U.S. SECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549

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Form 10-Q

|ý                                                             |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------
|For the quarterly period ended January 31, 2004              
|or                                                           
|o                                                             |  | 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

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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.)
|----------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------
|701 N. 34th Street, Suite 400
Seattle, WA 98103(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 ý    No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in rule 12b-2 of the Exchange
Act). Yes o    No ý

The number of shares of Common Stock of the registrant outstanding as of March 12, 2004 was 10,714,499.

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CUTTER & BUCK INC.  Quarterly Report on Form 10-Q  For the Quarter Ended January 31, 2004

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 |     
|                             | Item 3. |                                                      | Quantitative and Qualitative Disclosures about Market Risk                            |     
|                             | Item 4. |                                                      | Controls and Procedures                                                               |     
|PART IIOTHER INFORMATION    |         |                                                     
|                             | Item 1. |                                                      | Legal Proceedings                                                                     |     
|                             | Item 2. |                                                      | Changes in Securities and Use of Proceeds                                             |     
|                             | Item 3. |                                                      | Defaults Upon Senior Securities                                                       |     
|                             | Item 4. |                                                      | Submission of Matters to a Vote of Security Holders                                   |     
|                             | Item 5. |                                                      | Other Information                                                                     |     
|                             | Item 6. |                                                      | Exhibits and Reports on Form 8-K                                                      |     
|SIGNATURES                   |         | 27                                                  

2

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PART IFINANCIAL INFORMATION

Item 1. Financial Statements

CUTTER & BUCK INC.  Condensed Consolidated Balance Sheets

|                                                |                                                                                                                                                  | January 31, 2004                           |       | April 30, 2003 |       
|----------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------ | ----- | -------------- | ------
|
|(in thousands, except share amounts)            |                                                                                                                                                  |                                            |       |                |       
|Assets                                          |                                                                                                                                                  |                                            |       |                |       
|Current assets:                                 |                                                                                                                                                  |                                            |       |                |       
|                                                | Cash and cash equivalents                                                                                                                        |                                            | $     | 23,058         |       
|                                                | Short-term investments                                                                                                                           |                                            |       | 18,953         |       
|                                                | Accounts receivable, net of allowances for doubtful accounts and returns of $2,131 at January 31, 2004 and $3,746 at April 30, 2003              |                                            |       | 13,159         |       
|                                                | Inventories, net                                                                                                                                 |                                            |       | 24,517         |       
|                                                | Deferred income taxes                                                                                                                            |                                            |       | 1,244          |       
|                                                | Prepaid expenses and other current assets                                                                                                        |                                            |       | 2,714          |       
|                                                |                                                                                                                                                  |                                            |       |                |       
|                                                |                                                                                                                                                  | Total current assets                       |       |                | 83,645
|Furniture and equipment, net                    |                                                                                                                                                  |                                            | 6,580 |                |       
|Deferred income taxes                           |                                                                                                                                                  |                                            | 178   |                |       
|Other assets                                    |                                                                                                                                                  |                                            | 320   |                |       
|                                                |                                                                                                                                                  |                                            |       |                |       
|                                                |                                                                                                                                                  | Total assets                               |       | $              | 90,723
|                                                |                                                                                                                                                  |                                            |       |                |       
|Liabilities and Shareholders' Equity            |                                                                                                                                                  |                                            |       |                |       
|Current liabilities:                            |                                                                                                                                                  |                                            |       |                |       
|                                                | Accounts payable                                                                                                                                 |                                            | $     | 4,971          |       
|                                                | Accrued liabilities                                                                                                                              |                                            |       | 7,815          |       
|                                                | Current portion of capital lease obligations                                                                                                     |                                            |       | 574            |       
|                                                | Other current liabilities                                                                                                                        |                                            |       | 219            |       
|                                                |                                                                                                                                                  |                                            |       |                |       
|                                                |                                                                                                                                                  | Total current liabilities                  |       |                | 13,579
|Capital lease obligations, less current portion |                                                                                                                                                  |                                            | 241   |                |       
|Other liabilities                               |                                                                                                                                                  |                                            | 2,294 |                |       
|Commitments and contingencies                   |                                                                                                                                                  |                                            |      |                |       
|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: 10,712,049 issued and outstanding at January 31, 2004 and 10,634,132 at April 30, 2003 |                                            |       | 65,056         |       
|                                                | Deferred compensation                                                                                                                            |                                            |       |               |       
|                                                | Retained earnings                                                                                                                                |                                            |       | 9,553          |       
|                                                |                                                                                                                                                  |                                            |       |                |       
|                                                |                                                                                                                                                  | Total shareholders' equity                 |       |                | 74,609
|                                                |                                                                                                                                                  |                                            |       |                |       
|                                                |                                                                                                                                                  | Total liabilities and shareholders' equity |       | $              | 90,723
|                                                |                                                                                                                                                  |                                            |       |                |       

See
accompanying notes

3

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

|                                                              |                                     | Three Months Ended |        | Nine Months Ended |  
|------------------------------------------------------------- | ----------------------------------- | ------------------ | ------ | ----------------- | -
|
|(in thousands, except share and per share amounts)            |                                     |                    |        |                   |  
|Net sales                                                     |                                     | $                  | 22,540 |                   | $
|Cost of sales                                                 |                                     |                    | 12,507 |                   |  
|                                                              |                                     |                    |        |                   |  
|Gross profit                                                  |                                     |                    | 10,033 |                   |  
|Operating expenses:                                           |                                     |                    |        |                   |  
|                                                              | Depreciation                        |                    |        | 1,040             |  
|                                                              | Selling, general and administrative |                    |        | 9,025             |  
|                                                              | Restructuring and asset impairment  |                    |        | (65               | )
|                                                              | Restatement expenses                |                    |        | 1,172             |  
|                                                              |                                     |                    |        |                   |  
|                                                              | Total operating expenses            |                    |        | 11,172            |  
|                                                              |                                     |                    |        |                   |  
|Operating income (loss)                                       |                                     |                    | (1,139 | )                 |  
|Interest income (expense)                                     |                                     |                    |        |                   |  
|                                                              | Interest expense                    |                    |        | (31               | )
|                                                              | Interest income                     |                    |        | 108               |  
|                                                              |                                     |                    |        |                   |  
|                                                              | Net interest expense                |                    |        | 77                |  
|                                                              |                                     |                    |        |                   |  
|Income (loss) from continuing operations before income taxes  |                                     |                    | (1,062 | )                 |  
|Income tax expense (benefit)                                  |                                     |                    | (205   | )                 |  
|                                                              |                                     |                    |        |                   |  
|Net income (loss) from continuing operations                  |                                     |                    | (857   | )                 |  
|Income (loss) from discontinued retail operations, net of tax |                                     |                    |       |                   |  
|                                                              |                                     |                    |        |                   |  
|Net income (loss)                                             |                                     | $                  | (857   | )                 | $
|                                                              |                                     |                    |        |                   |  
|Basic earnings (loss) per share:                              |                                     |                    |        |                   |  
|Net earnings (loss) from continuing operations                |                                     | $                  | (0.08  | )                 | $
|Net earnings (loss) from discontinued retail operations       |                                     | $                  |       |                   | $
|Net earnings (loss)                                           |                                     | $                  | (0.08  | )                 | $
|Diluted earnings (loss) per share:                            |                                     |                    |        |                   |  
|Net earnings (loss) from continuing operations                |                                     | $                  | (0.08  | )                 | $
|Net earnings (loss) from discontinued retail operations       |                                     | $                  |       |                   | $
|Net earnings (loss)                                           |                                     | $                  | (0.08  | )                 | $
|Shares used in computation of:                                |                                     |                    |        |                   |  
|                                                              | Basic earnings (loss) per share     |                    |        | 10,706,372        |  
|                                                              |                                     |                    |        |                   |  
|                                                              | Diluted earnings (loss) per share   |                    |        | 10,706,372        |  
|                                                              |                                     |                    |        |                   |  

See
accompanying notes

4

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

|                                                                                         |                                                       | Nine Months Ended                                           |        
|---------------------------------------------------------------------------------------- | ----------------------------------------------------- | ----------------------------------------------------------- | -------
|
|(in thousands)                                                                           |                                                       |                                                             |        
|Operating activities:                                                                    |                                                       |                                                             |        
|Net income (loss)                                                                        |                                                       | $                                                           | 2,333  
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |                                                       |                                                             |        
|                                                                                         | Depreciation                                          |                                                             |        
|                                                                                         | Deferred gain on sale and leaseback of capital assets |                                                             |        
|                                                                                         | Gain on disposals of furniture and equipment          |                                                             |        
|                                                                                         | Amortization of deferred compensation                 |                                                             |        
|                                                                                         | Noncash compensation expense                          |                                                             |        
|                                                                                         | Noncash restructuring and asset impairment charges    |                                                             |        
|                                                                                         | Changes in assets and liabilities:                    |                                                             |        
|                                                                                         |                                                       | Accounts receivable, net                                    |        
|                                                                                         |                                                       | Inventories, net                                            |        
|                                                                                         |                                                       | Prepaid expenses and other assets                           |        
|                                                                                         |                                                       | Accounts payable, accrued liabilities and other liabilities |        
|                                                                                         |                                                       |                                                             |        
|Net cash provided by operating activities                                                |                                                       |                                                             | 25,515 
|Investing activities:                                                                    |                                                       |                                                             |        
|Purchases of furniture and equipment                                                     |                                                       |                                                             | (1,038 
|Purchases of short-term investments                                                      |                                                       |                                                             | (26,933
|Maturities of short-term investments                                                     |                                                       |                                                             | 7,980  
|Decrease in trademark, patents and marketing rights                                      |                                                       |                                                             |       
|                                                                                         |                                                       |                                                             |        
|Net cash used in investing activities                                                    |                                                       |                                                             | (19,991
|Financing activities:                                                                    |                                                       |                                                             |        
|Principal payments under capital lease obligations                                       |                                                       |                                                             | (1,581 
|Transfer to restricted cash                                                              |                                                       |                                                             |       
|Issuance of common stock                                                                 |                                                       |                                                             | 251    
|                                                                                         |                                                       |                                                             |        
|Net cash used in financing activities                                                    |                                                       |                                                             | (1,330 
|                                                                                         |                                                       |                                                             |        
|Net increase in cash and cash equivalents                                                |                                                       |                                                             | 4,194  
|Cash and cash equivalents, beginning of period                                           |                                                       |                                                             | 18,864 
|                                                                                         |                                                       |                                                             |        
|Cash and cash equivalents, end of period                                                 |                                                       | $                                                           | 23,058 
|                                                                                         |                                                       |                                                             |        

See
accompanying notes

5

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Cutter & Buck Inc.  Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by Cutter & Buck Inc. (the Company) in accordance with
accounting principles generally accepted in the United States for interim financial statements and in accordance 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 and nine months ended January 31, 2004 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, 2003, included in the Company's filing on Form 10-K.

Investments

The Company invests in interest-bearing U.S. Government and high-quality corporate debt instruments. Management determines the appropriate
classification of these investments at the time of purchase and re-evaluates such classification as of each balance sheet date. At January 31, 2004, the Company's investment
portfolio was classified as held-to-maturity, and the Company has the positive intent and ability to hold the securities to maturity. The investment portfolio is carried at
amortized cost, which approximates fair market value. Management regularly reviews the carrying value of investments in order to identify and record losses when events and circumstances indicate that
declines in the fair value of such assets below amortized cost are other-than-temporary. None of these investments had declines in fair market value below amortized cost during
the nine months ended January 31, 2004.

Stock-Based Compensation

The Company accounts for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations. The Company has elected to apply the disclosure-only provisions of Statement of Financial Accounting Standards (SFAS)
No. 123, "Accounting for Stock-Based Compensation," as amended by SFAS No. 148, "Accounting for Stock-based CompensationTransition and Disclosure." Compensation expense for
stock options is recognized over the vesting period of the grant based on the excess, if any, of the market price of the Company's common stock at the date of grant over the stock option exercise
price. Under the Company's plans, stock options are generally granted at fair market value on the date of grant. The Company also has an Employee Stock Purchase Plan that allows eligible employees to
purchase Company stock at a 15% discount from market price utilizing payroll deductions.

6

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If
compensation costs for stock-based compensation had been recognized based on the fair value method, the pro forma amounts of the Company's net income (loss) and net earnings (loss)
per share would have been as follows:

|                                                                                                                    |                     | Three Months Ended
January 31, |        | Nine Months Ended
January 31, |  
|------------------------------------------------------------------------------------------------------------------- | ------------------- | ------------------------------ | ------ | ----------------------------- | -
|
|Net income (loss), as reported                                                                                      |                     | $                              | (857   | )                             | $
|Add: Stock-based employee compensation expense, as reported                                                         |                     |                                |       |                               |  
|Deduct: Total stock-based employee compensation expense determined under the fair value based method for all awards |                     |                                | (302   | )                             |  
|                                                                                                                    |                     |                                |        |                               |  
|Pro forma net income (loss)                                                                                         |                     | $                              | (1,159 | )                             | $
|                                                                                                                    |                     |                                |        |                               |  
|Earnings (loss) per share:                                                                                          |                     |                                |        |                               |  
|                                                                                                                    | Basicas reported   |                                | $      | (0.08                         | )
|                                                                                                                    | Basicpro forma     |                                | $      | (0.11                         | )
|                                                                                                                    | Dilutedas reported |                                | $      | (0.08                         | )
|                                                                                                                    | Dilutedpro forma   |                                | $      | (0.11                         | )

The
fair value for each option grant was estimated at the date of grant using the Black-Scholes option pricing model, assuming no future dividends and the following weighted-average
assumptions:

Three Months Ended
January 31,

Nine Months Ended
January 31,2004

2003

2004

2003Risk-free interest rate

3.2
%
3.0
%
2.6
%
3.0
%Volatility

47
%
63
%
47
%
63
%Expected life

5 years

5 years

5 years

5 years


The
fair value for shares purchased under the Employee Stock Purchase Plan was estimated at the date of purchase using the Black-Scholes option pricing model, assuming no future
dividends and the following weighted-average assumptions. Shares are purchased twice a year under this Plan, in the first and third fiscal quarters. No shares are purchased in the second or fourth
fiscal quarters.

Three Months Ended
January 31,

Nine Months Ended
January 31,2004

2003

2004

2003Risk-free interest rate

3.2
%
2.9
%
2.8
%
2.7
%Volatility

47
%
63
%
47
%
63
%Expected life

6 months

6 months

6 months

6 months


Stock
compensation expense for options granted to non-employees is determined in accordance with SFAS No. 123 and the Emerging Issues Task Force (EITF) consensus in
Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services" (EITF
No. 96-18). Accordingly, expense is recognized

7

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over
the vesting period of the grant based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measured.

Segments

The Company has one business segment, "wholesale." This segment consists of designing, marketing, sourcing and selling high-quality sportswear under
the Cutter & Buck brand to golf pro shops and resorts, corporate accounts, upscale specialty retail stores, international distributors and licensees and our e-commerce business. The
results of this segment are used by the Company's chief operating decision maker to evaluate operating performance and allocate resources.

Note 2. Reclassifications

Certain prior year balances have been reclassified to conform to current-year presentation. These reclassifications primarily reflect the closure of
the Company-owned retail stores in fiscal 2003. The historical results of retail operations are presented as discontinued retail operations.

Note 3. 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.

Note 4. Short-term investments

Short-term investments held-to-maturity consisted of the following securities, all of which mature within one year:

(in thousands)

Amortized
cost

Gross
unrealized
gains

Gross
unrealized
losses

Estimated
fair valueU.S. Corporate debt securities

$
18,953

$
27

$


$
18,980Total

$
18,953

$
27

$


$
18,980


Note 5. Debt

The Company has a loan agreement with Wells Fargo Bank, N.A. (Wells Fargo) as agent and Wells Fargo Century, an affiliate of Wells Fargo, as collateral agent and
lender for a $35 million line of credit that expires in March 2005. This agreement is collateralized by a security interest in the Company's accounts receivable, inventory, furniture and
equipment, contract rights and general intangibles. The loan agreement contains certain restrictive covenants covering minimum net worth, minimum working capital and maximum capital expenditures.
These financial covenants require that the Company maintains a tangible net worth of at least $50 million, working capital of at least $35 million at all times, and limit capital
expenditures to not more than $2.5 million in each of fiscal years 2004 and 2005. The Company was in compliance with these covenants at January 31, 2004. At January 31, 2004,
letters of credit outstanding against this line of credit totaled approximately $6.9 million and there were

8

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no
working capital advances outstanding. At January 31, 2003, letters of credit outstanding against the previous line of credit totaled approximately $13.1 million and there were no
working capital advances outstanding.

Note 6. Shareholders' Equity

During the nine months ended January 31, 2004, the Company sold 77,917 shares under its employee stock purchase plan and pursuant to the exercise of stock
options.

Note 7. Restructuring, Asset Impairment and Discontinued Retail Operations Expenses

The Company has two restructuring plans, the 2002 Restructuring Plan and the 2003 Restructuring Plan. The 2002 Restructuring Plan included closing the Company's
wholly-owned European subsidiary, refining the Company-owned retail store strategy, closing four Company-owned retail stores, consolidating and restructuring the women's line sales forces,
discontinuing certain product lines, recording losses on subleases of excess warehouse capacity and certain management changes. The 2003 Restructuring Plan covered the closure of ten additional retail
stores, so that all Company-owned retail stores were closed by April 30, 2003. Costs associated with the 2002 Restructuring Plan, excluding costs associated with refining the Company's retail
strategy and closing its retail stores, are included in Restructuring and Asset Impairment Expenses. Costs associated with the 2003 Restructuring Plan and the costs associated with refining the
Company's retail strategy and closing its retail stores included in the 2002 Restructuring Plan are included in Discontinued Retail Operations.



In
the third quarter of fiscal 2002, the Company implemented a restructuring plan to reduce its operating costs, streamline its organizational structure and focus on those areas of its
business that it believes will provide the greatest growth and profit opportunities. A major initiative of this restructuring plan included closing the Company's wholly-owned European subsidiary,
Cutter & Buck (Europe) B.V. and establishing a third-party licensing relationship to serve key European markets. Effective May 1, 2002, the Company entered into a license agreement with
Eurostyle Ltd. (Eurostyle) to distribute its men's and women's Golf and Classic apparel collections and golf accessories throughout Europe. The license agreement requires Eurostyle to make
certain minimum royalty payments and expires on April 30, 2010. Effective May 1, 2002, the Company also entered into an asset purchase agreement with Eurostyle to sell them inventory,
certain accounts receivable balances and fixtures for a total purchase price of $1.1 million. This agreement covered substantially all of the remaining inventory, fixturing, furniture and
equipment in Europe.

Other
major initiatives under the plan included refining the Company-owned retail store strategy, closing four under-performing Company-owned retail stores in fiscal 2003, consolidating
and restructuring the women's line sales forces, discontinuing the golf shoe business, discontinuing the dressier side of the women's line, recording losses on subleases of excess warehouse capacity
at the Company's distribution center and making certain management changes.

9

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The
components of the 2002 Restructuring Plan charges were as follows:

|                                                                            |  | Three Months Ended |     | Nine Months Ended |  
|--------------------------------------------------------------------------- |  | ------------------ | --- | ----------------- | -
|
|Lease obligations                                                           |  | $                  |    |                   | $
|Asset impairment                                                            |  |                    | (82 | )                 |  
|Foreign currency translation gain                                           |  |                    | 17  |                   |  
|Other restructuring costs                                                   |  |                    |    |                   |  
|                                                                            |  |                    |     |                   |  
|Total charges under the 2002 Restructuring Plan                             |  |                    | (65 | )                 |  
|Reclassified to discontinued retail operations                              |  |                    |    |                   |  
|                                                                            |  |                    |     |                   |  
|Restructuring and asset impairment charges related to continuing operations |  | $                  | (65 | )                 | $
|                                                                            |  |                    |     |                   |  

The
$0.1 million reduction in restructuring and asset impairment expenses primarily related to accrual adjustments.

For
the nine months ended January 31, 2004, activity in the accrued liability account associated with the cash portion of charges in the 2002 Restructuring Plan consisted of the
following:

|(in thousands)            |  | Balance at
April 30,
2003 |       | Subsequent
Accruals,
Net |   | Subsequent
Payments |  | Balance at
January 31,
2004 |      | Due
Within
1 Year |   | Due
After
1 Year
|------------------------- |  | ------------------------- | ----- | ------------------------ | - | ------------------- |  | --------------------------- | ---- | ----------------- | - | ----------------
|Lease obligations         |  | $                         | 2,855 |                          | $ |                    |  | $                           | (240 | )                 | $ | 2,615           
|Other restructuring costs |  |                           | 73    |                          |   | 24                  |  |                             | (90  | )                 |   | 7               
|                          |  |                           |       |                          |   |                     |  |                             |      |                   |   |                 
|                          |  | $                         | 2,928 |                          | $ | 24                  |  | $                           | (330 | )                 | $ | 2,622           
|                          |  |                           |       |                          |   |                     |  |                             |      |                   |   |                 

Total
severance and termination benefits as a result of the 2002 Restructuring Plan related to 63 employees, all of whom have been terminated. Total cash paid for severance and
termination benefits was approximately $0.7 million and was fully paid in fiscal year 2003.

(b) 2003
Restructuring Plan

In
the third quarter of fiscal 2003 the Company announced plans to close its remaining ten retail stores, and all stores were closed by April 30, 2003. This plan included lease
termination costs, termination and severance benefits paid as a result of the involuntary termination of 88 employees located at both the retail stores and corporate retail division, the
write-down of other current assets, furniture and equipment and deferred rent to net realizable value and other costs resulting from the closure of the retail stores.

10

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The
components of the 2003 Restructuring Plan charges were as follows:

|                                                                            |  | Three Months Ended |   | Nine Months Ended |  
|--------------------------------------------------------------------------- |  | ------------------ | - | ----------------- | -
|
|Lease obligations                                                           |  | $                  |  |                   | $
|Termination benefits                                                        |  |                    |  |                   |  
|Other restructuring costs                                                   |  |                    |  |                   |  
|                                                                            |  |                    |   |                   |  
|Total charges under the 2003 Restructuring Plan                             |  |                    |  |                   |  
|Reclassified to discontinued retail operations                              |  |                    |  |                   |  
|                                                                            |  |                    |   |                   |  
|Restructuring and asset impairment charges related to continuing operations |  | $                  |  |                   | $
|                                                                            |  |                    |   |                   |  

For
the nine months ended January 31, 2004, activity in the accrued liability account associated with the cash portion of charges in the 2003 Restructuring Plan consisted of the
following:

|(in thousands)            |  | Balance at
April 30,
2003 |     | Subsequent
Accruals,
Net |   | Subsequent
Payments |   | Balance at
January 31,
2004 |      | Due
Within
1 Year |   | Due
After
1 Year
|------------------------- |  | ------------------------- | --- | ------------------------ | - | ------------------- | - | --------------------------- | ---- | ----------------- | - | ----------------
|Lease obligations         |  | $                         | 435 |                          | $ | (288                | ) | $                           | (147 | )                 | $ |                
|Termination benefits      |  |                           | 31  |                          |   | (1                  | ) |                             | (30  | )                 |   |                
|Other restructuring costs |  |                           | 433 |                          |   | 42                  |   |                             | (451 | )                 |   | 24              
|                          |  |                           |     |                          |   |                     |   |                             |      |                   |   |                 
|                          |  | $                         | 899 |                          | $ | (247                | ) | $                           | (628 | )                 | $ | 24              
|                          |  |                           |     |                          |   |                     |   |                             |      |                   |   |                 

As
of April 30, 2003 all of the retail store employees had been terminated. Approximately $0.2 million in severance and termination benefits relating to the retail store
closure was paid out by April 30, 2003 and the remainder was paid out during the first half of fiscal 2004.

The
$0.3 million reduction in the lease obligation accrual during the first nine months of fiscal 2004 related to favorable lease termination negotiations and lower than expected
exit costs.

Note 8. Restatement Expenses

In fiscal 2002, the Company restated certain financial statements for irregularities and errors. As a result of the circumstances underlying the restatement,
three shareholder class action lawsuits and a shareholder derivative lawsuit were filed, naming the Company and certain of its current and former directors and officers as defendants. The Company
settled those lawsuits and paid $4.0 million to the plaintiffs. The Company also settled the previously announced Securities and Exchange Commission investigation of the Company arising from
the circumstances underlying the restatement. That settlement did not require payment of any fines or penalties.

Restatement
expenses amounted to approximately $1.2 million for the three months ended January 31, 2004 and included $0.9 million of legal and professional fees, of
which $0.1 million we have advanced in connection with the indemnification of former officers, and $0.3 million of accrued retention bonuses to certain key employees. Restatement
expenses amounted to approximately $4.5 million for the first nine months of fiscal 2004 and included $3.3 million of legal and professional fees, of which $0.9 million we have
been required to pay in advance in connection with the

11

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indemnification
of former officers, $1.0 million of accrued retention bonuses to certain key employees and $0.2 million of amortization of the premium for the replacement directors' and
officers' liability insurance. Although the restatement has been completed, the Company expects to continue to incur legal and other professional service costs in connection with the indemnification
of former officers and the appeal of the Company's lawsuit against Genesis Insurance Company. These expenses cannot be estimated at this time. In addition, there will be an ongoing charge each quarter
until March 2004 for the retention bonuses, which will aggregate to as much as $2.0 million payable in fiscal 2004.

Note 9. Litigation

As previously disclosed, following the announcement in 2002 that the Company would restate its historical financial results, the Company and certain of its
current and former directors and officers were named defendants in three shareholder class actions filed in the United States District Court for the Western District of Washington alleging violations
of federal securities laws (the "Securities Suits"): Steven Bourret v. Cutter & Buck Inc., Harvey N. Jones and Stephen S. Lowber; Stanley Sved v. Cutter & Buck Inc. and
Harvey N. Jones; and Jason P. Hebert v. Cutter & Buck Inc., Harvey N. Jones and Stephen S. Lowber. In addition, we and certain of our current and former directors and officers were named
defendants in a shareholder derivative suit (the "Derivative Suit") filed in the Superior Court of the State of Washington, for King county: Morris Haimowitz Derivatively on behalf of Cutter &
Buck, Inc. [sic] v. Frances.M. Conley, Michael S. Brownfield, Larry C. Mounger, James C. Towne, Harvey N. Jones, Martin J. Marks, Stephen S. Lowber and Cutter &
Buck, Inc. [sic].

On
September 12, 2003, the Company entered into a Stipulation and Agreement of Settlement with the lead plaintiff in the Securities Suits and the plaintiff in the Derivative Suit.
As part of the settlement, the Derivative Suit was refiled in the United States District Court for the Western District of Washington. On December 2, 2003, the United States District Court for
the Western District of Washington granted final approval of that settlement, and dismissed the Securities Suits and the federal Derivative Suit. The state Derivative Suit was subsequently dismissed
by order of the Superior Court of the State of Washington, for King County, on December 10, 2003.

During
the period covered by this report the Company was also a party to its lawsuit against Genesis Insurance Company in the United States District Court for the Western District of
Washington. The Company's complaint alleged that Genesis' attempt to rescind its primary Directors' and Officers'
liability insurance was unlawful, and sought damages resulting from Genesis' breach of contract and the duty of good faith and fair dealing. On February 11, 2004, the Court entered an Order
granting Genesis' motions for summary judgment and, accordingly, the Company's claims against Genesis were dismissed on February 13, 2004. On March 1, 2004 the Company filed a motion
asking the Court to alter its decision and vacate this judgement, and on March 11, 2004, the Company filed a notice of appeal of the Court's decision to the Ninth Circuit Court of Appeals.

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

Note 10. Income Taxes

The Company recorded approximately $1.2 million of income tax expense in the first nine months of fiscal year 2004 compared to approximately
$0.8 million of income tax benefit in the first nine

12

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months
of fiscal year 2003. The Company has provided a valuation allowance against deferred tax assets. This allowance is periodically adjusted based on the Company's estimates of future taxable
income and the expected realization of deferred tax assets. As a result, the effective rates for income taxes were 35.7% and 21.4% for the first nine months of fiscal years 2004 and 2003,
respectively.

Note 11. Related Party Transactions

The Company had a Transition and Release Agreement with a former officer and director, pursuant to which this former officer executed promissory notes in favor of
the Company in the amounts of $80,000 and $165,223. Under the terms of this Agreement, the Company was required to cancel the $80,000 promissory note if certain conditions were met as of
May 11, 2003. Effective May 14, 2003, the Company entered into a "standstill" agreement with this former officer. Under the terms of the standstill agreement, the Company and this former
officer agreed to postpone any determination of their respective rights and obligations under the Transition and Release Agreement until March 14, 2004.

The
Company and this former officer have terminated the standstill agreement as of March 10, 2004. In accordance with the terms of the Transition and Release Agreement, the
Company has cancelled the $80,000 promissory note. The former officer repaid the $165,223 promissory note on March 10, 2004, which was recorded in accounts receivable at January 31,
2004.

The
Company also had a loan arrangement with a former officer which was recorded in accounts receivable and totaled $294,037, including interest, at January 31, 2004. The
outstanding balance on this loan was satisfied on February 17, 2004.

Note 12. Subsequent Events

On March 10, 2004 the Board of Directors approved the initiation of a quarterly dividend and a stock repurchase program. A dividend of $0.05 a share will
be payable on April 9, 2004 to shareholders of record on March 26, 2004. The stock repurchase program authorizes the purchase of up to $6 million in company stock. The purchases
may be made from time to time in the open market or in privately negotiated transactions. The repurchase program may be suspended at any time without notice. The timing of repurchases and the actual
number of shares repurchased will depend on market conditions, alternative uses of capital and other factors.

13

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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 statements. You should be aware that our actual results
could differ materially from those contained in any forward-looking statements. Our actual results will depend upon a number of factors, including, but not limited to, the following: our ability to
control costs and expenses; relations with and performance of suppliers; our ability to carry out successful designs and effectively advertise and communicate with the marketplace and to penetrate our
chosen distribution channels; competition; access to capital; risks related to the timely performance of third parties, such as shipping companies, including risks of strikes or labor disputes
involving these third parties; maintaining the integrity of our technology and information systems; maintaining satisfactory relationships with our banking partners; political and trade relations;
changes in international trade quota systems for apparel; the overall level of consumer spending on apparel; global economc and political conditions and additional threatened terrorist attacks and
responses thereto, including war. Additional information on these and other factors that could affect our financial results is set forth below and in our Form 10-K for the year
ended April 30, 2003. Finally, there may be other factors not mentioned above or included in our SEC filings that may cause actual results to differ materially from any forward-looking
statements. You should not place undue reliance on any forward-looking statements. We assume no obligation to update any forward-looking statements as a result of new information, future events or
developments, except as required by securities laws.

All references to fiscal years are references to our fiscal year ended April 30.

Overview

Cutter & Buck designs, sources, markets and distributes high-quality men's and women's sportswear under the Cutter & Buck brand. We sell
our products primarily through golf pro shops and resorts, corporate accounts, upscale specialty retail stores, and international distributors and licensees.

During
fiscal 2003 and the first half of fiscal 2004, our strategy focused on managing our gross profit and the profitability of our core wholesale business. Because we have positioned
the Cutter & Buck brand to represent a superior product available at select locations, we have foregone some sales opportunities that would have generated a lower gross profit.

Our
sales have also been affected by the difficult economic conditions faced by customers in our target markets. The number of golf rounds played are down, corporate spending on
marketing and events has been curtailed, and specialty retailers have faced declining sales. However, we believe our brand is strong and we are well positioned within these markets. We have seen some
growth in the specialty retail market as the economy begins to improve and we focus our products more closely on our target markets. We believe that as the economic turnaround becomes more widespread
we are in a good position to grow our brand.

As
part of the ongoing optimization of our organizational structure, in January 2004 we converted 41 of our sales representatives from employees to independent sales
representatives. Before the conversion, approximately half of our sales representatives were employees and half were independent. After the conversion virtually all of our sales representatives were
independent. This conversion was structured to have no impact on selling expenses or customer service. Since the conversion was completed, we have not experienced any significant impact on turnover,
selling expenses or customer service.

During
fiscal 2003, we restructured our business to focus our efforts on our wholesale business and reduce our operating costs. We also discontinued our retail stores business segment.
We now have one business segment, "wholesale." To understand the performance of our wholesale business, management considers it useful to review our operating results excluding costs that are not
elements of running our wholesale business on an ongoing basis, such as restructuring and restatement expenses and costs related to our former European operations. We adjust our GAAP-based
net income to exclude income

14

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and
expense items that are not directly related to our wholesale business in order to give us better information regarding the profitability of our wholesale business. We use this analysis to compare
pretax wholesale business income on a quarterly and year-to-date basis.

|                                                             |  | Three Months Ended |       | Nine Months Ended |  
|------------------------------------------------------------ |  | ------------------ | ----- | ----------------- | -
|
|Net income (loss) as reported                                |  | $                  | (857  | )                 | $
|                                                             |  |                    |       |                   |  
|Less: net income (loss) from discontinued retail operations  |  |                    |      |                   |  
|Add: income tax expense (benefit)                            |  |                    | (205  | )                 |  
|Add: pre-tax (income) expense of closed European operations  |  |                    | (5    | )                 |  
|Add: restructuring and asset impairment expenses (reversals) |  |                    | (65   | )                 |  
|Add: restatement expenses                                    |  |                    | 1,172 |                   |  
|                                                             |  |                    |       |                   |  
|Ongoing wholesale business income before tax                 |  | $                  | 40    |                   | $
|                                                             |  |                    |       |                   |  

The
next stage of our strategy includes strengthening the upscale positioning of the Cutter & Buck brand and superior execution of all of our business processes to enable total
customer satisfaction, in order to increase net sales while maintaining our gross profit. We are focusing on the needs of our customers within each strategic business unit (SBU), and updating our
styles and adding products to meet those needs. This is a long-term strategy to grow our business and, due in part to the long product lead times in this industry, we remain relatively
cautious about sales for the next six months compared to last year.

In
order to reach these goals, we are investing in design talent and market research, and the development of management information systems to improve our processes and continue our
commitment to customer service. We will also invest in marketing to expand our brand awareness within our SBU target markets. We expect these investments in our business to result in increased
expenses in these areas over the next fiscal year. However, we expect these increases in expenses to
ultimately be offset by increases in sales and impairments in operating efficiencies. We currently anticipate that operating expenses before restatement costs will be in line with recent history.

Recent Developments

The Board of Directors approved the initiation of a quarterly dividend and a stock repurchase program. A dividend of $0.05 per share will be payable on
April 9 to shareholders of record on March 26. The stock repurchase program authorizes the purchase of up to $6 million in Company stock.

Results of Operations

The following table sets forth, for the periods indicated, certain consolidated statements of operations data expressed as a percentage of net sales. For all
periods presented in this section, results

15

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of
operations reflect the classification of our Company-owned retail store operating results and income or loss on the disposal of these stores as discontinued retail operations.

|                                                              |                                     | Three Months Ended       |      | Nine Months Ended |     
|------------------------------------------------------------- | ----------------------------------- | ------------------------ | ---- | ----------------- | ----
|
|Net sales                                                     |                                     | 100.0                    | %    | 100.0             | %   
|Cost of sales                                                 |                                     | 55.5                     |      | 61.0              |     
|                                                              |                                     |                          |      |                   |     
|Gross profit                                                  |                                     | 44.5                     |      | 39.0              |     
|Operating expenses:                                           |                                     |                          |      |                   |     
|                                                              | Depreciation                        |                          | 4.6  |                   | 5.4 
|                                                              | Selling, general and administrative |                          | 40.0 |                   | 39.6
|                                                              | Restructuring and asset impairment  |                          | (0.3 | )                 | (0.2
|                                                              | Restatement expenses                |                          | 5.2  |                   | 5.0 
|                                                              |                                     |                          |      |                   |     
|                                                              |                                     | Total operating expenses |      | 49.5              |     
|                                                              |                                     |                          |      |                   |     
|Operating income (loss)                                       |                                     | (5.0                     | )    | (10.8             | )   
|                                                              | Net interest expense                |                          | 0.4  |                   | (0.4
|                                                              |                                     |                          |      |                   |     
|Income (loss) from continuing operations before income taxes  |                                     | (4.6                     | )    | (11.2             | )   
|Income tax expense (benefit)                                  |                                     | (0.9                     | )    | (2.0              | )   
|                                                              |                                     |                          |      |                   |     
|Net income (loss) from continuing operations                  |                                     | (3.7                     | )    | (9.2              | )   
|Income (loss) from discontinued retail operations, net of tax |                                     |                         |      | (28.7             | )   
|                                                              |                                     |                          |      |                   |     
|Net income (loss)                                             |                                     | (3.7                     | )%   | (37.9             | )%  
|                                                              |                                     |                          |      |                   |     



Net Sales

During the third quarter of fiscal 2004, net sales decreased approximately $3.0 million, or 11.9%, to $22.5 million from $25.6 million in the
same period of the prior year. In the third quarter of fiscal 2004 compared to the third quarter of fiscal 2003, net sales in all of our SBUs were negatively impacted as we focused on improving our
gross profit. Because we have foregone some sales opportunities with lower gross profits, our net sales have decreased compared to the third quarter of fiscal 2003 although our gross profit dollars
have increased over the same period.

The
detail of net sales by SBU was as follows:

|                 |       | Three Months Ended January 31, |       
|---------------- | ----- | ------------------------------ | ------
|
|Golf             |       | $                              | 4,877 
|Corporate        |       |                                | 11,010
|Specialty Retail |       |                                | 3,926 
|International    |       |                                | 641   
|Other            |       |                                | 2,086 
|                 |       |                                |       
|                 | Total |                                | $     
|                 |       |                                |       

In
the third quarter of fiscal 2004, net sales in our Golf SBU decreased by $0.9 million, or 16%, to $4.9 million from $5.8 million in the same period of the prior
year. Net sales in our Golf SBU have been impacted by internal factors, including hiring and training sales representatives who are new to

16

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the
Cutter & Buck brand. Our Golf SBU also continues to be negatively impacted by external factors, including ongoing flat demand in the golf industry. Net sales in our Corporate SBU decreased
by $2.0 million, or 15.1%, to $11.0 million from $13.0 million in the same period of the prior year. During fiscal 2004, we changed the cycle of our new product releases and
discontinued some designs. In January 2004, we launched a new corporate catalog featuring new designs which we expect will have a positive impact on sales in future periods, although corporate
SBU customers continue to be cautious in their spending on marketing programs. Net sales in our Specialty Retail SBU decreased $0.1 million, or 2.3%, to $3.9 million from
$4.0 million in the same period of the prior year primarily due to the timing of orders. Net sales in our International SBU decreased by $0.1 million, or 4.9%, to $0.6 million
from $0.7 million in the same period of the prior year, primarily due to our ongoing shift from distributor relationships to licensee relationships during fiscal 2004. Net sales in our Other
SBU, including liquidation sales, shipping revenue and our e-commerce business, decreased slightly compared to the same period of the prior year primarily due to the timing of our planned
seasonal liquidation sales.

Gross Profit

In the third quarter of fiscal 2004, gross profit increased to 44.5% of net sales compared to 39.0% in the same period of the prior year. In fiscal 2004, our
margins have increased as we improved our sourcing, focused on reducing our product returns and allowances, adjusted our pricing structure for certain products and reduced discounting. Our product
returns and allowances have decreased significantly during the last twelve months due to this intensive management. As a result of this trailing twelve-month decrease, we updated the estimates we use
to calculate the reserve for product returns and allowances. This reduced our reserve for product returns and allowances and increased our gross profit during the third quarter of fiscal 2004.
However, we have planned to liquidate out-of-season inventory in the fourth quarter of fiscal 2004 as part of our normal business cycle, and as a result we expect our gross
profit to be negatively impacted in that quarter.

Our
gross profit may not be comparable to other companies, since some companies include all costs related to their distribution network in the cost of sales. We have consistently
included inbound freight, import charges and embroidery costs in cost of sales, and included other costs of distribution in selling, general and administrative expenses.

Selling, General and Administrative Expense

Selling, general and administrative expenses totaled $9.0 million in the third quarter of fiscal 2004 compared to $10.1 million in fiscal 2003, a
decrease of $1.1 million. Sales commissions, salaries and related taxes decreased approximately $0.3 million, primarily due to a decrease in net sales, savings resulting from our
restructuring plans and internal cost-cutting measures. Legal and accounting fees decreased approximately $0.2 million primarily due to the timing of expenses. Bad debt expense
decreased approximately $0.1 million, primarily due to a decrease in net sales and increased management of credit exposures. Sample expenses decreased by approximately $0.3 million,
travel and entertainment expenses decreased by approximately $0.1 million and sales meeting and trade show costs decreased approximately $0.2 million, primarily due to internal
cost-cutting measures and improved operational efficiencies. Business taxes decreased approximately $0.2 million, primarily due to property taxes. These decreases were partially
offset by increases of approximately $0.2 million in advertising expenses, primarily due to the timing of print ad placements and an increase of approximately $0.1 million in insurance
expenses, primarily due to an overall increase in business insurance rates.

Restatement Expenses

In fiscal 2002, we restated certain of our historical financial statements for irregularities and errors. As a result of the circumstances underlying the
restatement, three shareholder class action lawsuits and

17

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a
shareholder derivative lawsuit were filed, naming us and certain of our current and former directors and officers as defendants. We settled those lawsuits and paid $4.0 million to the
plaintiffs. We also settled the previously announced Securities and Exchange Commission investigation of the Company arising from the circumstances underlying the restatement. That settlement did not
require payment of any fines or penalties.

Restatement
expenses amounted to approximately $1.2 million for the third quarter of fiscal 2004 and included $0.9 million of legal and professional fees, of which
$0.1 million we have advanced in connection with the indemnification of former officers, and $0.3 million of accrued retention bonuses to certain key employees. Although the restatement
has been completed, we expect to continue to incur legal and other professional service costs in connection with the indemnification of former officers and the appeal of our lawsuit against Genesis
Insurance Company. These expenses cannot be estimated at this time. In addition, there will be an ongoing charge each quarter until March 2004 for the retention bonuses, which will aggregate to
as much as $2.0 million payable in fiscal 2004.

Operating Income (Loss)

As a result of the above items, our operating loss was $1.1 million in the third quarter of fiscal 2004 compared to $2.8 million in the third
quarter of fiscal 2003.

Income Taxes

We recorded approximately $0.2 million of income tax benefit in the third quarter of fiscal 2004 compared to $0.5 million in the third quarter of
fiscal 2003. We have provided a valuation allowance against our deferred tax assets. This allowance is periodically adjusted based on our estimates of future taxable income and the expected
realization of deferred tax assets. As a result, the effective rates for income taxes in the third quarters of fiscal 2004 and 2003 were 19.3% and 17.7%, respectively.

Loss from Discontinued Retail Operations, net of tax

During fiscal 2003, our Board of Directors determined that we should focus our resources on our wholesale business and close our retail stores. Although the
retail stores provided a showcase for our product lines, the operation of the stores did not provide a satisfactory financial return. All of our stores were closed and all retail store operations
ceased as of April 30, 2003. There was no income or loss from discontinued retail operations in the third quarter of fiscal 2004. The third quarter of fiscal 2003 loss from discontinued retail
operations, net of tax, was $7.3 million, which included a pre-tax charge of $9.6 million for retail store closure expenses.



Net Sales

During the first nine months of fiscal 2004, net sales decreased approximately $5.4 million, or 5.6%, to $90.0 million from $95.4 million in
the same period of the prior year. In the first nine months of fiscal 2004 compared to the same period of the prior year, net sales in all of our SBUs were negatively impacted as we focused on
improving our gross profit. Because we have foregone some sales opportunities with lower gross profits, our net sales have decreased compared to the fiscal 2003 although our gross profit dollars have
increased over the same period.

18

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The
detail of net sales by SBU was as follows:

|                 |       | Nine Months Ended January 31, |       
|---------------- | ----- | ----------------------------- | ------
|
|Golf             |       | $                             | 25,796
|Corporate        |       |                               | 39,048
|Specialty Retail |       |                               | 17,190
|International    |       |                               | 1,871 
|Other            |       |                               | 6,119 
|                 |       |                               |       
|                 | Total |                               | $     
|                 |       |                               |       

In
the first nine months of fiscal 2004, net sales in our Golf SBU decreased by $3.2 million, or 11%, to $25.8 million from $29.0 million in the same period of the
prior year. Net sales in our Golf SBU have been impacted by internal factors, including hiring and training sales representatives who are new to the Cutter & Buck brand. Our Golf SBU also
continues to be negatively impacted by external factors, including ongoing flat demand in the golf industry. Net sales in our Corporate SBU decreased by $2.3 million, or 5.5%, to
$39.0 million from $41.3 million in the same period of the prior year. During fiscal 2004, we changed the cycle of our new product releases and discontinued some designs. In
January 2004, we launched a new corporate catalog featuring new designs which we expect will have a positive impact on sales in future periods, although corporate SBU customers continue to be
cautious in their spending on marketing programs. Net sales in our Specialty Retail SBU increased $0.8 million, or 5.1%, to $17.2 million from $16.4 million in the same period of
the prior year. This increase was primarily due to the success of our collegiate and pro sports sales programs. Net sales in our International SBU decreased by $1.2 million, or 39.7%, to
$1.9 million from $3.1 million in the same period of the prior year. For the nine months ended January 31, 2003, net sales in our International SBU included approximately
$0.7 million in revenue generated by selling inventory to Eurostyle Ltd. in conjunction with establishing a licensing relationship with them. Net sales in this SBU also decreased as we
continue to shift from distributor relationships to licensee relationships during fiscal 2004. Net sales in our Other SBU, including liquidation sales, shipping revenue and our e-commerce
business, increased $0.5 million, or 8.9%, to $6.1 million from $5.6 million in the same period of the prior year.

Gross Profit

In the first nine months of fiscal 2004, gross profit increased to 45.5% of net sales compared to 40.6% in the same period of the prior year. In fiscal 2003, our
gross profit was negatively impacted by lower margins on off-price sales. In fiscal 2004, our margins have increased as we improved our sourcing, focused on reducing our product returns
and allowances, adjusted our pricing structure for certain products and reduced discounting. Our product returns and allowances have decreased significantly during the last twelve months due to this
intensive management. As a result of this trailing twelve-month decrease, we updated the estimates we use to calculate the reserve for product returns and allowances. This reduced our reserve for
product returns and allowances and increased our gross profit during the first nine months of fiscal 2004. However, we have planned to liquidate out-of-season inventory in the
fourth quarter of fiscal 2004 as part of our normal business cycle, and as a result we expect our gross profit to be negatively impacted in that quarter.

Our
gross profit may not be comparable to other companies, since some companies include all costs related to their distribution network in the cost of sales. We have consistently
included inbound freight, import charges and embroidery costs in cost of sales, and included other costs of distribution in selling, general and administrative expenses.

19

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Selling, General and Administrative Expense

Selling, general and administrative expenses totaled $30.0 million in the first nine months of fiscal 2004 compared to $31.8 million in the first
nine months of fiscal 2003, a decrease of $1.8 million. Sales commissions, salaries and related taxes decreased approximately $1.5 million, primarily due to a decrease in net sales,
savings resulting from our restructuring plans and internal cost-cutting measures. This decrease was partially offset by an increase in benefits of approximately $0.6 million. Bad
debt expense decreased approximately $0.6 million, primarily due to a decrease in net sales and increased management of credit exposures. Rent expense decreased by approximately
$0.3 million primarily due to subleasing abandoned warehouse space and the expiration of certain operating leases. Sample expenses decreased by approximately $0.5 million, sales meeting
and tradeshow costs decreased by approximately $0.4 million and supply costs decreased by approximately $0.3 million primarily due to internal cost-cutting measures and
improved operational efficiencies. These decreases were partially offset by increases of approximately $0.7 million in accounting, legal and other professional fees, primarily due to an
increase in consulting fees. Insurance expense increased approximately $0.2 million, primarily due to an overall increase in business insurance rates. Advertising expense increased
approximately $0.2 million, primarily due to additional print ads placed during the period, and director fees increased approximately $0.1 million primarily due to the increased number
of board of director meetings held during the period.

Restructuring and Asset Impairment

We have two restructuring plans, the 2002 Restructuring Plan and the 2003 Restructuring Plan. The 2002 Restructuring Plan included closing our wholly-owned
European subsidiary, refining our Company-owned retail store strategy, closing four under-performing Company-owned retail stores, consolidating and restructuring our women's line sales forces,
discontinuing our golf shoe business, discontinuing the dressier side of our women's line, recording losses on subleases of excess warehouse capacity and certain management changes. The 2003
Restructuring Plan covered the closure of ten additional retail stores, resulting in all Company-owned retail stores being closed by April 30, 2003.

Costs
associated with the 2002 Restructuring Plan, excluding costs associated with refining our retail strategy and closing our retail stores, are included in Restructuring and Asset
Impairment Expenses. Costs associated with the 2003 Restructuring Plan and the costs associated with refining our retail strategy and closing our retail stores included in the 2002 Restructuring Plan
are included in Discontinued Retail Operations.

There
was a $0.1 million reduction in restructuring and asset impairment expenses in the first nine months of fiscal 2004, compared to $3.8 million of expenses in the first
nine months of fiscal 2003. The $0.1 million reduction in expenses in fiscal 2004 primarily related to accrual adjustments. Of the $3.8 million recorded in fiscal 2003,
$3.3 million related to losses on subleases of excess warehouse capacity at our distribution center, $0.3 million related to additional reserves against receivable balances for both our
former Chief Executive Officer and our former President $0.1 million related to the charge-off of certain deferred compensation for our former Chief Executive Officer and
$0.1 million related to additional asset write-downs.

Restatement Expenses

In fiscal 2002, we restated certain of our historical financial statements for irregularities and errors. As a result of the circumstances underlying the
restatement, three shareholder class action lawsuits and a shareholder derivative lawsuit were filed, naming us and certain of our current and former directors and officers as defendants. We settled
those lawsuits and paid $4 million to the plaintiffs. We also settled the previously announced Securities and Exchange Commission investigation of the Company arising from the circumstances
underlying the restatement. That settlement did not require payment of any fines or penalties.

20

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Restatement
expenses amounted to approximately $4.5 million for the first nine months of fiscal 2004 and included $3.3 million of legal and professional fees, of which
$0.9 million we have advanced in connection with the indemnification of former officers, $1.0 million of accrued retention bonuses to certain key employees and $0.2 million of
amortization of the premium for the replacement directors' and officers' liability insurance. Although the restatement has been completed, we expect to continue to incur legal and other professional
service costs in connection with the indemnification of former officers and the appeal of our lawsuit against Genesis Insurance Company. These expenses cannot be estimated at this time. In addition,
there will be an ongoing charge each quarter until March 2004 for the retention bonuses, which will aggregate to as much as $2.0 million payable in fiscal 2004.

Operating Income (Loss)

As a result of the above items, operating income increased $6.7 million to $3.3 million in the first nine months of fiscal 2004, compared to an
operating loss of $3.4 million in the first nine months of fiscal 2003.

Income Taxes

We recorded approximately $1.2 million of income tax expense in the first nine months of fiscal 2004 compared to $0.8 million of income tax benefit
in the first nine months of fiscal 2003. We have provided a valuation allowance against our deferred tax assets. This allowance is periodically adjusted based on our estimates of future taxable income
and the expected realization of deferred tax assets. As a result, the effective rates for income taxes in the first nine months of fiscal 2004 and 2003 were 35.7% and 21.4%, respectively.

Loss from Discontinued Retail Operations, net of tax

During fiscal 2003, our Board of Directors determined that we should focus our resources on our wholesale business and close our retail stores. Although the
retail stores provided a showcase for our product lines, the operation of the stores did not provide a satisfactory financial return. All of our stores were closed and all retail store operations
ceased as of April 30, 2003. The income from discontinued retail operations, net of tax, for the first nine months of fiscal 2004 was $0.1 million. This income resulted primarily from
the final settlement of certain lease obligations at favorable amounts. The loss from discontinued retail operations, net of tax, during the first nine months of fiscal 2003 was $8.1 million,
which included a pre-tax charge of $9.6 million for retail store closure expenses.

Liquidity and Capital Resources

Net cash provided by operating activities for the first nine months of fiscal 2004 was $25.5 million compared to $14.3 million for the first nine
months of fiscal 2003. The overall increase in net cash provided by operating activities from the first nine months of fiscal 2003 compared to the first nine months of fiscal 2004 was primarily due to
decreases in inventory as a result of more focused inventory management and an increase in net income. These changes were partially offset by decreases in noncash charges for depreciation,
restructuring and asset impairment and a smaller decrease in our accounts receivable. Net cash used in investing activities was $20.0 million compared to $1.9 million for the first nine
months of fiscal 2003. The increase was primarily due to the purchase of short-term investments in fiscal 2004. We invest in interest-bearing U.S. Government and high-quality
corporate debt instruments and hold these instruments to maturity, which is generally 90 days or less. At January 31, 2004 we held $19.0 million in instruments with a maturity
date slightly longer than 90 days, which we have classified as short-term investments. In addition, in December 2003 we received a federal tax refund of $3.6 million.
At January 31, 2004, our cash and cash equivalents were $23.0 million compared to $8.8 million at January 31, 2003.

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On
March 13, 2003 we entered into a loan agreement with Wells Fargo Bank, N.A. (Wells Fargo) as agent and Wells Fargo Century, an affiliate of Wells Fargo, as collateral agent and
lender for a $35 million line of credit that expires in March 2005. This replaced our previous line of credit that expired on March 31, 2003. The amount of credit available to us
under this agreement is determined by a formula based on our accounts receivable and inventory balances. The amount of our available credit fluctuates as these balances fluctuate, and may at times be
less than the maximum $35 million available under the agreement. We use this line of credit to support our trade financing with letters of credit. We may also use the line for operating
expenses, although we do not currently do so. This loan agreement also contains certain restrictive covenants covering minimum net worth, minimum working capital and maximum capital expenditures.
These financial covenants require that we maintain a tangible net worth of at least $50 million and working capital of at least $35 million at all times; and limit capital expenditures
to not more than $2.5 million in each of the fiscal years 2004 and 2005. We were in compliance with these covenants at January 31, 2004.

Our
primary ongoing capital requirements are to finance working capital, the continued growth and operations of our business, the stock repurchase program and cash dividends. To support
our operations, capital expenditures totaling approximately $1.5 million to $2.0 million are planned for fiscal 2004. These capital expenditures include amounts for information
technology initiatives, computer hardware, software, and furniture and office equipment. We will also pay approximately $2.0 million in retention bonuses in the fourth quarter of fiscal 2004.
On March 10, 2004 the Board of Directors approved the initiation of a quarterly dividend and a stock repurchase program. A dividend of $0.05 a share will be payable on April 9, 2004 to
shareholders of record on March 26, 2004. The share repurchase program authorizes the purchase of up to $6 million in company stock. The purchases may be made from time to time in the
open market or in privately negotiated transactions. The repurchase program may be suspended at any time without notice. The timing of repurchases and the actual
number of shares repurchased will depend on market conditions, alternative uses of capital and other factors.

We
believe that cash on hand and cash generated from operations, as well as the ability to borrow under bank lines of credit will be sufficient to meet our cash requirements during the
remainder of fiscal 2004 and fiscal 2005. We also have available alternative sources of financing, including factoring our accounts receivable and financing our capital expenditures with leases.
Although these methods of financing are currently available to us, we do not anticipate using alternative sources of financing during the remainder of fiscal 2004 or in fiscal 2005. However, our
capital needs will depend on many factors, including our growth rate, the need to finance increased production and inventory levels, the success of our various sales and marketing programs, expenses
associated with the risks and uncertainties related to our restatement and various other factors.

Foreign Currency Exchange Risk

We do not currently use derivative financial instruments to reduce our exposure to changes in foreign exchange rates. In conjunction with the closing of our
European operations, we have some remaining assets and liabilities denominated in Euros. These balances are not material to our consolidated financial statements. To the extent we have assets and
liabilities denominated in foreign currencies that are not hedged, we are subject to foreign currency transaction gains and losses.

Critical Accounting Policies

Our significant accounting policies are described in Note 1 to the consolidated financial statements included in the Company's filing on
Form 10-K for the year ended April 30, 2003. Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial
statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of the financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related

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disclosures
of contingent assets and liabilities. On an on-going basis, we evaluate the estimates that we have made. These estimates have been based upon our historical experience and on
various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. We believe the following
critical accounting policies affect the more significant judgments and estimates used in the preparation of our consolidated financial statements.

Allowances for Doubtful Accounts and Returns

We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments, which is included in
bad debt expense. We determine the adequacy of this allowance by regularly reviewing our accounts receivable aging and evaluating individual customer receivables, considering individual customer's
financial condition, credit history and current economic conditions. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required. We also maintain an estimate of potential future product returns related to current period sales. We analyze the rate of historical returns when evaluating the
adequacy of the allowance for returns, which is included with the allowance for doubtful accounts on our balance sheets.

Inventories

Inventories, which are predominantly finished goods, are valued at the lower of cost or market, with cost determined using the weighted average method. A detailed
analysis of inventory is performed on a quarterly basis to identify unsold seasonal or aging merchandise. The net realizable value of the seasonal or aging merchandise is estimated based on
disposition plans and historical experience. A valuation allowance is established to reduce the carrying amount of seasonal or aging merchandise to its estimated net realizable value. If actual market
conditions are less favorable than those projected by management, additional allowances may be required.

Impairment of Long-Lived Assets

We review the carrying values of our long-lived assets whenever events or changes in circumstances indicate that such carrying values may not be
recoverable. Unforeseen events and changes in circumstances and market conditions and changes in estimates of future cash flows could negatively affect the fair value of our assets and result in an
impairment charge. Fair value is the amount at which the asset could be bought or sold in a current transaction between willing parties and may be estimated using a number of techniques, including
quoted market prices or valuations by third parties, present value techniques based on estimates of cash flows, or multiples of earnings or revenues performance measures. The fair value of the asset
could be different using different estimates and assumptions in these valuation techniques.

Restructuring Liabilities

Restructuring-related liabilities include estimates for anticipated disposition of lease obligations and other costs. Key variables in determining such estimates
include the anticipated timing of sublease rentals, estimates of sublease rental payment amounts and estimates for brokerage and other related costs. We periodically evaluate and, if necessary, adjust
our estimates based on currently available information.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are subject to certain market risks, including interest rate risks associated with financial instruments included in cash and cash equivalents and
short-term investments. We invest in interest-bearing U.S. Government and high-quality corporate debt instruments and hold these instruments until

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maturity,
which is approximately 90 days or less. Changes in interest rates may affect the fair market value of these instruments. Due to the short-term nature of these instruments
and our investment policies and procedures, we do not expect interest rate fluctuations to have a material adverse effect on our results of operations. We do not use derivative financial instruments
to manage interest rate risk.

We
do not use derivative financial instruments to reduce our exposure to changes in foreign currency exchange rates, and we do not use derivatives for speculative trading purposes.

The
following table provides information about our cash equivalent and marketable fixed income securities, including principal cash flows by expected maturity and the related weighted
average interest rates at January 31, 2004. Amounts were as follows:

(in thousands, except percentages)

Expected maturity date
Fiscal 2005U.S. Corporate debt securities

18,953Average rate of return

0.973
%


Item 4. Controls and Procedures

Evaluation of the Company's Disclosure Controls and Procedures.As of January 31, 2004, we evaluated the effectiveness
of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (the "Exchange Act").
This evaluation was done under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer. The evaluation included inquiring of senior
managers whether our records and reports were correct and complete. We are developing internal processes for documenting, testing and monitoring our disclosure procedures. These internal processes are
based on employees' reports of their processes, analysis of our documentation, and limited testing to validate our processes and documentation.

Limitations on the Effectiveness of Controls.Our management does not expect that our disclosure controls or our internal
controls will prevent all errors and all fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control
system are met. The design of our control system reflects the fact that there are resource constraints and the benefits of such controls were considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control failures and instances of fraud, if any, within the Company have been detected.
These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be
circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of control. The design of any system of controls is also based in part on certain
assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the
inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Conclusions.Based on our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in SEC rules and forms.

Changes in Internal Controls.There were no changes in our internal control over financial reporting (as defined in
Rules 13a-15(f) or 15d-15(f) of the Exchange Act) during the fiscal quarter ended January 31, 2004 that has materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.

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PART IIOTHER INFORMATION

Item 1. Legal Proceedings

As previously disclosed, following the announcement in 2002 that we would restate our historical financial results, we and certain of our current and former
directors and officers were named defendants in three shareholder class actions filed in the United States District Court for the Western District of Washington alleging violations of federal
securities laws (the "Securities Suits"): Steven Bourret v. Cutter & Buck Inc., Harvey N. Jones and Stephen S. Lowber; Stanley Sved v. Cutter & Buck Inc. and Harvey N.
Jones; and Jason P. Hebert v. Cutter & Buck Inc., Harvey N. Jones and Stephen S. Lowber. In addition, we and certain of our current and former directors and officers were named
defendants in a shareholder derivative suit (the "Derivative Suit") filed in the Superior Court of the State of Washington, for King county: Morris Haimowitz Derivatively on behalf of Cutter &
Buck, Inc. [sic] v. Frances.M. Conley, Michael S. Brownfield, Larry C. Mounger, James C. Towne, Harvey N. Jones, Martin J. Marks, Stephen S. Lowber and Cutter &
Buck, Inc. [sic].

On
September 12, 2003, we entered into a Stipulation and Agreement of Settlement with the lead plaintiff in the Securities Suits and the plaintiff in the Derivative Suit. As part
of the settlement, the Derivative Suit was refiled in the United States District Court for the Western District of Washington. On December 2, 2003, the United States District Court for the
Western District of Washington granted final approval of that settlement, and dismissed the Securities Suits and the federal Derivative Suit. The state Derivative Suit was subsequently dismissed by
order of the Superior Court of the State of Washington, for King county, on December 10, 2003.

During
the period covered by this report, we were also a party to our lawsuit against Genesis Insurance Company in the United States District Court for the Western District of
Washington. Our complaint alleged that Genesis' attempt to rescind our primary Directors' and Officers' liability insurance was unlawful, and sought damages resulting from Genesis' breach of contract
and the duty of good faith and fair dealing. On February 11, 2004, the Court entered an Order granting Genesis' motions for summary judgment and, accordingly, our claims against Genesis were
dismissed on February 13, 2004. On March 1, 2004 we filed a motion asking the Court to alter its decision and vacate this judgement,
and on March 11, 2004 we filed a notice of appeal of the Court's decision to the Ninth Circuit Court of Appeal.

We
are also party to other routine litigation incidental to our business. Management believes the ultimate resolution of these other routine matters will not have a material adverse
effect on our financial condition 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

None

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Item 6. Exhibits and Reports on Form 8-K



|Exhibit
Number |  | Description                                                                                                        
|-------------- |  | -------------------------------------------------------------------------------------------------------------------
|31.1           |  | Certification of the Company's Chief Executive Officer required by Section 302(a) of the Sarbanes-Oxley Act of 2002
|31.2           |  | Certification of the Company's Chief Financial Officer required by Section 302(a) of the Sarbanes-Oxley Act of 2002
|32.1           |  | Certification of the Company's Chief Executive Officer required by Section 906 of the Sarbanes-Oxley Act of 2002   
|32.2           |  | Certification of the Company's Chief Financial Officer required by Section 906 of the Sarbanes-Oxley Act of 2002   



The
Company filed a Form 8-K on December 15, 2003 to announce financial results for the second quarter and first six months of the fiscal year 2004.

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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 16, 2004 |  | By                             
|       |  |                |  |                                
|       |  |                |  |                                

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