Saucony, Inc. reported that fourth quarter net income increased 83% to $1.5 million, compared to $806,000 in the fourth quarter of 2002. Diluted earnings per share increased to $0.21 per Class A share and $0.24 per Class B share in the fourth quarter of 2003, compared to diluted earnings per share of $0.12 per Class A share and $0.13 per Class B share for the comparable period in 2002. Net sales for the fourth quarter increased 8%, to $30.5 million, compared to $28.2 million in the fourth quarter of 2002.

For the fiscal year 2003, net income increased 62% to $8.5 million from $5.2 million in fiscal 2002. Diluted earnings per share increased to $1.26 per Class A share and $1.38 per Class B share in fiscal 2003, compared to diluted earnings per share of $0.80 per Class A share and $0.88 per Class B share for fiscal 2002. Net sales increased 2% to $136.1 million, compared to $133.2 million for fiscal 2002.

Net income available to the Company's common stockholders is allocated among our two classes of common stock, Class A Common Stock and Class B Common Stock. The allocation among each class is based upon the two-class method. Under the two-class method, earnings per share for each class of common stock is presented. The two-class presentation method is required as a result of the Company having two classes of common stock with different participation rights in undistributed earnings.

Net income for the fourth quarter and fiscal year 2003 includes a pre-tax charge of $416,000 recorded in cost of goods sold due to the acceleration of the vesting of stock warrants which were issued to five of our footwear suppliers in March 2001. The 50,250 stock warrants which were vested in full at January 2, 2004, expire on June 30, 2004. In addition, we recorded a pre-tax benefit of $329,000 in other non-operating income, resulting from the sale of our former manufacturing facility located in Bangor, Maine on November 7, 2003, a tax benefit of $325,000, on the reversal of valuation reserves on certain foreign deferred tax assets, which we expect to realize in 2004.

Net income for the fiscal year 2003, also includes a pre-tax benefit of $566,000 recorded in general and administrative expenses as a result of a litigation settlement agreement between the Company and the trustee appointed to oversee the liquidation of assets of a former customer.

John H. Fisher, President and Chief Executive Officer, commented, “These results, which mark our ninth consecutive quarter of meeting or exceeding expectations, represent a rewarding finish to another great year for Saucony. Our robust performance during the fourth quarter was primarily fueled by ongoing strength in our domestic technical business as well as our Hind apparel and international businesses. We believe that the positive response we received across the board at the recent Western Shoe Association (WSA) tradeshow is very encouraging and bodes well for us as we head into the new year.”

Mr. Fisher continued, “Throughout fiscal 2003, we continued to make progress executing our long-term strategic plan. Operationally, we continued to enhance our business processes and efficiencies which enabled us to expand gross margin by more than 400 basis points and increase net income by over 60%. At the same time, we increased our cash position and improved working capital velocity. This allowed us to increase our regular cash dividend and to declare a special dividend, as announced separately today, in an effort to further return value to our shareholders. All in all, we are very pleased about what we have accomplished for the year and grateful to our employees at Saucony for their continued hard work and dedication.”

Our backlog of open orders at January 2, 2004 scheduled for delivery within the next five months (January 3, 2004 – May 28, 2004) increased 16% to $53.6 million, compared to $46.1 million at January 3, 2003.

At January 2, 2004, the open order backlog for delivery in the next 12 months increased 15% to $59.9 million, from $52.0 million at January 3, 2003.

Mr. Fisher continued, “We continue to see momentum growing in our domestic technical footwear business, which has, once again, significantly contributed to our double-digit increase in open orders scheduled for delivery over the next five months. We expect that our focus in this segment of the business will continue to be a key in our effort to meet our growth objectives of doubling our revenue within the next five years.”

Mr. Fisher remarked, “The number of days sales in inventory decreased to 98 days at January 2, 2004, compared to 113 days at January 3, 2003. Our inventory management has continued to be exceptional during these challenging times. We believe our year ending inventories are high in quality and position us well to take advantage of potential increases in the demand for our core products in the next few months of 2004.”

Mr. Fisher continued, “We are very pleased with our year end cash and short-term investments position of $47.6 million. We are continuing our efforts to proactively manage our working capital to achieve even greater efficiencies.”

Net sales for the fourth quarter of 2003 increased 8.3% to $30.5 million, compared to $28.2 million in the fourth quarter of 2002. Domestic net sales increased 12% to $24.3 million in the fourth quarter of 2003, compared to $21.8 million in the fourth quarter of 2002. International net sales posted a slight decrease of 3% caused primarily by economic conditions in Pacific rim countries, to $6.2 million in the fourth quarter of 2003 compared to $6.4 million in the fourth quarter of 2002. Saucony brand footwear accounted for approximately 84% of total fourth quarter 2003 net sales, while a combination of Hind apparel and factory outlet stores net sales accounted for the balance.

Net sales for fiscal 2003 increased 2.2% to $136.1 million, compared to $133.2 million in fiscal 2002. Domestic net sales increased to $103.6 million in fiscal 2003, compared to $103.4 million in fiscal 2002. International net sales increased 8.7% to $32.5 million in fiscal 2003, compared to $29.8 million in fiscal 2002. Saucony brand footwear accounted for approximately 83% of total sales during fiscal 2003, while a combination of Hind apparel and factory outlet stores net sales accounted for the balance.

The Company's gross margin in the fourth quarter of fiscal 2003 increased 190 basis points to 35.5% compared to 33.6% in the fourth quarter of 2002, due primarily improved margins on Hind brand apparel, due to increased sales of first quality product at higher margins, as well as lower inventory reserve provisions taken in 2003, favorable currency exchange due to the impact of a weaker U.S. dollar against European and Canadian currencies and lower Saucony footwear product costs. Offsetting these margin increases in the fourth quarter of 2003 are a pre-tax charge of $416,000 recorded in cost of goods sold due to accelerating the vesting on stock warrants, increased rebates provided to certain Saucony domestic customers and increased inventory reserve provisions taken on certain slow-moving Spot-bilt brand inventory.

For fiscal 2003, gross margin increased 410 basis points to 38.5% versus 34.4% in fiscal 2002 due primarily to lower Saucony footwear product costs, improved margins on Hind brand apparel, due to increased sales of first quality product at higher margins, as well as lower inventory reserve provisions taken in 2003, favorable currency exchange due to the impact of a weaker U.S. dollar against European and Canadian currencies, improved margins at our factory outlet stores and lower sales of closeout footwear. Offsetting these margin increases in 2003 are a pre-tax charge of $416,000 recorded in cost of goods sold due to accelerating the vesting on stock warrants, increased rebates provided to certain Saucony domestic customers and increased inventory reserve provisions taken on certain slow-moving Spot-bilt brand inventory.

Selling, general and administrative expenses as a percentage of net sales increased to 32.1% in the fourth quarter of 2003 compared to 29.8% in the fourth quarter of 2002. In absolute dollars, selling, general and administrative expenses increased 17%, due primarily to increased operating expenses associated with the factory outlet division expansion, increased account specific advertising and promotion, increased severance costs, increased print media advertising, increased administrative and selling payroll, increased employee healthcare costs, increased variable selling expenses, increased professional fees, partially offset by reduced depreciation and lower provisions for doubtful accounts. Selling expenses as a percentage of net sales in the fourth quarter of 2003 were 14.1% compared to 11.4% in the comparable 2002 period, while general and administrative expenses were 18.0% of net sales compared to 18.4% in the fourth quarter of 2002.

For fiscal 2003, selling, general and administrative expenses as a percentage of net sales increased to 29.5% compared to 28.0% in fiscal 2002. In absolute dollars, selling, general and administrative expenses increased 8%, due primarily to increased administrative and selling payroll, increased incentive compensation, increased operating expenses associated with the factory outlet division expansion, increased employee healthcare costs, increased print media advertising, increased severance costs, increased insurance costs and higher professional fees, partially offset by lower provisions for bad debt expense, due to the litigation settlement and, to a lesser extent, decreased account specific advertising and promotion, lower depreciation expense and reduced variable selling expenses. Selling expenses as a percentage of net sales in fiscal 2003 were 13.6% compared to 13.4% in fiscal 2002, while general and administrative expenses were 15.9% of net sales in fiscal 2003 compared to 14.6% in fiscal 2002.

Non-operating income increased in the fourth quarter of 2003 to $663,000, compared to $191,000 in the fourth quarter of 2002. The increase was due primarily to a pre-tax benefit of $329,000 recorded in other non-operating income resulting from the sale of our former manufacturing facility located in Bangor, Maine on November 7, 2003 and foreign currency gains of $271,000 in the fourth quarter of 2003, compared to $82,000 in the fourth quarter of 2002. Offsetting these increases was a decrease in interest income to $69,000 in the fourth quarter of 2003, compared to $89,000 in the fourth quarter of 2002, due to lower interest rates on invested cash balances.

For the fiscal year 2003, non-operating income increased to $906,000, compared to $338,000 in the comparable period of 2002. The increase was due primarily to a pre-tax benefit of $329,000 recorded in other non-operating income resulting from the sale of our former manufacturing facility located in Bangor, Maine on November 7, 2003 and foreign currency gains of $288,000 in fiscal 2003, compared to $20,000 in fiscal 2002. Offsetting these increases was a decrease in interest income to $245,000 in fiscal 2003, compared to $332,000 in fiscal 2002, due to lower interest rates on invested cash balances.

On January 14, 2004, the Company issued an updated earnings guidance for the fourth quarter and fiscal year 2003. Under the two-class method, this earnings guidance was approximately $0.13 to $0.16 for Class A shares and $0.15 to $0.18 for Class B shares for the fourth quarter of fiscal 2003 and approximately $1.18 to $1.21 for Class A shares and $1.30 to $1.33 for Class B shares for the 2003 fiscal year.

Net income for the fourth quarter of 2003 was $1.5 million, or $0.21 per Class A share and $0.24 per Class B share on a diluted basis, compared to $806,000, or $0.12 per Class A share and $0.13 per Class B share on a diluted basis, in the fourth quarter of 2002.

For the fiscal year 2003, net income was $8.5 million, or $1.26 per share Class A share and $1.38 per Class B share on a diluted basis, compared to $5.2 million, or $0.80 per Class A share and $0.88 per Class B share on a diluted basis for 2002.

Mr. Fisher concluded, “We are very pleased to have delivered strong results in fiscal 2003 and as we enter 2004, we remain excited about the opportunities that lie ahead. We have made the strategic decision to increase our 2004 marketing expenditures, targeting several specific growth opportunities. We believe these efforts will further build brand awareness and better position our Saucony and Hind brands for the future. We move ahead with strong brands, solid financials, a focused management team and an ongoing commitment to growth and increased shareholder value.”

First Quarter and Fiscal Year 2004

The Company expects fully diluted earnings per share to range from $0.44 to $0.46 for Class A shares and to range from $0.48 to $0.50 for Class B shares for the first quarter of 2004 and to range from $1.29 to $1.32 for Class A shares and to range from $1.42 to $1.46 for Class B shares for the year.

The Company expects first quarter net sales to range from $43 million to $44 million. The Company expects net sales for the year to range from $155 million to $157 million.

The Company expects gross margins of approximately 40% for both the first quarter and the year.

The Company expects selling, general and administration expenses of approximately 29% of sales for the first quarter and of approximately 30% of sales for the year.

                    SAUCONY, INC. AND SUBSIDIARIES
              Condensed Consolidated Statements of Income
  For the quarter and year ended January 2, 2004 and January 3, 2003

                              (Unaudited)
               (in thousands, except per share amounts)


                              Quarter     Quarter     Year       Year
                                Ended      Ended     Ended      Ended
                              January     January   January    January
                                 2,          3,        2,         3,
                                2004       2003       2004       2003
                               ------      ------     ------    ------

Net sales                    $30,548    $28,211   $136,066   $133,196
Other revenue                    122        101        379        303
                              ----------------------------------------
Total revenue                 30,670     28,312    136,445    133,499
                              ----------------------------------------

Costs and expenses
  Cost of sales               19,714     18,733     83,613     87,350
  Selling expenses             4,307      3,203     18,574     17,790
  General and
   administrative expenses     5,498      5,196     21,625     19,488
Plant closing and other
 credits                         (35)       (13)       (35)       (72)
                              ----------------------------------------
     Total costs and
      expenses                29,484     27,119    123,777    124,556
                              ----------------------------------------

Operating income               1,186      1,193     12,668      8,943
Non-operating income
 (expense)
  Interest income                 69         89        245        332
  Interest expense                --         (3)        (5)        (5)
Foreign currency gains           271         82        288         20
  Other                          323         23        378         (9)
                              ----------------------------------------

Income before income taxes
 and minority interest         1,849      1,384     13,574      9,281
Provision for income taxes       364        584      4,940      3,865
Minority interest in
 income of consolidated
 subsidiaries                     11         (6)       146        173
                           -------------------------------------------
Net income                   $ 1,474    $   806   $  8,488   $  5,243
                           ===========================================

Earnings per share:
  Basic:
       Class A common
        stock                $  0.23    $  0.12   $   1.31   $   0.81
                              ========================================
       Class B common
        stock                $  0.25    $  0.14   $   1.44   $   0.89
                              ========================================
  Diluted:
       Class A common
        stock                $  0.21    $  0.12   $   1.26   $   0.80
                              ========================================
       Class B common
        stock                $  0.24    $  0.13   $   1.38   $   0.88