Cutter & Buck CEO aims to reassure investors at forum
But as she summed up a tumultuous year for Cutter & Buck yesterday, Chief Executive Fran Conley borrowed a line from 19th-century poet Alfred Lord Tennyson: "The old order changeth, yielding place to new."
The old order at Cutter & Buck certainly was shaken up in 2002, during which several top executives left and the company restated financial results from 1998 forward. The Seattle sportswear company also decided earlier this month to close all 14 of its retail stores and still faces an inquiry by the Securities and Exchange Commission.
Conley, a longtime director who took over after Harvey Jones resigned as CEO in April, tried to assure investors yesterday that the company is back on track. She said the company's core business of designing and selling upscale sportswear is still profitable, although those profits are being canceled out by restructuring costs and other charges.
"We have had a lot of difficulties," Conley said. "But I want you to know that that's all they are — difficulties and distractions and expenses. The work of the company has gone on, and it will go on. ... We're building a company that can produce the results, which you, as shareholders, deserve."
Conley said the company has landed a new liability-insurance policy for directors and officers after its existing carrier said it intends to rescind coverage in light of the restatements. Cutter & Buck admitted in August that it overstated its 2000 sales by $5.8 million, and an internal investigation later found more accounting missteps, including premature shipments to some customers.
The restatements triggered several shareholder lawsuits that won't be covered by the new insurance coverage. But Cutter & Buck is disputing the decision to rescind its previous policy, Conley said, and the new coverage will cover directors and officers from here on.
Yesterday's annual meeting, held at the company's new headquarters in Fremont, had just two items of business: Shareholders ratified Ernst & Young as the company's outside auditor and elected two new directors — Henry "Skip" Kotkins Jr., Skyway Luggage chief executive; and Douglas Southern, the former chief financial officer for Immunex.
A relatively tame question-and-answer session was roused when Joey Rodolfo, a co-founder and former director of Cutter & Buck who now runs his own sportswear brands, questioned Conley's credibility in the sportswear industry. Conley, a venture capitalist, was an interim CEO at companies including Edmark and Data I/O, and is a director for REI and Coinstar.
"This company has been brought to the edge of the canyon; several people have been pushed off the cliff; and now we're at a stage where Fran Conley is saying, 'Believe me, I know where I'm taking this company,' " Rodolfo said. "With everything ... this company has to offer, there is a much bigger opportunity for this company with a CEO that brings leadership and that brings strong industry background."
Rodolfo left Cutter & Buck in 1997 after a falling out with company executives that worsened after he raised concerns about the company's revenue-recognition practices. Last year, he lost a lawsuit he filed against the company for preventing him from taking a job with Eddie Bauer.
Conley responded to Rodolfo: "Thank you for your comment, Joey. I don't hear any question in it, and I'm sure the board of directors will note it."
Jake Batsell: 206-464-2718 or jbatsell@seattletimes.com