Cutter & Buck Files 10-K and 10-Q,
Restates Earnings
PR NEWSWIRE - October 10, 2002 04:00
SEATTLE, Oct 10, 2002 /PRNewswire-FirstCall via COMTEX/ -- Cutter & Buck Inc. (Nasdaq: CBUKE) today announced results of its internal investigation, which has led to restatement of its financial statements. Since most of the restatement relates to timing of revenue recognition on sales, there is virtually no change in the company's cumulative net income or net worth for the three years ended April 30, 2002. The company's net income and net worth for the three years ended April 2002 were lowered by less than 1%.
"We are pleased to remove the uncertainty about our financial status," said Fran Conley, CEO. "The recent examination of our books was more intensive than most companies will ever experience. We dedicated an enormous amount of company staff and resources to address the matter, and engaged a consultant with CFO experience, along with two accounting firms and two law firms, to assist in the review. We have a high degree of confidence in the results. We had net book value of $82 million or $7.75 per share as of July 31, 2002. We have working capital of $74 million. Simply stated, Cutter & Buck continues to have a strong financial position."
The company has restated its books to properly record certain shipments to distributors which were originally booked as sales but should have been recorded as consignments; to adjust for the timing of revenue recognition on certain other sales transactions; and to correct some accounting errors that were discovered at the company's European subsidiary during the process of closing down that operation.
Today the company filed with the Securities and Exchange Commission its annual report on Form 10-K for the fiscal year ended April 30, 2002, and its quarterly report on Form 10-Q for the first quarter ended July 31, 2002. These reports, and charts showing the effects of the restatement, are also available on the company's web site, at cutterbuck.com .
"Although the restatement does not significantly impact our net worth, we took this matter very seriously, and we have initiated measures to ensure that it will not recur," said Conley. "The managers responsible for circumventing company procedures and those responsible for the related accounting are no longer with the company. Every employee at Cutter & Buck is now more sensitized to issues regarding our shipping practices. Every employee has the responsibility to speak up about any actions they consider even remotely questionable."
The company announced in August that it intended to restate certain financial statements as a result of inaccurate reporting of certain transactions and the improper recording of sales entries. The irregularities were discovered by Conley, who had been appointed CEO in April. A Special Committee of the Board of Directors immediately started the investigation.
"This has been a very difficult time for all of us at Cutter & Buck," said Conley. "Because we are proud of our people, products, and customers, it was especially sad to discover these failings in our company. It's difficult when we face investigations and lawsuits. But I am proud of the way we have handled this, and of our employees, who have kept focused on our customers and our mission to provide the highest quality men's and women's sportswear."
"As CEO and Chairman of the Board, I want to apologize to all who have been affected by the actions which led to the restatement. We are fixing what was wrong and we are making sure it will never happen again. We are renewing our determination to provide good service to our customers, and to continue to create the finely-crafted garments they have come to expect from Cutter & Buck," said Conley.
Conley indicated that the company hopes that its filings of the 10-K and the 10-Q will result in a favorable decision on the delisting of the company's stock by NASDAQ. Informal inquiries by NASDAQ and the SEC continue, and the company is cooperating fully.
The company gave a very preliminary estimate that costs of the investigation and restatement will be at least $4.5 million, including the costs of the professionals doing the investigation and responding to the NASDAQ and SEC inquiries, employee retention programs, and increases in insurance costs.
"In recent weeks we have experienced some weakness in bookings related to customers' uncertainty about our financial condition," said Conley. "Hopefully that uncertainty is now ended." The company expects sales for this fiscal year to be lower than originally forecast. The effects of the port labor dispute, the possibility of war, and the continuing weakness in the stock market and in travel make it extraordinarily difficult to forecast the rest of this fiscal year.
For the first quarter ended July 31, 2002, the company reported net sales of $36.6 million and a net loss of $1.6 million, or $0.15 per share. This loss was after a pre-tax charge of $3.3 million related to abandoning excess warehouse space.
"In the first quarter, our basic business operations showed a profit," said Conley. "The charge for abandoning excess warehouse space changed our results to a net loss. Although business in the first quarter was affected by the general weakness in the economy, we are pleased with the overall stability of the business."
Cutter & Buck invites investors to listen to a broadcast of the company's conference call to discuss these matters. The conference call will be broadcast live over the internet on Thursday October 10, 2002 at 11:00 a.m. Eastern Daylight Time. To listen to the conference call, go to cutterbuck.com . At the website, select "investor relations". The call will be archived shortly after its completion and will be available on the web through October 25, 2002. The call can also be accessed at 1-800-839-0860, pin 7016, through October 25, 2002.
Cutter & Buck designs and markets upscale sportswear and outerwear under the Cutter & Buck brand. The Company sells its products primarily through golf pro shops and resorts, corporate sales accounts and specialty retail stores. Cutter & Buck products feature distinctive, comfortable designs, high quality materials and manufacturing and rich detailing.
Statements made in this news release that are not historical facts are forward-looking statements. Actual results may differ materially from those projected in any forward-looking statement. Specifically, there are a number of important factors that could cause actual results to differ materially from those anticipated, such as style changes and product acceptance; relations with and performance of the 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 operating retail locations; risks associated with the company's entry into new markets or distribution channels; 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 satisfactory relationships with our banking partners; technological change; political and trade relations; the overall level of consumer spending on apparel and global economic conditions; additional threatened terrorist attacks and the ongoing military action. Additional information on these and other factors, which could affect the company's financial results, are included in its Securities and Exchange Commission filings. Finally, there may be other factors not mentioned above or included in the company's SEC filings that may cause actual results to differ materially from any forward-looking information. You should not place undue reliance on these forward-looking statements. 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 Securities laws. |
