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U.S. SECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549

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Form 10-Q

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

For the quarterly period ended July 31, 2001

or

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

For the transition period from  to

Commission File No. 0-26608

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

Washington(State or Other Jurisdiction of
Incorporation or Organization)

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


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

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

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

The
number of shares of Common Stock of the registrant outstanding as of September 12, 2001 was 10,567,589.

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

Index

|                             |         |    |                                                                                       |  | Page
|---------------------------- | ------- | -- | ------------------------------------------------------------------------------------- |  | ----
|PART IFINANCIAL INFORMATION |         |   
|                             | Item 1. |    | Financial Statements (unaudited):                                                     |  |     
|                             |         |    | Condensed Consolidated Balance Sheets                                                 |  | 3   
|                             |         |    | Condensed Consolidated Statements of Operations                                       |  | 4   
|                             |         |    | Condensed Consolidated Statements of Cash Flows                                       |  | 5   
|                             |         |    | Notes to Condensed Consolidated Financial Statements                                  |  | 6   
|                             | Item 2. |    | Management's Discussion and Analysis of Financial Condition and Results of Operations |  | 9   
|PART IIOTHER INFORMATION    |         |   
|                             | Item 1. |    | Legal Proceedings                                                                     |  | 13  
|                             | Item 2. |    | Changes in Securities and Use of Proceeds                                             |  | 13  
|                             | Item 3. |    | Defaults Upon Senior Securities                                                       |  | 13  
|                             | Item 4. |    | Submission of Matters to a Vote of Security Holders                                   |  | 13  
|                             | Item 5. |    | Other Information                                                                     |  | 13  
|                             | Item 6. |    | Exhibits and Reports on Form 8-K                                                      |  | 13  
|SIGNATURES                   |         | 14

2

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PART IFINANCIAL INFORMATION

Item 1.  Financial Information

CUTTER & BUCK INC.        Condensed Consolidated Balance Sheets

|                                                |                                                                                                                                               | July 31,
2001 |                                            | April 30,
2001 |  
|----------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------- | ------------- | ------------------------------------------ | -------------- | -
|
|ASSETS                                          |                                                                                                                                               |               |                                            |                |  
|Current assets:                                 |                                                                                                                                               |               |                                            |                |  
|                                                | Cash and cash equivalents                                                                                                                     |               | $                                          | 4,363,316      |  
|                                                | Accounts receivable, net of allowances for doubtful accounts and returns of $4,283,023 at July 31, 2001 and $3,320,416 at April 30, 2001      |               |                                            | 30,077,238     |  
|                                                | Inventories                                                                                                                                   |               |                                            | 60,065,893     |  
|                                                | Deferred income taxes                                                                                                                         |               |                                            | 3,350,726      |  
|                                                | Prepaid expenses and other current assets                                                                                                     |               |                                            | 5,664,166      |  
|                                                |                                                                                                                                               |               |                                            |                |  
|                                                |                                                                                                                                               |               | Total current assets                       |                |  
|Furniture and equipment, net                    |                                                                                                                                               |               | 22,187,248                                 |                |  
|Deferred income taxes                           |                                                                                                                                               |               | 763,321                                    |                |  
|Other assets                                    |                                                                                                                                               |               | 842,871                                    |                |  
|                                                |                                                                                                                                               |               |                                            |                |  
|                                                |                                                                                                                                               |               | Total assets                               |                | $
|                                                |                                                                                                                                               |               |                                            |                |  
|LIABILITIES AND SHAREHOLDERS' EQUITY            |                                                                                                                                               |               |                                            |                |  
|Current liabilities:                            |                                                                                                                                               |               |                                            |                |  
|                                                | Short-term borrowings                                                                                                                         |               | $                                          | 8,375,529      |  
|                                                | Accounts payable                                                                                                                              |               |                                            | 10,075,189     |  
|                                                | Accrued liabilities                                                                                                                           |               |                                            | 2,955,750      |  
|                                                | Current portion of capital lease obligations and long-term debt                                                                               |               |                                            | 2,733,180      |  
|                                                | Other current liabilities                                                                                                                     |               |                                            | 276,333        |  
|                                                |                                                                                                                                               |               |                                            |                |  
|                                                |                                                                                                                                               |               | Total current liabilities                  |                |  
|Capital lease obligations, less current portion |                                                                                                                                               |               | 6,440,159                                  |                |  
|Long-term debt, less current portion            |                                                                                                                                               |               | 3,571,428                                  |                |  
|Other liabilities                               |                                                                                                                                               |               | 560,147                                    |                |  
|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; 10,567,589 issued and outstanding at July 31, 2001 and 10,539,512 at April 30, 2001 |               |                                            | 64,318,462     |  
|                                                | Deferred compensation                                                                                                                         |               |                                            | (627,175       | )
|                                                | Retained earnings                                                                                                                             |               |                                            | 29,154,531     |  
|                                                | Accumulated other comprehensive loss                                                                                                          |               |                                            | (518,754       | )
|                                                |                                                                                                                                               |               |                                            |                |  
|                                                |                                                                                                                                               |               | Total shareholders' equity                 |                |  
|                                                |                                                                                                                                               |               |                                            |                |  
|                                                |                                                                                                                                               |               | Total liabilities and shareholders' equity |                | $
|                                                |                                                                                                                                               |               |                                            |                |  

See
accompanying notes.

3

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

|                                  |                                                                | Three Months Ended                |                         
|--------------------------------- | -------------------------------------------------------------- | --------------------------------- | ------------------------
|
|Net sales                         |                                                                | $                                 | 37,730,756              
|Cost of sales                     |                                                                |                                   | 21,229,503              
|                                  |                                                                |                                   |                         
|Gross profit                      |                                                                |                                   | 16,501,253              
|Operating expenses:               |                                                                |                                   |                         
|                                  | Design and production                                          |                                   |                         
|                                  | Selling and shipping                                           |                                   |                         
|                                  | General and administrative                                     |                                   |                         
|                                  |                                                                |                                   |                         
|                                  |                                                                |                                   | Total operating expenses
|                                  |                                                                |                                   |                         
|Operating income (loss)           |                                                                |                                   | (1,812,124              
|Other income (expense):           |                                                                |                                   |                         
|                                  | Factor commission and interest expense, net of interest income |                                   |                         
|                                  | License and royalty income, net of other expense               |                                   |                         
|                                  |                                                                |                                   |                         
|                                  |                                                                |                                   | Total other expense     
|                                  |                                                                |                                   |                         
|Income (loss) before income taxes |                                                                |                                   | (2,254,847              
|Income taxes (benefits)           |                                                                |                                   | (902,968                
|                                  |                                                                |                                   |                         
|Net income (loss)                 |                                                                | $                                 | (1,351,879              
|                                  |                                                                |                                   |                         
|                                  |                                                                | Basic earnings (loss) per share   |                         
|                                  |                                                                |                                   |                         
|                                  |                                                                | Diluted earnings (loss) per share |                         
|                                  |                                                                |                                   |                         
|                                  | Shares used in computation of:                                 |                                   |                         
|                                  |                                                                | Basic earnings (loss) per share   |                         
|                                  |                                                                |                                   |                         
|                                  |                                                                | Diluted earnings (loss) per share |                         
|                                  |                                                                |                                   |                         

See
accompanying notes.

4

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

|                                                                                                   |                                                            | Three Months Ended                        |            
|-------------------------------------------------------------------------------------------------- | ---------------------------------------------------------- | ----------------------------------------- | -----------
|
|Operating activities                                                                               |                                                            |                                           |            
|Net Income (loss)                                                                                  |                                                            | $                                         | (1,351,879 
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |                                                            |                                           |            
|                                                                                                   | Depreciation and amortization                              |                                           |            
|                                                                                                   | Amortization of deferred compensation                      |                                           |            
|                                                                                                   | Deferred gain on sale and leaseback of capital assets      |                                           |            
|                                                                                                   | Noncash compensation expense                               |                                           |            
|                                                                                                   | Changes in assets and liabilities:                         |                                           |            
|                                                                                                   |                                                            | Receivables, net                          |            
|                                                                                                   |                                                            | Inventories                               |            
|                                                                                                   |                                                            | Prepaid expenses and other current assets |            
|                                                                                                   |                                                            | Accounts payable and accrued liabilities  |            
|                                                                                                   |                                                            | Income taxes payable                      |            
|                                                                                                   |                                                            |                                           |            
|Net cash provided by (used in) operating activities                                                |                                                            |                                           | 7,442,891  
|Investing activities                                                                               |                                                            |                                           |            
|Purchases of furniture and equipment                                                               |                                                            |                                           | (640,354   
|Increase (decrease) in trademarks, patents and marketing rights                                    |                                                            |                                           | 13,615     
|                                                                                                   |                                                            |                                           |            
|Net cash used in investing activities                                                              |                                                            |                                           | (626,739   
|Financing activities                                                                               |                                                            |                                           |            
|Net proceeds from (repayments of) short term borrowings                                            |                                                            |                                           | (10,299,396
|Principal payments under capital lease obligations                                                 |                                                            |                                           | (338,096   
|Issuance of common stock                                                                           |                                                            |                                           | 116,073    
|                                                                                                   |                                                            |                                           |            
|Net cash provided by (used in) financing activities                                                |                                                            |                                           | (10,521,419
|Effects of foreign exchange rate changes on cash                                                   |                                                            |                                           | (3,873     
|                                                                                                   |                                                            |                                           |            
|Net decrease in cash                                                                               |                                                            |                                           | (3,709,140 
|Cash and cash equivalents, beginning of period                                                     |                                                            |                                           | 8,072,456  
|                                                                                                   |                                                            |                                           |            
|Cash and cash equivalents, end of period                                                           |                                                            | $                                         | 4,363,316  
|                                                                                                   |                                                            |                                           |            
|Supplemental information:                                                                          |                                                            |                                           |            
|Noncash financing activities:                                                                      |                                                            |                                           |            
|                                                                                                   | Deferred compensation for the issuance of restricted stock |                                           |            
|                                                                                                   |                                                            |                                           |            

See
accompanying notes.

5

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Cutter & Buck Inc.        Notes to Condensed Consolidated Financial Statements

Note 1.  Basis of Presentation

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

Note 2.  Earnings (Loss) Per Share

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

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

Three Months Ended July 312001

2000Numerator:Numerator for basic and diluted earnings (loss) per sharenet income (loss)

$
(1,351,879
)
$
1,321,738Denominator:Denominator for basic earnings (loss) per shareweighted average common shares outstanding


10,548,785


10,379,462Effect of dilutive securitiesweighted average stock options (excluded for loss quarter)





73,221Denominator for diluted earnings per share


10,548,785


10,452,683Basic earnings (loss) per share

$
(0.13
)
$
0.13Diluted earnings (loss) per share

$
(0.13
)
$
0.13


Note 3.  Income Taxes

We
recorded approximately $0.9 million of income tax benefit in the first quarter of fiscal 2002 compared to income tax expense of $0.8 million in the first quarter of
fiscal 2001, as a result of the net operating loss realized during the quarter. The effective rate for income taxes in the first quarter of fiscal 2002 and fiscal 2001 was 40% and 38%, respectively.
The effective rate increased as the Company opened retail stores in additional states, thereby increasing state income taxes.

6

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Note 4.  Comprehensive Income (Loss)

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

Three Months Ended
July 31,2001

2000Net income (loss)

$
(1,351,879
)
$
1,321,738Foreign currency translation adjustments


(58,722
)

15,805Comprehensive income (loss)

$
(1,410,601
)
$
1,337,543


Note 5.  Debt

In
July 2000, the Company entered into a loan agreement with Washington Mutual Bank d/b/a Western Bank (Western Bank) for a $55 million line of credit, replacing the
Company's previous line of credit. Western Bank has included Bank of America, N.A. in the arrangement as co-lender. The revolving line of credit is to be used for general corporate
purposes. Interest on borrowings is charged and payable monthly at either the Prime rate or the LIBOR rate plus 1.75%, each as defined in the loan agreement, at the borrower's election. The line of
credit expires on August 1, 2002 and is collateralized by a security interest in the Company's inventory, accounts receivable, furniture and equipment,
contract rights and general intangibles. The loan agreement contains certain restrictive covenants covering minimum working capital and tangible net worth, as well as a maximum
debt-to-equity ratio and maximum capital expenditures. The Company was in compliance with these covenants at July 31, 2001. At July 31, 2001 letters of credit
outstanding against this line of credit totaled approximately $11.7 million and working capital advances totaled $5 million at an interest rate of 6.75%.

In
November 2000, the Company amended its $55 million line of credit agreement with Western Bank to allocate $5 million for use solely by the Dutch subsidiary,
replacing the subsidiary's previous line of credit. The allocated amount is to be used by the subsidiary for the same purposes and is subject to the same terms and performance criteria described
above. At July 31, 2001 working capital advances totaled approximately $3.4 million at an interest rate of 6.2%.

The
Company also has a $5 million term credit facility with Western Bank. As of July 31, 2001, $5 million had been advanced against the term credit facility. The
term loan bears interest at a fixed annual rate of 6.6% with interest payable monthly and remaining annual principal payments of $714,286 due in August of years 2002 through 2004. The final principal
payment of $1,428,570 is due in August 2005. The term loan is also collateralized by a security interest in the Company's inventory, accounts receivable, furniture and equipment, and contract
rights.

Note 6.  Shareholders' Equity

During the three months ended July 31, 2001, the Company sold 28,077 shares under its employee stock purchase plan and pursuant to the exercise of stock
options.

7

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Note 7.  Litigation

As previously described, the Company is a party to a lawsuit related to labor issues in Saipan, Does v. The Gap, Inc. That lawsuit has been settled,
subject to court approval. The hearing for preliminary approval of the settlement is currently scheduled for February 28, 2002.

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

8

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

Statements made in this filing that are not historical facts are forward looking information that involve risks and uncertainties. Forward-looking statements
typically are identified by the use of such terms as "may," "will," "expect," "believe," "anticipate," "estimate," "plan" and similar words, although some forward-looking statements are expressed
differently. You should be aware that our actual growth and results could differ materially from those contained in any forward-looking statements due to a number of factors, which include, but are
not limited to the following: style changes and product acceptance, relations with and performance of suppliers, the ability of the Company to control costs and expenses, the ability of the Company to
carry out successful design and planned product and brand messaging/extension activities and to penetrate its chosen distribution channels, competition, access to capital, foreign currency risks,
risks associated with opening and operating retail locations, risks associated with the Company's entry into new markets or distribution channels, technological change, political and trade relations
and the overall level of consumer spending on apparel and global economic conditions. Additional information on these and other factors that could affect the Company's financial results is set forth
below and in our Securities and Exchange Commission filings. Finally, there may be other factors not mentioned above or included in the Company's SEC filings that may cause actual results to differ
materially from any forward-looking information. You should not place undue reliance on these forward-looking statements. The Company assumes no obligation to update any forward-looking statements as
a result of new information, future events or developments, except as required by the securities laws.

Overview

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

Net
sales for the first quarter of fiscal 2002 decreased approximately $1.3 million or 3.3% to $37.7 million from $39.0 million in the first quarter of fiscal
2001. During the quarter, net sales to all of our distribution channels except "other", decreased. The decrease in net sales to our golf and corporate distribution channels is due to the slowed
economy and difficult retail environment. The decrease in our specialty retail distribution channel is primarily due to the timing of shipments occurring later in the Fall season. The decrease in net
sales to our international distribution channel is due to the slowing global economy and the strength of the US dollar relative to the foreign currencies of our international customers. The decrease
in net sales to these three distribution channels was partially offset by an increase in net sales to our "other" distribution channel. Net sales to our "other" distribution channel
includes sales from Company-owned retail stores and liquidation sales and increased primarily due to the increase in the number of Company-owned retail stores.

Gross
margin for the first of fiscal 2002 decreased to 43.7% from 44.9% in the same period of the prior year. This was due to an increase in sales allowances relating to promotional
sales programs and higher liquidation discounts on liquidation sales. We recognize our revenue at the time the product is shipped to the account, and there is no right of return other than for
defective products.

During
the first quarter of fiscal 2002, we continued to invest in new business initiatives, management and systems and opened one outlet store. These investments have resulted in
operating expenses growing at a faster rate than the growth in net sales and have increased operating expenses as a percentage of net sales.

Our
flagship retail store is located in Seattle, Washington and as of July 31, 2001 we have a total of thirteen stores in selected metropolitan markets. We plan to add one
additional Company-owned

9

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retail store during fiscal 2002. This store will be located in Naples, Florida and is expected to open during our second quarter.

Results of Operations



Net SalesDuring the first quarter of fiscal 2002 net sales decreased $1.3 million or 3.3% to
$37.7 million from $39.0 million in the same period of the prior year. The detail of net sales by distribution channel is as follows:

Three Months Ended July 312001

2000

Increase/
(Decrease)

Percent
ChangeIn Thousands, except percent changeGolf

$
12,334

$
13,028

$
(694
)
(5.3
)%Corporate


14,701


15,369


(668
)
(4.3
)Specialty retail


4,266


4,964


(698
)
(14.1
)International


2,097


2,843


(746
)
(26.2
)Other


4,333


2,825


1,508

53.4$
37,731

$
39,029

$
(1,298
)
(3.3
)%


In
the first quarter of fiscal 2002, net sales to the golf distribution channel decreased by $0.7 million or 5.3% to $12.3 million from $13 million in the same
period of the prior year. Net sales to the corporate distribution channel decreased by $0.7 million or 4.3% to $14.7 million from $15.4 million in the same period of the prior
year. The decrease in net sales to these two distribution channels is due to the slowed economy and difficult retail environment. Net sales to our specialty retail distribution channel also decreased
$0.7 million or 14.1% to $4.3 million from $5.0 million in the same period of the prior year. The decrease in this channel is due to the timing of shipments occurring later in the
Fall season. Net sales to our international distribution channel decreased by approximately $0.7 million or 26.2% to $2.1 million from $2.8 million in the same period of the prior
year. The decrease in this channel is due to the slowing global economy and the strength of the US dollar relative to foreign currencies of our international customers. Net sales to our "other"
distribution channel which includes sales from
Company-owned retail stores and liquidation sales increased 53.4% or $1.5 million to $4.3 million from $2.8 million in the same period of the prior year. This increase is
primarily due to an increase in the number of Company-owned retail stores from six in the first quarter of fiscal 2001 to thirteen in the first quarter of fiscal 2002.

Gross MarginIn the first quarter of fiscal 2002, gross margin decreased to 43.7% from 44.9% in the same period of the
prior year. This was due to an increase in sales allowances relating to promotional programs and higher liquidation discounts on liquidation sales.

Design and Production ExpenseDesign and production expenses increased approximately $0.3 million or 32.9% to
$1.3 million from $1.0 million in the same period of the prior year and increased as a percentage of net sales to 3.4% from 2.5%. The increase was primarily attributable to increased
personnel and sample costs to support our expanding sportswear collection and the development of our women's fashion line.

Selling and Shipping ExpenseSelling and shipping expenses increased by $1.5 million, or 13.2%, to
$12.5 million in the first quarter of fiscal 2002 from $11.0 million in the same period of the prior year, and increased as a percentage of net sales to 33.0% from 28.2%. The increase in
selling expenses was attributable to increased sample costs, increased customer service staffing expense as well as increased trade advertising and fixturing. The increase in shipping expenses was
primarily due to increased

10

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warehouse staffing expense, facilities costs and depreciation expenses associated with the distribution center. The store level operating expenses associated with Company-owned retail stores are also
included in selling and shipping expenses and reflect expenses associated with thirteen retail locations during the first quarter of fiscal 2002 compared to six in the first quarter of fiscal 2001.

General and Administrative ExpenseGeneral and administrative expenses increased by $1.3 million or 38.3%, to
$4.6 million in the first quarter of fiscal 2002 from $3.3 million in the first quarter of fiscal 2001 and increased as a percentage of net sales from 8.4% to 12.2%. The increase during
the first quarter of fiscal 2002 was primarily due to increased management and staffing expense, increased depreciation and rent expense associated with information technology initiatives and
corporate facilities, and increased bad debt expense relating to credit exposures.

Operating IncomeAs a result of the above items, operating income decreased by $4.1 million to an operating loss
of $1.8 million in the first quarter of fiscal 2002 compared to operating income of $2.2 million in the first quarter of fiscal 2001.

Income TaxesWe recorded approximately $0.9 million of income tax benefit in the first quarter of fiscal 2002
compared to income tax expense of $0.8 million in the first quarter of fiscal 2001, as a result of the net operating loss realized during the quarter. The effective rate for income taxes in the
first quarter of fiscal 2002 and fiscal 2001 was 40% and 38%, respectively. The effective rate increased as the Company opened retail stores in additional states, thereby increasing state income
taxes.

Liquidity and Capital Resources

Net cash provided by operating activities for the three months ended July 31, 2001 was approximately $7.4 million compared to net cash used in
operations of approximately $0.4 million for the three months ended July 31, 2000. Net cash provided by operating activities for the three months ended July 31, 2001 resulted
primarily from collections of accounts receivables of $18.4 million and depreciation and amortization of $1.6 million. These amounts were partially offset by a loss from operations of
$1.4 million, increases in inventory of $6.6 million and the timing of payments for certain payables. Approximately $4.3 million of the increase in inventory relates to fashion
merchandise, $2.1 million relates to Classics merchandise, and the balance of the increase relates primarily to embroidery work in process. The increase in inventory in the first quarter was
planned as we took delivery of Fall fashion merchandise and received Classics merchandise representing the last of our large production commitments pushed out of fiscal 2001. We reduced our inventory
buys beginning in the second quarter of fiscal 2002 and as a result, we expect inventory levels to trend down in that quarter as well as the remainder of the fiscal year. For the three months ended
July 31, 2000, net cash used in operating activities resulted from increases in inventory of $7.1 million, and payments of accounts payable, accrued liabilities, and income taxes payable
of $4.5 million. These increases were partially offset by cash generated from profitable operations, a reduction in accounts receivable of $8.8 million and depreciation and amortization.

Net
cash used in investing activities was approximately $0.6 million for the three months ended July 31, 2001 and was primarily due to the purchases of capital
equipment. Capital expenditures during this period included $0.2 million for in-store fixtures and concept shops, $0.1 million for computer hardware and software,
$0.2 million for equipment and leasehold improvements associated with Company-owned retail stores and $0.1 million for the distribution center and warehouse management system. Net cash
used in investing activities for the three months ended July 31, 2000 was $3.0 million and was primarily due to purchases of capital equipment. Capital expenditures during this period
included $0.4 million for in-store fixtures and concept shops, $1.0 million for equipment and leasehold improvements associated with Company-owned retail stores,
$0.8 million for the distribution center and warehouse management system and $0.8 million for computer hardware and software, leasehold improvements, and other furniture and equipment.

11

---

Net cash used in financing activities for the three months ended July 31, 2001 was approximately $10.5 million. This resulted from net repayments of $10.3 million
in short-term borrowings and payments of approximately $0.3 million under capital lease obligations. These amounts were partially offset by
$0.1 million of cash generated from the sale of common stock under the employee stock purchase plan and pursuant to the exercise of stock options. Net cash provided by financing activities for
the three months ended July 31, 2000 was approximately $0.1 million. This was primarily due to net short term borrowings of $0.1 million and cash generated from the sale of common
stock under the employee stock purchase plan of $0.1 million. These proceeds were partially offset by capital lease payments of $0.1 million.

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

12

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PART IIOTHER INFORMATION

Item 1.  Legal Proceedings

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

Item 2.  Changes in Securities and Use of Proceeds

None

Item 3.  Defaults Upon Senior Securities

None

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

None

Item 5.  Other Information

None

Item 6.  Exhibits and Reports on Form 8-K



Exhibit
Number

DescriptionNone




The
Company filed a Form 8-K on September 14, 2001 announcing earnings for the fourth quarter of fiscal 2001, the first quarter of fiscal 2002 and guidance
for the remainder of fiscal 2002.

13

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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: September 14, 2001 |  | By:               

14

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