998 to
$17,763,495 from $12,378,031 in the three months ended July 31, 1997.  For the
first quarter of fiscal 1999 compared to the first quarter of fiscal 1998, net
sales to the golf distribution channel increased 39.1% or $2,605,219 to
$9,267,998, net sales to the corporate channel increased 57.6% or $2,129,387 to
$5,824,294 and net sales to the specialty store channel increased 39.4% or
$446,273 to $1,579,657.  Other sales, including sales to the liquidation and
international channels, increased 19.7% or $204,585 to $1,040,982 for the three
months ended July 31, 1998 compared to the same three month period of the
previous year.  Net sales in the golf distribution channel through the Company's
European subsidiaries included in these figures increased 51.6%, or $421,718 to
$1,239,214.

     GROSS PROFIT increased in the three months ended July 31, 1998 to
$7,612,310 from $4,960,362 in the three months ended July 31, 1997.  Gross
profit as a percentage of net sales was 42.9% for the first quarter of fiscal
1999 compared to 40.1% for the first quarter of fiscal 1998.  The increase in
gross profit margin in the first quarter of fiscal 1999 was primarily due to the

                                     Page 8


<PAGE>

Company's ability to negotiate lower production costs based on higher volumes,
and due to reduced embroidery costs related to the Company's in-house embroidery
operation.

     OPERATING EXPENSES increased to $6,451,895 in the three months ended July
31, 1998 from $4,242,601 in the three months ended July 31, 1997, and increased
as a percentage of net sales to 36.3% in the first quarter of fiscal 1999 from
34.3% in the first quarter of fiscal 1998.  The increase in operating expenses
when expressed as a percentage of net sales reflects increased investments in
senior management, brand promotion and distribution, systems, staffing and
facilities in support of the Company's growth.  Selling and handling expenses
increased by $1,339,418 making up 60.6% of the overall increase in operating
expenses.  The majority of the increase in selling and handling expenses was due
to increased sales commissions, staffing costs and travel related to a higher
sales volume and a larger sales force.  The Company also has increased its
advertising expenditures and has incurred additional handling expenses
associated with expanding its warehouse facility in Seattle and supporting the
increase in sales volume.  General and administrative expenses increased by
$686,421 making up 31.1% of the overall increase in operating expenses.  The
majority of the increase in general and administrative expenses was due to
increased staffing costs, professional fees and other operating costs to support
expanded operations.  Design and production expenses increased by $183,455
primarily due to the costs associated with expansion of the Company's sportswear
collections, including the addition of a women's line of apparel along with
expanded product sourcing.

     OTHER INCOME.  Net interest and factor commission expense was $33 in the
quarter ended July 31, 1998 compared $11,081 in the quarter ended July 31, 1997.
The reduction in this net expense is primarily due to increased interest income
earned on invested cash balances.  License and royalty income earned under
licensing contracts totaled $80,771 for the three months ended July 31, 1998 and
$53,144 for the three months ended July 31, 1997.  The increase in license and
royalty income was primarily due to increased sales volume of the Company's
existing licensees.  The Company experienced no material gain or loss on foreign
currency transactions in the quarter ended July 31, 1998 compared to a loss of
$39,554 in the quarter ended July 31, 1997.

     INCOME TAXES.  The Company recorded $447,000 of income tax expense in the
three months ended July 31, 1998 and $245,000 in the three months ended July 31,
1997.  Tax expense has been recorded at statutory rates.

     As a result of the foregoing factors, the Company had NET INCOME of
$794,153 for the three months ended July 31, 1998 compared to $475,270 for the
three months ended July 31, 1997.

LIQUIDITY AND CAPITAL RESOURCES

     The Company's primary need for funds is to finance working capital
associated with growth in sales volume, specifically accounts receivable and
finished goods inventory.  Working capital for the three months ended July 31,
1998 was funded primarily by profitable operations and collections of accounts
receivable.

     Net cash generated by operating activities was $1,956,033 for the three
months ended July 31, 1998 compared to $80,759 for the three months ended July
31, 1997.  For the three months ended July 31, 1998, cash was primarily provided
by net income and by a net decrease in accounts receivable of $4,909,407 which
were offset by an increase in inventory of $3,030,627 and an increase in prepaid
expenses of $903,457.  The reduction in accounts receivable is
primarily seasonal in nature.  The increase in inventory primarily relates to
planned sales volume in the second quarter and purchases of products with multi-
season appeal.  For the three months ended July 31, 1997, cash was primarily
provided by net income and by a net decrease in accounts receivable of
$3,105,649 which were offset by an increase in inventory of $1,215,623, a
reduction in accounts payable and accrued liabilities of $2,324,740 and a
reduction in income taxes payable of $327,000.

                                     Page 9


<PAGE>

     Net cash used in investing activities of $664,289 for the three months
ended July 31, 1998 was primarily attributable to investments in warehouse
equipment and leasehold improvements totaling $136,000, in-store fixtures of
$276,000, computer systems and equipment totaling $66,000, other furniture and
equipment totaling $124,000 and investments in trademarks of $62,000.  For the
three months ended July 31, 1997, net cash used in investing activities was
$426,092 and was primarily attributable to purchases of in-store fixtures
totaling $169,000 investments in warehouse equipment and leasehold improvements
totaling $169,000 and purchases of other furniture, equipment totaling $27,000
and investments in trademarks of $61,000.

     Net cash provided by financing activities for the three months ended July
31, 1998 was $1,186,526 compared to net cash used of $3,182 during the three
months ended July 31, 1997.  During the three months ended July 31, 1998, the
Company sold 176,960 shares under its employee stock purchase plan and pursuant
to the exercise of stock options and warrants, generating $1,374,043, increased
its borrowing from banks by $505,370 and decreased its borrowing from the factor
by $653,535  For the three months ended July 31, 1997, cash used for financing
activities of $3,182 was primarily due to $136,644 generated by the sale of
47,534 shares of Common Stock under its employee stock purchase plan and
pursuant to the exercise of stock options, offset by decreased borrowing from
the factor totaling $102,536 and principal payments on capital leases totaling
$37,290.

     The Company has a loan agreement with Washington Mutual Bank d/b/a Western
Bank for a $35 million line of credit and a loan agreement with Cooperatieve
Rabobank "Huizen" B.A., for a $2 million line of credit which are more fully
described in footnote four to the Company's financial statements on page seven
hereof.

YEAR 2000

     The Company recognizes the need to ensure that its systems, applications
and hardware will recognize and process transactions for the year 2000 and
beyond.  With the recent hire of a Chief Information Officer, the Company has
developed and begun implementing a company-wide plan which includes identifying
all issues related to the impact of year 2000 on its internal systems by October
31, 1998 and addressing deficiencies before March 31, 1999.  The Company expects
to implement successfully the systems and programming changes necessary to
address year 2000 issues with respect to its internal systems and believes that
the total cost of such actions will be approximately $100,000.  Due to the
nature of the Company's business, its operations generally do not include
significant systems relying on embedded technology such as microcontrollers
which are difficult to evaluate and repair.
     
     The Company has a fully integrated, real-time management information system
that is specifically designed for the apparel industry.  The system runs on a
UNIX platform with IBM's RISC 6000 hardware.  The Company has received
assurances from the vendors for these systems that they are year 2000 compliant.
The Company is developing a complete testing program for both systems to verify
compliance and will complete this testing by March 1999.  In the event these
systems fail the testing program, the Company's existing information technology
staff will be augmented by outside professionals to remedy the deficiencies.
     
     The Company is in the process of identifying and working with its
significant suppliers, customers and financial institutions to ensure that those
parties have appropriate plans to remediate year 2000 issues when their systems
interface with the Company's systems or may otherwise impact operations.
     
     Although the Company is not presently aware of any material operational
issues or costs associated with preparing its internal systems for the year
2000, there can be no assurance that there will not be a delay in, or increased
costs associated with, the implementation of the necessary systems and changes
to address the year 2000 issues. The Company and its significant suppliers,
customers, and financial institutions' inability to implement such systems and
changes could have an adverse effect on future results of operations.
                                     Page 10


<PAGE>

PART II - OTHER INFORMATION

Item 1.    Legal Proceedings

           None

Item 2.    Changes in Securities

           None

Item 3.    Defaults Upon Senior Securities

           None

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

           None

Item 5.    Other Information

           None

Item 6.    Exhibits and Reports on Form 8-K

           a)   Exhibits

                None


           b)   Reports on Form 8-K

                There were no reports on Form 8-K filed during the first
                quarter ended July 31, 1998.

                                     Page 11


<PAGE>

                                     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:  September 11, 1998             By  /s/ Stephen S. Lowber
                                         ----------------------------
                                           Stephen S. Lowber
                                           Vice-President and
                                           Chief Financial Officer
                                           (Principal Financial and
                                           Accounting Officer)


                                    Page 12