Saucony, Inc. announced net income for the third quarter ended October 3, 2003 increased 37% to $2.2 million from $1.6 million in the comparable period of 2002, and diluted earnings per share increased 32% to $0.34, compared to diluted earnings per share of $0.26 for the comparable period in 2002. Net sales for the third quarter were $32.0 million, compared to $33.7 million in the third quarter of 2002.

For the nine months ended October 3, 2003, net income increased
58% to $7.0 million from $4.4 million in the comparable period of
2002, and diluted earnings per share increased 54% to $1.11, compared
to diluted earnings per share of $0.72 for the comparable period in
2002. Net sales for both periods were $105.0 million.

Net income for the nine months ended October 3, 2003, 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 represent our 8th consecutive quarter of meeting or
exceeding our expectations and were due, in large part, to our
dedicated team driving further improvements in our business processes
and effectively executing our long-term strategy. We were particularly
pleased with our domestic technical running footwear backlog, as our
strategic initiatives have begun to significantly improve our open
order backlog trends and position us for future growth.”

Our backlog of open orders at October 3, 2003 scheduled for
delivery within the next five months (October 4, 2003 – February 27,
2004) increased 12% to $43.5 million, compared to $39.0 million at the
end of the third quarter of 2002.

At October 3, 2003, the open order backlog for delivery in the
next 12 months increased 6% to $58.8 million, compared to the October
4, 2002 backlog of $55.4 million. On a constant dollar basis, our open
order backlog for delivery in the next 12 months increased 4%.

Mr. Fisher continued, “The growing momentum within our domestic
technical footwear business has significantly contributed to our
double-digit increase in open orders scheduled for delivery over the
next five months.”

Mr. Fisher remarked, “Our inventory management execution has
continued to be exceptional during these challenging times. We believe
our quarter ending inventories are high in quality and position us
well to take advantage of any increases in the demand for our core
products in the fourth quarter of 2003.”

Net sales for the third quarter of 2003 were $32.0 million,
compared to $33.7 million in the third quarter of 2002. On a constant
dollar basis, net sales were $31.2 million for the third quarter of
2003. Domestic net sales were $22.6 million in the third quarter of
2003, compared to $26.1 million in the third quarter of 2002.
International net sales increased 24% to $9.4 million in the third
quarter of 2003 compared to $7.6 million in the third quarter of 2002.
Saucony brand footwear accounted for approximately 78% of total third
quarter 2003 net sales, while a combination of Hind apparel and
factory outlet stores net sales accounted for the balance.

Net sales for the nine months ended October 3, 2003 remained
constant at $105.0 million compared to the comparable period in 2002.
On a constant dollar basis, net sales for the first nine months of
2003 were $103.2 million. Domestic net sales were $79.3 million,
compared to $81.5 million in the comparable period of 2002.
International net sales increased 11.8% to $26.2 million, compared to
$23.5 million in the comparable period of 2002. Saucony brand footwear
accounted for approximately 83% of total sales during the first nine
months of 2003, while a combination of Hind apparel and factory outlet
stores net sales accounted for the balance.

The Company's gross margin in the third quarter of 2003 increased
490 basis points to 40.6% compared to 35.7% in the third quarter of
2002, due primarily to improved margins on Hind brand apparel,
reflecting increased sales of first quality product at higher margins
and 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, lower Saucony footwear product costs
and improved margins at our factory outlet stores.

For the first nine months of 2003, gross margin increased 480
basis points to 39.4% versus to 34.6% in the comparable period of 2002
due primarily to lower Saucony footwear product costs, favorable
currency exchange due to the impact of a weaker U.S. dollar against
European and Canadian currencies, improved margins on Hind brand
apparel, reflecting increased sales of first quality product at higher
margins and lower inventory reserve provisions taken in 2003, improved
margins at our factory outlet stores and proportionately lower sales
of closeout footwear.

Selling, general and administrative expenses as a percentage of
net sales increased to 29.9% in the third quarter of 2003 compared to
27.9% in the third quarter of 2002. In absolute dollars, selling,
general and administrative expenses increased 2%, due primarily to
increased administrative and selling payroll, increased insurance
costs, increased depreciation and increased print media advertising,
partially offset by reduced account specific advertising and
promotion, reduced incentive compensation, lower employee healthcare
costs and reduced variable selling expenses. Selling expenses as a
percentage of net sales in the third quarter of 2003 were 13.7%
compared to 13.4% in the 2002 period, while general and administrative
expenses were 16.2% of net sales compared to 14.5% in the third
quarter of 2002.

For the nine months ended October 3, 2003, selling, general and
administrative expenses as a percentage of net sales increased to
28.8% compared to 27.5% in the comparable period of 2002. In absolute
dollars, selling, general and administrative expenses increased 5%,
due primarily to increased administrative and selling payroll,
increased incentive compensation, increased employee healthcare costs,
increased insurance costs, higher professional fees and increased
print media advertising, 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 the first nine months of 2003
were 13.5% compared to 13.9% in the comparable period of 2002, while
general and administrative expenses were 15.3% of net sales compared
to 13.6% in the first nine months of 2002.

Net income for the third quarter of 2003 was $2.2 million, or
$0.34 per share on a diluted basis, compared to $1.6 million, or $0.26
per share on a diluted basis, in the third quarter of 2002.

For the nine months ended October 3, 2003, net income was $7.0
million, or $1.11 per share on a diluted basis, compared to $4.4
million, or $0.72 per share on a diluted basis for the first nine
months of 2002.

Mr. Fisher concluded, “We are very pleased with our positive
momentum and look forward to a solid fiscal 2003 performance. Over the
past several months we have made significant progress, both
financially and operationally, and we now move ahead with a firm
foundation for growth. We remain committed to further capitalizing on
our position in the marketplace.”

Fourth Quarter and Fiscal Year 2003

  • The Company expects fully diluted earnings per share to range from
    $0.08 to $0.10 for the fourth quarter of 2003 and to range from $1.19
    to $1.21 for the year.

  • The Company expects fourth quarter net sales to be approximately
    $30 million. The Company expects net sales for the year to range from
    $135 million to $136 million.

  • The Company expects gross margins of approximately 37% for the
    fourth quarter and approximately 39% for the year.

  • The Company expects selling, general and administration expenses
    of approximately 33% of net sales for the fourth quarter and to be
    approximately 30% of net sales for the year.
                    SAUCONY, INC. AND SUBSIDIARIES
                   Consolidated Statements of Income
                 For the quarter and nine-months ended
                  October 3, 2003 and October 4, 2002

                              (Unaudited)
             (Amounts in thousands, except per share data)

                    Quarter      Quarter     Nine-Months   Nine-Months
                     Ended        Ended         Ended         Ended
                    October 3,   October 4,   October 3,    October 4,
                      2003         2002         2003          2002
                   -----------  -----------  -----------   -----------

Net sales         $    31,978  $    33,745  $   105,518   $   104,985
Other revenue              94          105          257           202
                   -----------  -----------  -----------   -----------
Total revenue          32,072       33,850      105,775       105,187
                   -----------  -----------  -----------   -----------

Costs and expenses
  Cost of sales        18,983       21,683       63,899        68,617
  Selling
   expenses             4,396        4,520       14,266        14,587
  General and
   administrative
   expenses             5,172        4,900       16,127        14,293
  Plant closing
   and other
   credits                 --           --           --           (59)
                   -----------  -----------  -----------   -----------
     Total costs
      and expenses     28,551       31,103       94,292        97,438
                   -----------  -----------  -----------   -----------

Operating income        3,521        2,747       11,483         7,749

Non-operating income
 (expense)
  Interest income          49           94          176           249
  Interest expense         --           (1)          (5)           (4)
  Foreign currency gains
   (losses)               (41)         (18)          17           (62)
  Other                    38          (78)          55           (34)
                   -----------  -----------  -----------   -----------

Income before
 income taxes and
 minority interest      3,567        2,744       11,726         7,898

Provision for
 income taxes           1,359        1,099        4,577         3,282

Minority interest
 in income of
 consolidated
 subsidiaries              29           58          135           179
                   -----------  -----------  -----------   -----------

Net income        $     2,179  $     1,587  $     7,014   $     4,437
                   ===========  ===========  ===========   ===========


Earnings per
 common share:
  Basic           $      0.36  $      0.26  $      1.15   $      0.73
                   ===========  ===========  ===========   ===========
  Diluted         $      0.34  $      0.26  $      1.11   $      0.72