Saucony (SCNYA) 8-K Saucony, Inc. Reports Second Quarter Fiscal 2005 Results

Exhibit 99.1

Company Contact:	Michael Umana
	Saucony, Inc.
	Chief Financial Officer,
	Chief Operating Officer and Treasurer
	(978) 532-9000
	(800) 625-8080
Investor Relations:	Chad A. Jacobs/Brendon Frey
	Integrated Corporate Relations
	(203) 222-9013
	cjacobs@icr-online.com

For Immediate Release

SAUCONY, INC. REPORTS SECOND QUARTER FISCAL 2005 RESULTS

Peabody, Massachusetts – July 27, 2005 — Saucony, Inc. (NASDAQ: SCNYA and SCNYB) today announced financial results for the quarter ended July 1, 2005.

Net sales for the second quarter decreased 8.8%, to $40.1 million, compared to $44.0 million in the second quarter of 2004. The Company’s gross margin in the second quarter of fiscal 2005 decreased to 40.4% compared to 41.1% in the second quarter of 2004. Selling, general and administrative expenses as a percentage of net sales increased to 33.4% in the second quarter of 2005 compared to 29.2% in the second quarter of 2004. In absolute dollars, selling, general and administrative expenses increased 4.5%, due primarily to $802,000 in transaction costs related to the evaluation of our strategic alternatives and the sale of the company and $150,000 in costs related to the settlement of a patent infringement lawsuit, offset in part by lower incentive compensation. The Company does not receive any tax benefit from the transaction costs as they are not deductible for tax purposes. Net income decreased 44.4% to $1.7 million in the second quarter of 2005, compared to $3.0 million in the second quarter of 2004, primarily because of lower revenues and the transaction costs referred to above. Diluted earnings per share decreased to $0.22 per Class A share and $0.24 per Class B share in the second quarter of 2005, compared to diluted earnings per share of $0.41 per Class A share and $0.45 per Class B share for the comparable period in 2004.

For the six months ended July 1, 2005, net sales decreased 9.9%, to $82.0 million, compared to $90.9 million in the comparable period of 2004. The Company’s gross margin in the first six months of fiscal 2005 increased to 41.2% compared to 40.8% in the six months ended July 2, 2004. Selling, general and administrative expenses as a percentage of net sales increased to 31.8% for the six months ended July 1, 2005 compared to 27.4% in the six months ended July 2, 2004. In absolute dollars, selling, general and administrative expenses increased 4.4%, due primarily to $922,000 in transaction costs related to the evaluation of our strategic alternatives and the sale of the company and $150,000 in costs related to the settlement of a patent infringement lawsuit. The Company does not receive any tax benefit from the transaction costs as they are not deductible for tax purposes. Net income for the six months ended July 1, 2005 decreased 32.9% to $4.9 million, compared to $7.3 million in the comparable period of 2004, primarily because of lower revenues and the transaction costs referred to above. Diluted earnings per share decreased to $0.64 per Class A share and $0.70 per Class B share for the six months ended July 1, 2005, compared to diluted earnings per share of $0.98 per Class A share and $1.08 per Class B share for the six months ended July 2, 2004.

The following table provides details of net sales for the quarter and six months ended July 1, 2005 in comparison to the quarter and six months ended July 2, 2004.

Net Sales

(dollars in thousands)

	Quarter Ended July 1, 2005		Quarter Ended July 2, 2004		Six Months Ended July 1, 2005		Six Months Ended July 2, 2004
Saucony
Domestic	$	25,794	$	30,146	$	50,850	$	60,689
International		9,141		8,215		19,610		18,771
		34,935		38,361		70,460		79,460
Other Products
Domestic		4,912		5,313		10,891		10,738
International		254		305		601		750
		5,166		5,618		11,492		11,488
Total	$	40,101	$	43,979	$	81,952	$	90,948

Our backlog of open orders at July 1, 2005 scheduled for delivery within the next five months (July 1, 2005 – November 25, 2005) decreased 8.9% to $40.9 million, compared to $44.9 million at July 2, 2004. At July 1, 2005, the open order backlog for delivery in the next 12 months decreased 9.7% to $44.2 million, from $49.0 million at July 2, 2004.

Saucony, Inc. designs, develops, and markets (i) a broad line of performance-oriented athletic shoes for adults under the Saucony^® brand name, (ii) athletic apparel under the Hind^® brand name and (iii) athletic and workplace shoes under the Spot-bilt^® name.

This press release contains forward-looking statements that involve a number of risks and uncertainties. For this purpose, any statements that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “will”, “believes,” “anticipates,” “plans,” “expects,” “intends,” “estimates,” and similar expressions are intended to identify forward-looking statements. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are set forth in the Company’s Annual Report on Form 10-K under “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Certain Other Factors that May Affect Future Results” (“Certain Factors”) filed by Saucony, Inc. with the Securities and Exchange Commission on March 16, 2005, which Certain Factors discussion is incorporated herein by this reference. In particular, there can be no assurance as to the level of earnings per share, net sales, total costs and expenses and other operating results that will be achieved or experienced by the Company in any period because such items are materially dependent upon the condition of the domestic and world economies, the impact of foreign regulation and the performance of foreign suppliers, competition from other parties, consumer preferences, the inherent uncertainties in estimating conditions in the environment and the costs of addressing such conditions and the Company’s assessment and implementation of its strategic alternatives. All forward-looking statements are made only as of the date of this press release. The Company makes no undertaking to update any of these statements.

SAUCONY, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheet

(Unaudited)

(in thousands, except per share amounts)

ASSETS

	July 1, 2005		December 31, 2004
Current assets:
Cash and cash equivalents	$	30,164	$	12,042
Short-term investments		300		20,694
Accounts receivable		28,935		22,485
Inventories		23,762		25,645
Deferred taxes		2,036		2,455
Prepaid expenses and other current assets		1,163		1,316
Total current assets		86,360		84,637
Property, plant and equipment, net		9,059		9,570
Other assets:
Goodwill		912		912
Deferred charges, net		191		91
Other		1,036		1,047
Total other assets		2,139		2,050
Total assets	$	97,558	$	96,257
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of capitalized lease obligations	$	65	$	63
Accounts payable		9,621		10,484
Accrued expenses and other current liabilities		9,606		11,249
Environmental accrual		1,957		2,275
Total current liabilities		21,249		24,071
Long-term obligations:
Capitalized lease obligations, net of current portion		107		138
Other long-term obligations		1,012		932
Deferred income taxes		1,905		1,964
Total long-term obligations		3,024		3,034
Minority interest in consolidated subsidiary		529		461
Stockholders’ equity:
Common stock, $.33 1/3 par value		2,233		2,205
Additional paid in capital		18,839		18,049
Retained earnings		50,866		46,693
Accumulated other comprehensive income		818		1,744
Total		72,756		68,691
Total liabilities and stockholders’ equity	$	97,558	$	96,257

SAUCONY, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income

For the quarter and the six months ended July 1, 2005 and July 2, 2004

(Unaudited)

(in thousands, except per share amounts)

	Quarter Ended July 1, 2005			Quarter Ended July 2, 2004			Six Months Ended July 1, 2005			Six Months Ended July 2, 2004
Net sales	$	40,101		$	43,979		$	81,952		$	90,948
Other revenue		65			103			161			282
Total revenue		40,166			44,082			82,113			91,230
Costs and expenses
Cost of sales		23,899			25,908			48,156			53,820
Selling expenses		5,871			6,311			11,622			12,369
General and administrative expenses		7,532			6,512			14,426			12,590
Total costs and expenses		37,302			38,731			74,204			78,779
Operating income		2,864			5,351			7,909			12,451
Non-operating income (expense)
Interest income		166			57			323			126
Interest expense		(1	)		—			(4	)		—
Foreign currency		212			(217	)		312			(361	)
Other		5			9			29			12
Income before income taxes and minority interest		3,246			5,200			8,569			12,228
Provision for income taxes		1,513			2,129			3,596			4,888
Minority interest in income of consolidated subsidiary		39			26			89			64
Net income	$	1,694		$	3,045		$	4,884		$	7,276
Per share amounts:
Earnings per share:
Basic:
Class A common stock	$	0.24		$	0.44		$	0.69		$	1.07
Class B common stock	$	0.26		$	0.49		$	0.76		$	1.18
Diluted:
Class A common stock	$	0.22		$	0.41		$	0.64		$	0.98
Class B common stock	$	0.24		$	0.45		$	0.70		$	1.08
Weighted average common shares and equivalents outstanding:
Basic:
Class A common stock		2,521			2,521			2,521			2,521
Class B common stock		4,177			3,992			4,157			3,896
		6,698			6,513			6,678			6,417
Diluted:
Class A common stock		2,521			2,521			2,521			2,521
Class B common stock		4,666			4,527			4,683			4,430
		7,187			7,048			7,204			6,951
Cash dividends per share of common stock:
Class A common stock	$	0.050		$	0.050		$	0.100		$	4.100
Class B common stock	$	0.055		$	0.055		$	0.110		$	4.110