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PROSPECTUS Filed Pursuant to Rule 424(B)(1)
Registration No. 333-29107
129,861 Shares
CUTTER & BUCK INC.
COMMON STOCK
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This prospectus ("Prospectus") relates to the offering (the "Offering") from
time to time by a holder named in this Prospectus (the "Selling Shareholder") of
129,861 shares (the "Shares") of Common Stock, no par value per share, of
Cutter & Buck Inc. (the "Company"). The Company will not receive any proceeds
from the Offering.
The Selling Shareholder directly, or through agents, dealers, underwriters, or
market makers, may offer and sell from time to time all or any part of the
Shares in amounts and on terms to be determined at the time of sale. To the
extent required, the specific Shares to be sold, the respective purchase price
and public offering price, the names of any such agent, dealer or underwriter,
and any applicable commission or discount with respect to a particular offer
will be set forth in an accompanying supplement to the Prospectus (a "Prospectus
Supplement"). Offers or sales of the Shares have not been registered or
qualified under the laws of any country other than the United States. See "Plan
of Distribution."
See "Plan of Distribution" herein for a description of indemnification
arrangements for agents, dealers and underwriters, as well as a description of
the arrangements for payment of expenses related to the sale of the Shares.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON
PAGE 3 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE SHARES OFFERED HEREBY.
The closing price of the Company's Common Stock as reported on the Nasdaq
National Market on June 17, 1997 was $15.25 per share.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is June 17, 1997.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). This information can
be inspected and copies obtained (at prescribed rates) at the public
reference facilities of the Commission's office at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at certain of its Regional Offices at Seven World
Trade Center, New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. The Commission maintains a Web
site that contains reports, proxy and other information of the Company at
http://www.sec.gov. This information may also be inspected at the offices of
the National Association of Securities Dealers, Inc., 9513 Key West Avenue,
Rockville, MD 20850.
The Company has filed a registration statement on Form S-3 (the "Registration
Statement") with the Commission under the Securities Act of 1933, as amended
(the "Securities Act"), concerning the Shares covered by this Prospectus. This
Prospectus omits certain information and exhibits included in the Registration
Statement, copies of which may be obtained (at prescribed rates) or may be
examined free of charge at the Commission's Public Reference Section at 450
Fifth Street, N.W., Washington, D.C. 20549.
The Company's Common Stock is quoted on the Nasdaq National Market under the
symbol "CBUK". The Company furnishes its shareholders with annual reports
containing financial statements audited by its independent auditors and with
quarterly reports containing unaudited summary financial information for each of
the first three quarters of each fiscal year.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the Commission and
are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K, as amended by Forms 10-K/A-1
and 10-K/A-2, for the fiscal year ended April 30, 1996;
(b) The Company's Quarterly Reports on Form 10-Q for the quarters ended
July 31, 1996, October 31, 1996 and January 31, 1997;
(c) The Company's Current Report on Form 8-K dated March 25, 1997; and
(d) The description of the Company's Common Stock contained in the
Registration Statement on Form 8-A filed with the Commission on August 9, 1995.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Shares made hereby shall also be deemed
to be incorporated by reference into this Prospectus.
Any statement contained in a document all or a portion of which is incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of the Registration Statement and this Prospectus to
the extent that a statement contained in the Registration Statement, this
Prospectus, or any other subsequently filed document that is also incorporated
by reference herein modifies or supersedes such statement. Any such statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute part of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a Prospectus is delivered, upon written
or oral request of such person, a copy of any document incorporated herein by
reference (other than exhibits to such documents unless such exhibits are
specifically incorporated by reference into the documents that this Prospectus
incorporates by reference). Such requests should be directed to Martin J.
Marks, Cutter & Buck Inc., 2701 First Avenue, Suite 500, Seattle,
Washington 98121.
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RISK FACTORS
AN INVESTMENT IN THE COMMON STOCK BEING OFFERED HEREBY INVOLVES A HIGH DEGREE
OF RISK. CERTAIN STATEMENTS MADE IN THE FOLLOWING RISK FACTORS CONSTITUTE
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN
AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL
RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY, OR INDUSTRY RESULTS, TO
BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS
EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH FACTORS
INCLUDE, AMONG OTHERS, THE FOLLOWING: VOLATILITY OF THE APPAREL INDUSTRY;
UNEXPECTED CHANGES IN FASHION TRENDS; PRIOR SEASON INVENTORIES; COMPETITION;
DEPENDENCE ON KEY PERSONNEL; RELIANCE ON CONTRACTORS AND FOREIGN SOURCING;
IMPORT RESTRICTIONS; AND OTHER FACTORS. IN EVALUATING AN INVESTMENT IN THE
COMMON STOCK, INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS IN
ADDITION TO THE OTHER INFORMATION (INCLUDING THE INFORMATION INCORPORATED BY
REFERENCE) IN THIS PROSPECTUS.
VOLATILITY OF APPAREL INDUSTRY. The apparel industry historically has been
subject to substantial cyclical variations. The Company and other apparel
manufacturers rely on the expenditure of discretionary income for most, if
not all, of their sales. Any downturn, whether real or perceived, in economic
conditions or prospects could adversely affect consumer spending habits and
the Company's sales and results of operations. During the past several years,
various retailers, including some of the Company's customers, have
experienced financial problems which increases credit risk of extending
credit to such retailers. The Company has historically assigned the credit
risk of its customer receivables to its factor. The Company has discontinued
its use of its factor for management of its accounts receivable credit and
collection function associated with its sales to the golf, corporate and
international distribution channels. The Company currently uses the factor's
accounts receivable management exclusively for its sales to the specialty
store channel. The Company has only limited experience in managing its
credit and collection operations and there can be no assurance that the
increased assumption of this credit risk will not have a material adverse
effect on the Company's financial condition and results of operations.
UNEXPECTED CHANGES IN FASHION TRENDS; PRIOR SEASON INVENTORIES. Fashion trends
can change rapidly, and the Company's business is particularly sensitive to
changes because the Company typically designs and arranges for the manufacture
of its apparel substantially in advance of sales of its products to consumers.
There can be no assurance that the Company will accurately anticipate shifts in
fashion trends and adjust its merchandise mix to appeal to changing consumer
tastes in a timely manner. If the Company misjudges the market for its products
or is unsuccessful in responding to changes in fashion trends or in market
demand, the Company could experience insufficient or excess inventory levels,
missed market opportunities or higher markdowns, any of which would have a
material adverse effect on the Company's financial condition and results of
operations. At the end of its fall and spring seasons, the Company has unsold
FASHION inventory (i.e., products incorporating the latest innovations in color,
fabric and styling and which tend to remain in line for only one season) as a
consequence of making inventory available to satisfy anticipated customer demand
across a broad range of styles. The Company historically has been able to sell
this inventory approximately at cost through sales to off-price retail or club
store accounts in subsequent seasons and recently, in response to consolidation
in the off-price channel, increased marketing of this inventory to regular
retail accounts. If the Company experiences increased amounts of excess
inventory, or if the Company's ability to dispose of its prior season FASHION
merchandise is impaired, due to abrupt changes in fashion trends or for other
reasons, the Company's financial condition and results of operations could be
materially adversely affected.
COMPETITION. The men's sportswear segment of the apparel industry is highly
competitive. The Company's future growth and financial success depend on the
Company's ability to further penetrate the golf distribution channel and
increase the size of its average annual net sales per account in that channel.
The Company encounters substantial competition in the golf distribution channel
from Ashworth, Izod Club and Polo/Ralph Lauren. Apparel companies recently
entering the golf distribution channel, such as Tommy Hilfiger, will further
increase the level of competition in that channel. For the nine months ended
January 31, 1997, the golf distribution channel represented approximately 53% of
the Company's net sales. Most of the Company's competitors are significantly
larger and more diversified than the Company and have substantially greater
resources available for developing and marketing their products. There can be no
assurance that the Company will be able to maintain its growth rate by
increasing its market share at the expense of existing competitors and other
established apparel manufacturers choosing to enter
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the market. In addition, there can be no assurance that the Company will be
able to achieve significant growth in its other distribution channels.
DEPENDENCE ON KEY PERSONNEL. The Company's success largely depends on the
personal efforts and abilities of its key executives, including Harvey N. Jones,
the Company's Chairman and Chief Executive Officer and Martin J. Marks, the
Company's President and Chief Operating Officer. The loss of the
services of either of Messrs. Jones or Marks could have a material adverse
effect on the Company. The Company maintains a "key man" life insurance policy
in the amount of $1.0 million on Mr. Jones. There can be no assurance that such
insurance will continue to be available at an acceptable cost, if at all, or
would adequately compensate the Company for its loss of his services. The
Company does not have an employment agreement with either Mr. Jones or
Mr. Marks.
RELIANCE ON CONTRACTORS AND FOREIGN SOURCING. The Company obtains all of its
garments from independent foreign and domestic suppliers, and does not have
formal long-term contracts with any of its suppliers or agents. Currently, the
Company's production is sourced through an agent in Thailand, two agents in Hong
Kong coordinating Chinese suppliers, an agent managing other Asian sources of
supply and direct factory relationships in Asia and California. Approximately
45% of the Company's knit shirt production is currently managed by its agent in
Thailand. Due to the concentration of production and production control with
these parties, the Company would experience difficulty satisfying its production
requirements if any of them had an interruption of business or were unable or
unwilling to meet the Company's production needs. Furthermore, the Company
could experience delays in shifting production to other manufacturers or agents
because of the complex fabrication, unique trims and extensive detailing of its
products. In addition, there can be no assurance that the Company will not
experience difficulties with third parties in the manufacture of its products.
Delays in shipments to the Company, inconsistent or inferior garment quality and
other factors beyond the Company's control would adversely affect the Company's
relationships with its customers, its reputation in the industry and its sales
and results of operations. The Company has experienced production delays in the
past, and there can be no assurance that production delays will not occur in the
future. Because a substantial portion of the Company's products are
manufactured in China and Thailand, the Company's operations may also be
affected by economic, political, governmental and labor conditions in those
countries. In addition, changes in economic policies and political conditions
in those countries could result in disruption of trade, new or additional
currency or exchange controls or the imposition of other restrictions. The
Company incurred increased expenses in its first quarter of fiscal 1997 to
expedite products from Chinese manufacturers due to threatened trade sanctions.
Furthermore, although the Company contracts to purchase its products in United
States dollars, changes in exchange rates could increase the prices the Company
pays for its products. Currently, the Company does not engage in any hedging
activities with respect to such exchange rate risk.
IMPORT RESTRICTIONS. The Company's import operations are subject to constraints
imposed by bilateral textile agreements between the United States and each of
Hong Kong, Thailand and China. These agreements, which have been negotiated
under the framework established by the Arrangement Regarding International Trade
in Textiles, known as the Multifiber Agreement, impose quotas on the amount and
type of goods that can be imported into the United States from these countries.
Such agreements also allow the United States to impose at any time restraints on
the importation of categories of merchandise that, under the terms of the
agreements, are not subject to specified limits. The Company's imported products
also are subject to U.S. customs duties, which are a material portion of the
Company's cost of goods, and customs inspections, which could result in delays
in delivery of the Company's products. Partly as a result of changes to customs
laws enacted in December 1994, importers such as the Company may face increasing
scrutiny for the acts of their manufacturers, suppliers and agents. While to
date the Company has experienced no material disruption of its business due to
quota or customs restrictions, there can be no assurance that it will not face
such disruptions in the future. A substantial increase in customs duties or
decrease in quotas could have an adverse effect on the Company's results of
operations. Furthermore, the United States and the countries in which the
Company's products are manufactured may, from time to time, impose new quotas,
duties, tariffs or other restrictions, or adversely adjust presently prevailing
quota, duty or tariff levels. While the Company is not aware that any current
impositions, adjustments or increased scrutiny would adversely affect the
Company or its ability to continue to import products at current levels, it
cannot predict the likelihood or frequency of any such events occurring.
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DEPENDENCE ON INDEPENDENT SALES REPRESENTATIVES. The Company sells its products
through a network of Company-employed and independent sales representatives. The
Company's independent sales representative agreements are generally terminable
for any reason by either party on 30 days' notice. The Company's independent
sales representatives typically also sell other non-competing products that may
nonetheless divert the representatives' or the customers' attention from the
Company's line. The Company intends to increase the number of sales
representatives in the future, but anticipates that an increasing proportion of
its sales representatives will be Company employees selling Cutter & Buck
merchandise exclusively. There can be no assurance, however, that the Company
will be successful in retaining existing or recruiting additional sales
representatives, or that the addition of sales representatives will be an
effective means to increase the Company's net sales.
RISKS OF NEW INTERNATIONAL OPERATIONS. The Company has recently commenced the
direct distribution of its products in the United Kingdom and Continental Europe
through newly established subsidiaries. The Company's sales outside of the
United States totaled approximately $1.3 million for the nine month period ended
January 31, 1997, and the Company expects the amount of its international sales
to increase. International sales are subject to the inherent risks of doing
business in a foreign country, including fluctuations in local economies,
fluctuating exchange rates, difficulties in staffing and managing foreign
operations, increased difficulty of inventory management, greater difficulty in
accounts receivable collection, unexpected changes in regulatory requirements,
tariffs and other trade barriers, and the burdens of complying with a variety of
foreign laws. In addition, the Company relies on international distributors to
distribute its products in some foreign countries. There can be no assurance
that these distributors will be able to provide a sufficient level of support
for the Company's products. The Company's inability to achieve a sufficient
level of sales from its foreign operations or the loss or insolvency of any of
its international distributors could have a material adverse effect on the
Company's financial condition and results of operations.
LIMITED HISTORY OF PROFITABILITY. The Company has a limited history of
profitable operations. There can be no assurance that the Company will be
profitable on either a quarterly or annual basis. In addition, the Company's
expense levels are based in part on anticipated future revenue levels. If
revenues fall below anticipated levels, operating results would be adversely
affected.
SEASONALITY. The Company's business has been and will continue to be highly
seasonal, and its quarterly operating results have fluctuated primarily due to
the seasonality of its sales of sportswear. The Company's sales tend to be
highest during the Company's second and fourth quarters, ending October 31 and
April 30, respectively.
FUTURE STATUS OF HONG KONG. On July 1, 1997, China will resume sovereignty over
Hong Kong in accordance with the 1984 Sino-British Joint Declaration (the "Joint
Declaration"), and Hong Kong will become a Special Administrative Region of
China. Although the Joint Declaration provides for the continuation of existing
economic and social systems in Hong Kong through 2047, there can be no assurance
that Hong Kong will not experience political, economic or social disruption as a
result of the resumption of Chinese sovereignty. In addition, there have been a
number of recent trade disputes between China and the United States during which
the United States threatened to impose tariffs and duties on some products
imported from China and to withdraw China's "most favored nation" trade status.
Any significant disruption in the Company's operations or its relationships with
its manufacturing sources located in Hong Kong or the loss of most favored
nation trade status for China could have a material adverse effect on the
Company.
ANTITAKEOVER CONSIDERATIONS. The Company's Board of Directors has the
authority, without action by the shareholders, to issue up to 25,000,000 shares
of Common Stock and 6,000,000 shares of Preferred Stock and to fix the rights
and preferences of the Preferred Stock. Preferred Stock may be issued with
rights senior to those of the Common Stock. This authority may have the effect
of making it more difficult for a third party to acquire, or discouraging a
third party from attempting to acquire, control of the Company. In addition,
Washington law contains certain provisions that may have the effect of delaying,
deterring or preventing a hostile takeover of the Company.
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SELLING SHAREHOLDER
The Selling Shareholder is Joey Rodolfo. Mr. Rodolfo, a co-founder of the
Company, was a director of the Company from its inception until April 4, 1997.
Mr. Rodolfo was Senior Vice President and Secretary of the Company from its
inception until May 1995, and was an independent design consultant from that
date until April 4, 1997. Mr. Rodolfo and the Company are currently parties to
a Transition Agreement (the "Agreement"), which generally provides for the
transition of Mr. Rodolfo out of the role as a design consultant to the Company
by July 1, 1997. In connection with the Agreement, the Company agreed to file a
registration statement with the Commission covering the Shares and to indemnify
the Selling Shareholder against claims made against him arising out of, among
other things, statements made in the Registration Statement. The Company has
agreed to cause the Registration Statement to remain effective until
December 19, 1997, or until all the Shares are sold, whichever is earlier.
As of May 27, 1997, the Selling Shareholder beneficially owned 164,550 shares
of Common Stock of the Company, 129,861 of which are covered by this Prospectus
and 46,253 of which are represented by options exercisable within 60 days.
Because the Selling Shareholder may sell all or part of his Shares pursuant to
this Prospectus, and this Offering is not being underwritten on a firm
commitment basis, no estimate can be given as to the number and percentage of
shares of Common Stock that will be held by the Selling Shareholder upon
termination of this Offering.
PLAN OF DISTRIBUTION
The Shares may be sold from time to time by the Selling Shareholder or by
donees or transferees, directly or through underwriters, dealers or agents,
who may receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Shareholder or the purchasers of
Shares for whom they may act as agent. The Shares or any part of the Shares
may be sold in amounts and on terms to be determined at the time of sale,
including, without limitation, block trades, in the over-the-counter market
through Nasdaq, through the writing of options on the Shares, or through a
combination of such methods of sale, at negotiated prices or at or relating
to quoted market prices then prevailing. The Selling Shareholder reserves
the sole right to accept and, together with any agent of the Selling
Shareholder, to reject in whole or in part any proposed purchase of the
Shares. All proceeds of any sale transactions will go to the Selling
Shareholder.
To the extent required, the amount of the Shares to be sold, purchase prices,
public offering prices, the names of any agents, dealers or underwriters, and
any applicable commissions or discounts with respect to a particular offer will
be set forth by the Company in a Prospectus Supplement accompanying this
Prospectus or, if appropriate, a post-effective amendment to the Registration
Statement. The Selling Shareholder and agents who execute orders on his behalf
may be deemed to be underwriters as that term is defined in Section 2(11) of the
Securities Act and a portion of any proceeds of sales and discounts, commissions
or other seller's compensation may be deemed to be underwriting compensation for
purposes of the Securities Act. Offers or sales of the Shares have not been
registered or qualified under the laws of any country other than the United
States.
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Pursuant to the Agreement, all expenses incurred in connection with registration
of the Shares, including, without limitation, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses and the
expense of any special audits incident to or required by the filing of the
Registration Statement (but excluding the compensation of regular employees of
the Company which shall be paid by the Company) are called Registration
Expenses, and all registration, qualification and filing fees and all
underwriting discounts and selling commissions applicable to any sales of the
Shares are called Selling Expenses. The Selling Shareholder has agreed to pay
all Selling Expenses. In addition, the Selling Shareholder has agreed to pay
the first $15,000 of all Registration Expenses in connection with the filing of
the Registration Statement; provided, however, that if the average price per
Share for all Shares actually sold pursuant to the Prospectus (inclusive of the
Selling Expenses) is less than $15.50 per share, the Registration Expenses
incurred by the Selling Shareholder shall be paid by the Company or promptly
reimbursed to the Selling Shareholder by the Company if they have been
previously paid by the Selling Shareholder. Pursuant to the Agreement, the
Company has agreed to indemnify the Selling Shareholder against certain civil
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the Shares offered by this Prospectus will be passed upon by
Lane Powell Spears Lubersky LLP, Seattle, Washington. As of the date of this
Prospectus, members of that firm beneficially owned approximately 3,100 shares
of Common Stock of the Company.
EXPERTS
The financial statements of Cutter & Buck Inc. incorporated by reference in
its Annual Report (Form 10-K) for the year ended April 30, 1996, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
financial statements have been incorporated herein by reference in reliance
upon such report given upon the authority of such firm as experts in
accounting and auditing.
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No person has been authorized to give any information or make any
representations other than those contained in this Prospectus in connection
with the offering herein contained and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company or the Selling Shareholder or any underwriter or agent. This
Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, the securities offered hereby in any jurisdiction to any person
to whom it is unlawful to make an offer or solicitation. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create an implication that there has not been any change in
the facts set forth in this Prospectus or in the affairs of the Company since
the date hereof.
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TABLE OF CONTENTS
Page
Available Information. . . . . . . . . . . . . . . . . . . . . . . .. . . . 2
Incorporation of Certain Documents by
Reference. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Selling Shareholder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
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129,861 SHARES
CUTTER & BUCK INC.
COMMON STOCK
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PROSPECTUS
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June 17, 1997
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