<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM 10-Q
<TABLE>
<C> <S>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2000
OR
<TABLE>
<C> <S>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NO. 0-26608
------------------------
CUTTER & BUCK INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C>
WASHINGTON 91-1474587
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
</TABLE>
2701 FIRST AVENUE, SUITE 500
SEATTLE, WA 98121
(Address of Principal Executive Offices, Including Zip Code)
(206) 622-4191
(Registrant's Telephone Number, Including Area Code)
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
The number of shares of Common Stock of the registrant outstanding as of
March 13, 2000 was 10,344,621.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CUTTER & BUCK INC.
Quarterly Report on Form 10-Q
For the Quarter Ended January 31, 2000
Index
<TABLE>
<S> <C> <C>
PAGE
--------
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited):
Consolidated Balance Sheets................................. 3
Consolidated Statements of Income........................... 4
Consolidated Statements of Cash Flows....................... 5
Notes to 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........................................... 15
Item 2. Changes in Securities and Use of Proceeds................... 15
Item 3. Defaults Upon Senior Securities............................. 15
Item 4. Submission of Matters to a Vote of Security Holders......... 15
Item 5. Other Information........................................... 15
Item 6. Exhibits and Reports on Form 8-K............................ 15
SIGNATURES.................................................................. 16
</TABLE>
2
<PAGE>
PART I--FINANCIAL INFORMATION
Item 1. Financial Information
CUTTER & BUCK INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 30, JANUARY 31,
1999 2000
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 4,760,259 $ 14,416,067
Accounts receivable, net of allowances for doubtful
accounts and returns of $1,726,191 at April 30, 1999 and
$2,143,228 at January 31, 2000.......................... 32,518,666 28,884,346
Inventories............................................... 28,620,774 43,482,606
Deferred income taxes..................................... 1,496,945 1,496,945
Prepaid expenses and other current assets................. 3,288,538 3,303,914
----------- ------------
Total current assets.................................... 70,685,182 91,583,878
Furniture and equipment, net................................ 9,478,174 15,017,793
Deferred income taxes....................................... 127,715 127,715
Other assets................................................ 297,708 412,615
----------- ------------
Total assets............................................ $80,588,779 $107,142,001
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings..................................... $12,084,704 $ 3,811,515
Accounts payable.......................................... 6,807,324 7,995,836
Accrued liabilities....................................... 3,635,341 4,553,708
Income taxes payable...................................... 3,025,968 1,394,374
Current portion of capital lease obligations & long-term
debt.................................................... 220,546 1,002,447
----------- ------------
Total current liabilities............................... 25,773,883 18,757,880
Capital lease obligations, less current portion............. 907,260 977,391
Long-term debt, less current portion........................ 5,000,000 4,285,714
Commitments
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;
8,312,236 issued and outstanding at April 30, 1999 and
10,340,922 at January 31, 2000.......................... 32,998,010 62,596,205
Deferred compensation..................................... (107,340) (294,952)
Retained earnings......................................... 16,175,865 21,011,581
Accumulated other comprehensive loss...................... (158,899) (191,818)
----------- ------------
Total shareholders' equity.............................. 48,907,636 83,121,016
----------- ------------
Total liabilities and shareholders' equity.............. $80,588,779 $107,142,001
=========== ============
</TABLE>
See accompanying notes.
3
<PAGE>
CUTTER & BUCK INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------- ----------------------------
JANUARY 31, JANUARY 31, JANUARY 31, JANUARY 31,
1999 1999 2000 2000
----------- --------------- ----------- --------------
<S> <C> <C> <C> <C>
Net sales......................... $23,148,465 $31,785,889 $66,905,402 $97,865,453
Cost of sales..................... 13,256,025 17,539,704 38,461,355 54,697,654
----------- ----------- ----------- -----------
Gross profit...................... 9,892,440 14,246,185 28,444,047 43,167,799
Operating expenses:
Design and production........... 706,363 849,465 2,166,915 2,531,886
Selling and shipping............ 5,398,261 8,625,398 14,683,167 24,666,370
General and administrative...... 2,275,476 2,665,214 6,375,036 8,219,599
----------- ----------- ----------- -----------
Total operating expenses...... 8,380,100 12,140,077 23,225,118 35,417,855
----------- ----------- ----------- -----------
Operating income.................. 1,512,340 2,106,108 5,218,929 7,749,944
Other income (expense):
Factor commission and interest
expense, net of interest
income........................ (83,672) (21,779) (129,204) (326,968)
License and royalty income, net
of other expense.............. 90,849 51,468 265,352 132,831
----------- ----------- ----------- -----------
Total other income
(expense)................... 7,177 29,689 136,148 (194,137)
----------- ----------- ----------- -----------
Income before income taxes........ 1,519,517 2,135,797 5,355,077 7,555,807
Income taxes...................... 550,800 768,891 1,927,800 2,720,091
----------- ----------- ----------- -----------
Net income........................ $ 968,717 $ 1,366,906 $ 3,427,277 $ 4,835,716
=========== =========== =========== ===========
Basic earnings per share........ $ 0.12 $ 0.13 $ 0.42 $ 0.50
=========== =========== =========== ===========
Diluted earnings per share...... $ 0.11 $ 0.13 $ 0.40 $ 0.49
=========== =========== =========== ===========
Shares used in computation of:
Basic earnings per share........ 8,289,222 10,329,348 8,182,809 9,669,863
=========== =========== =========== ===========
Diluted earnings per share...... 8,630,386 10,483,642 8,544,607 9,879,539
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
4
<PAGE>
CUTTER & BUCK INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------------
JANUARY 31, JANAURY 31,
1999 2000
------------ --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income.................................................. $ 3,427,277 $ 4,835,716
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization........................... 1,579,877 2,779,652
Amortization of deferred compensation................... 42,936 64,404
Changes in assets and liabilities:
Receivables, net...................................... 2,026,328 3,610,053
Inventories........................................... (14,414,332) (15,002,551)
Prepaid expenses and other current assets............. (1,854,288) (40,875)
Accounts payable and accrued liabilities.............. 2,770,899 2,162,460
Income taxes payable.................................. (932,036) (1,631,594)
------------ ------------
Net cash used in operating activities....................... (7,353,339) (3,222,735)
INVESTING ACTIVITIES
Purchases of furniture and equipment........................ (4,123,778) (7,946,792)
Increase in trademarks, patents and marketing rights........ (92,292) (116,366)
------------ ------------
Net cash used in investing activities....................... (4,216,070) (8,063,158)
FINANCING ACTIVITIES
Net proceeds from (repayments of) short term borrowings..... 6,333,851 (8,149,975)
Principal payments under capital lease obligations.......... (180,977) (244,326)
Net decrease in advances from factor........................ (22,351) --
Issuance of common stock.................................... 1,781,623 29,346,179
------------ ------------
Net cash provided by financing activities................... 7,912,146 20,951,878
Effects of foreign exchange rate changes on cash............ 15,664 (10,177)
------------ ------------
Net increase (decrease) in cash............................. (3,641,599) 9,655,808
Cash, beginning of period................................... 7,589,731 4,760,259
------------ ------------
Cash, end of period......................................... $ 3,948,132 $ 14,416,067
============ ============
SUPPLEMENTAL INFORMATION:
Noncash financing and investing activities:
Equipment acquired with capital leases.................... $ 568,850 $ 382,072
============ ============
Deferred compensation for the issuance of restricted
stock................................................... $ 171,744 $ 252,016
============ ============
</TABLE>
See accompanying notes.
5
<PAGE>
CUTTER & BUCK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited 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 nine
months ended January 31, 2000 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, 1999, included in
the Company's filing on Form 10-K.
NOTE 2. EARNINGS PER SHARE
Basic earnings per share is based on the weighted average number of common
shares outstanding. Diluted earnings 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
per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JANUARY 31, JANUARY 31,
---------------------- -----------------------
1999 2000 1999 2000
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Numerator:
Numerator for basic and diluted earnings per
share--net income.......................... $ 968,717 $1,366,906 $3,427,277 $4,835,716
========= ========== ========== ==========
Denominator:
Denominator for basic earnings per share--
weighted average common shares
outstanding................................ 8,289,222 10,329,348 8,182,809 9,669,863
Effect of dilutive securities stock options.... 341,164 154,294 361,798 209,676
--------- ---------- ---------- ----------
Denominator for diluted earnings per share... 8,630,386 10,483,642 8,544,607 9,879539
========= ========== ========== ==========
Basic earnings per share....................... $ 0.12 $ 0.13 $ 0.42 $ 0.50
Diluted earnings per share..................... $ 0.11 $ 0.13 $ 0.40 $ 0.49
</TABLE>
6
<PAGE>
CUTTER & BUCK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. COMPREHENSIVE INCOME
The components of the Company's total comprehensive income were:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JANUARY 31, JANUARY 31,
--------------------- -----------------------
1999 2000 1999 2000
-------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income...................................... $968,717 $1,366,906 $3,427,277 $4,835,716
Foreign currency translation adjustments........ (113,844) (11,667) 15,664 (32,919)
-------- ---------- ---------- ----------
Comprehensive income............................ $854,873 $1,355,239 $3,442,941 $4,802,797
======== ========== ========== ==========
</TABLE>
NOTE 4. DEBT
In April 1999, the Company entered into a loan agreement with Washington
Mutual Bank d/b/a Western Bank ("Western Bank") for a $40 million line of
credit, replacing the Company's previous line of credit. Western Bank has
included Bank of America National Trust and Savings Association d/b/a Seafirst
Bank in the arrangement as co-lender. The revolving line of credit is to be used
for general corporate purposes, without limitation, repayment of any other
advances, reimbursement of draws under letters of credit, equipment and
leasehold improvements and other corporate purposes and provides for a $25
million sublimit for direct advances. Interest on borrowings is charged and
payable monthly at either the Prime rate or the LIBOR rate plus 2%, each as
defined in the loan agreement, at the borrower's election. The line of credit
expires on August 1, 2000 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 January 31, 2000. At January 31, 2000,
letters of credit outstanding against this line of credit totaled $15,218,975
and there were no working capital advances.
During fiscal 1999, the Company's Dutch subsidiary entered into a loan
agreement with Cooperatieve Rabobank "Huizen" B.A. ("Rabobank") for a $3.4
million line of credit. In October 1999, the line of credit was increased to
$4.4 million. The line of credit with Rabobank is to be used for international
letters of credit and working capital advances. Interest on borrowings is
charged and payable quarterly at a variable rate (5-6% at January 31, 2000). The
line of credit is secured by the Company's European inventory, an irrevocable
standby letter of credit issued by Western Bank of $4.4 million and
subordination of $2.7 million of intercompany debt. At January 31, 2000, letters
of credit outstanding against this line of credit totaled $214,189 and working
capital advances totaled $3,811,515.
The Company also has a $5 million term credit facility with Western Bank. As
of January 31, 2000, $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 annual principal payments of $714,286 due in August
of years 2000 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 5. SHAREHOLDERS' EQUITY
On July 23, 1999 the Company sold 1,700,000 shares of its common stock to
the public at $16 per share. On August 3, 1999, the underwriters exercised their
over-allotment option to purchase an additional
7
<PAGE>
CUTTER & BUCK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5. SHAREHOLDERS' EQUITY (CONTINUED)
255,000 shares of common stock at $16 per share. Proceeds to the Company, net of
underwriting discounts and commissions and offering expenses totaling
$2,462,760, amounted to $28,817,240.
In addition to these shares sold to the public, the Company sold 56,161
shares of common stock under its employee stock purchase plan and pursuant to
the exercise of stock options.
On August 13, 1999, the Company granted an additional 17,525 shares under
its Restricted Stock Plan and recorded deferred compensation of $252,016
relating to this grant.
NOTE 6. LITIGATION
In August 1999, the Company reached a settlement of the two
previously-described lawsuits related to labor issues in Saipan. The settlement
involves both a monetary payment which had no material impact on the Company's
financial position or results of operations, and a monitoring component which
requires all future Company contracts for the manufacture of garments in Saipan
to include a requirement that the manufacturer maintain compliance with certain
minimum workplace and living standards. The settlement of the federal court
action is subject to court approval applicable to class actions of this nature.
No hearing has been set to date.
The Company is also 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.
8
<PAGE>
`
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
STATEMENTS MADE IN THIS FILING THAT ARE NOT HISTORICAL FACTS ARE FORWARD LOOKING
INFORMATION 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 SUPPLIERS AND INDEPENDENT SALES REPRESENTATIVES, 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,
FOREIGN CURRENCY RISKS, RISKS ASSOCIATED WITH OPENING AND OPERATING RETAIL
LOCATIONS, THE ABILITY OF THE COMPANY TO TIMELY IMPLEMENT THE NEW WAREHOUSE
MANAGEMENT SYSTEM, TECHNOLOGICAL CHANGE, POLITICAL AND TRADE RELATIONS AND
GENERAL ECONOMIC CONDITIONS.
OVERVIEW
Cutter & Buck is a lifestyle brand with broad demographic appeal, targeted
to men and women who seek updated classic American styles inspired by golf and
our Pacific Northwest heritage. We sell our distinctive sportswear and outerwear
products primarily through golf pro shops and resorts, corporate sales accounts
and better specialty stores.
We have grown sales in our three primary channels of distribution over the
last five years through an increase in the number of accounts and an increase in
the average annual net sales per account. The increase in the number of accounts
is primarily due to the growth in the size of our direct sales force. We have
increased average annual net sales per account by offering more product styles
and increasing the average annual net sales per style. We believe the increased
purchasing levels by our customers also reflect strong cooperative working
relationships in the area of fixturing and merchandising our coordinated product
line, and growing consumer recognition of our brand. We recognize revenue at the
time the product is shipped to the account, and there is no right to return
other than for defective products.
As our sales volume has increased, we have continued to invest in management
and systems to strengthen our sales and marketing effort and to negotiate
improved cost arrangements with our suppliers through economies of scale. We
have also expanded our customer support, embroidery services and distribution
center operations. While these actions have resulted in an increase in operating
expenses as a percentage of net sales, we have continued to experience
improvements in gross margin.
Our flagship retail store is located in Seattle and we have three additional
stores in Denver, Orlando and Mission Viejo. We have signed leases to open
additional stores in Las Vegas, Portland and Atlanta and we expect to open a
limited number of additional stores in selected metropolitan markets during the
remainder of this calendar year and beyond.
9
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED JANUARY 31, 2000 COMPARED WITH THREE MONTHS ENDED JANUARY
31, 1999
NET SALES During the third quarter of fiscal 2000 net sales increased $8.6
million or 37.3% to $31.8 million from $23.1 million in the same period of the
prior year. The detail of net sales by distribution channel is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JANUARY 31,
------------------------------------------
PERCENT
1999 2000 INCREASE CHANGE
-------- -------- --------- --------
<S> <C> <C> <C> <C>
IN THOUSANDS, EXCEPT PERCENT CHANGE
Golf................................................. $10,485 $13,680 $3,195 30.5%
Corporate............................................ 7,520 11,078 3,558 47.3
Specialty stores..................................... 2,802 4,017 1,215 43.4
Other................................................ 2,341 3,011 670 28.6
------- ------- ------ ----
$23,148 $31,786 $8,638 37.3%
======= ======= ====== ====
</TABLE>
The $3.2 million increase in net sales to the golf distribution channel in
the third quarter of fiscal 2000 represented approximately 37.0% of the total
increase in net sales for the quarter. The growth in net sales to the golf
distribution channel is primarily attributable to an increase in the number of
golf pro shops purchasing Cutter & Buck products, an increase in the average
annual net sales per golf pro shop and increasing brand awareness. The increase
in the number of our golf pro shop customers is primarily due to the growth in
the size of our golf pro shop sales force that exclusively sells Cutter & Buck
products. Net sales through our European subsidiary, which are included in the
golf distribution channel figures, increased $0.4 million, or approximately
52.4%, to $1.3 million in the third quarter of fiscal 2000.
Net sales through the corporate distribution channel increased $3.6 million,
or approximately 47.3%, to $11.1 million in the third quarter of fiscal 2000
from $7.5 million in the third quarter of fiscal 1999. The increase in corporate
sales during the third quarter of fiscal 2000 represented approximately 41.2% of
the total increase in net sales for the quarter. This increase is primarily
attributable to the increased size and effectiveness of our exclusive sales
force, the increase in the number of styles and inventory levels of our CLASSICS
products, improved relationships with a greater number of promotional products
companies that resell Cutter & Buck apparel to large corporate accounts and our
growing brand strength.
Specialty store sales increased $1.2 million or approximately 43.4% to $4
million in the third quarter of fiscal 2000 representing approximately 12.6% of
our net sales in the quarter. Sales to other distribution channels, including
liquidation and company-owned retail, increased from $2.3 million in the third
quarter of fiscal 1999 to $3.0 million in the third quarter of fiscal 2000.
However, sales to other distribution channels decreased slightly as a percentage
of net sales from 10.1% to 9.5%.
COST OF SALES In the third quarter of fiscal 2000, our cost of sales was
55.2% of net sales, compared to 57.3% in the third quarter of fiscal 1999. The
decrease during the third quarter of fiscal 2000 was primarily due to higher
production volumes which has given us the ability to expand our international
sourcing and increased our negotiating leverage to purchase product at lower
unit costs. In addition, we also benefited from a relatively lower proportion of
liquidation sales during the third quarter of fiscal 2000 compared to the same
period of the prior year. The gross margin improvement attributable to the
factors mentioned above was partially offset by higher unit embroidery costs
than a year ago due to increased costs and inefficiencies associated with moving
our embroidery operations to the new distribution center in December 1999.
DESIGN AND PRODUCTION EXPENSE Design and production expenses were up
approximately $0.1 million in the third quarter of fiscal 2000 compared to the
third quarter of fiscal 1999. Although design and
10
<PAGE>
production expenses increased, we were able to leverage these expenses over a
growing revenue base as they decreased as a percentage of net sales from 3.1% in
the third quarter of fiscal 1999 to 2.7% in the third quarter of fiscal 2000.
The dollar increase in production costs is attributable to the strengthening of
our embroidery development organization to support our growing embroidery
business and to personnel and travel costs associated with expanded product
sourcing. The dollar increase in design expense relates to additional personnel
costs to support our expanding sportswear collection including the women's line
and the golf footwear product extension.
SELLING AND SHIPPING EXPENSE Selling and shipping expenses increased by
$3.2 million, or 59.8%, to $8.6 million in the third quarter of fiscal 2000 from
$5.4 million in the same period in the prior year, and increased as a percentage
of net sales to 27.1% from 23.3%. The increase in selling expenses was
attributable to increased salaries and commissions, travel expense and sales
samples expense associated with a larger sales force and increased customer
service staffing, trade advertising and fixturing, and trade show costs
associated with higher sales volume. The increase in shipping expenses was due
to increased warehouse staffing expense, facilities costs and packaging supplies
costs directly associated with the Company's increased sales volumes and higher
levels of inventory. Costs associated with the move to the new distribution
center also contributed to the increase in shipping expenses. The store level
operating expenses relating to the Company-owned retail stores are also included
in selling and shipping expenses and reflect four expenses associated with
retail locations during most of the third quarter of fiscal 2000 compared to one
in the third quarter of fiscal 1999.
GENERAL AND ADMINISTRATIVE EXPENSE General and administrative expenses
increased by $0.4 million, or 17.1%, to $2.7 million in the third quarter of
fiscal 2000 from $2.3 million in the third quarter of fiscal 1999. Although
general and administrative expenses increased, we were able to achieve
significant leverage in these expenses as they decreased as a percentage of
sales from 9.8% in the third quarter of fiscal 1999 to 8.4% in the third quarter
of fiscal 2000. The dollar increase during the third quarter of fiscal 2000 was
due to increased management and staffing, including a team hired to manage our
retail operations and a director of e-business development. The increased
general and administrative expenses in fiscal 2000 also reflected increased
depreciation expense associated with information technology initiatives and
corporate facilities. Since these expenses grew at a slower rate than the growth
in sales, general and administrative expenses decreased as a percentage of net
sales.
OPERATING INCOME As a result of the above items, operating income increased
by $0.6 million, or 39.3%, to $2.1 million in the third quarter of fiscal 2000
from $1.5 million in the third quarter of fiscal 1999. Operating income as a
percentage of net sales increased from 6.5% in the third quarter of fiscal 1999
to 6.6% in the third quarter of fiscal 2000.
INCOME TAXES We recorded approximately $0.8 million of income tax expense
in the third quarter of fiscal 2000 compared to $0.6 million in the third
quarter of fiscal 1999 reflecting the increase in the profitability of the
Company. Income taxes for the third quarter of fiscal 2000 and 1999 are recorded
at an effective rate of 36%.
11
<PAGE>
RESULTS OF OPERATIONS
NINE MONTHS ENDED JANUARY 31, 2000 COMPARED WITH NINE MONTHS ENDED JANUARY
31, 1999
NET SALES Net sales for the nine months ended January 31, 2000 increased
$31 million or 46.3% to $97.9 million from $66.9 million in the same period of
the prior year. The detail of net sales by distribution channel is as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JANUARY 31,
------------------- PERCENT
1999 2000 INCREASE CHANGE
-------- -------- --------- --------
<S> <C> <C> <C> <C>
IN THOUSANDS, EXCEPT PERCENT CHANGE
Golf................................................. $33,385 $43,458 $10,073 30.2%
Corporate............................................ 21,063 34,282 13,219 62.8
Specialty stores..................................... 7,879 11,361 3,482 44.2
Other................................................ 4,578 8,764 4,186 91.4
------- ------- ------- ----
$66,905 $97,865 $30,960 46.3%
======= ======= ======= ====
</TABLE>
The $10.1 million increase in net sales to the golf distribution channel for
the nine months ended January 31, 2000 represented approximately 32.5% of the
total increase in net sales when compared to the nine months ended January 31,
1999. The growth in net sales to the golf distribution channel is primarily
attributable to an increase in the number of golf pro shops purchasing Cutter &
Buck products, an increase in the average annual net sales per golf pro shop and
increasing brand awareness. The increase in the number of our golf pro shop
customers is primarily due to the growth in the size of our golf pro shop sales
force that exclusively sells Cutter & Buck products. Net sales through our
European subsidiary, which are included in the golf distribution channel
figures, increased $1 million, or approximately 32%, to $4.1 million for the
nine months ended January 31, 2000.
Net sales through the corporate distribution channel increased $13.2
million, or approximately 62.8%, to $34.3 million for the nine months ended
January 31, 2000 from $21.1 million for the nine months ended January 31, 1999.
The increase in fiscal 2000 represented approximately 42.7% of the total
increase in net sales for the nine months ended January 31, 2000. This increase
is primarily attributable to the increased size and effectiveness of our
exclusive sales force, the increase in the number of styles and inventory levels
of our CLASSICS products, improved relationships with a greater number of
promotional products companies that resell Cutter & Buck apparel to large
corporate accounts and our growing brand strength.
Specialty store sales increased $3.5 million or approximately 44.2% to $11.4
million for the nine months ended January 31, 2000, representing approximately
11.6% of our net sales for the year. Sales to other distribution channels,
including liquidation and Company-owned retail, increased from $4.6 million or
6.8% of net sales for the nine months ended January 31, 1999 to $8.8 million or
9.0% of net sales for the nine months ended January 31, 2000.
COST OF SALES For the nine months ended January 31, 2000, our cost of sales
was 55.9% of net sales, compared to 57.5% for the nine months ended January 31,
1999. The decrease during fiscal 2000 was primarily due to higher production
volumes which has given us the ability to expand our international sourcing and
increased our negotiating leverage to purchase product at lower unit costs.
DESIGN AND PRODUCTION EXPENSES Design and production expenses increased
from $2.2 million for the nine months ended January 31, 1999 to $2.5 million for
the nine months ended January 31, 2000, but decreased as a percentage of net
sales to 2.6% for the nine months ended January 31, 2000 from 3.2% for the nine
months ended January 31, 1999. The dollar increase was primarily attributable to
increased management and staffing costs to support our expanding sportswear
collection including the women's line and the golf footwear product, increased
embroidery design costs for the golf and corporate distribution
12
<PAGE>
channels and increased expenses associated with our efforts to further diversify
product sourcing. These increases were more than offset by the benefits of
higher sales volume which resulted in an overall reduction in design and
production costs as a percentage of net sales during the nine months ended
January 31, 2000 compared to the nine months ended January 31, 1999.
SELLING AND SHIPPING EXPENSES Selling and shipping expenses increased from
$14.7 million for the nine months ended January 31, 1999 to $24.7 million for
the nine months ended January 31, 2000, and increased as a percentage of net
sales to 25.2% for the nine months ended January 31, 2000 from 21.9% for the
nine months ended January 31, 1999. The increase in selling expenses was
primarily attributable to increased salaries and commissions, travel expense and
sales samples expense associated with a larger sales force and increased
customer service staffing, trade advertising and fixturing, and trade show costs
associated with higher sales volume. The increase in shipping expenses was due
to increases in warehouse staffing expense, facilities costs and packaging
supplies costs directly associated with the Company's increased sales volumes
and higher levels of inventory. Expenses relating to the relocation of our
distribution center also contributed to the increase in shipping expenses for
the nine months ended January 31, 2000. The store level operating expenses
associated with the company-owned retail stores are also included in selling and
shipping expenses and reflect four retail locations as of January 31, 2000
compared to one as of January 31, 1999.
GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses
increased by $1.8 million, or 28.9%, to $8.2 million for the nine months ended
January 31, 2000 from $6.4 million for the nine months ended January 31, 1999,
but decreased as a percentage of net sales to 8.4% for the nine months ended
January 31, 2000 from 9.5% for the nine months ended January 31, 1999. The
dollar increase during the nine months ended January 31, 2000 was primarily due
to increased management and staffing, including a team hired to manage our
retail operations and a director of e-business development and increased
depreciation expense associated with information technology initiatives and
corporate facilities. Since these expenses grew at a slower rate than the growth
in sales, general and administrative expenses decreased as a percentage of net
sales.
OPERATING INCOME As a result of the above items, operating income increased
by $2.5 million, or 48.5%, to $7.7million for the nine months ended January 31,
2000 from $5.2 million for the nine months ended January 31, 1999. Operating
income as a percentage of net sales increased to 7.9% for the nine months ended
January 31, 2000 from 7.8% for the nine months ended January 31, 1999.
INCOME TAXES We recorded approximately $2.7 million of income tax expense
for the nine months ended January 31, 2000 compared to $1.9 million for the nine
months ended January 31, 1999 reflecting the increase in the profitability of
the Company. Income taxes for the nine months ended January 31, 2000 and 1999
are recorded at an effective rate of 36%.
LIQUIDITY AND CAPITAL RESOURCES
Our primary need for funds is to finance increased working capital to
support sales growth and to fund capital expenditures including Company-owned
retail stores and the new distribution center.
Net cash used in operating activities for the nine months ended January 31,
2000 was $3.2 million compared to net cash used in operations of $7.4 million
for the nine months ended January 31, 1999. Net cash used in operating
activities for the nine months ended January 31, 2000 resulted from increases in
investors of $15 million and income tax payments of $1.6 million. These
increases were partially offset by cash generated from profitable operations, a
reduction in accounts receivable of $3.6 million, increases in accounts payable
and accrued liabilities and depreciation and amortization. These increases were
partially offset by cash generated from increases in inventory of $15 million
and income tax payments of $1.6 million. Approximately $5.6 million of the
increase in inventory relates to FASHION merchandise, $4.3 million relates to
our CLASSICS merchandise, $2.5 million relates to Europe, and the balance of the
13
<PAGE>
increase relates primarily to embroidery work in process, our new footwear
product category and new retail store locations. The increase in inventory was
intentional and was designed to support our planned fourth quarter sales, which
historically, has been strong and also reflects early receipt of a portion of
this inventory as part of our year 2000 contingency plans. Inventory levels are
expected to decrease during the fourth quarter of fiscal 2000. For the nine
months ended January 31, 1999, net cash used in operating activities resulted
from increases in inventory of $14.4 million, increases in prepaid expenses and
other current assets of $1.9 million and income tax payments of $0.9 million.
These increases were partially offset by cash generated from profitable
operations, a net decrease in accounts receivable of $2 million and increases in
accounts payable and accrued liabilities of $2.8 million. The increase in
inventory primarily relates to planned sales volume in the fourth quarter and
the need for the Company to have a sufficient stock of products with
multi-season appeal to service the corporate sales channel and other expedited
business.
Net cash used in investing activities was $8.1 million for the nine months
ended January 31, 2000 and was primarily due to purchases of capital equipment.
Capital expenditures during this period included $2.3 million for in-store
fixtures, concept shops, a PGA merchandise tent and a PGA trade show booth,
$2.1 million for equipment and leasehold improvements associated with
Company-owned retail specialty stores, $1.7 million for the new distribution
center and warehouse management system and $1.8 million for computer hardware
and software, leasehold improvements, and other furniture and equipment. Net
cash used in investing activities was $4.2 million for the nine months ended
January 31, 1999 and was primarily attributable to investments in warehouse
leasehold improvements and equipment totaling $0.4 million, in-store fixtures of
$1.2 million, $0.7 million for equipment and leasehold improvements associated
with Company-owned retail stores and $1.8 million for computer hardware and
software, leasehold improvements, and other furniture and equipment, and
increases in trademarks, patents and marketing rights of $0.1 million.
Net cash provided by financing activities for the nine months ended January
31, 2000 was approximately $21 million compared to $8 million during the nine
months ended January 31, 1999. During the nine months ended January 31, 2000,
the Company generated $29.3 million through the sale of common stock, the
exercise of stock options and the purchase of common stock under the employee
stock purchase plan. This was partially offset by the net repayment of $8.1
million of short-term borrowings and $0.2 million in capital lease payments. Net
cash provided by financing activities during the nine months ended January 31,
1999 was primarily due to net short term borrowings of $6.3 million and $1.8
million in cash generated from the exercise of warrants and stock options and
the sale of common stock under the Company's employee stock purchase plan. These
proceeds were partially offset by capital lease payments of $0.2 million.
We are a party to a loan agreement with Washington Mutual Bank d/b/a Western
Bank for a $40 million line of credit. Our Dutch subsidiary, Cutter & Buck
(Europe) B.V., is a party to a loan agreement with Cooperatieve Rabobank
"Huizen" B.A., or Rabobank, for a $4.4 million line of credit. Both of these
lines of credit are more fully described in footnote four to the Company's
financial statements on page seven hereof.
YEAR 2000
To date, the Company has not experienced any significant disruptions in its
operations relating to year 2000 issues. However, it is not possible to conclude
that all aspects of the year 2000 issue that may affect the Company, including
those relating to third parties with whom the Company has material business
relationships (such as suppliers, customers and other general service
providers), have been resolved. To date, the costs to address the Company's year
2000 issues have not exceeded $100,000 and all costs incurred have been
expensed.
14
<PAGE>
PART II--OTHER INFORMATION
Item 1. Legal Proceedings
In August 1999, the Company reached a settlement of the two
previously-described lawsuits related to labor issues in Saipan. The settlement
involves both a monetary payment which had no material impact on the Company's
financial position or results of operations, and a monitoring component which
requires all future Company contracts for the manufacture of garments in Saipan
to include a requirement that the manufacturer maintain compliance with certain
minimum workplace and living standards. The settlement of the federal court
action is subject to court approval applicable to class actions of this nature.
No hearing has been set to date. The Company is also 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
a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<C> <S>
10.1 First Amendment dated October 6th, 1999 to Industrial Lease
dated May 27, 1999 between Cutter & Buck Inc. and Zelman
Renton, LLC.
</TABLE>
b) Reports on Form 8-K
None
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
<TABLE>
<CAPTION>
<S> <C>
CUTTER & BUCK INC.
------------------------------------------------------
(Registrant)
Dated: March 16, 2000 By /s/ Stephen S. Lowber
------------------------------------------------------
Stephen S. Lowber
Vice-President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
</TABLE>
16
<PAGE>
Exhibit 10.1
FIRST AMENDMENT TO LEASE
This FIRST AMENDMENT TO LEASE ("Amendment") is entered into as
of this 6th day of October, 1999, by and between ZELMAN RENTON, LLC, a Delaware
limited liability company ("Landlord"), and CUTTER & BUCK, INC., a Washington
corporation ("Tenant"), with respect to the facts set forth in the Recitals
below.
R E C I T A L S :
A. Landlord and Tenant are parties to that certain Industrial
Lease dated May 27, 1999 (the "Lease"), whereby Tenant currently leases from
Landlord those certain premises (the "Premises"), in Oakesdale Business Campus
located at 4001 Oakesdale Avenue SW, Renton, Washington and containing
approximately 170,500 square feet.
B. Capitalized terms which are not defined in this Amendment
have the meanings given to them in the Lease.
C. Landlord and Tenant desire to modify the Lease as follows
with regard to the construction of office improvements.
A G R E E M E N T:
NOW, THEREFORE, in consideration of the foregoing Recitals,
the mutual covenants and agreements contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Landlord and Tenant agree as follows:
1. INITIAL MONTHLY BASE RENT. The entire second sentence of
Paragraph 1(j) of the Lease, beginning with "By way of example, . . .", is
hereby deleted in its entirety and replaced by the following:
"By way of example, if the Building contains 170,500 square
feet, of which 10,383 square feet comprise office space, the
initial Monthly Base Rent shall be equal to the sum of (A)
$.3325 x 170,500 (i.e. $56,691.25) plus (B) $.65 x 10,383
(i.e. $6,748.95), for a total initial Monthly Base Rent of
$63,440.20."
2. EARLY ENTRY. The first sentence of Paragraph 4(c) of the
Lease is deleted in its entirety. The entire second sentence of Paragraph 4(c)
of the Lease, beginning with "Tenant may elect . . . ," is hereby deleted and
replaced by the following:
"Tenant may elect to enter upon the Premises commencing on
October 4, 1999 (the "Early Entry Date") in order to install
communications cable, fixtures and racking and the like, at
Tenant's sole cost and expense (collectively, "Tenant's
Work")."
3. BUILDING SHELL; TENANT IMPROVEMENTS. The entire second
sentence of Paragraph 1 of Exhibit C, beginning with "As used in the Lease . . .
," is hereby deleted and replaced by the following:
"As used in the Lease and this Work Letter Agreement, the term
"Tenant Improvements" or "Tenant Improvement Work" means
collectively those items of tenant improvement construction
relating to the office portion of the Premises ("Office
Improvements") shown on the Tenant's Final Plans (described in
Paragraph 4 below), the Above-Standard Improvements (described
in Paragraph 5(b) below) and the Above Standard Office
Improvements (described in Paragraph 5(g) below)."
4. WORK COST ESTIMATE AND STATEMENT. The first three (3)
sentences of Paragraph 4(f) of Exhibit C are hereby deleted and replaced by the
following:
"Prior to the commencement of construction of any of the
Office Improvements and/or the Above-Standard Improvements
and/or the Above Standard Office Improvements shown on
Tenant's Final Plans, Landlord will submit to Tenant a written
estimate of the cost to complete the Tenant Improvement Work,
which written estimate will be based on the Tenant's Final
Plans taking into account any modifications which may be
required to reflect changes in the Tenant's Final Plans
required by the City or County in which the Premises are
located (the "Work Cost Estimate"). Tenant acknowledges that
it has approved the Work Cost Estimate submitted by Landlord."
5. OFFICE ALLOWANCE. The "$210,000" figure set forth in
Paragraph 5(a) of Exhibit C is hereby deleted and replaced with "$363,405."
6. EXCESS COSTS. The entire first and second sentences of
Paragraph 5(c) of Exhibit C are hereby deleted and replaced with the following:
"The cost of each item referenced in Paragraphs 5(a) and 5(b)
above and Paragraph 5(g) below shall be charged against the
respective Allowance. If the Work Cost for either the Office
Improvements or the Above-Standard Improvements or the Above
Standard Office Improvements exceeds the respective Allowance,
Tenant agrees to pay to Landlord such excess including
reasonable fees for the contractor prior to the commencement
of construction (less any sums previously paid by Tenant for
such excess pursuant to the Work Cost Estimate)."
<PAGE>
7. UNUSED ALLOWANCE AMOUNTS. Paragraph 5(e) of Exhibit C is
hereby deleted and replaced with the following:
"Except as provided in the following sentence, any unused
portion of any Allowance upon completion of the Tenant
Improvements will not be refunded to Tenant or be available to
Tenant as a credit against any obligations of Tenant under the
Lease. The unused portion of any Allowance, if any, shall be
credited against the excess costs, if any, associated with
improvements made with respect to any of the other
Allowances."
8. AMENDMENT TO LEASE. Paragraph 5(f) of Exhibit C is hereby
deleted in its entirety and replaced with the following:
"Within fifteen (15) business days following the Commencement
Date (as defined in Paragraph 8(a) below), Landlord and Tenant
shall execute an amendment to the Lease setting forth a new
rent schedule which incorporates the amortization of any costs
funded by Landlord with respect to the Above Standard
Allowance or the Above Standard Office Allowance."
9. ABOVE STANDARD OFFICE ALLOWANCE. Paragraph 5(g) is hereby
added to Exhibit C as follows:
"ABOVE STANDARD OFFICE ALLOWANCE. In addition to the Above
Standard Allowance described in Paragraph 5(b) above, Landlord
hereby grants to Tenant an allowance of up to $70,000 ("Above
Standard Office Allowance") for the purchase, construction and
installation of the above-standard office improvements
described on SCHEDULE "2" to this Exhibit "C" ("Above Standard
Office Improvements"). The Office Allowance, the Above
Standard Allowance and the Above Standard Office Allowance are
sometimes each individually referred to as an "Allowance" and
sometimes collectively referred to as the "Allowances." All
costs disbursed or expended by Landlord as part of the Above
Standard Office Allowance shall be fully amortized over the
original seven (7) years of the Term, plus interest at a rate
of eleven percent (11%) per year, and the annual amortized
amount shall be paid by Tenant monthly, as additional rent
under the Lease, in equal installments throughout such seven
(7) year period until such excess costs have been fully
repaid."
10. COMMENCEMENT DATE. The term "Shell Delivery Date" set
forth in Paragraph 8(a) of Exhibit C is hereby deleted and replaced with the
term "Early Entry Date." Therefore, if the Early Entry Date is actually October
4, 1999, then the Commencement Date will not occur earlier than November 15,
1999.
11. SCHEDULE "2" TO EXHIBIT C. The attached Schedule "2",
entitled "Above Standard Office Improvements," is hereby added to Exhibit C of
the Lease.
12. NO OTHER MODIFICATION. Except as specifically modified in
this Amendment, the Lease remains in full force and effect between the parties
hereto, as modified by this Amendment. To the extent of any inconsistency or
conflict between the terms and conditions of the Lease and the terms and
conditions of this Amendment, the terms and conditions of this Amendment shall
prevail and control.
IN WITNESS WHEREOF, Landlord and Tenant have executed this
Amendment as of the date first written above.
<TABLE>
<CAPTION>
TENANT: LANDLORD:
<S> <C>
CUTTER & BUCK, INC., ZELMAN RENTON, LLC,
a Washington corporation a Delaware limited liability company
By: Zelman Industrial Partners, Inc.,
a California corporation,
By: /s/ PHILIP DAVIS Its: Managing Member
----------------
Print Name: PHILIP DAVIS
Print Title: VP of Operations
------------
By: /s/ PAUL T. CASEY
---------------------
Print Name: Paul T. Casey
Print Title: Vice President
</TABLE>
2
<PAGE>
STATE OF WASHINGTON )
--------------------------------------------
) ss.
COUNTY OF KING )
-----------------------------------
I certify that I now or have satisfactory evidence that
Phil Davis is the person who appeared before me, and said person acknowledged
that he/she was authorized to execute the instrument and acknowledged it as
the VICE PRESIDENT OF OPERATIONS of CUTTER & BUCK INC. to be the free and
voluntary act of such party for the uses and purposes mentioned in the
instrument.
Dated: OCTOBER 6, 1999
---------------------------------------------
- ---------------------------------
/s/ BARBARA J GELLING
-------------------------------------------
Notary Public
Print Name: Barbara J. Gelling
------------------------------
My commission expires 11/29/99
----------------------
- ----------------------------------
(Use this space for notarial stamp/seal)
STATE OF CALIFORNIA )
--------------------------------------------
) ss.
COUNTY OF LOS ANGELES )
--------------------------------------------
I certify that I now or have satisfactory evidence that
PAUL T. CASEY is the person who appeared before me, and said person
acknowledged that he/she was authorized to execute the instrument and
acknowledged it as the Vice President of ZELMAN INDUSTRIAL PARTNERS, INC. to
be the freeand voluntary act of such party for the uses and purposes
mentioned in the instrument.
Dated: OCTOBER 11, 1999
--------------------------------------------
- ------------------------------
/S/ LINDA KAREN WILLIAMS
------------------------------------------------
Notary Public
Print Name: LINDA KAREN WILLIAMS
-------------------------------------
My commission expires OCT 11, 2002
---------------------------
- -------------------------------
(Use this space for notarial stamp/seal)
- ----------------------------------------------------------
- ----------------------------------------------------------
3
<PAGE>
ABOVE STANDARD OFFICE IMPROVEMENTS
----------------------------------
ITEM ESTIMATED ADDITIONAL COST
- ---- -------------------------
- -------------------------------------- ----------------------------------------
- -------------------------------------- ----------------------------------------
- -------------------------------------- ----------------------------------------
Total $70,000
-------
4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-2000
<PERIOD-START> MAY-01-1999
<PERIOD-END> JAN-31-2000
<CASH> 14,416,067
<SECURITIES> 0
<RECEIVABLES> 28,884,346
<ALLOWANCES> (2,143,228)
<INVENTORY> 43,482,606
<CURRENT-ASSETS> 91,583,878
<PP&E> 15,017,793
<DEPRECIATION> 2,779,652
<TOTAL-ASSETS> 107,142,001
<CURRENT-LIABILITIES> 18,757,880
<BONDS> 0
0
0
<COMMON> 62,301,253
<OTHER-SE> 20,819,763
<TOTAL-LIABILITY-AND-EQUITY> 107,142,001
<SALES> 97,865,453
<TOTAL-REVENUES> 97,865,453
<CGS> 54,697,654
<TOTAL-COSTS> 54,697,654
<OTHER-EXPENSES> 35,417,855
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (194,137)
<INCOME-PRETAX> 7,555,807
<INCOME-TAX> (2,720,091)
<INCOME-CONTINUING> 4,835,716
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,835,716
<EPS-BASIC> 0.50
<EPS-DILUTED> 0.49
</TABLE>
