SECURITIES AND EXCHANGE COMMISSION
                              Washington, D.C.  20549

                                     FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934

  For the fiscal year ended January 2, 1998     Commission file number: 0-05083

                           HYDE ATHLETIC INDUSTRIES, INC.
               (Exact name of registrant as specified in its charter)

       Massachusetts                                     04-1465840
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

        Centennial Industrial Park, 13 Centennial Drive, Peabody, MA  01960
                      (Address of principal executive offices)

        Registrant's telephone number, including area code:   (978) 532-9000

         Securities registered pursuant to Section 12(b) of the Act:   None

            Securities registered pursuant to Section 12(g) of the Act:

                      Class A Common Stock, $.33-1/3 par value
                                  (Title of class)

                      Class B Common Stock, $.33-1/3 par value
                                  (Title of class)

                                                                               1
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 [    ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [   ]

The aggregate market value of voting and non-voting stock held by non-affiliates
of the registrant, as of March 31, 1998 was approximately $20,355,000 (based on
the last sale prices of the Class A Common Stock and Class B Common Stock on
such date as reported on the Nasdaq National Market).

The number of shares of the registrant's Class A Common Stock, $.33-1/3 par
value, and Class B Common Stock, $.33-1/3 par value, outstanding on March 31,
1998 was 2,703,227 and 3,548,087, respectively.

Portions of the following documents are incorporated by reference in this
Report.

                        Documents Incorporated by Reference

              Document                                       Form 10-K Part

Proxy Statement for Annual Meeting of Stockholders              Part III
of the Registrant to be held on May 14, 1998, to be
filed with the Securities and Exchange Commission.

                                                                               2
PART I

ITEM 1 - BUSINESS

Hyde Athletic Industries, Inc. and its subsidiaries (together, "Hyde" or the
"Company") design, develop, manufacture and market (i) a broad line of
performance-oriented athletic shoes for adults under the Saucony(R) brand name,
(ii) high-quality bicycles and bicycle frames under the Quintana Roo(R) and
Merlin(R) names, (iii) athletic apparel under the Hind(R) brand name and (iv)
shoes for coaches and officials under the Spot-Bilt(R) name.  The Company's
Saucony athletic footwear products include running, women's walking, cross
training and outdoor trail shoes.  The following table sets forth the
approximate contribution to net sales (in dollars and as a percentage of net
sales) attributable to  the Company's Saucony product line and other product
lines for the periods and geographic areas indicated.  "Other" consists of Spot-
Bilt coaches and officials shoes, Quintana Roo bicycles and wetsuits, Hind
apparel, sales of the Company's and other products at retail factory outlets
operated by the Company and sales of other branded products at the Company's
subsidiary in Australia.



                                                                               3
<TABLE>
                                                           Net Sales (1)
                                                       (dollars in thousands)
<CAPTION>
                             Fiscal 1997                        Fiscal 1996                       Fiscal 1995
                     -----------------------------     -----------------------------     -----------------------------
                        Sales      Sales     Co.         Sales       Sales     Co.          Sales       Sales     Co.
                          $          %        %            $           %        %             $           %        %
                                     -        -                        --       -              -          -        --
 <S>                 <C>           <C>       <C>       <C>           <C>       <C>       <C>             <C>      <C>
Saucony
  Domestic           $   56,050        71%             $   54,445       69%              $   47,040        67%
  International          22,580        29%                 24,366       31%                  23,628        33%
                     ----------    -------             ----------    ------              ----------     ------
  Total              $   78,630       100%     84%     $   78,811      100%      86%     $   70,668       100%      90%
                     ----------    -------             ----------    ------              ----------     ------

 Other
  Domestic           $    9,552        64%             $    5,791       46%              $    4,021        51%
  International           5,429        36%                  6,739       54%                   3,860        49%
                     ----------    -------             ----------    ------              ----------     ------
  Total              $   14,981       100%     16%     $   12,530      100%      14%     $    7,881       100%      10%
                     ----------    -------  ------     ----------    ------    -----     ----------     ------   ------

 Grand Total         $   93,611               100%     $   91,341               100%     $   78,549                100%
                     ==========             ======     ==========             ======     ==========              ======

(1) Excludes the results of operations of Brookfield Athletic Co., Inc., substantially all of the assets of which were sold by the
Company in July 1997.
</TABLE>


RECENT DEVELOPMENTS

There were a number of developments affecting the Company during 1997 and the
first quarter of 1998.  During the second quarter of 1997, the Company commenced
delivery of its Hind apparel to customers.  In July 1997, the Company received
proceeds of $6,841,000 in connection with the sale of substantially all of the
assets of its Brookfield Athletic subsidiary.  In February 1998, the Company
purchased substantially all of the assets of Merlin Materials, Inc., a high-
quality manufacturer of titanium bicycle frames.  Together with the Company's
Quintana Roo subsidiary, Merlin is expected to provide growth opportunities as
the Company expands its line of high-performance athletic products.

During the fourth quarter of fiscal 1997, the financial position of the
Company's Australian subsidiary deteriorated significantly.  Principal factors
affecting the operating results and financial position of this subsidiary
included: lower sales of Saucony brand products, excess inventories which were
liquidated in the fourth quarter of 1997, a significant devaluation of the
Australian currency, a reduction in net sales of non-Saucony products due to the
discontinuance of distribution rights in Australia of another brand of athletic
footwear and too high a level of administrative overhead in light of the lower
levels of net sales.

As a consequence of the deterioration in the Australian subsidiary's financial
position, the Company recorded a restructuring charge of $2,766,000 ($3,089,000
after tax, or $0.50 per diluted share) in the fourth quarter of fiscal 1997.  In
March 1998, the Company entered into an agreement with its joint venture
partners in its Australian subsidiary pursuant to which the Company will acquire
all of the proprietary interests of such partners in the subsidiary for nominal
consideration and the employment of the managing director of such subsidiary

will be terminated.    The Company expects the closing to occur pursuant to such
agreement by no later than May 1, 1998.  The Company is in the process of
reassessing its operations in Australia and is evaluating several alternative
methods of continuing its presence in the Australian market.

SAUCONY BRAND.  The Company sells performance running, walking, cross training,
and outdoor trail shoes for athletes under the Saucony brand name, which has
been marketed in the United States for over 30 years.  The Company assembles
most of its Saucony footwear sold in the United States at its manufacturing
facility in Bangor, Maine, largely with components sourced from independent
manufacturers located overseas.  The Company believes that assembly at its
Bangor facility assists in timely and flexible product delivery in the domestic
market.  According to ASD/Target Research, Inc., an independent market research
organization ("ASD/Target Research"), the Company ranked  sixth in sales of
running shoes in the United States during 1997.  In addition, according to
ASD/Target Research, the Company's market share of running shoes sold in the
United States was 4.0% in 1997.  The Company believes that a high percentage of
purchasers of Saucony brand footwear buy such products for athletic uses and
that such consumers have greater brand loyalty than athletic shoe purchasers who
buy for casual wear purposes.  The Company has several product offerings within
each of the Saucony brand categories.  These offerings have different designs
and features, resulting in different cushioning, stability, support
characteristics and prices.

The Company builds its Saucony shoes with a high level of technological
performance characteristics to appeal to athletic users.  As a result of the
Company's application of biomechanical technology in the design process, the
Company believes that its Saucony shoes have a distinctive "fit and feel" that
is attractive to athletic users.  A key element in the design of Saucony shoes
is an anatomically correct toe and heel configuration that provides support and
comfort throughout the human gait cycle for the particular activity for which
the shoe is designed.
                                                                               6

Most of the Company's top-of-the-line running and other athletic shoes
incorporate the Company's GRID System, an innovative midsole system that employs
molded strings engineered to create a feeling similar to that of the "sweet
spot" of a tennis racquet.  In contrast with conventional athletic shoe
midsoles, the GRID System is designed to react to various stress forces
differently and thereby simultaneously to maximize shock absorption and minimize
rear foot motion.

The Company designs and markets separate lines for men and women within most
Saucony product categories.   The Company currently sells approximately the same
percentage of Saucony shoes to men and women.  The suggested domestic retail
prices for most Saucony footwear products are in the range of $50 to $85 per
pair, with the Company's top-of-the-line running shoes having suggested domestic
retail prices of up to $110 per pair.

The Company designs its Saucony cross training, women's walking and outdoor
trail shoes with many of the same performance features and "fit and feel"
characteristics as are found in Saucony running shoes.  Currently, the Company's
most popular non-running athletic shoe is a women's performance walking shoe.

The Company believes that a line of athletic apparel bearing the Saucony name is
supportive of its athletic footwear products and enhances the visibility of the
Saucony brand.  Saucony markets apparel under both the Dave Scott and Saucony
labels.  These products carry the same commitment to quality and performance as
the Company's footwear line.  The Dave Scott line is an upscale multi-sport and
triathlon collection, while the Saucony apparel line is targeted at the
mainstream running consumer.


OTHER PRODUCTS

                                                                               7
HIND.  In the fourth quarter of 1996, the Company purchased trademarks and
related intellectual property from Hind, Inc. ("Hind"), a performance athletic
apparel company.  The Company began delivery of its Hind apparel products to the
retail trade in the second quarter of 1997.

QUINTANA ROO.  The Company manufactures and distributes the Quintana Roo line of
triathlon bicycles, road bicycles, mountain bicycles and wet suits through high-
end bicycle stores and sporting goods stores geared to triathletes.

MERLIN.  In February 1998, the Company acquired the assets of Merlin Materials,
Inc., a high performance manufacturer of titanium bicycle frames.  The Company
is marketing titanium bicycle frames under the Merlin trademark.

SPOT-BILT BRAND. The Company offers Spot-Bilt shoes for coaches and officials
through the distribution channels for its Saucony brand shoes.  In addition, the
Company has licensed the Spot-Bilt name to a third party that distributes youth
team field sport shoes under this name.  See Note 3 of Notes to Consolidated
Financial Statements.

FACTORY OUTLET STORES.  The Company operates five retail factory outlet stores.
To avoid competing against its customers' retail outlets, the Company generally
limits the products offered at these stores to products with cosmetic defects,
products which have been discontinued and certain slow-moving products.  The
Company sells Saucony, Hind, Spot-Bilt and Quintana Roo products at these
outlets, as well as athletic accessory goods of third parties.


PRODUCT DEVELOPMENT

The Company believes that the technical performance (i.e., comfort, support and
stability experienced by the athlete) of its Saucony footwear is important to
purchasers of its products.  The Company uses consulting services of such
                                                                               8
professionals as podiatrists, orthopedists, athletes, trainers and coaches as
part of its Saucony product development program.  The Company maintains a staff
of 20  persons located in Peabody, Massachusetts to undertake continuing product
development and design.  Product development work also is performed for the
Company by its suppliers at their overseas facilities.  During the years ended
January 2, 1998, January 3, 1997 and January 5, 1996, the Company expended
$1,438,000, $1,417,000 and $1,513,000, respectively, in connection with its
product development programs, most of which related to Saucony products.


SALES AND MARKETING

SAUCONY BRAND.  The Company's Saucony athletic footwear products are sold at
more than 5,000 retail outlets in the United States, primarily higher-end, full-
margin sporting goods chains, independent sporting goods stores, athletic
footwear specialty stores and department stores.  Retail outlets include Foot
Locker/Lady Foot Locker, Athlete's Foot, The Sports Authority, Road Runner's
Sport, Sport Mart and Just For Feet.   The Company maintains a corporate sales
team that is directly responsible for the sales activity in its largest 50
accounts.  The Company also sells its footwear and apparel in the United States
through 13 independent manufacturer agents whose organizations employ
approximately 44 sales representatives.

The Company also maintains a field sales management team to supervise, direct
and evaluate the 44 sales representatives.  The Company uses certain state-of-
the-art multi-media presentations for sales and marketing initiatives.  The
Company's Website (saucony.com) receives thousands of hits weekly from consumers
looking for new product profiles, race and event data, as well as general
Saucony information.

The Company sells its Saucony products outside the United States in 34 countries
through 19 distributors located throughout the world, including joint venture
                                                                               9
subsidiaries in which the Company holds controlling interests located in
Australia and Canada and through the Company's subsidiary located in the
Netherlands (which holds the distribution rights to the Company's Saucony
products in the Benelux countries) and a branch office in the United Kingdom.
In 1994, the Company formed a German subsidiary, Saucony Deutschland Vertriebs
GmbH, to provide additional sales and marketing support in Europe and to
undertake sales and marketing of Saucony products in Germany.  The primary
overseas markets for the Company's Saucony products are in Western Europe.

To accommodate its customers' requirements and plan for its own product needs,
the Company employs a futures orders program for its Saucony products under
which the Company takes orders well in advance of the selling season for a
particular product and commits to ship the product to the customer in time for
the selling season.  The Company affords customers price discounts and extended
payment terms in respect of such advance orders.  The Company generally requires
payment at the time that the selling season ends, which increases the Company's
working capital requirements.

Saucony engages in various advertising and promotional programs.  The main media
vehicles used are magazines and television.  The Company employs many sports
marketing initiatives to drive brand awareness and imagery to athletes.
Examples include Saucony running and racing seen monthly on ESPN, as well as
sponsorship of the L.A. Marathon and Chase Corporate Challenge race series.  To
build in-store presence, the Company uses account-specific and in-store
promotions, such as athlete appearances, special events, gift with purchase
programs and employee cost programs.

Although most of the Company's advertising and promotional programs for its
Saucony brand are directed towards ultimate consumers, the Company promotes
these products to the trade through attendance at trade shows and similar
events.  The Company employs an advertising program under which it reimburses
participating retailers for a portion of the costs incurred by such retailers in
advertising the Company's Saucony products.

The Company's advertising of non-Saucony products includes advertisements in
magazines and product promotion through attendance at trade shows and similar
events.

BACKLOG; SEASONALITY; DISTRIBUTION.  The Company's backlog of unfilled orders
was approximately $42.0 million at January 2, 1998 and $39.7 million at January
3, 1997.  The Company expects that all of its backlog at January 2, 1998 will be
shipped in fiscal 1998.  While the Company has not generally experienced
material cancellations of orders, orders may be cancelled by customers without
financial penalty, and backlog does not necessarily represent actual future
shipments.

The Company is subject to seasonality in its product sales because of the
different selling seasons for various products. The Company's first three fiscal
quarters are often stronger than the last fiscal quarter due to Saucony product
introductions in January and July and spring sales associated with warmer
weather in the Company's principal markets.  The Company distributes its Saucony
and Hind products through its warehouses in Peabody, Massachusetts as well as
through independent warehouse facilities located throughout the world.  The
Company distributes its Quintana Roo products through its leased warehouse in
San Marcos, California.

For information about the Company's foreign operations and export sales, see
Note 15 of Notes to Consolidated Financial Statements.


MANUFACTURING

The Company assembles most of its domestically sold Saucony footwear at the
Company's manufacturing facility in Bangor, Maine, largely with components
sourced from independent manufacturers located overseas.  Independent overseas
manufacturers produce the balance of the Company's Saucony products and all of
the Company's Spot-Bilt products.  Quintana Roo and Merlin products are
manufactured by the Company in San Marcos, California and Cambridge,
Massachusetts, respectively.  Hind outsources the manufacturing of all its
products.

The overseas manufacturers that supply products and product components to the
Company are located in  the Far East, primarily in China, but also in Taiwan and
Thailand.  The Company seeks to develop additional overseas manufacturing
sources from time to time, both to increase its sourcing capacity and to obtain
alternative sources of supply.  All products and components produced by foreign
suppliers are manufactured in accordance with product specifications furnished
by the Company.  The Company carefully monitors foreign manufacturing operations
and imported products and components to assure compliance with the Company's
design, production and quality requirements.

The number of foreign suppliers and the percentage of the Company's total
foreign production requirements produced by each such supplier vary from time to
time.  During fiscal 1997, the Company purchased products from 20 overseas
suppliers.  One of such suppliers, located in China, accounted for approximately
41% of the Company's total overseas purchases by dollar volume.

The Company is subject to the usual risks of a business involving foreign
suppliers, such as government regulation of fund transfers, export and import
duties and political and labor instability.  The Company has not been materially
affected by any of these factors to date.  Substantially all purchases from
foreign suppliers to date have been denominated in United States dollars in
order to reduce the Company's risk from currency fluctuations.

Although the Company has no long-term manufacturing agreements with its overseas
suppliers and competes with other athletic shoe and recreational product
companies (including companies that are much larger than the Company) for access
to production facilities, management believes that the Company's relationships
with its footwear and other suppliers are strong and that it has the ability to
develop, over time, alternative sources in various countries for footwear,
footwear components and other products obtained from its current suppliers.
However, in the event of a supply interruption, the Company's operations could
be materially and adversely affected if a substantial delay occurred in locating
and obtaining alternative sources of supply.

Raw materials required for the manufacture of the Company's products, including
leather, rubber, nylon, titanium, aluminum and other fabrics, are generally
available in the country in which the products are manufactured.  The Company
and its suppliers have not experienced any difficulty in satisfying their raw
material needs to date.


TRADE POLICY

The Company's practice of sourcing products and components overseas, with
subsequent importation into the United States, exposes it to possible product
supply disruptions and increased costs in the event of actions by United States
or foreign government agencies adverse to continued trade or the enactment of
legislation that restricts trade.  For example, on February 2, 1997, the United
States and China reached an agreement on a four-year textile pact that generally
extends current quota arrangements in Chinese textile and apparel exports to the
United States, but reduces quotas on three occasions -- most recently in
September, 1996 when the United States imposed triple charges for illegally
transshipped merchandise (excluding footwear).  China's compliance with the
current textiles agreement is under review by U.S. trade officials.

In addition, Company imports a significant amount of its products and product
components from China.  The United States provides China with most-favored-
nation ("MFN") status, allowing China to receive the same tariff treatment that
the United States extends to its "most favored" trading partners.

Notwithstanding this current policy, Congress could seek to revoke MFN for China
or condition its renewal on factors such as China's human rights record.
Recently, there has been heightened scrutiny of extending MFN for China in light
of certain allegations that Chinese nationals may have sought to improperly or
illegally influence members of the Administration or Congress through political
contributions.  In addition, there has been increasing concern in Congress with
regard to the growing U.S. trade deficit with China.

The administration of existing U.S. trade laws can also create adverse
consequences for trade with the Company's suppliers.  In particular, under
Section 301 of the Trade Act of 1974, as well as "Special 301" and "Super 301,"
the Office of the United States Trade Representative ("USTR") can retaliate
against certain unfair foreign trading practices.  For example, in early 1995
such retaliation almost occurred against China in a Special 301 investigation of
China's intellectual property regime.  However, on February 26, 1995, the United
States and China reached an agreement in this Special 301 investigation,
avoiding the scheduled imposition of increased tariffs by the United States on
certain products imported from China, including certain footwear products.  This
bilateral agreement has extensive compliance features, and China's compliance
with this agreement is currently under review by U.S. trade officials.  On May
15, 1996, based on monitoring carried out under Section 306(a) of the Trade Act
of 1974, as amended, the United States considered that China was not
satisfactorily implementing the February 26, 1995 agreement, and proposed to
impose prohibitive tariffs on certain products from China, including certain
textile and apparel, but excluding footwear.  Additionally, to prevent import
surges, USTR directed Customs to limit exports of certain textile products by
their date of entry.  On June 17, 1996, USTR announced that, based on measures
that China has taken and will take in the future to implement key elements of
the 1995 agreement, the proposed sanctions would not be imposed.  On April 30,
1997, the USTR reported that significant progress had occurred in China in late
1996 and early 1997.  The Company is unable to predict whether USTR may decide
in the future to impose sanctions or take other actions against China under this
agreement.  Also, U.S./ China trade relations, especially with respect to
China's efforts to accede to the World Trade Organization, have been contentious
in the recent past, and the Company cannot predict whether this tension will
interfere with the ability of the Company to import products from China in the
future.

In addition, USTR has identified certain of the Asian countries in which the
Company's suppliers are located as having various foreign trade barriers.  As a
result of these or other unfair trade practices as identified by USTR, such
countries could be subject to possible retaliation by the United States under
Super or regular Section 301 authority.

The Company is unable to predict whether additional U.S. customs duties, quotas
or other restrictions may be imposed in the future upon the importation of its
products and/or components as a result of any of the matters discussed above, or
because of similar U.S. or foreign government actions.  In addition, the
Company's imports into the United States, the European Union or elsewhere could
be subjected to antidumping duties if an antidumping order that covered the
Company's products were issued in such countries or regions.  Such action could
result in increases in the costs of imported footwear, footwear components or
other Company products generally, or  limitations on the Company's ability to
import footwear, footwear components or such other products into the United
States.  Such occurrences might adversely affect the sales or profitability of
the Company, possibly materially.


COMPETITION

Competition is intense in the markets in which the Company sells its products.
The Company competes with a large number of other companies, both domestic and
foreign.  Several competitors are large organizations with diversified product
lines, well-known brands and financial resources substantially greater than
those of the Company.  The principal competitors for the Company's Saucony
products are Nike, New Balance and ASICS.  The principal competitors for the
Company's Hind products are Nike, Pearl Izumi and Speedo.  The principal
competitors for the Company's Quintana Roo and Merlin products are Cannondale
and Trek.  The Company believes that the key competitive factors as to its
products are styling, durability, technical performance, product identification
through promotion, brand awareness and price. Customer support services and
E.D.I. (Electronic Data Interchange) are also important competitive factors.
The Company believes that it is competitive in all of these areas.


TRADEMARKS

The Company utilizes trademarks on nearly all of its products and believes that
having distinctive marks is an important factor in marketing its goods.  The
Company has federally registered its Saucony(R), Spot-Bilt(R), Hyde(R),
G.R.I.D.(R), Quintana Roo(R), Merlin(R) and Hind(R) marks, among others.  The
Company has also registered some of these marks in a number of foreign
countries, including countries in Europe, the Far East, and North, Central and
South America.   Although the Company has a foreign trademark registration
program for selected marks, no assurance can be given that it will be able to
register or use such marks in each foreign country in which registration is
sought.


EMPLOYEES

At January 2, 1998, the Company employed approximately 442 people worldwide, of
whom approximately 142 worked at the Company's manufacturing plant in Bangor,
Maine, approximately 28 worked in the Company's Peabody, Massachusetts
warehouse, approximately 29 were sales and marketing personnel, approximately 33
were executive and finance personnel, approximately 20 were product development
and design personnel and the remainder were involved in various other aspects of
the Company's business.  Eighty-five of the Company's employees work at foreign
locations.  The Company believes that its employee relations are excellent.  The
Company has never experienced a strike or other work stoppage.  Approximately 20
employees in the Company's Peabody warehouse were represented by a union at
January 2, 1998.  None of the Company's other employees is represented by a
union or subject to a collective bargaining agreement.


ITEM 2 - PROPERTIES

The Company's general and executive offices and its main distribution facility
are located in Peabody, Massachusetts, and are owned by the Company.  This
facility consists of approximately 175,000 square feet, of which 145,000 square
feet is warehouse space.

The Company owns a factory in Bangor, Maine, containing approximately 82,000
square feet of space, substantially all of which is used for the manufacture of
the Company's Saucony running shoes, mostly with imported components.  The
Company also owns a retail store in Bangor, containing approximately 3,000
square feet of space, and a warehouse in East Brookfield, Massachusetts,
containing approximately 100,000 square feet.

The Company's Quintana Roo subsidiary leases approximately 15,000 square feet of
manufacturing office space in San Marcos, California.  The Company's Merlin
division leases 13,600 square feet of manufacturing and office space in
Cambridge, Massachusetts.


ITEM 3 - LEGAL PROCEEDINGS

The Company is involved in routine litigation incident to its business.  In
management's opinion, none of these proceedings will have a material adverse
effect on the Company's financial position, operations or cash flows.



ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS

Not applicable.


EXECUTIVE OFFICERS OF THE REGISTRANT


The executive officers of the Company are as follows:

       Name                   Age                   Position
--------------------          ---           --------------------------


John H. Fisher                50            President, Chief  Executive Officer
                                            and Director


Charles A. Gottesman          47            Executive Vice President,
                                            Chief Operating Officer, Treasurer
                                            and Director


Wolfgang Schweim              45            President, Saucony International


Arthur E. Rogers, Jr.         35            President, Saucony North America


Roger P. Deschenes            39            Vice President, Controller and
                                            Chief Accounting Officer


Kenneth W. Graham             44            Senior Vice President,
                                            Research & Development/Textiles


Daniel J. Horgan              42            Vice President, Operations


Andrew M. James               41            Vice President, MIS



John H. Fisher has served as Chief Executive Officer of the Company since 1991.
He was elected President and Chief Operating Officer in 1985 after having served
as Executive Vice President from 1981 to 1985 and as Vice President, Sales from
1979 and 1981.  Mr. Fisher is a member of the World Federation of Sporting Goods
Industries, is the former Chairman of the Athletic Footwear Council of the
Sporting Goods Manufacturers Association, and is a member of various civic
associations.  Mr. Fisher became a director in 1980.

Charles A. Gottesman has served as Executive Vice President and Chief Operating
Officer of the Company since 1992, and served as Executive Vice President,
Finance from 1989 to 1992, Senior Vice President from 1987 to 1989, Vice
President from 1985 to 1987, and Treasurer since 1983.  Mr. Gottesman became a
director in 1983 and is the brother-in-law of John H. Fisher.

Wolfgang Schweim became the President of Saucony International in January 1998
after serving as President of the Company's athletic footwear division from June
1994 to January 1998.  From 1993 to 1994, Mr. Schweim served as Managing
Director for Saucony Europe.  From 1989 to 1993, Mr. Schweim was the German
Managing Director and Marketing Sales Manager for Europe at Asics, an athletic
shoe manufacturer.  Prior to 1989, Mr. Schweim worked in sales and marketing
positions with Nike International, Le Coq Sportif and Adidas AG.

Arthur E. Rogers, Jr. became the President of Saucony North America in January
1998.  Mr. Rogers re-joined the Company as Senior Director of Global Marketing
in 1994, having previously served as Brand Manager from 1990 - 1992.  Most
recently, Mr. Rogers has been the Vice President of North American Sales and
Worldwide Marketing.  Prior to joining the Company, Mr. Rogers held various
sales and marketing positions at Proctor & Gamble as well as Converse Shoe,
Inc., an athletic shoe company.

Roger P. Deschenes has served as Vice President, Controller since August 1997,
after having served as Controller and Chief Accounting Officer from October 1995
to August 1997.  Mr. Deschenes joined the Company in 1990 as Corporate
Accounting Manager.  He was employed at Allen-Bradley, a manufacturing company
and subsidiary of Rockwell International, Corp., from 1987 to 1990 as Financial
and Cost Reporting Supervisor.  Mr. Deschenes is a Certified Management
Accountant.

Kenneth W. Graham became Senior Vice President of Research and
Development/Textiles in January 1998 after serving as Senior Vice President of
Research and Development/Manufacturing since 1996.  Prior to that Mr. Graham
served as Vice President of Research and Development/Manufacturing.  Mr. Graham
joined the Company in 1984 and has served as Manager and Vice President of
Research and Development.  Prior to joining the Company, Mr. Graham worked for
seven years with New Balance Athletic Shoe, Inc.

Daniel J. Horgan became Vice President of Operations in September 1995 after
serving as Senior Director of Operations from September 1994 to September 1995.
Mr. Horgan joined the Company in 1982 as Manager of Import and Export
Operations, served as Product Procurement and Distribution Manager from 1985 to
1988, Manager of Production from 1988 to 1992, and Director of International
Trade for the Company from 1992 to 1994.

Andrew M. James joined the Company in February 1984.  He has served the Company
as Accounting Manger (1984 - 1988), Assistant Controller (1989 - 1993), Senior
Director of Information Systems (1994 - 1997) and most recently as Vice
President, MIS.  Mr. James  holds advanced degrees from Washington University
(MBA) and Bentley College (MS).





PART II


ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's Class A Common Stock and Class B Common Stock trade on the Nasdaq
National Market under the symbols "HYDEA" and "HYDEB," respectively.  The
following table sets forth, for the periods indicated, the actual high and low
sales prices per share of the Class A Common Stock and the Class B Common Stock
as reported by the Nasdaq National Market.





<TABLE>
   <CAPTION>
                                                                    Class A                          Class B
                                                                  Common Stock                     Common Stock
                                                                  ------------                     ------------

                                                                High           Low             High             Low
                                                                ----           ---             ----             ---
    <S>                                                     <C>           <C>              <C>             <C>
    FISCAL YEAR ENDED JANUARY 2, 1998
    ---------------------------------

    First Quarter                                           $    5-1/4    $    4-3/8       $      5-3/8    $     4-3/8
    Second Quarter                                               5-3/8         4-1/2              5-1/4          4-1/2
    Third Quarter                                                    5         3-7/8              5-1/8              4
    Fourth Quarter                                               5-1/8         3-5/8              5-1/8          3-3/8


    FISCAL YEAR ENDED JANUARY 3, 1997
    ---------------------------------

    First Quarter                                           $    4-3/8    $    3-5/8       $      4-1/4    $    3-3/16
    Second Quarter                                               6-3/4         3-5/8            5-13/16          3-1/4
    Third Quarter                                                6-1/2         4-1/2            5-15/16          4-3/4
    Fourth Quarter                                               5-1/2         4-3/8              5-1/2          4-1/2

</TABLE>




                         

There were 375 and 354 stockholders of record of the Class A Common Stock and
Class B Common Stock, respectively, on March 17, 1998.

The Company does not anticipate paying any cash dividends in the foreseeable
future on the shares of Class A Common Stock or Class B Common Stock.  The
Company currently intends to retain future earnings to fund the development and
growth of its business.  The Company's note agreement with an insurance company
contains certain covenants restricting the cash dividends which may be paid by
the Company.  As of January 2, 1998, approximately $11,143,000 was available for
payment of cash dividends under the terms of these covenants.  Additionally, the
Company's credit facility agreement with two banks further restricts the payment
or declaration of any dividend or other distributions to stockholders, in money
or property, except in shares of its own Common Stock.  Each share of Class B
Common Stock is entitled to a regular cash dividend equal to 110% of the regular
cash dividend, if any, payable on a share of Class A Common Stock.





<TABLE>
ITEM 6 - SELECTED FINANCIAL DATA
Selected Income Statement Data                                    (in thousands; per share amounts in dollars)
<CAPTION>
                                                          Year        Year         Year          Year          Year
                                                         Ended       Ended        Ended         Ended         Ended
                                                       January 2,  January 3,   January 5,   December 30,  December 31,
                                                          1998        1997         1996          1994          1993
                                                          ----        ----         ----          ----          ----
<S>                                                    <C>          <C>          <C>          <C>          <C>
Net sales                                              $  93,611    $  91,341    $  78,549    $  83,055    $  84,482

Income (loss) from continuing operations before
  interest, income taxes and minority interest            (2,566)       2,785        1,291        4,491        9,027

Minority interest in income (loss) of
  consolidated subsidiaries                                 (123)         308         (286)           9          (47)

Income (loss) from continuing operations                  (3,826)       1,349          522        2,085        4,727

Discontinued operations:(1)
  Income (loss) from discontinued operations                (394)         145        1,069          851         (119)
  Loss on disposal of Brookfield Athletic Co., Inc.         (498)          --           --           --           --

Net income (loss)                                         (4,718)       1,494        1,591        2,937        4,608

Earnings per common share  - basic (2)
  Income (loss) from continuing operations             $   (0.62)   $    0.22    $    0.08    $    0.32    $     0.78
  Income (loss) from discontinued operations               (0.14)        0.02         0.18         0.14         (0.02)
                                                       ---------    ---------    ---------    ---------    -----------
Net income (loss) per common share - basic             $   (0.76)   $    0.24    $    0.26    $    0.46    $     0.76
                                                       ==========   =========    =========    =========    ==========
                                                                                                                         24

Earnings per common share - diluted (2)
  Income (loss) from continuing operations             $   (0.62)   $    0.22    $    0.08    $    0.32    $     0.78
  Income (loss) from discontinued operations               (0.14)        0.02         0.18         0.14         (0.02)
                                                       ---------         ----         ----    ---------    -----------
Net income (loss) per common share - diluted           $   (0.76)   $    0.24    $    0.26    $    0.46    $     0.76
                                                       ==========   =========    =========    =========    ==========

Weighted average common shares and
  equivalents outstanding (2)                              6,240        6,268        6,244        6,446        6,057

Cash dividends per share of common stock                      --           --           --           --           --

<CAPTION>
Selected Balance Sheet Data
                                                       January 2,  January 3,    January 5,   December 30, December 31,
                                                          1998        1997          1996          1994         1993
                                                          ----        ----          ----          ----         ----
<S>                                                    <C>          <C>          <C>          <C>          <C>
Current assets                                         $  50,295    $  58,726    $  59,190    $  61,621    $  58,121

Current liabilities                                       13,315       13,963       14,728       15,657       13,372

Working capital                                           36,980       44,763       44,462       45,964       44,747

Total assets                                              61,624       71,346       69,471       77,082       73,693

Long-term debt and capitalized lease
  obligations, net of current portion                        771        4,893        4,205       11,922       12,942

Stockholders' equity                                      45,278       50,078       48,365       46,754       44,709

                                                                                                                     25
---------------------------
<FN>
(1)  See Note 13 of the Notes to Consolidated Financial Statements regarding discontinued operations.

(2)  See Notes 1 and 11 of the Notes to Consolidated Financial Statements regarding the adoption of Statement of Financial
Accounting Standards 128  (SFAS 128) in fiscal 1997.  SFAS 128 requires the restatement of all previously reported per share
amounts.
</TABLE>
--






ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
 RESULTS OF OPERATIONS

Selected Quarterly Financial Results

The following tables sets forth certain unaudited quarterly financial data of
the Company for each of the four fiscal quarters in each of fiscal 1997, 1996
and 1995.  The Company believes that this information has been prepared on the
same basis as the audited Consolidated Financial Statements and that all
necessary adjustments, consisting only of normal recurring adjustments, have
been included in the amounts stated below to present fairly the selected
quarterly information when read in conjunction with the audited Consolidated
Financial Statements and the Notes thereto.




<TABLE>
                                                                                       Quarters Ended
                                                                                        (Unaudited)
                                                                       (in thousands; per share amounts in dollars)
<CAPTION>
                                                                      April 4,       July 4,    October 3,   January 2,
                                                                        1997           1997        1997         1998
                                                                        ----           ----        ----         ----
STATEMENT OF INCOME DATA:
<S>                                                                   <C>          <C>          <C>          <C>
Saucony
  Domestic                                                            $  14,914    $  16,260    $  14,221    $  10,655
  International                                                           6,352        4,879        6,488        4,861
                                                                      ---------    ---------    ---------    ---------
    Saucony Total                                                        21,266       21,139       20,709       15,516
                                                                      ---------    ---------    ---------    ---------

Other
  Domestic                                                                1,500        2,013        3,016        3,023
  International                                                           2,451        1,246          910          822
                                                                      ---------    ---------    ---------    ---------
    Other Total                                                           3,951        3,259        3,926        3,845
                                                                      ---------    ---------    ---------    ---------

Net sales                                                                25,217       24,398       24,635       19,361
Other income (expense)                                                     (151)         101          314         (544)
                                                                      ----------   ---------    ---------    ----------
Total revenue                                                            25,066       24,499       24,949       18,817
                                                                      ---------    ---------    ---------    ---------

Costs and expenses
  Cost of sales                                                          16,632       15,848       16,213       13,478
    Selling expenses                                                      3,964        4,565        4,076        4,093
  General and administrative expenses                                     3,234        3,458        3,449        3,271
  Writedown of assets                                                        --          850           --           --
  Restructuring of Australian operations                                     --           --           --        2,766
  Interest expense                                                          249          251          165          223
                                                                      ---------    ---------    ---------    ---------
  Total costs and expenses                                               24,079       24,972       23,903       23,831
                                                                      ---------    ---------    ---------    ---------

Income (loss) from continuing operations before
  income taxes and minority interest                                        987         (473)       1,046       (5,014)
Provision (benefit) for income taxes                                        382         (171)         419         (135)
Minority interest in income (loss) of consolidated subsidiaries              35         (182)          46          (22)
                                                                      ---------    ----------   ---------    ----------
Income (loss) from continuing operations                                    570         (120)         581       (4,857)

Discontinued operations:
  Loss from discontinued operations (net of tax provision
    (benefit) ($190) and ($72), respectively)                              (287)        (107)          --           --
  Loss on disposal of Brookfield Athletic Co., Inc. including
    operating loss of $243 during the phase-out period
    (net of tax provision (benefit) of ($153), ($128) and ($42)              --         (241)        (172)         (85)
                                                                      ---------    ----------   ----------   ----------

Net income (loss)                                                     $     283    $    (468)   $     409    $  (4,942)
                                                                      =========    ==========   =========    ==========

Earnings per common share - basic:
  Income (loss) from continuing operations                            $    0.10    $   (0.02)   $    0.09    $   (0.78)
  Income (loss) from discontinued operations                              (0.05)       (0.05)       (0.02)       (0.01)
                                                                      ----------   ----------   ----------   ----------

Net income (loss) per common share - basic                            $    0.05    $   (0.07)   $    0.07    $   (0.79)
                                                                      =========    ==========   =========    ==========

Earnings per common share - diluted
  Income (loss) from continuing operations                            $    0.10    $   (0.02)   $    0.09    $   (0.78)
  Income (loss) from discontinued operations                              (0.05)       (0.05)       (0.02)       (0.01)
                                                                      ----------   ----------   ----------   ----------

Net income (loss) per common share - diluted                          $    0.05    $   (0.07)   $    0.07    $   (0.79)
                                                                      =========    ==========   =========    ==========

Weighted average common shares and equivalent outstanding                 6,270        6,237        6,264        6,249
                                                                      =========    =========    =========    =========
</TABLE>















<TABLE>
Statement of Income Data as a Percentage of Net Sales:
                                                                                   Quarters Ended
                                                                                    (Unaudited)

<CAPTION>
                                                               April 4,        July 4,      October 3,       January 2,
                                                                 1997            1997          1997             1998
                                                                 ----            ----          ----             ----
<S>                                                           <C>             <C>            <C>            <C>
Saucony
  Domestic                                                        59.1%          66.6%           57.8%          55.0%
  International                                                   25.2%          20.0%           26.3%          25.1%
                                                              ---------       --------       ---------      ---------
    Saucony Total                                                 84.3%          86.6%           84.1%          80.1%
                                                              ---------       --------       ---------      ---------
Other
  Domestic                                                         5.9%           8.3%           12.2%          15.8%
  International                                                    9.8%           5.1%            3.7%           4.1%
                                                              ---------       --------       ---------      ---------
    Other Total                                                   15.7%          13.4%           15.9%          19.9%
                                                              ---------       --------       ---------      ---------

Net sales                                                        100.0%         100.0%          100.0%         100.0%
Other income (expense)                                            (0.6%)          0.4%            1.3%          (2.8%)
                                                              ----------      --------       ---------      ----------
Total revenue                                                     99.4%         100.4%          101.3%          97.2%
                                                              ---------       --------       ---------      ---------
Costs and expenses
  Cost of sales                                                   66.0%          65.0%           65.8%          69.6%
  Selling expenses                                                15.7%          18.7%           16.5%          21.1%
                                                                                                                                  32
  General and administrative expenses                             12.8%          14.2%           14.0%          16.9%
  Writedown of assets                                              0.0%           3.4%            0.0%           0.0%
  Restructuring of Australian operations                          --             --              --             14.4%
  Interest expense                                                 1.0%           1.0%            0.7%           1.2%
                                                              ---------       --------       ---------      ---------

    Total costs and expenses                                      95.5%         102.3%           97.0%         123.1%
                                                              ---------       --------       ---------      ---------

Income (loss) from continuing operations
  before income taxes and minority interest                        3.9%          (1.9%)           4.3%         (25.9%)

Provision (benefit) for income taxes                               1.5%          (0.7%)           1.7%          (0.7%)

Minority interest in income (loss) of
  consolidated subsidiaries                                        0.2%          (0.7%)           0.2%          (0.1%)
                                                              ---------       ---------      ---------      ----------

Income (loss) from continuing operations                           2.2%          (0.5%)           2.4%         (25.1%)

Discontinued operations:
  Loss from discontinued operations
    (net of tax)                                                  (1.1%)         (0.4%)           0.0%           0.0%

  Loss on disposal of Brookfield Athletic
    Co., Inc. including operating loss during
    the phase-out period (net of tax)                              0.0%          (1.0%)          (0.7%)         (0.5%)
                                                              ---------       ---------      ----------     ----------

Net income (loss)                                                  1.1%          (1.9%)           1.7%         (25.6%)
                                                              ========        =========      =========      ==========
                                                                                                                                  33
</TABLE>


        





                                                                              35
<TABLE>
Selected Quarterly Financial Results
                                                                                   Quarters Ended
                                                                                    (Unaudited)
                                                                    (in thousands; per share amounts in dollars)

<CAPTION>
                                                                   April 5,    July 5,      October 4,   January 3,
                                                                     1996        1996         1996          1997
                                                                     ----        ----         ----          ----
<S>                                                               <C>          <C>          <C>          <C>
Saucony
  Domestic                                                        $ 18,569     $  15,688    $  10,796    $   9,392
  International                                                      7,140         5,489        6,418        5,319
                                                                  --------     ---------    ---------    ---------
    Saucony Total                                                   25,709        21,177       17,214       14,711
                                                                  --------     ---------    ---------    ---------

Other
  Domestic                                                           1,397         1,735        1,343        1,316
  International                                                      1,532         1,484        2,052        1,671
                                                                  --------     ---------    ---------    ---------
    Other Total                                                      2,929         3,219        3,395        2,987
                                                                  --------     ---------    ---------    ---------

Net sales                                                           28,638        24,396       20,609       17,698
Other income                                                           239           355           84          300
                                                                  --------     ---------    ---------    ---------
Total revenue                                                       28,877        24,751       20,693       17,998
                                                                  --------     ---------    ---------    ---------

Costs and expenses
                                                                                                                                  36
  Cost of sales                                                     19,850        16,854       13,402       11,586
  Selling expenses                                                   4,223         4,478        3,626        3,738
  General and administrative expenses                                2,907         2,741        2,984        3,145
  Interest expense                                                     258           222          180          143
                                                                  --------     ---------    ---------    ---------

    Total costs and expenses                                        27,238        24,295       20,192       18,612
                                                                  --------     ---------    ---------    ---------

Income (loss) from continuing operations
  before income taxes and minority interest                          1,639           456          501         (614)

Provision (benefit) for income taxes                                   621           136          134         (566)

Minority interest in income (loss) of
  consolidated subsidiaries                                            135            93          147          (67)
                                                                  --------     ---------    ---------    ----------

Income  from continuing operations                                     883           227          220           19

Discontinued operations:
  Income (loss) from discontinued operations
    (net of tax provision (benefit) of ($95),
    ($75), $258 and $15, respectively)                                (143)         (114)         383           19
                                                                  ---------    ----------   ---------    ---------

Net income                                                        $    740     $     113    $     603    $      38
                                                                  ========     =========    =========    =========

Earnings per common share - basic:
  Income  from continuing operations                              $   0.14     $    0.04    $    0.04    $    0.01
  Income (loss) from discontinued operations                         (0.02)        (0.02)        0.06         0.00
                                                                                                                                  37
                                                                  ---------    ----------   ---------    ---------
Net income  per common share - basic                              $   0.12     $    0.02    $    0.10    $    0.01
                                                                  =======      =========    =========    =========

Earnings per common share - diluted:
  Income  from continuing operations                              $   0.14     $    0.04    $    0.04    $    0.01
  Income (loss) from discontinued operations                         (0.02)        (0.02)        0.06         0.00
                                                                  ---------    ----------   ---------    ---------
Net income  per common share - diluted                            $   0.12     $    0.02    $    0.10    $    0.01
                                                                  =======      =========    =========    =========

Weighted average common shares and
  equivalent outstanding                                             6,226         6,244        6,269        6,269
                                                                  ========     =========    =========    =========
</TABLE>







  <TABLE>
Statement of Income Data as a Percentage of Net Sales


                                                                                   Quarters Ended
                                                                                    (Unaudited)

<CAPTION>
                                                               April 5,        July 5,      October 4,      January 3,
                                                                 1996            1996          1996            1997
                                                                 ----            ----          ----            ----
<S>                                                           <C>             <C>            <C>            <C>
Saucony
  Domestic                                                        64.9%          64.3%           52.4%          53.1%
  International                                                   24.9%          22.5%           31.1%          30.0%
                                                              ---------       --------       ---------      ---------
    Saucony Total                                                 89.8%          86.8%           83.5%          83.1%
                                                              ---------       --------       ---------      ---------

Other
  Domestic                                                         4.8%           7.1%            6.5%           7.4%
  International                                                    5.4%           6.1%           10.0%           9.5%
                                                              ---------       --------       ---------      ---------
    Other Total                                                   10.2%          13.2%           16.5%          16.9%
                                                              ---------       --------       ---------      ---------

Net sales                                                        100.0%         100.0%          100.0%         100.0%
Other income                                                       0.8%           1.5%            0.4%           1.7%
                                                              ---------       --------       ---------      ---------
Total revenue                                                    100.8%         101.5%          100.4%         101.7%
                                                              ---------       --------       ---------      ---------

                                                                                                                                  40
Costs and expenses
  Cost of sales                                                   69.3%          69.1%           65.0%          65.5%
  Selling expenses                                                14.7%          18.4%           17.6%          21.1%
  General and administrative expenses                             10.2%          11.2%           14.5%          17.8%
  Interest expense                                                 0.9%           0.9%            0.9%           0.8%
                                                              ---------       --------       ---------      ---------

    Total costs and expenses                                      95.1%          99.6%           98.0%         105.2%
                                                              ---------       --------       ---------      ---------

Income (loss) from continuing operations before
  income taxes and minority interest                               5.7%           1.9%            2.4%          (3.5%)

Provision (benefit) for income taxes                               2.1%           0.6%            0.7%          (3.2%)

Minority interest in income (loss) of
  consolidated subsidiaries                                        0.5%           0.3%            0.7%          (0.4%)
                                                              ---------       --------       ---------      ----------

Income from continuing operations                                  3.1%           1.0%            1.0%           0.1%

Discontinued operations:
  Income (loss) from discontinued operations
    (net of tax)                                                  (0.5%)         (0.5%)           1.9%           0.1%
                                                              ----------      ---------      ---------      ---------

Net income                                                         2.6%           0.5%            2.9%           0.2%
                                                              =========       ========       =========      =========


</TABLE>

     



                                                                              42
<TABLE>

Selected Quarterly Financial Results
                                                                                  Quarters Ended
                                                                                   (Unaudited)
                                                                   (in thousands; per share amounts in dollars)
<CAPTION>
                                                                 March 31,     June 30,  September 29,   January 5,
                                                                    1995         1995         1995          1996
                                                                    ----         ----         ----          ----
<S>                                                               <C>          <C>          <C>          <C>
Saucony
  Domestic                                                        $ 16,146     $  12,778    $   9,959    $   8,157
  International                                                      7,146         5,776        5,487        5,219
                                                                  --------     ---------    ---------    ---------
    Saucony Total                                                   23,292        18,554       15,446       13,376
                                                                  --------     ---------    ---------    ---------

Other
  Domestic                                                             745         1,186        1,142          948
  International                                                      1,477           559          916          908
                                                                  --------     ---------    ---------    ---------
    Other Total                                                      2,222         1,745        2,058        1,856
                                                                  --------     ---------    ---------    ---------

Net sales                                                           25,514        20,299       17,504       15,232
Other income                                                            68           524          379          120
                                                                  --------     ---------    ---------    ---------
Total revenue                                                       25,582        20,823       17,883       15,352
                                                                  --------     ---------    ---------    ---------

Costs and expenses
                                                                                                                                  43
  Cost of sales                                                     16,897        13,330       11,495       10,973
    Selling expenses                                                 4,389         3,916        3,813        2,393
  General and administrative expenses                                3,138         2,609        2,762        2,634
  Interest expense                                                     367           273          161          262
                                                                  --------     ---------    ---------    ---------

    Total costs and expenses                                        24,791        20,128       18,231       16,262
                                                                  --------     ---------    ---------    ---------

Income (loss) from continuing operations before
  income taxes and minority interest                                   791           695         (348)        (910)

Provision (benefit) for income taxes                                   289           249         (146)        (400)

Minority interest in income (loss) of
  consolidated subsidiaries                                             28          (114)          25         (225)
                                                                  --------     ----------   ---------    ----------

Income (loss) from continuing operations                               474           560         (227)        (285)

Discontinued operations:
  Income from discontinued operations
    (net of tax provision of $129, $212, $367
    and $16, respectively)                                             155           279          546           89
                                                                  --------     ---------    ---------    ---------

Net income (loss)                                                 $    629     $     839    $     319    $    (196)
                                                                  ========     =========    =========    ==========

Earnings per common share - basic:
  Income (loss) from continuing operations                        $   0.08     $    0.09    $   (0.04)   $  (0.04)
  Income from discontinued operations                                 0.02          0.04         0.09        0.01
                                                                                                                                  44
                                                                  --------     ---------    ---------    --------
Net income (loss) per common share - basic                        $   0.10     $    0.13    $    0.05    $  (0.03)
                                                                  ========     =========    =========    =========

Earnings per common share - diluted:
  Income (loss) from continuing operations                        $   0.08     $    0.09    $   (0.04)   $  (0.04)
  Income from discontinued operations                                 0.02          0.04         0.09        0.01
                                                                  --------     ---------    ---------    --------
Net income (loss) per common share - diluted                      $   0.10     $    0.13    $    0.05    $  (0.03)
                                                                  ========     =========    =========    =========

Weighted average common shares and
  equivalent outstanding                                             6,253         6,246        6,217        6,217
                                                                  ========     =========    =========    =========
</TABLE>








                                                                              46
<TABLE>

Statement of Income Data as a Percentage of Net Sales


                                                                                   Quarters Ended
                                                                                    (Unaudited)

<CAPTION>
                                                               March 31,      June 30,    September 29,      January 5,
                                                                  1995          1995           1995             1996
                                                                  ----          ----           ----             ----
<S>                                                           <C>             <C>            <C>            <C>
Saucony
  Domestic                                                        63.3%          62.9%           56.9%          53.5%
  International                                                   28.0%          28.5%           31.3%          34.3%
                                                              ---------       --------       ---------      ---------
    Saucony Total                                                 91.3%          91.4%           88.2%          87.8%
                                                              ---------       --------       ---------      ---------

Other
  Domestic                                                         2.9%           5.8%            6.6%           6.2%
  International                                                    5.8%           2.8%            5.2%           6.0%
                                                              ---------       --------       ---------      ---------
    Other Total                                                    8.7%           8.6%           11.8%          12.2%
                                                              ---------       --------       ---------      ---------

Net sales                                                        100.0%         100.0%          100.0%         100.0%
Other income                                                       0.3%           2.6%            2.2%           0.8%
                                                              ---------       --------       ---------      ---------
Total revenue                                                    100.3%         102.6%          102.2%         100.8%
                                                              ---------       --------       ---------      ---------
                                                                                                                                  47

Costs and expenses
  Cost of sales                                                   66.2%          65.7%           65.7%          72.1%
  Selling expenses                                                17.2%          19.3%           21.8%          15.7%
  General and administrative expenses                             12.3%          12.9%           15.8%          17.3%
  Interest expense                                                 1.5%           1.3%            0.9%           1.7%
                                                              ---------       --------       ---------      ---------

    Total costs and expenses                                      97.2%          99.2%       104.2%            106.8%
                                                              ---------       --------       ------         ---------

Income (loss) from continuing operations before
  income taxes and minority interest                               3.1%           3.4%           (2.0%)         (6.0%)

Provision (benefit) for income taxes                               1.1%           1.2%           (0.8%)         (2.6%)

Minority interest in income (loss) of
  consolidated subsidiaries                                        0.1%          (0.6%)           0.1%          (1.5%)
                                                              --------        ---------      ---------      ----------

Income (loss) from continuing operations                           1.9%           2.8%           (1.3%)         (1.9%)

Discontinued operations:
  Income from discontinued operations
    (net of tax)                                                   0.6%           1.3%            3.1%           0.6%
                                                              ---------       --------       ---------      ---------

Net income (loss)                                                  2.5%           4.1%            1.8%          (1.3%)
                                                              =========       ========       =========      ==========
</TABLE>


                                                                    


 This Annual Report on Form 10-K contains forward-looking statements.  For this
 purpose, any statements contained herein that are not statements of historical
 fact may be deemed to be forward-looking statements.  Without limiting the
 foregoing, the words "believes," "anticipates," "plans," "expects" and similar
 expressions are intended to identify forward-looking statements.  There are a
 number of important factors that could cause the Company's actual results to
 differ materially from those indicated by such forwarding-looking statements.
 These factors include, without limitation, those set forth below under the
 caption "Certain Factors That May Affect Future Results."


 FISCAL 1997 COMPARED TO FISCAL 1996

 The Company had a net loss of $4,718,000, or $0.76 per diluted share, in fiscal
 1997 as compared to net income of $1,494,000, or $0.24 per diluted share, in
 fiscal 1996.  The Company had a loss from continuing operations of $3,826,000,
 or $0.62 per diluted share, in fiscal 1997 as compared to income from
 continuing operations of $1,349,000, or $0.22 per diluted share, in fiscal
 1996.  The Company had a loss from discontinued operations of $892,000,
 or $0.14 per diluted share, in fiscal 1997 as compared to income from
 discontinued operations of $145,000, or $0.02 per diluted share, in fiscal
 1996.

The loss from continuing operations realized in fiscal 1997 was due 
primarily to the operations and financial condition of the Company's 
Australian subsidiary.
Factors affecting the operating results of the Company's Australian subsidiary
in fiscal 1997 included lower sales of Saucony brand products, excess
inventories which were liquidated in the fourth quarter of 1997, a significant
devaluation of the Australian currency, reduction in net sales of other products
due to the discontinuance of distribution rights of another brand of athletic
footwear and to a high level of administrative overhead in light of lower levels
                                                                              49
 of net sales. As a consequence of the deterioration in the Australian
 subsidiary's financial position, the Company recorded a restructuring charge of
 $2,766,000 ($3,089,000 after tax, or $0.50 per diluted share) in the fourth
 quarter of fiscal 1997.  See Note 14 of Notes to Consolidated Financial
 Statements.

 In addition, the Company recorded a non-recurring charge of $850,000 ($508,000
 after tax, or $0.08 per share diluted) in the second quarter of fiscal 1997,
 reducing the carrying value of the Company's distribution facility in East
 Brookfield, Massachusetts, to market.

The loss from discontinued operations in fiscal 1997 resulted from the sale of
substantially all of the assets of the Company's wholly owned subsidiary,
Brookfield Athletic Co., Inc., as well as operating losses incurred by
Brookfield subsequent to the transaction measurement date.  See Note 13 of Notes
to Consolidated Financial Statements.

The Company's net sales increased 3% to $93,611,000 in fiscal 1997 from
$91,341,000 in fiscal 1996.  Net sales of the Company's Saucony products
decreased .2% to $78,630,000 in fiscal 1997 from $78,811,000 in fiscal 1996, due
primarily to decreased footwear unit volume and unfavorable currency exchange.
Saucony domestic net sales increased 3% to $56,050,000 in fiscal 1997 from
$54,445,000 in fiscal 1996, primarily due to higher selling prices of the
Company's recently introduced products, and, to a lesser extent, increased unit
volume.  Saucony foreign net sales decreased 7% to $22,580,000 in fiscal 1997
from $24,366,000 in fiscal 1996, due primarily to decreased footwear unit volume
and, to a lesser extent, unfavorable currency exchange, offset in part by
 increased apparel sales.

 Net sales of other products increased 20% to $14,981,000 in fiscal 1997 from
$12,530,000 in fiscal 1996, due to increased sales by the Company's wholly owned
subsidiary, Quintana Roo, Inc. (Quintana Roo), and sales of Hind apparel, which
                                                                              50
were offset to some extent by decreased sales of non-corporate brand products by
the Company's Australian subsidiary.  The Company acquired trademarks and
 related intellectual property from Hind, Inc. in December, 1996 and began to
 ship Hind products in the second quarter of 1997.

Other income (expense) decreased 129% to ($280,000) in fiscal 1997 from $978,000
 in fiscal 1996 due primarily to foreign currency transaction losses on U.S.
 dollar-denominated obligations held by certain of the Company's foreign
 subsidiaries.

 The Company's gross profit increased 6% to $31,440,000 in fiscal 1997 from
 $29,649,000 in fiscal 1996.  The Company's gross margin increased to 33.6% in
 fiscal 1997 from 32.5% in fiscal 1996, due primarily to increased margin for
 Saucony products.  The gross margin for Saucony products in fiscal 1996
 reflected a significant level of unit volume of slow-moving, non-current models
 and lower-margin special make-up footwear.  These factors, and, to a lesser
 extent, decreased freight costs and reduced manufacturing costs in fiscal 1997,
primarily accounted for the gross margin increase for Saucony products in fiscal
 1997.  The gross margin improvement for Saucony products in fiscal 1997 was
 limited by a significant decline in gross margin realized by the Company's
 Australian subsidiary during the fourth fiscal quarter of 1997 which was due to
 increased sales of non-current models.

 Selling, general and administrative expenses increased to $30,110,000, or 32.2%
 of net sales, in fiscal 1997 from $27,842,000, or 30.5% of net sales, in fiscal
 1996.  Advertising and promotion expenses decreased $200,000 in fiscal 1997 due
 primarily to decreased Saucony domestic television and media advertising and
 reduced spending by the Company's foreign subsidiaries, offset in part by
 increased account specific promotions.  Selling expenses increased $833,000 in
 fiscal 1997 due to increased payroll costs and selling and marketing expenses
 related to the introduction of Hind apparel and to increases in domestic and
 foreign sales staffs.  General and administrative expenses increased $1,635,000
                                                                              51
 in fiscal 1997 due to increased costs related to the Company's upgraded
 information system, increased professional fees, higher domestic payroll costs,
 increased provisions for doubtful debts and increased administrative costs
 attributable to the introduction of Hind apparel and continued expansion of
 Quintana Roo's infrastructure.

 The Company recorded a non-recurring charge of $850,000 ($508,000 after tax or
 $0.08 per diluted  share ) in fiscal 1997 to reduce the carrying value of the
Company's distribution facility in East Brookfield, Massachusetts to market.  In
 addition, the Company recorded a non-recurring charge of $821,000, which
 includes operating losses of $243,000 during the phase-out period ($498,000
 after tax or $0.07 per diluted share) in fiscal 1997 in connection with the
 disposal of the assets of Brookfield Athletic Co., Inc., a wholly-owned
 subsidiary of the Company.

 In the fourth quarter of 1997, the Company recorded a restructuring charge of
$2,766,000 ($3,089,000 after tax or $0.50 per diluted share) associated with the
restructuring of the Company's Australian subsidiary.  The restructuring  charge
 consisted of asset write-downs to estimated realizable values, as follows:
 accounts receivable, $858,000, inventories, $1,340,000 and prepaid expenses and
other assets, $568,000.  The Company recorded a deferred tax valuation allowance
 of $999,000 relating to net operating loss carryforwards of the Australian
 subsidiary which are not expected to be realized.  In addition, the Company
 forgave $1,691,000 of intercompany trade receivables owed by the Australian
 subsidiary, resulting in a tax benefit of $676,000.

 Interest expense increased 11% to $888,000 in fiscal 1997 from $803,000 in
 fiscal 1996 due to increase borrowings on the Company's demand credit facility
 and increased asset-based borrowing.  Increased working capital requirements
caused the Company's borrowing in the first half of fiscal 1997 to substantially
 exceed its borrowings in the second half of the year.  The Company used a
 portion of the $6,841,000 received in the second half of fiscal 1997 from the
                                                                              52
July 4, 1997 sale of substantially all of the assets of the Company's Brookfield
 subsidiary to pay down the borrowings.

 The provision for income taxes increased to $495,000 in fiscal 1997 from
$325,000 in fiscal 1996, due to the deferred tax valuation allowance recorded in
 fiscal 1997 relating to foreign net operating loss carryforwards that are not
 expected to be realized.  The effective tax rate decreased by 2.1% to 14.3% in
 fiscal 1997 from 16.4% in fiscal 1996 due primarily to recording the deferred
 tax valuation allowance in fiscal 1997 and from a shift in the composition of
 foreign and domestic pre-tax profits and losses.


 FISCAL 1996 COMPARED TO FISCAL 1995

 The Company's net income decreased by 6% to $1,494,000, or $0.24 per diluted
 share, in fiscal 1996 as compared to $1,591,000, or $0.26 per diluted share, in
 fiscal 1995.  Income from continuing operations increased 58% to $1,349,000, or
 $0.22 per diluted share, in fiscal 1996 from $582,000, or $0.08 per diluted
 share, in fiscal 1995.  Income from discontinued operations decreased 86% to
 $145,000, or $0.02 per diluted share, in fiscal 1996 from $1,069,000,  or $0.18
 per diluted share, in fiscal 1995.

 The Company's net sales increased 16% to $91,341,000 in fiscal 1996 from
 $78,549,000 in fiscal 1995.  Net sales of the Company's Saucony products
 increased 12% to $78,811,000 in fiscal 1996 from $70,668,000 in fiscal 1995 due
 primarily to higher selling prices and, to a lesser extent, increased unit
shipment volume.  The Company believes that the increase resulted from technical
and cosmetic improvements to its Saucony products in 1996.  Saucony domestic net
sales increased 16% to $54,445,000 in fiscal 1996 from $47,040,000 in fiscal
1995, due to higher selling prices of the Company's recently introduced products
in comparison with the Company's existing products and increased unit shipment
volume.  Saucony foreign net sales increased 3% to $24,366,000 in fiscal 1996
                                                                              53
from $23,628,000 in fiscal 1995, due primarily to higher selling prices and, to
a lesser extent, favorable currency exchange.

Net sales of other products increased 59% to $12,530,000 in fiscal 1996 from
$7,881,000 in fiscal 1995, due primarily to additional sales from the Company's
wholly owned subsidiary, Quintana Roo, which was acquired in August 1995, and
increased sales of non-corporate brands by the Company's Australian subsidiary.
Other income decreased 10% to $978,000 in fiscal 1996 from $1,091,000 in fiscal
1995, due to the gain on the sale of the Company's investment in a limited
partnership which was recognized in fiscal 1995.

The Company's gross profit increased 15% to $29,649,000 in fiscal 1996 from
$25,854,000 in fiscal 1995.  The Company's gross margin decreased to 32.5% in
fiscal 1996 from 32.9% in fiscal 1995 reflecting decreased margins for Saucony
products.  The gross margin decrease for Saucony products resulted from the
shipment of a single slow-moving, non-current model, increased sales of lower-
margin footwear and, to a lesser extent, increased freight costs.

Selling, general and administrative expenses increased to $27,842,000, or 30.5%
 of net sales, in fiscal 1996 from $25,654,000, or 32.7% of net sales, in fiscal
 1995.  Advertising and promotion expenses increased $1,233,000 in fiscal 1996
 due primarily to increased Saucony domestic television and print media
advertising and, to a lesser extent, increased sponsorship of athletes.  Selling
 expenses increased by $321,000 in fiscal 1996 due to increased selling payroll
 and travel costs, offset to some extent by management's initiative to reduce
 commissions on sales of Saucony products.  General and administrative expenses
increased $634,000 in fiscal 1996, due to increased administrative costs related
 to Quintana Roo and increased foreign costs for payroll due to increased
 staffing at several of the Company's foreign subsidiaries and increased
 professional fees.

                                                                              54
 Interest expense decreased 24% to $803,000 in fiscal 1996 from $1,063,000 in
 fiscal 1995, reflecting the paydown of the Company's senior notes and debt
 reduction realized as a result of the sale by the Company of its limited
 partnership investment.

 The effective tax rate increased 19.9%, to 16.4% in fiscal 1996 from (3.5%) in
 fiscal 1995, due to a shift in the international mix of pre-tax earnings among
taxing jurisdictions.  During 1996, the Company recovered low income housing tax
 credits, which had previously been recaptured and reversed a foreign tax
 valuation allowance.  The low-income housing tax credit recovery is a non-
 recurring event.


 LIQUIDITY AND CAPITAL RESOURCES

 As of January 2, 1998, the Company's cash and cash equivalents totaled
 $4,432,000, an increase of $1,629,000 from January 3, 1997.  The increase was
 the result of the receipt of $6,841,000 from the sale of substantially all of
 the net assets of the Company's wholly owned subsidiary, Brookfield Athletic
Co., Inc.  The increase was offset in part by an increase in accounts receivable
 of $2,170,000, net of the provision for bad debts and discounts of $4,887,000,
 and an increase in inventories of $1,301,000.  The increase in accounts
 receivable was due to increased net sales of the Company's Saucony products and
 Hind products in the fourth quarter of fiscal 1997.  The Company's days sales
 outstanding for its accounts receivable decreased to 92 days at the end of
 fiscal 1997 from 95 days at the end of fiscal 1996.  Inventories increased in
 fiscal 1997 due to the buildup of Hind apparel inventory.  The Company's
 inventory turn ratio decreased to 2.5 turns in fiscal 1997 from 2.6 turns in
 fiscal 1996.

 During fiscal 1997, the Company used $1,422,000 of net cash in operating
 activities, expended $1,331,000 to acquire capital assets and information
                                                                              55
 technology, decreased short-term borrowings by $1,063,000, expended $2,711,000
 to reduce long-term debt, received $511,000 from the sale of capital assets,
 principally the sale of the Company's facility in Australia, and expended
$140,000 to acquire the remaining shares held by the minority shareholder in the
 Company's Dutch subsidiary.  Current maturities of long-term debt increased
 $1,190,000 in fiscal 1997 due primarily to the reclassification of a note
 payable due on January 30, 1998 from long-term debt.

Principal factors (other than net income, accounts receivable, provision for bad
 debts and discounts and inventory) affecting the operating cash flows in fiscal
 1997 included the restructuring charge of $2,766,000 ($3,089,000 after tax or
 $0.50 per diluted share) to write-down assets of the Company's Australian
 subsidiary to estimated realizable value, net cash provided by discontinued
 operations of $2,227,000, an increase in prepaid expenses of $539,000 (due to
 advanced payments for advertising and inventory) , a decrease in accrued
expenses of $296,000 (due to a change in sales commissions payment terms) and an
 increase in accounts payable and accrued letters of credit of $307,000 (due to
 the timing of inventory purchases).  The strengthening of the U.S. dollar in
 fiscal 1997 increased the value of cash and cash equivalents by $905,000.

 As of January 3, 1997, the Company's cash and cash equivalents totaled
$2,803,000, a decrease of $8,865,000 from January 5, 1996.  The decrease was the
result of an increase in accounts receivable of $4,669,000, net of the provision
 for bad debts and discounts of $5,269,000, an increase of $1,158,000 in
 inventory during fiscal 1996 and the acquisition of trademarks and trade names
 of an athletic apparel manufacturer for $1,250,000.  The increase in accounts
 receivable was due to increased net sales of the Company's Saucony products in
the fourth quarter of fiscal 1996 and extended payment terms given to certain of
 the Company's customers.  The Company's days sales outstanding for its accounts
 receivable increased to 95 days at the end of fiscal 1996 from 79 days at the
 end of fiscal 1995.  Inventories increased in fiscal 1996 due to an increase in
 production at the Company's Bangor manufacturing facility and a higher level of
                                                                              56
 finished goods inventory at the Company's overseas subsidiaries.  The Company's
 inventory turn ratio remained consistent with fiscal 1995's inventory turns
 ratio of 2.6 turns.

During fiscal 1996, the Company used $5,224,000 of net cash to finance operating
 activities, expended $1,857,000 to acquire capital assets and information
 technology, expended $1,250,000 to acquire the trade names and trademarks of an
athletic apparel manufacturer, received $78,000 from the sale of capital assets,
 increased short-term borrowings by $1,313,000, expended $2,379,000 to reduce
long-term debt, received $69,000 from the issuance of the Company's common stock
and borrowed $420,000 on a long-term basis, secured by the Company's facility in
 St. Peters, Australia.  The Company sold this facility in November 1997.

Principal factors (other than net income, accounts receivable, provision for bad
 debts and discounts and inventory) affecting the operating cash flows in fiscal
 1996 included a decrease in accrued letters of credit and accounts payable of
 $1,138,000 (due to the timing of inventory shipments), an increase in accrued
 expenses of $733,000 (due to increased advertising and promotional spending), a
 decrease in prepaid expenses of $281,000 (due to a decrease in advance payments
 for insurance and other administrative expenses) and net cash used by
discontinued operations of $2,234,000..  The declining value of the U.S. dollar
 decreased the value of cash and cash equivalents by $50,000.

 The Company has a credit facility with two principal banks pursuant to which a
 $30,000,000 credit line is available to the Company.  This credit facility,
 which was amended in January 1997, extends through July 31, 1998 and provides
 for a short-term demand line of credit in the principal amount of up to
 $15,000,000 and a revolving line of credit in the principal amount of
 $15,000,000, each subject to formula adjustment.   Borrowings under this
 facility generally will be made at the primary bank's prime rate of interest or
 a euro dollar-based rate.  As of January 2, 1998, there was $2,001,000
 outstanding under the revolving credit facility.  The Company had open
                                                                              57
 commitments at such date related to letters of credit in the amount of
 $3,284,000.  As of March 13, 1998, $6,736,000 was available for borrowing under
the short-term demand line and $12,694,000 was available for borrowing under the
 revolving term line.

 The credit facility contains various covenants, including restrictions on
 additional indebtedness; restrictions on the payment or declaration of
 dividends; a minimum tangible net worth, as defined; a minimum ratio of current
 assets to current liabilities, as defined; a minimum annual cash flow coverage
ratio; that there be no demand loans outstanding under the demand line of credit
 for a period of at least 30 consecutive days in each calendar year; and, fiscal
 quarter and annual net income requirements.  Due to the non-recurring charge to
 reduce the carrying value of the Company's distribution facility in East
 Brookfield, Massachusetts, to market, the operating results applicable to the
 discontinued operation, the net loss realized as a result of the sale of
 substantially all of the assets of Brookfield Athletic Co., Inc. and the
 significant net loss attributable to the Company's Australian subsidiary in the
 fiscal quarter and fiscal year ended January 2, 1998, the Company was unable to
 comply with the minimum tangible net worth, the minimum annual cash flow
 coverage ratio and the net income requirements for both the fourth quarter of
 fiscal 1997 and fiscal 1997.  In addition, borrowings by certain of the
 Company's foreign subsidiaries in fiscal 1997 caused the Company to violate the
 requirement that there be no demand borrowings under the demand credit line for
 a period of at least 30 consecutive days.  The banks have waived the foregoing
covenant violations as of January 2, 1998 and have waived prospective violations
 of such covenants, as well as violation of an additional covenant relating to
the ratio of the Company's current assets to current liabilities, as of April 3,
 1998.  The Company currently plans to renegotiate its credit agreement during
 the second quarter of fiscal 1998.

Certain of the Company's foreign subsidiaries have credit facilities, consisting
of demand and/or revolving lines of credit, in the aggregate principal amount of
                                                                              58
 approximately $4,607,000.  As of February 28, 1998, an aggregate of
approximately $1,842,000 was available for borrowing under the facilities of the
foreign subsidiaries.  See Note 9 of Notes to Consolidated Financial Statements.

 On April 29, 1988, Hyde issued to a life insurance company $12,000,000 of 9.70%
 senior notes due April 29, 1998.  The notes provide for semi-annual payments of
 interest, payable in April and October of each year, continuing to April 1998,
 and annual payments of principal of $2,000,000 each from April 1993 to and
 including April 1998.  The note purchase agreement relating to the notes
contains restrictive covenants commonly found in such agreements.  See Note 6 of
 Notes to Consolidated Financial Statements.

During 1996, the Company acquired an information technology hardware system at a
 cost of $991,000 pursuant to a long-term capital lease.  The lease provides for
 a bargain purchase option at the conclusion of the lease term.  At January 2,
 1998, the Company had various commitments for capital expenditures, including
information technology systems.  The Company believes that these commitments are
 not significant.

The liquidity of the Company is contingent upon a number of factors, principally
 the Company's future operating results.  Management believes that the Company's
 current cash and cash equivalents, credit facilities and internally generated
 funds are adequate to meet its working capital requirements and to fund its
 capital investment needs and debt service payments.


 INFLATION AND CURRENCY RISK

 The effect of inflation on the Company's results of operations over the past
 three years has been minimal.  The impact of currency fluctuation on the
 purchase of inventory by the Company from foreign suppliers has been minimal as
 the transactions were denominated in U.S. dollars.  The Company, however, is
 subject to currency fluctuation risk with respect to the operating results of
 the Company's foreign subsidiaries and certain foreign currency denominated
 payables.  The Company has entered into certain forward foreign exchange
 contracts to minimize the transaction currency risk.


 YEAR 2000

 The Company has evaluated and documented the effect of the turn-of-the-century
 on its computer hardware, operating systems and software applications.  A plan
is in place to correct year 2000 problems in the Company's long-term, technical
assets.  This plan is substantially funded by existing maintenance contracts and
 by normal, recurring upgrades to the computer systems.  Correcting year 2000
 problems in the Company's long-term technical assets will not have a material
 impact on the Company's consolidated financial position.

 The Company has also considered the impact of the year 2000 issue on its
customers and suppliers.  The footwear and apparel industry is less advanced, in
 terms of automation, than many other industries.  Customers have shared their
 awareness of the year 2000 issue with the Company, but have not provided
management with formal year 2000 compliance reports.  The Company's suppliers of
 raw materials and components are less technically sophisticated than the
 Company's customers, often relying on personal computers and manual systems for
 their own business needs.  However, the apparel and footwear industry is
 characterized by numerous companies competing in an open market.  No customer
 makes up 10% of sales volume.  Purchase contracts and sources of supply can be
 negotiated and geographically moved within a six-month period.  For these
reasons, management does not expect a major disruption in supply of inventory or
 a major decline in customer purchases as the year 2000 approaches.


 SFAS 123

 The Financial Accounting Standards Board issued Financial Accounting Standards
 No. 123 "Accounting for Stock-Based Compensation" (SFAS 123) in October 1995.
 SFAS 123 establishes the financial accounting and reporting standards for all
stock-based compensation.  SFAS 123 prescribes a fair value method of accounting
 for stock options and other similar equity instruments and encourages companies
 to adopt this accounting treatment for all stock-based compensation plans.
 However, under SFAS 123, companies are permitted to continue to measure
 compensation expense using the intrinsic value based method of accounting as
 prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees,"
 provided that pro forma disclosures are made of net income and earnings per
 share had the fair value method been adopted.

 SFAS 123 is effective for fiscal years commencing after December 15, 1995.  As
 permitted by SFAS 123, the Company has continued to account for employee stock
 compensation expense under the precepts of APB Opinion No. 25.  See Note 11 of
 Notes to the Consolidated Financial Statements for pro forma disclosures of net
 income and earnings per share, calculated utilizing the fair value method
 prescribed under SFAS 123.


 SFAS 128

 During the first quarter of 1997, the Financial Accounting Standards Board
 issued Financial Accounting Standards No. 128 "Earnings Per Share" (SFAS 128).
 SFAS 128 is intended to improve the Earnings Per Share ("EPS") information
contained in the financial statements by simplifying the calculation of earnings
 per share, revising the disclosure requirements, and achieving comparability
with international accounting standards.  SFAS 128 is effective for both interim
and annual financial statements for periods after December 15, 1997.  The impact
 of adopting SFAS 128 on basic and diluted EPS was not material.


 SFAS 130

 The Financial Accounting Standards Board issued Financial Accounting Standards
 No. 130 "Reporting Comprehensive Income" (SFAS No. 130) in June 1997.  SFAS 130
 defines and establishes the financial accounting and reporting standards for
comprehensive income.  As used in SFAS 130, comprehensive income encompasses net
 income and other components of comprehensive income that are excluded from net
 income under Generally Accepted Accounting Principles.  These previously
 excluded components of comprehensive income are limited to the following:
 foreign currency translation adjustments, minimum pension liability adjustments
 and unrealized gains and losses on certain investments in debt and equity
 securities classified as available-for-sales securities.

 SFAS 130 is effective for fiscal years commencing after December 15, 1997, with
earlier adoption permitted.  The Company will incorporate SFAS 130 into its Form
 10-Q filing for the quarter ending April 3, 1998.  The Company has not
 determined the impact of adopting SFAS 130 on the consolidated financial
 statements.


 SFAS 131

 The Financial Accounting Standards Board issued Financial Accounting Standards
 No. 131 "Disclosures about Segments of an Enterprise and Related Information"
 (SFAS No. 131) in June 1997.  SFAS 131 establishes the reporting standards for
 operating segments in annual financial statements and requires selected
 information on operating segments in interim financial statements.  SFAS 131
 revises the disclosure requirements for segment reporting by defining the
 characteristics and quantitative thresholds for which segment information is
 required to be disclosed.  SFAS 131 is effective for fiscal years commencing
after December 15, 1997, application of which is not required to interim periods
 during the initial year of adoption.  The Company expects to incorporate the
 added disclosure requirements of SFAS 131 into its Form 10-K filing for the
 fiscal year ending January 1, 1999.


 CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

 The following important factors, among others, could cause actual results to
 differ materially from those indicated by forward-looking statements made in
 this Annual Report and presented elsewhere by management from time to time.

 COMPETITION.  Competition is intense in the markets in which the Company sells
its products.  The Company competes with a large number of other companies, both
 domestic and foreign, several of which have diversified products lines, well-
 known brands and financial, distribution and marketing resources substantially
 greater than those of the Company.  The principal competitors for the Company's
Saucony products are Nike, New Balance and ASICS.  The principal competitors for
 the Company's Hind products are Nike, Pearl Izumi and Speedo.  The principal
 competitors for the Company's Quintana Roo and Merlin products are Cannondale
 and Trek.

 DEPENDENCE ON FOREIGN SUPPLIERS.  A number of manufacturers located in the Far
 East, primarily in China, Taiwan and Thailand, supply products and product
components to the Company. During fiscal 1997, one of such suppliers, located in
 China, accounted for approximately 41% of the Company's total purchases by
 dollar volume.  The Company is subject to the usual risks of a business
 involving foreign suppliers, such as currency fluctuations, government
 regulation of fund transfers, export and import duties, trade limitations
 imposed by the United States or foreign governments and political and labor
 instability.  In particular, there are a number of trade-related and other
 issues creating significant friction between the governments of the United
 States and China, and the imposition of punitive import duties on certain
 categories of Chinese products has been threatened in the past and may be
 implemented in the future.  In addition, the Company has no long-term
 manufacturing agreements with its foreign suppliers and competes with other
 athletic shoe and recreational product companies, including companies that are
 much larger than the Company, for access to production facilities.

 FOREIGN CURRENCY EXCHANGE.  From time to time, the Company's financial results
 have been adversely affected by the fluctuations in currency exchange rates.
There can be no assurance that the Company's efforts to reduce currency exchange
 losses will be successful or that currency exchange rates will not have an
 adverse impact on the Company's future operating results and financial
 condition.

 POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS.  The Company's quarterly operating
 results may vary significantly depending on a number of factors, including the
 timing and shipment of individual orders, market acceptance of new athletic
 footwear  and other products offered by the Company, changes in the Company's
 operating expenses, personnel changes, mix of products sold, changes in product
 pricing and general economic conditions.  In addition, a substantial portion of
 the Company's revenue is realized during the last few weeks of each quarter;
 therefore, any delays in orders or shipments are more likely to result in
 revenue not being recognized until the following quarter, which could adversely
 impact the results of operations for that quarter.  The Company's current
expense levels are based in part on its expectations of future revenue and, as a
 result, net income for a given period could be disproportionately affected by
 any reduction in revenue.  It is possible that in some future quarter the
 Company's revenue or operating results will be below the expectations of stock
 market securities analysts and investors; if that were to occur, the market
 price of the Common Stock could be materially adversely affected.

MANAGEMENT OF GROWTH.  One element of the Company's business strategy is to seek
 acquisitions of businesses and products that are complementary to those of the
 Company.  There can be no assurance that the Company will be able to effect any
 acquisitions, operate any such acquired businesses profitably or otherwise
 implement its growth strategy successfully.  In addition, identifying and
 effecting acquisitions and integrating the acquired businesses with the
 operations of the Company may place significant demands upon the current
 management team and operational systems of the Company.  In order to effect
 acquisitions of a certain size, the Company may require additional capital,
 which the Company may obtain through additional borrowings under its credit
 facility or otherwise.

 DEPENDENCE ON CONSUMER PREFERENCES.  The Company is susceptible to fluctuations
in its business based upon fashion trends and frequently changing consumer style
 preferences and product demands, including levels of enthusiasm for athletic
 activities.  The Company believes that its success depends in substantial part
on its ability to anticipate, gauge and respond to changing consumer demands and
 fashion trends in a timely manner.  Moreover, the Company could be materially
 adversely affected by conditions in the retail industry in general, including
 consolidation and the resulting decline in the number of retailers and other
 cyclical economic factors.

 DISCRETIONARY CONSUMER SPENDING.  Purchases of bicycles, particularly high-
performance models such as those offered by the Company, and the Company's other
 products are discretionary for consumers.  The success of the Company is
influenced by a number of economic factors affecting disposable consumer income,
 such as employment levels, business conditions, interest rates and taxation
 rates.  Adverse changes in these economic factors may restrict consumer
 spending, thereby negatively affecting the Company's growth and profitability.

 ADVERTISING AND MARKETING PROGRAMS.  The Company's success in the markets in
 which it competes depends in part upon the effectiveness of advertising and
marketing programs of the Company.  In particular, the Company must periodically
 design and successfully execute new and effective advertising and marketing
 programs.

 DEPENDENCE ON MAJOR CUSTOMERS.  Although the Company had no customer that
 accounted for ten percent or more of the Company's consolidated revenue during
1997, the Company's business is susceptible to the loss of certain key customers
 of the Company's product lines, such as Foot Locker for the Company's Saucony
 products.


 ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 Not applicable.


 ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 See the Index to the Company's Consolidated Financial Statements in Item 14 and
 the accompanying consolidated financial statements, notes and schedules which
 are filed as part of this Form 10-K following the signature page and are
 incorporated herein by this reference.


 ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS  ON ACCOUNTING AND
 FINANCIAL DISCLOSURE

 None.


 PART III

 ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

 The information required by this item is contained in part under the caption
 "Executive Officers of the Registrant" in PART I hereof, and the remainder is
 contained in the Company's Proxy Statement for the Company's Annual Meeting of
 Stockholders to be held on May 14, 1998 (the "1998 Proxy Statement") under the
 captions "ELECTION OF DIRECTORS" and "SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE" and is incorporated herein by this reference.  The Company
 expects to file the 1998 Proxy Statement within 120 days after the close of the
 fiscal year ended January 2, 1998.

Officers are elected on an annual basis and serve at the discretion of the Board
 of Directors.


 ITEM 11 - EXECUTIVE COMPENSATION

 The information required by this item is contained under the captions
 "Compensation of Directors," "Compensation of Executive Officers," "Employment
 and Consulting Agreements and Other Arrangements" and "Compensation Committee
 Interlocks and Insider Participation" in the  1998 Proxy Statement and is
 incorporated herein by this reference.


 ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 The information required by this item is contained in the 1998 Proxy Statement
 under the caption "Stock Ownership of Certain Beneficial Owners and Management"
 and is incorporated herein by this reference.


 ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is contained under the caption "Employment
 and Consulting Agreements and Other Arrangements" appearing in the 1998 Proxy
 Statement and is incorporated herein by this reference.



 PART IV

 ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

 (a)  1.    Index to Financial Statements
            -----------------------------

    The following consolidated financial statements of Hyde Athletic Industries,
        Inc. and its subsidiaries are included in this report:

      Reports of Independent Accountants
      Consolidated balance sheets at January 2, 1998 and January 3, 1997.

      Consolidated statements of income for the years ended January 2, 1998,
        January 3, 1997 and January 5, 1996

      Consolidated statements of stockholders' equity for the years ended
        January 2, 1998, January 3, 1997 and January 5, 1996

      Consolidated statements of cash flows for the years ended January 2, 1998,
        January 3, 1997 and January 5, 1996

      Notes to the consolidated financial statements


      2.    Index to Consolidated Financial Statement  Schedule
            ---------------------------------------------------

       Schedule II  -- Valuation and Qualifying Accounts

 All other schedules are omitted because they are not applicable, or not
 required, or because the required information is included in the consolidated
 financial statements or notes thereto.

 Separate financial statements of the Company have been omitted since it is
primarily an operating Company and its subsidiaries included in the consolidated
 financial statements do not have a minority equity interest or indebtedness to
 any person other than the Company in an amount which exceeds 5% of the total
 assets as shown by the consolidated financial statements as filed herein.


      3.    Index to Exhibits
            -----------------

    The exhibits filed as part of this Form 10-K are listed on the Exhibit Index
 immediately preceding such exhibits, which Exhibit Index is incorporated herein
 by reference.

      (b)   Reports on Form 8-K
            -------------------

      No Current Reports on Form 8-K were filed in the fourth quarter of fiscal
 1997.




                                    SIGNATURES


 Pursuant to the requirements of Section 13 or 15(d) 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.


                                          HYDE ATHLETIC INDUSTRIES, INC.
                                          ------------------------------
                                          (registrant)


                                          By: /s/ John H. Fisher
                                          -----------------------------------
                                          John  H.  Fisher
                                          President and Chief Executive Officer

 Date:     April 2, 1998

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
 has been signed below by the following persons on behalf of the registrant and
 in the capacities and on the dates indicated.

         NAME                          CAPACITY                     DATE
         ----                          --------                     ----


 /s/ John H. Fisher                   President                  April 2, 1998
 ----------------------------
 John H. Fisher                       Chief Executive Officer
                                      Director

 / s/ Charles A. Gottesman            Executive Vice President   April 2, 1998
 ----------------------------
 Charles A. Gottesman                 Chief Operating Officer
                                      Director
                                      (Principal Financial Officer)

 /s/ Roger P. Deschenes               Vice President, Controller April 2, 1998
 ----------------------------
 Roger P. Deschenes                   Chief Accounting Officer

 /s/ John J. Neuhauser                Director                   April 2, 1998
 ----------------------------
 John J. Neuhauser

 /s/ Jonathan O. Lee                  Director                   April 2, 1998
 ----------------------------
 Jonathan O. Lee

 /s/ Robert J. LeFort, Jr.            Director                   April 2, 1998
 ----------------------------
 Robert J. LeFort, Jr.

 /s/ Phyllis H. Fisher                Director                   April 2, 1998
 ----------------------------
 Phyllis H. Fisher





 REPORT OF INDEPENDENT ACCOUNTANTS


 To the Board of Directors of
 Hyde Athletic Industries, Inc.

 We have audited the consolidated financial statements and the financial
 statement schedule of Hyde Athletic Industries, Inc. and Subsidiaries listed in
 Note 1 to these financial statements.  These consolidated financial statements
 and financial statement schedule are the responsibility of the Company's
 management.  Our responsibility is to express an opinion on these consolidated
 financial statements and financial statement schedule based on our audits.  We
 did not audit the financial statements of Saucony SP Pty. Ltd., a fifty percent
 owned joint venture, which statements reflect total net assets and revenues
 consisting of six percent and eleven percent, respectively, of the related
 consolidated totals.  Those statements were audited by other auditors whose
 report has been furnished to us, and in our opinion, insofar as it relates to
 the amounts included for Saucony SP Pty. Ltd., is based solely on the report of
 the other auditors.

 We conducted our audits in accordance with generally accepted auditing
 standards.  Those standards require that we plan and perform the audits to
 obtain reasonable assurance about whether the consolidated financial statements
 are free of material misstatement.  An audit also includes examining, on a test
 basis, evidence supporting the amounts and disclosures in the consolidated
 financial statements.  An audit also includes assessing the accounting
 principles used and significant estimates made by management, as well as
 evaluating the overall consolidated financial statement presentation.  We
 believe that our audits provide a reasonable basis for our opinion.

 In our opinion, the consolidated financial statements referred to above present
 fairly, in all material respects, the consolidated financial position of Hyde
 Athletic Industries, Inc. and Subsidiaries as of January 2, 1998 and January 3,
 1997, and the consolidated results of their operations and their cash flows for
 each of the three years in the period ended January 2, 1998, in conformity with
 generally accepted accounting principles.  In addition, in our opinion, the
 financial statement schedule referred to above, when considered in relation to
 the basic financial statements taken as a whole, presents fairly, in all
 material respects, the information required to be included therein.


                                          /s/ Coopers & Lybrand L.L.P.
                                          Coopers & Lybrand L.L.P.
 Boston, Massachusetts
 March 26, 1998





 INDEPENDENT AUDIT REPORT TO THE MEMBERS OF SAUCONY SP PTY., LIMITED

 Scope

We have audited the financial statements of Saucony SP Pty., Ltd., as set out on
 pages 2 to 19, for the year ended 2 January 1998.  The Company's directors are
 responsible for the financial statements.  We have conducted an independent
 audit of these financial statements in order to express an opinion on them to
 the members of the Company.

 Our audit has been conducted in accordance with generally accepted auditing
standards to provide reasonable assurance as to whether the financial statements
 are free of material misstatement.  Our procedures included examination, on a
 test basis, of evidence supporting the amounts and other disclosures in the
 financial statements, and the evaluation of accounting policies and significant
 accounting estimates.  These procedures have been undertaken to form an opinion
 as to whether, in all material respects, the financial statements are presented
fairly in conformity with generally accepted accounting principles and so as to
 present a view which is consistent with our understanding of the Company's
 financial position, the results of its operations and its cash flows.

 The audit opinion expressed in this report has been formed on the above basis.

 Audit Opinion

 In our opinion, the financial statements of Saucony SP Pty Limited are properly
 drawn up so as to present fairly in accordance with generally accepted
 accounting principles the Company's state of affairs as at 2 January 1998 and
 its profit and cash flows for the financial year ended on that date.

 Going Concern Basis of Accounting

Without qualification to the opinion expressed above, attention is drawn to Note
 1 of the financial statements.  Notwithstanding the deficiency of working
 capital and net assets, the financial statements have been prepared to on a
 going concern basis as the directors have received an undertaking of continued
 financial support from the directors of Hyde Athletic Industries, Inc. and the
 directors believe that such financial support will be continued to be made
 available.


                                        GRANT THORNTON
                                        Chartered Accountants
 /s/ Grant Thornton


 /s/  B.R. Gordon
 Partner





 Sydney, NSW Australia
 April 2, 1998














                                                                              75
<TABLE>
                                   HYDE ATHLETIC INDUSTRIES, INC. AND SUBSIDIARIES
                                             CONSOLIDATED BALANCE SHEETS

                                                        ASSETS
                                                    (in thousands)
<CAPTION>
                                                                                    January 2,          January 3,
                                                                                       1998                1997
                                                                                       ----                ----
<S>                                                                               <C>                  <C>
Current assets:
    Cash and cash equivalents                                                      $     4,432           $    2,803

    Marketable securities (Note 2)                                                         148                  236

    Accounts receivable, net of allowance for
       doubtful accounts and discounts (1997,
       $2,032; 1996, $1,234) (Note 3)                                                   18,730               18,403

    Inventories (Note 4)                                                                23,471               24,537

    Deferred income taxes (Note 12)                                                      1,989                1,425

    Prepaid expenses and other current assets                                            1,525                1,388

    Net assets of discontinued operations (Note 13)                                         --                9,934
                                                                                    ----------           ----------

    Total current assets                                                                50,295               58,726
                                                                                    ----------           ----------

                                                                                                                                  76
Property, plant and equipment, net of accumulated
  depreciation and amortization (Note 5)                                                 8,135                9,027
                                                                                    ----------           ----------

Other assets:

    Deferred charges, net of accumulated
       amortization (1997, $1,843; 1996, $1,558)                                           491                1,380

    Long-term accounts and notes receivable (Note 3)                                       366                  138

    Goodwill, net of accumulated amortization
       (1997, $42; 1996, $0) (Note 17)                                                   1,238                1,250

    Investment in limited partnership (Note 6)                                             653                  753

    Deferred income taxes (Note 12)                                                        353                   --

    Other                                                                                   93                   72
                                                                                    ----------           ----------

    Total other assets                                                                   3,194                3,593
                                                                                    ----------           ----------

Total assets                                                                       $    61,624           $   71,346
                                                                                    ==========           ==========

<FN>

                                           See notes to consolidated financial statements
</TABLE>

                                                         


















                                                                              78
<TABLE>
                                   HYDE ATHLETIC INDUSTRIES, INC. AND SUBSIDIARIES
                                             CONSOLIDATED BALANCE SHEETS


<CAPTION>                                LIABILITIES AND STOCKHOLDERS' EQUITY
                                                    (in thousands)

                                                                                    January 2,           January 3,
                                                                                       1998                 1997
                                                                                       ----                 ----
<S>                                                                                <C>                  <C>
Current liabilities:

    Accrued letters of credit (Note 9)                                              $    1,201          $    1,849
    Notes payable (Note 9)                                                               2,885               4,237
    Current portion of long-term debt and capital
       lease obligations (Notes 6 & 7)                                                   3,639               2,449
    Accounts payable                                                                     2,680               2,091
    Accrued expenses (Note 9)                                                            2,910               3,337
                                                                                    ----------          ----------

Total current liabilities:                                                              13,315              13,963
                                                                                    ----------          ----------
Long-term obligations:

    Long-term debt, net of current portion (Note 6)                                         25               3,885
    Capital lease obligations, net of current portion (Note 7)                             746               1,008
    Deferred income taxes (Note 12)                                                      1,921               1,924
    Other obligations                                                                      144                  --
                                                                                    ----------          ----------

                                                                                                                                  79
Total long-term obligations                                                              2,836               6,817
                                                                                    ----------          ----------

Commitments and contingencies (Note 9)

Minority interest in consolidated subsidiaries                                             195                 488
                                                                                    ----------          ----------

Stockholders' Equity (Notes 10 & 11)

Preferred stock, $1.00 par; authorized 500,000
    shares; none issued and outstanding                                                     --                  --

Common stock:
      Class A, $.333 par; authorized 20,000,000 shares
       (issued 1997, 2,706,227; 1996, 2,706,227)                                           902                 902
      Class B, $.333 par; authorized 20,000,000 shares
       (issued 1997, 3,743,487; 1996, 3,729,059)                                         1,248               1,243

Additional paid-in capital                                                              15,652              15,581
Retained earnings                                                                       28,987              33,705
Accumulated translation                                                                   (417)               (234)
                                                                                    -----------         -----------
                                                                                        46,372              51,197
                                                                                    ----------          ----------
  Less:
    Common stock held in treasury, at cost
      (1997, 198,400; 1996, 198,400)                                                    (1,054)             (1,054)
    Unearned compensation                                                                  (40)                (65)
                                                                                    -----------         -----------

                                                                                        45,278              50,078
                                                                                                                                  80
                                                                                    ----------          ----------

Total liabilities and stockholders' equity                                          $   61,624          $   71,346
                                                                                    ==========          ==========

<FN>
                                          See notes to consolidated financial statements.
</TABLE>





                                                                              82
<TABLE>
                                     HYDE ATHLETIC INDUSTRIES, INC. AND SUBSIDIARIES
                                            CONSOLIDATED STATEMENTS OF INCOME
                         For the Years Ended January 2, 1998, January 3, 1997 and January 5, 1996

                                       (in thousands; per-share amounts in dollars)
<CAPTION>
                                                                               1997           1996            1995
                                                                               ----           ----            ----
<S>                                                                       <C>             <C>            <C>
Net sales                                                                 $    93,611     $    91,341    $    78,549
Other income (expense) (Note 15)                                                 (280)            978          1,091
                                                                          ------------    -----------    -----------

Total revenue                                                                  93,331          92,319         79,640
                                                                          -----------     -----------    -----------

Costs and expenses:
  Cost of sales                                                                62,171          61,692         52,695
  Selling expenses                                                             16,698          16,065         14,511
  General and administrative expenses (Note 9)                                 13,412          11,777         11,143
  Writedown of assets (Note 14)                                                   850              --             --
  Restructuring of Australian operations (Note 14)                              2,766              --             --
  Interest expense                                                                888             803          1,063
                                                                          -----------     -----------    -----------
    Total costs and expenses                                                   96,785          90,337         79,412
                                                                          -----------     -----------    -----------

Income (loss) before continuing operations,
  income taxes and minority interest                                           (3,454)          1,982            228

Provision (benefit) for income taxes (Note 12)                                    495             325             (8)
                                                                                                                                  83

Minority interest in income (loss) of
  consolidated subsidiaries                                                      (123)            308           (286)
                                                                          ------------    -----------    ------------

Income (loss) from continuing operations                                       (3,826)          1,349            522

Discontinued operations (Note 13):
  Income (loss) from discontinued operations (net
    of tax provision (benefit) expense ($262), $103
    and $723, respectively)                                                      (394)            145          1,069
  Loss on disposal of Brookfield Athletic Co., Inc.,
    including operating loss of $243 during the
    phase-out period (net of tax benefit of $323)                                (498)              0              0
                                                                          ------------    -----------    -----------

Net income (loss) (Note 11)                                               $    (4,718)    $     1,494    $     1,591
                                                                          ============    ===========    ===========
Earnings per common share - basic (Note 11):
  Income (loss) from continuing operations                                $     (0.62)    $     0.22     $      0.08
  Income (loss) from discontinued operations                                    (0.14)          0.02            0.18
                                                                          ------------    ----------     -----------
Net income (loss) per common share - basic                                $     (0.76)    $     0.24     $      0.26
                                                                          ============    ==========     ===========

Earnings per common share - Diluted (Note 11)
  Income (loss) from continuing operations                                $     (0.62)    $     0.22     $      0.08
  Income (loss) from discontinued operations                                    (0.14)          0.02            0.18
                                                                          ------------    ----------     -----------
Net income (loss) per common share - diluted                              $     (0.76)    $     0.24     $      0.26
                                                                          ============    ==========     ===========
<FN>
                                                                                                                                  84
                                           See notes to consolidated financial statements
</TABLE>

























                                                                              86
<TABLE>
                                        HYDE ATHLETIC INDUSTRIES, INC. AND SUBSIDIARIES
                                   CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                            FOR THE YEARS ENDED JANUARY 2, 1998, JANUARY 3, 1997 AND JANUARY 5, 1996
<CAPTION>

                                                                     Common Stock               Paid-In        Retained
                                                                Class A         Class B         Capital        Earnings
                                                                -------         -------          ------        --------
<S>                                                             <C>            <C>            <C>            <C>
Balance,  December 30, 1994                                     $    901       $   1,237      $  15,593      $  30,620

Issuance of 1,400 shares of common
  stock, stock option exercise (Note 10)                               1              --              3             --

Cancellation of below market options (Note 11)                        --              --            (75)            --

Amortization of unearned compensation (Note 11)                       --              --             --             --

Acquisition of 17,700 shares of common stock, at cost (Note 10)       --              --             --             --

Net income                                                            --              --             --          1,591

Foreign currency translation adjustments                              --              --             --             --
                                                                --------       ---------      ---------      ---------

Balance, January 5, 1996                                        $    902       $   1,237      $  15,521      $  32,211

Issuance of 19,744 shares of common
  stock, stock option exercise (Note 10)                              --               6             63             --

Cancellation of below market options (Note 11)                        --              --             (3)            --
                                                                                                                                  87

Amortization of unearned compensation (Note 11)                       --              --             --             --

Net income                                                            --              --             --          1,494

Foreign currency translation adjustments                              --              --             --             --
                                                                --------       ---------      ---------      ---------

Balance, January 3, 1997                                        $    902       $   1,243      $  15,581      $  33,705

Issuance of 14,428 shares of common stock, stock
  option exercise (Note 10)                                           --               5             34             --

Cancellation of below market options (Note 11)                        --              --            (15)            --

Issuance of below market options and restricted stock                 --              --             52             --

Amortization of unearned compensation (Note 11)                       --              --             --             --

Net loss                                                              --              --             --         (4,718)

Foreign currency translation adjustments                              --              --             --             --
                                                                --------       ---------      ---------      ---------

Balance, January 2, 1998                                        $    902           1,248         15,652         28,987
                                                                ========       =========      =========      =========




                                        HYDE ATHLETIC INDUSTRIES, INC. AND SUBSIDIARIES
                              CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, CONTINUED
                                                                                                                                  88
                            FOR THE YEARS ENDED JANUARY 2, 1998, JANUARY 3, 1997 AND JANUARY 5, 1996

<CAPTION>

                                                               Treasury Stock           Unearned     Accumulated    Stockholders'
                                                           Shares          Amount     Compensation   Translation        Equity
                                                            -----          ------     ------------    ----------        ------
<S>                                                       <C>           <C>             <C>            <C>            <C>
Balance, December 30, 1994                                 180,700      $    (977)      $   (447)      $    (171)     $  46,756

Issuance of 1,400 shares of common
  stock, stock option exercise (Note 10)                        --             --             --              --              4

Cancellation of below market options (Note 11)                  --             --             75              --             --

Amortization of unearned compensation (Note 11)                 --             --            178              --            178

Acquisition of 17,700 shares of common stock,
  at cost (Note 10)                                         17,700            (77)            --              --            (77)

Net income                                                      --             --             --              --          1,591

Foreign currency translation adjustments                        --             --             --             (86)           (86)
                                                         ---------      ---------       --------       ----------     ----------

Balance, January 5, 1996                                   198,400      $  (1,054)      $   (194)      $    (257)     $  48,366

Issuance of 19,744 shares of common stock,
  stock option exercise (Note 10)                               --             --             --              --             69

Cancellation of below market options (Note 11)                  --             --              3              --             --

                                                                                                                                  89
Amortization of unearned compensation (Note 11)                 --             --            126              --            126

Net income                                                      --             --             --              --          1,494

Foreign currency translation adjustments                        --             --             --              24             24
                                                         ---------      ---------       --------       ---------      ---------

Balance, January 3, 1997                                   198,400      $  (1,054)      $    (65)      $    (233)     $  50,079

Issuance of 14,428 shares of common stock, stock
  option exercise (Note 10)                                     --             --             --              --             39

Cancellation of below market options (Note 11)                  --             --             15              --             --

Issuance of below market options and restricted stock           --             --            (52)             --             --

Amortization of unearned compensation (Note 11)                 --             --             62              --             62

Net loss                                                        --             --             --              --         (4,718)

Foreign currency translation adjustments                        --             --             --            (184)          (184)
                                                         ---------      ---------       --------       ----------     ----------

Balance, January 2, 1998                                   198,400      $  (1,054)      $    (40)      $    (417)     $  45,278
                                                         =========      ==========      =========      ==========     =========


                                        See notes to condensed consolidated financial statements.
</TABLE>

                                                                              91
<TABLE>
                                    HYDE ATHLETIC INDUSTRIES, INC. AND SUBSIDIARIES
                                         CONSOLIDATED STATEMENTS OF CASH FLOWS

                        For the Years Ended January 2, 1998, January 3, 1997 and January 5, 1996
                                                           (in thousands)
<CAPTION>
                                                                             1997           1996           1995
                                                                             ----           ----           ----
<S>                                                                       <C>             <C>            <C>
Cash flows from operating activities:
  Net income (loss)                                                       $  (4,718)      $   1,494      $  1,591

Adjustments to reconcile net income (loss) to net cash
  provided (used) by operating activities:
    Restructuring of Australian operations                                    3,089              --            --
    Discontinued operations                                                     892            (145)       (1,069)
    Depreciation and amortization                                             1,594           1,452         1,113
    Provision for bad debt and discounts                                      4,887           5,269         4,807
    (Gain) loss on sale of equipment                                            (91)             22             2
    Deferred income tax benefit                                              (1,445)           (217)         (369)
    Minority interest in (income) loss of consolidated subsidiaries            (123)            308          (286)
    Compensation from stock grants and stock options                             62             126           178
    Gain on sale of investment in limited partnership                            --              --          (426)
    Writedown of assets                                                         850              --            --

Changes in operating assets and liabilities, net of effects
  of acquisitions, dispositions and foreign currency adjustments:
Decrease (increase) in assets:
  Marketable securities                                                          88              71          (308)
  Accounts and notes receivable                                              (7,057)         (9,938)         (157)
  Inventories                                                                (1,301)         (1,158)        4,104
                                                                                                                                  92
  Prepaid expenses and other current assets                                    (539)            281           (45)
Increase (decrease) in liabilities:
  Accrued letters of credit                                                    (612)           (613)        1,189
  Accounts payable                                                              919            (525)         (655)
  Accrued expenses                                                             (296)            733        (1,415)
  Accrued income taxes                                                          152              (5)         (749)
                                                                          ---------       ----------     ---------

Total adjustments                                                             1,069          (4,339)        5,914
                                                                          ---------       ----------     --------

Net cash provided (used) by continuing operations                            (3,649)         (2,845)        7,505
                                                                          ----------      ----------     --------

Net cash provided (used) by discontinued operations                           2,227          (2,379)        3,621
                                                                          ---------       ----------     --------

Net cash provided (used) by operating activities                             (1,422)         (5,224)       11,126
                                                                          ----------      ----------     --------

Cash flows from investing activities:
  Proceeds from the sale of Brookfield Athletic Co., Inc.                     6,841              --            --
  Purchases of property, plant and equipment                                 (1,305)           (791)         (569)
  Proceeds from the sale of equipment                                           511              78            32
  Increase in deferred charges and other                                        (26)         (1,066)         (469)
  Investment distribution from limited partnership                               --              --            29
  Payments for trademarks and trade names                                        --          (1,250)           --
  Payments for business acquisitions, net of cash acquired                     (140)             --          (112)
  Proceeds from sale of investment in limited partnership                        --              --         1,335
                                                                          ---------       ---------      --------

Net cash provided (used) by investing activities                              5,881          (3,029)          246
                                                                                                                                  93
                                                                          ---------       ----------     --------



                                     HYDE ATHLETIC INDUSTRIES, INC. AND SUBSIDIARIES
                                     CONSOLIDATED STATEMENT OF CASH FLOWS, Continued
<CAPTION>
                                                                             1997           1996           1995
                                                                             ----           ----           ----
<S>                                                                       <C>             <C>            <C>
Cash flows from financing activities:
  Net short-term borrowings                                                  (1,063)          1,313            (30)
  Repayment of long-term debt and capital lease obligations                  (2,711)         (2,364)        (2,887)
  Proceeds from long-term borrowings                                             --             420             --
  Common stock repurchased                                                       --              --            (77)
  Payment of termination benefit payable                                         --              --            (27)
  Issuances of common stock, including options                                   39              69              4
                                                                          ---------       ---------      ---------

Net cash used by financing activities                                        (3,735)           (562)        (3,017)

Effect of exchange rate changes on cash and cash equivalents                    905             (50)           (37)
                                                                          ---------       ----------     ----------

Net increase (decrease) in cash and cash equivalents                          1,629          (8,865)         8,318

Cash and cash equivalents at beginning of period                              2,803          11,668          3,350
                                                                          ---------       ---------      ---------

Cash and cash equivalents at end of period                                $   4,432       $   2,803      $  11,668
                                                                          =========       =========      =========

                                                                                                                                  94
Supplemental disclosure of cash flow information:

  Cash paid during the period for:
    Income taxes, net of refunds                                          $     663       $     736      $   1,936
                                                                          =========       =========      =========

    Interest                                                              $     887       $     959      $   1,534
                                                                          =========       =========      =========

Non-cash Investing and Financing Activities:

Property purchased under capital leases                                   $      86       $   1,234      $     138

Reconciliation of assets acquired and liabilities
  assumed, business acquisitions
    Assets acquired                                                              --              --            232
    Liabilities assumed                                                          --              --            120
                                                                          ---------       ---------      ---------
       Cash paid for business acquisitions                                $      --       $      --      $     112
                                                                          =========       =========      =========

Sale of investment in limited partnership
  Cash received, net of broker fees                                              --              --          1,335
  Reduction in short-term debt, long-term
    debt and accrued liabilities                                                 --              --          4,056
                                                                          ---------       ---------      ---------

    Total proceeds                                                               --              --          5,391

  Investment in limited partnership, net of distributions                        --              --          4,965
                                                                          ---------       ---------      ---------

                                                                                                                                  95
    Gain realized on sale                                                        --              --      $     426
                                                                          =========       =========      =========
<FN>

                                           See notes to consolidated financial statements
</TABLE>









                HYDE ATHLETIC INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    For the Years Ended January 2, 1998, January 3, 1997 and January 5, 1996


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
     ------------------------------------------

     BUSINESS ACTIVITY
     -----------------

     The Company is an importer and manufacturer of a broad line of high-
     performance athletic footwear, athletic apparel and high-quality bicycles
     and bicycle frames.  The Company markets its products principally to
     domestic and international retailers and distributors.

     REPORTING PERIOD
     ----------------

     The Company adopted a 52-53 week fiscal year reporting period in 1991.  The
     consolidated financial statements and notes for 1997, 1996 and 1995
     represent the fiscal years ended January 2, 1998, January 3, 1997 and
     January 5, 1996, respectively.  In management's opinion, the consolidated
     financial statements for 1997, 1996 and 1995 are comparable.

     PRINCIPLES OF CONSOLIDATION
     ---------------------------
                                                                              97
     The consolidated financial statements include the accounts of Hyde Athletic
     Industries, Inc. and its wholly owned subsidiaries, Spot-Bilt, Inc., Hyde
     Transition Corp. (formerly Brookfield Athletic Co., Inc.), Saucony, Inc.,
     Saucony Deutschland Vertriebs GmbH (Germany), Quintana Roo, Inc. and Hyde
     International Services Limited (Hong Kong), and its majority-owned foreign
     subsidiary, Saucony Canada, Inc., all herein referred to as the "Company".
     Hyde International Services Limited owns a controlling interest in a
     subsidiary called Saucony SP Pty Limited (Australia).  (See Note 14 of
     Notes to Consolidated Financial Statements.)  Saucony, Inc. owns a wholly
     owned subsidiary called Saucony Sports BV (Netherlands).  The Company also
     operates a branch in the United Kingdom called Saucony UK and maintains a
     marketing representative office in Germany called Saucony Europe.  Saucony
     GmbH and Quintana Roo, Inc. are included in the consolidated financial
     statements beginning in December 1994 and August 1995, respectively.
     Saucony Shoe Manufacturing Co., Inc., an inactive wholly owned domestic
     subsidiary, was dissolved in 1992.  Hyde Security Corp., a wholly owned
     domestic subsidiary, was dissolved in 1996.  During 1997, the Company sold
     substantially all of the assets of Brookfield Athletic Co., Inc.  The
     effects of transactions among related companies are eliminated in the
     consolidated financial statements.

     USE OF ESTIMATES
     ----------------

     The preparation of financial statements in conformity with generally
     accepted accounting principles requires management to make estimates and
     assumptions that affect the reported amounts of assets and liabilities at
     the date of the financial statements and the reported amounts of revenues
     and expenses during the reporting period.  Actual results could differ from
     those estimates.

     REVENUE RECOGNITION
     -------------------

     Sales, net of discounts, and related costs of sales are recognized upon
     shipment of products.

     INVENTORIES
     -----------

     Inventories are stated at lower of cost or market.  Cost is determined
     using the first-in, first-out (FIFO) method.

     PROPERTY, PLANT AND EQUIPMENT
     -----------------------------

     Land, buildings and equipment, including significant improvements to
     existing facilities, are stated at cost.  The assets are depreciated over
     their estimated useful lives or capital lease terms, if shorter, using the
     straight-line method for financial reporting purposes and accelerated
     methods for income tax purposes.  The estimated useful lives of the assets
     are: 33 years for buildings and improvements and 3 to 15 years for office
     equipment and machinery and equipment.  Major renewals and betterments are
     capitalized.  Maintenance, repairs and minor property renewals are expensed
     as incurred. The cost and related accumulated depreciation of all property,
     plant and equipment retired or otherwise disposed of, are removed from the
     accounts.  Any gain or loss, resulting from the retirement or disposition
     of property, plant and equipment, is included in consolidated net income.

     INVESTMENTS
     -----------

     The Company's investment in a real estate limited partnership is valued at
     its net realizable value.  It is management's intention to retain this
     investment for its long-term tax benefit.

     INVESTMENTS IN MARKETABLE SECURITIES
     ------------------------------------

     Investment in debt securities and marketable securities are categorized as
     trading, held-to-maturity or available-for-sale.  Trading securities are
     reported at fair value, with changes in fair value recorded in consolidated
     net income.  Investment securities include both available-for-sale and
     held-to-maturity securities.  Available-for-sale securities are reported at
     fair value, with net unrealized gains and losses included as a separate
     component of stockholders' equity.  Held-to-maturity debt securities are
     reported at amortized cost.  For all investments, unrealized losses, other
     than temporary losses, are recognized in consolidated net income.

     DEFERRED CHARGES AND GOODWILL
     ------------------------------

     Deferred charges consist primarily of bond issuance, trademarks, financing
     and organization costs.  The deferred charges are amortized on the
     straight-line basis over the term of the debt; organization costs and
     trademarks are amortized over five years; goodwill, representing the excess
     of the purchase price over the estimated fair value of the net assets of
     the acquired business, is being amortized over the period of expected
     benefit of fifteen years.

     INCOME TAXES
     ------------

     The provision for income taxes is calculated according to the precepts of
     Statement of Financial Accounting Standards No. 109 (SFAS No. 109),
     "Accounting for Income Taxes".  Under SFAS No. 109, income taxes are
     provided for the amount of taxes payable or refundable in the current year
     and for the expected future tax consequences of events that have been
     recognized in the financial statements or tax returns.  As a result of
     recognition and measurement differences between tax laws and financial
     accounting standards, temporary differences arise between the amount of
     taxable income and pretax financial income for a year and the tax bases of
     assets or liabilities and their reported amount in the financial
     statements.  The deferred tax assets and liabilities reported as of January
     2, 1998 and January 3, 1997 reflect the estimated future tax effects
     attributable to temporary differences and carryforwards based on the
     provisions of enacted tax law.

     EARNINGS PER SHARE
     ------------------

     Earnings per common share is calculated in accordance with the precepts of
     Financial Accounting Standards No. 128 "Earnings Per Share" (SFAS 128),
     which was issued in 1997 by the Financial Accounting Standards Board.  SFAS
     128 replaced the calculation of primary and fully diluted earnings per
     share with basic and diluted earnings per share.  Unlike primary earnings
     per share, basic earnings per share excludes the dilutive effect of
     options, warrants and convertible securities.  Diluted earnings per share
     is very similar to fully diluted earnings per share.  As required under
     SFAS 128, all previously reported per share amounts have been restated.

     STATEMENTS OF CASH FLOWS
     ------------------------

     For purposes of these statements, cash equivalents include all short-term
     deposits with an original  maturity of three months or less purchased in
     connection with the Company's cash management program.

     FOREIGN CURRENCY TRANSLATION
     ----------------------------

     The financial statements of the Company's foreign subsidiaries are measured
     using the local currency as the functional currency.  Assets and
     liabilities of these subsidiaries are translated at exchange rates as of
     the balance sheet date.   Revenues and expenses are translated at average
     rates of exchange in effect during the year. The resulting cumulative
     translation adjustments have been recorded as a separate component of
     stockholders' equity.  Foreign currency transaction gains and losses are
     included in consolidated net income.  Net gains and (losses) from foreign
     currency transaction translation amounted to ($1,127,000), $171,000  and
     $77,000 for 1997, 1996 and 1995, respectively.

     FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
     -------------------------------------------

     From time to time, the Company enters into forward foreign currency
     exchange contracts to hedge certain foreign currency denominated payables.
     Gains and losses on forward exchange contracts are deferred and offset
     against foreign currency exchange gains or losses on the underlying hedged
     item upon consummation of the transaction.

     RECLASSIFICATIONS
     -----------------

     Certain items in prior years' consolidated financial statements have been
     reclassified to conform to the 1997 presentation.  The results of
     operations for Brookfield Athletic Co., Inc. for the fiscal years ended
     January 2, 1998, January 3, 1997 and January 5, 1996 have been segregated
     from continuing operations and are reported separately as discontinued
     operations.

     ADVERTISING AND PROMOTION
     -------------------------

     Advertising and promotion costs are expensed when incurred or expensed
     ratably over the year in relation to sales.  Production costs of future
     media advertising are deferred until the advertising occurs.  Advertising
     and promotion expense amounted to $8,543,000, $8,743,000 and $7,508,000 for
     1997, 1996 and 1995, respectively.

     RESEARCH AND DEVELOPMENT EXPENSES
     ---------------------------------

     Expenditures for research and development of products are expensed as
     incurred.  Research and development expenses amounted to approximately
     $1,438,000, $1,417,000 and $1,513,000 for 1997, 1996 and 1995,
     respectively.

     RELATED PARTY TRANSACTIONS
     --------------------------

     Saucony Sports BV, a wholly owned foreign subsidiary, leased office space
     and office equipment from an entity controlled by the former minority
     stockholder of Saucony Sports BV.  Rent expense amounted to $12,442 and
     $70,980 for 1996 and 1995, respectively.

     The Company issued a note payable to the minority stockholder of Saucony
     Canada, Inc., a majority-owned foreign subsidiary, as part of the
     consideration paid to acquire an 85% interest in the former Canadian
     distributor.  Interest expense incurred amounted to $7,038 for 1995.

     See Note 6 of the Notes to Consolidated Financial Statements for further
     discussion of the note agreement.  During 1995, the Company prepaid the
     note and realized a discount of $13,759 which is included in 1995
     consolidated net income.

     The Company entered into a consulting agreement with a principal
     stockholder of the Company's Class A Common Stock, beginning January 4,
     1993.  The agreement, as amended, was effective for a term of five years,
     provided for an annual fee of $40,000 during each of the first two years of
     the agreement and $90,000 for each of the final three years of the
     agreement.  Included in general and administrative expenses for 1997, 1996
     and 1995 are consulting fees of $90,000, $90,000 and $90,000, respectively.
     As of January 2, 1998, the agreement had not been renewed.

     The Company presently holds a note receivable of $100,000 from a former
     officer of the Company.  The promissory note, originated from a transaction
     in 1993, is collateralized by a mortgage from the former officer on two
     parcels of real estate.  See Note 3 of the Notes to Consolidated Financial
     Statements for further discussion of the terms and conditions of the
     promissory note.

     NEW ACCOUNTING PRONOUNCEMENTS
     -----------------------------

     During the first quarter of 1997, the Financial Accounting Standards Board
     issued Financial Accounting Standards No. 128 "Earnings Per Share" (SFAS
     128).  SFAS 128 is intended to improve the Earnings Per Share ("EPS")
     information contained in the financial statements by simplifying the
     calculation of earnings per share, revising the disclosure requirements,
     and achieving comparability with international accounting standards.  SFAS
     128 is effective in financial statements for periods ending after December
     15, 1997, and has been adopted by the Company in fiscal 1997.
 

     The Financial Accounting Standards Board issued Financial Accounting
     Standards No. 130 "Reporting Comprehensive Income" (SFAS No. 130) in June
     1997.  SFAS 130 defines and establishes the financial accounting and
     reporting standards for comprehensive income.  As used in SFAS 130,
     comprehensive income encompasses net income and other components of
     comprehensive income that are excluded from net income under generally
     accepted accounting principles.  These previously excluded components of
     comprehensive income are limited to the following: foreign currency
     translation adjustments, minimum pension liability adjustments and
     unrealized gains and losses on certain investments in debt and equity
     securities classified as available-for-sales securities.

     SFAS 130 is effective for fiscal years commencing after December 15, 1997,
     with earlier adoption permitted.  The Company will incorporate SFAS 130
     into the Form 10-Q filing for the quarter ending April 3, 1998.  The
     Company has not determined the impact of adopting SFAS 130 on the
     consolidated financial statements.

     The Financial Accounting Standards Board issued Financial Accounting
     Standards No. 131 "Disclosures about Segments of an Enterprise and Related
     Information" (SFAS No. 131) in June, 1997.  SFAS 131 establishes the
     reporting standards for operating segments in annual financial statements
     and requires selected information on operating segments in interim
     financial statements.  SFAS 131 revises the disclosure requirements for
     segment reporting by defining the characteristics and quantitative
     thresholds for which segment information is required to be disclosed.  SFAS
     131 is effective for fiscal years commencing after December 15, 1997,
     application of which is not required to interim periods during the initial
     year of adoption.  The Company expects to incorporate the added disclosure
     requirements of SFAS 131 into its Form 10-K filing for the fiscal year
     ending January 1, 1999.
 

2.   MARKETABLE SECURITIES:
     ---------------------

     As of January 2, 1998, the Company's holdings in marketable securities
     consisted primarily of equity securities which were classified as trading
     securities.

     The cost of the securities held at January 2, 1998 and January 3, 1997 was
     $138,000 and $171,000, respectively.  As of January 2, 1998 and January 3,
     1997, the market value of such securities was $148,000 and $236,000,
     respectively.  Gross unrealized gains of $2,000 and $65,000, based on
     quoted market prices, are included in consolidated net income for the years
     ended January 2, 1998 and January 3, 1997.

     Included in the determination of net income for the years ended January 2,
     1998 and January 3, 1997 and January 5, 1996 were:  1997, net realized
     gains of $22,000 and net unrealized gains of $2,000; 1996, net realized
     gains of $10,000 and net unrealized gains of $65,000; and 1995, net
     unrealized gains of $20,000.


3.   ACCOUNTS AND NOTES RECEIVABLE:
     -----------------------------

     On August 1, 1997, the Company executed an agreement whereby it renewed its
     grant of an exclusive, worldwide, nonassignable right and license for the
     use of the "Spot-Bilt" and the "single spot" logo trademarks.  The
     agreement, which expires in 2000 and may be renewed for up to three
     additional one-year terms at the licensee's option, contains restrictions
     with respect to the licensed product, its manufacture, distribution and
     sale.  The agreement established a minimum cumulative guaranteed royalty of
     $447,000, subject to annual upward adjustments, due in various quarterly
     payments, commencing in 1997.  In 1997, the Company recorded a receivable
     based upon the minimum guaranteed royalty for the present value of future
     cash flows, utilizing an imputed interest rate of 8.5%, which equates to
     $378,000.  At January 2, 1998, $363,000 was outstanding, of which $111,000
     was included in current accounts receivable and $252,000 was included in
     long-term accounts receivable.  The Company has received all scheduled
     payments on a timely basis.

     During 1995, the Company exchanged inventory having a fair value of
     $1,400,000 for $100,000 in cash, receipt of which occurred in March 1996,
     and media and trade receivable barter credits amounting to $1,300,000.  The
     media and trade receivable barter credits expire on November 14, 1998.  As
     of January 3, 1997, $1,297,714 was outstanding, of which $400,000 was
     included in current accounts receivable and $897,714 was included in long-
     term accounts receivable.  The media and trade receivable barter credits
     were included in the assets sold to Brookfield International, Inc. during
     1997.

     During 1993, the Company loaned $100,000 to a former officer of the
     Company.  The promissory note issued to the Company by the former officer
     is collateralized by a mortgage from the officer on two parcels of real
     estate (land and building).  The note calls for semi-annual payments of
     interest through maturity on the unpaid principal amount, commencing on
     July 1, 1994 and five annual principal payments of $15,000 commencing July
     1, 1998 and one principal payment of $25,000 due on July 1, 2003.  The note
     bears interest at a rate equal to the prevailing prime rate of interest.
     At January 2, 1998, $100,000 was outstanding of which $15,000 was included
     in current accounts receivable and $85,000 was including in long-term
     accounts receivable.

 



4.   INVENTORIES:
     -----------

     Inventories at January 2, 1998 and January 3, 1997 consisted of the
     following (in thousands):


                                                   1997           1996
                                                   ----           ----

            Finished goods                     $  17,534       $ 18,215

            Work-in-process                          514            110

            Raw materials and supplies             5,423          6,212
                                                --------       --------

            Total                               $ 23,471       $ 24,537
                                                ========       ========



5.    PROPERTY, PLANT AND EQUIPMENT:
      -----------------------------

     Major classes of property, plant and equipment, at cost, at January 2, 1998
     and January 3, 1997 were as follows (in thousands):

 
                                                 1997             1996
                                                 ----             ----

            Land                               $     484       $    761
            Buildings and improvements             5,997          7,043
            Machinery and equipment                8,328          6,744
            Capitalized leases                     1,708          1,751
            Leasehold improvements                   236            206
                                               ---------       --------
                                                  16,753         16,505
            Less accumulated depreciation
            and amortization                       8,618          7,478
                                               ---------       --------

            Total                              $   8,135       $  9,027
                                               =========       ========


     Accumulated amortization of the leased property was $678 and $344 at
     January 2, 1998 and  January 3, 1997, respectively.

     During 1997, the Company recorded a non-recurring charge of $850,000
     ($508,000 after tax or $0.08 per diluted share) to reduce the carrying
     value of the Company's distribution facility in East Brookfield,
     Massachusetts to market.

6.   LONG-TERM DEBT:
     --------------
                                                            (in thousands)

                                                          1997          1996
                                                           ----          ----

     Senior notes payable due in semiannual
       installments of interest on the unpaid
       principal amount through maturity and
       six annual principal payments of
       $2,000,000 commencing April 29, 1993.
       The notes bear interest at 9.70% and are
       subject to certain restrictive covenants
       pertaining to consolidation or merger
       with another entity, levels of working
       capital, net worth, the payment of cash
       dividends and various other restrictions.        $ 2,000      $  4,000

       Note payable to a bank under a revolving line
       of credit agreement, due on January 30,
       1998, with interest of 8.15%.                      1,302         1,581

     Note payable due in ten semi-annual principal
       payments of $43,477 commencing July 1, 1996
       and interest on the unpaid principal amount
       through maturity.  The note bears interest at
       9.25% and is secured by a mortgage.                   --           391

     Note payable to bank due in sixty monthly installments
       of $744 commencing May 1997 with interest of
       10.0%.                                                31            --
                                                        -------      --------
                                                          3,333         5,972

     Less current portion                                 3,308         2,087
                                                        -------      --------
 


                                                        $    25      $  3,885
                                                        =======      ========


    Long-term debt maturities payable for the five years and thereafter
    subsequent to January 2, 1998 are as follows (in thousands):

                          1998                  $  3,308
                          1999                         7
                          2000                         7
                          2001                         8
                          2002                         3
                                                --------

                          Total                 $  3,333
                                                ========

     On June 1, 1995, the Company sold its entire limited partnership interest
     in the Columbia Housing Partners Corporate Tax Credit II Limited
     Partnership for $5,501,000.  Net proceeds totaled $1,335,000, resulting in
     a pre-tax gain of $426,000, after transaction expenses, or $.02 per share
     after tax.  The after-tax gain is based upon projected tax credits and
     passive losses provided by the general partner.  As a result of the sale,
     the Company realized reductions in current and long-term debt and accrued
     interest of $4,056,000.

     During 1995, the Company prepaid its note payable to the minority
     stockholder of the Company's majority-owned Canadian subsidiary, resulting
     in a gain of $13,759, which is included in consolidated net income.

     Under the terms of the senior notes payable, the Company may not declare
     any cash dividends or make any cash distributions unless, immediately
     thereafter, the aggregate amount of cash dividends and cash distributions
     since December 31, 1987 would not exceed the sum of (i) $2,000,000, (ii)
     75% of cumulative consolidated net income as defined (or minus 100% of
     consolidated net income in the case of a loss) for such period and (iii)
     the proceeds of sales of Common Stock of the Company.  As of January 2,
     1998, approximately $11,143,000 was available for payment of cash dividends
     under the terms of these covenants.


7.   CAPITAL LEASE OBLIGATIONS:
     -------------------------

     The following is a schedule by years of future minimum lease payments under
     capital leases together with the present value of the net minimum lease
     payments as of January 2, 1998 (in thousands):

               1998...................................     $  392
               1999...................................        336
               2000...................................        295
               2001...................................        157
               2002...................................          8
                                                           ------
               Total minimum lease payments                $1,188
               Less amounts representing interest             111
                                                           ------
               Present value of minimum lease payments      1,077
               Less current portion                           331
                                                           ------
               Long-term portion                           $  746
                                                           ======
                                                                             112

8.   EMPLOYEE BENEFIT PLANS:
     ----------------------

     The Company maintains a qualified retirement plan for the benefit of all
     United States employees who have attained the age of 21 and have completed
     six months of consecutive service.  As amended in 1996, the plan permits
     employees to defer on a pre-tax basis up to 15% of gross wages subject to
     the federal maximum limit.  The Company will match a portion of the
     employee contributions, subject to profitability goals, at the discretion
     of the Board of Directors.  The Company matched 25% of employee elective
     deferrals subject to a limitation of 1.25% of total employee compensation.
     Both employee and employer contributions are funded, on a monthly basis, to
     a group defined contribution plan administered by an independent investment
     company.  The defined contribution for 1997, 1996 and 1995 were $83,000,
     $71,000 and $51,000, respectively.  Expenses related to the administration
     of the plan are paid by the Company.

     During 1995, the Company established a supplementary retirement program to
     provide retirement benefits to certain management and highly compensated
     employees, as determined by the Company's Board of Directors.  Employees
     are eligible to defer up to 15% of gross wages on a pre-tax basis.  The
     Company will match a portion of employee contributions, subject to
     profitability goals, at the discretion of the Board of Directors.  The
     Company match of employee elective deferrals is limited to 1.25% of total
     employee compensation.  Both employee and employer contributions and deemed
     investment income accrued, net of the amount allowable under the qualified
     plan are funded, on a monthly basis to a group defined contribution plan
     administered by an independent investment company.  The defined
     contribution for 1997 and 1996 amounted to $10,000 and $5,000,
     respectively.  Expenses related to the administration of the plan are paid
     by the Company.



9.   COMMITMENTS AND CONTINGENCIES:
     -----------------------------

     LEASE COMMITMENTS
     -----------------

     The Company is obligated under various leases for equipment and retail
     space through 2002.  Total rental expenses for 1997, 1996 and 1995 were
     $910,000, $831,000 and $674,000, respectively.  Future minimum rental
     payments are as follows:  1998, $534,000; 1999, $436,000; 2000, $166,000;
     2000, $197,000; 2001, $94,000; and 2002 and thereafter, $1,000.

     OTHER COMMITMENTS
     -----------------

     The Company is obligated under various agreements, including event
     sponsorships and athlete sponsorship through 2012.  Future sponsorship
     payments are as follows:  1998, $185,000; 1999, $192,000; 2001, $180,000;
     and 2002 and thereafter, $610,000.

     COMMITMENTS
     -----------

     On August 31, 1993, the Company entered into a credit facility with two
     banks pursuant to which up to a $30,000,000 credit line was available to
     the Company as of January 2, 1998.  This arrangement provides for a short-
     term demand line of credit, in the principal amount of up to $15,000,000,
     subject to formula, for domestic borrowings, international borrowings, and
     letters of credit; and a revolving line of credit in the principal amount
     of up to $15,000,000.  Borrowings under the demand line of credit are
     made at the bank's prime rate of interest while borrowing's under the
     revolving line of credit are made at the bank's prime rate of interest, or
     at the Company's option, the Eurodollar rate (Fixed Rate Option).

     At January 2, 1998, there was $2,001,000 outstanding under this facility.
     This credit facility, which was amended in January 1997, terminates July
     31, 1998.  This credit facility is subject to the bank's periodic reviews
     of the Company's operations.  The credit facility contains various
     covenants, including: restrictions on additional indebtedness; restrictions
     on the payment or declaration of dividends; a minimum tangible net worth,
     as defined; a minimum ratio of current assets to current liabilities, as
     defined; a minimum annual cash flow coverage ratio; that there be no demand
     loans outstanding under the demand line of credit for a period of at least
     30 consecutive days in each calendar year; and, fiscal quarter and annual
     net income requirements.  Due to the non-recurring charge to reduce the
     carrying value of the Company's distribution facility in East Brookfield,
     Massachusetts, the operating results applicable to the discontinued
     operation, the net loss realized as a result of the sale of substantially
     all of the assets of Brookfield Athletic Co., Inc. and the significant net
     loss attributable to the Company's Australian subsidiary in the fiscal
     quarter and fiscal year ended January 2, 1998, the Company was unable to
     comply with the minimum tangible net worth, the minimum annual cash flow
     coverage ratio and the net income requirements for both the fourth quarter
     of fiscal 1997 and fiscal 1997.  In addition, borrowings by certain of the
     Company's foreign subsidiaries in fiscal 1997 caused the Company to violate
     the requirement that there be no demand borrowings under the demand credit
     line for a period of at least 30 consecutive days.  As of January 2, 1998,
     the banks granted waivers as of that date only for these covenant
     violations.  Additionally, the facility limits the Company's ability to pay
     or declare a dividend or make other distributions to stockholders.


     Saucony Canada Inc. maintains a credit facility with a Canadian lender.
     The agreement provides Saucony Canada with a line of credit for $1,000,000
     Canadian dollars, subject to formula (approximately $702,000 in U.S.
     dollars at January 2, 1998).  The agreement provides for a demand line in
     the principal amount of $300,000 (Canadian dollars), for letters of credit,
     and a revolving line of credit, in the principal amount of $700,000
     (Canadian dollars).  Borrowings under this facility are made at the
     lender's prime lending rate plus .25%.  At January 2, 1998, there were no
     borrowings outstanding under this credit facility.  The facility contains
     requirements for maintaining defined levels of net worth, working capital
     and various financial ratios.

     Saucony SP Pty Limited maintains a credit facility with an Australian
     lender.  The credit facility provides Saucony SP with a $6,000,000
     Australian dollar (approximately $3,905,000 in U.S. dollars at January 2,
     1998) line of credit.  The agreement provides for a short-term demand line
     of credit, in the principal amount of up to $4,000,000  (Australian
     dollars), for letters of credit and foreign exchange facilities; and a
     revolving line of credit, in the principal amount of $2,000,000 (Australian
     dollars).  Borrowings under this facility are made at market rates of
     interest as defined in the agreement or at the lender's quoted rate.  At
     January 2, 1998, there was $2,186,000 in U.S. dollars outstanding under
     this credit facility.  The facility is subject to the lender's periodic
     reviews of the Company's operations.  The Company has guaranteed the
     obligations of Saucony SP Pty Limited enabling such obligations to be
     satisfied.  See Notes 14 and 20 of Notes to Consolidated Financial
     Statements.

     At January 2, 1998, the Company was committed under open letters of credit
     to several lenders in the aggregate amount of $3,307,000 under foreign
     exchange contracts to purchase U.S. dollars in the amount of $1,072,000 and
     foreign exchange contracts to sell U.S. dollars in the amount of $146,000.

     The Company is guarantor on credit facility agreements for two foreign
     subsidiaries.  At January 2, 1998, the guarantees totaled $4,607,000.

     The Company has entered into an employment contract with one key employee
     that provides for minimum annual compensation of $216,000 in 1998.  The
     contract provides for annual salary, cost-of-living adjustments, additional
     compensation in the form of bonuses based on performance, life insurance
     coverage and options to purchase shares of the Company's common stock.
     Bonus expense to key executives amounted to $0, $148,000 and $276,000 for
     1997, 1996 and 1995, respectively.

     Included in accrued expenses at January 2, 1998 and January 3, 1997 were
     sales commissions payable of $209,000 and $759,000, respectively.

     LITIGATION
     ----------

     The Company is involved in various routine litigation incident to its
     business.  Many of these proceedings are covered in whole or in part by
     insurance.  In management's opinion, none of these proceedings will have a
     material adverse effect on the Company's financial position, operations or
     cash flows (irrespective of any potential insurance recovery).


10.  STOCKHOLDERS' EQUITY:
     --------------------

     As of January 2, 1998 and January 3, 1997, the number of shares of Class A
     Common Stock and Class B Common Stock outstanding were as follows:

                                                                             117
                                    January 2, 1998   January 3, 1997
                                     --------------    ---------------

            Class A Common Stock       2,703,227         2,703,227
            Class B Common Stock       3,548,087         3,533,659

     Issuances by the Company of shares of Class A Common Stock and Class B
     Common Stock, for the years ended January 2, 1998, January 3, 1997 and
     January 5, 1996 were:  1997, 14,428 shares of Class B Common Stock; 1996,
     1,500 shares of Class A Common Stock and 18,244 shares of Class B Common
     Stock; and 1995, 700 shares each of Class A Common Stock and Class B Common
     Stock.

     During 1995, the Company repurchased 17,700 shares of Class B Common Stock
     at a cost of $76,687.  At January 2, 1998, Saucony SP Pty LTD, a foreign
     subsidiary controlled by the Company, held 2,000 shares of each of the
     Company's Class A Common Stock and Class B Common Stock.


11.  STOCK OPTIONS AND EARNINGS PER SHARE:
     ------------------------------------

     At the 1993 Annual Meeting of the Stockholders held on May 23, 1993, the
     stockholders approved the Company's 1993 Equity Incentive Plan (the "Equity
     Incentive Plan") and the 1993 Director Stock Option Plan (the "Director
     Option Plan"), adopted by the Company's Board of Directors on April 7,
     1993. The 1993 Equity Incentive Plan provides for the grant to officers and
     key employees of the Company, incentive stock options, non-statutory stock
     options and awards of restricted stock.  Outside consultants and advisors
     to the Company are eligible to receive only non-statutory options and
     restricted stock awards under the Equity Incentive Plan.

                                                                             118
     The Equity Incentive Plan is administered by the Compensation Committee of
     the Board of Directors which, at its sole discretion, grants options to
     purchase shares of Common Stock and make awards of restricted stock.  The
     plan provides that the purchase price per share of Common Stock shall be
     determined by the Board of Directors, provided, however, in the case of
     Incentive Stock Options, the purchase price shall not be less than 100% of
     the fair market value of such stock at the time of grant of the option.
     The terms of option agreements are established by the Board of Directors,
     except, in the case of Incentive Stock Options, wherein the term cannot
     exceed ten years.  Generally, an option cannot be exercised within one year
     of date of grant.  The vesting schedule is subject to the discretion of the
     Board of Directors.

     Restricted stock awards which may be granted under the Equity Incentive
     Plan entitle recipients to purchase shares of the Company's Common Stock
     subject to restrictions concerning the sale, transfer and other disposition
     of the shares issued until such shares are vested.  The Board of Directors
     shall determine the purchase price, which can be less than the fair market
     value of the Common Stock, and the vesting schedule for such award.  The
     Equity Incentive Plan provides for grants of restricted stock awards
     without the payment of any cash purchase price.

     At the 1997 Annual Meeting of Stockholders held on May 15, 1997, the
     stockholders approved an amendment to the Equity Incentive Plan.  The
     amendment increased the number of shares issuable under the Equity
     Incentive Plan from 800,000 to 1,150,000 shares and limited to 150,000 the
     number of shares for which options or awards may be granted in any calendar
     year to any one person.  As amended, a total of 1,150,000 shares, in the
     aggregate, of Class A Common Stock and Class B Common Stock have been
     reserved by the Company and may be issued under the plan.


                                                                             119
     The following table summarizes the awards available for grant under the
     Company's 1993 Equity Incentive Plan and 1993 Director Option Plan for the
     three-year reporting period ended January 2, 1998:
                                                            Shares
                                                            ------

            Shares available at December 30, 1994          502,738
            Awards granted                                (112,000)
            Options expired                                 30,502
                                                           -------
            Shares available at January 5, 1996            421,240
            Awards granted                                  (8,000)
            Options expired                                 44,486
                                                           -------
            Shares available at January 3, 1997            457,726
            Additional shares reserved                     350,000
            Awards granted                                (149,150)
            Options expired                                 25,278
                                                           -------
            Shares available at January 2, 1998            683,854
                                                           =======

     The Director Stock Option Plan provides for the automatic grant to non-
     employee directors of non-statutory stock options upon specified occasions.
     A total of 100,000 shares of Class B Common Stock have been reserved for
     issuance under the plan.  The option purchase price per share shall equal
     the fair market value of Class B Common Stock on the date of the grant.
     The options are exerciseable at any time, in whole or in part, prior to the
     fifth anniversary of the date of the grant.

     The following table sets forth the computation of basic earnings per common

                                                                             120
     share and diluted earnings per common share (dollars in thousands, except
     per share amounts):






























                                                                             121
<TABLE>
         <CAPTION>
                                                    1997                      1996                      1995
                                            ---------------------    ----------------------    ----------------------
                                            Earnings    Earnings     Earnings     Earnings      Earnings     Earnings
                                              per         per          per          per           per          per
                                             Common      Common       Common       Common        Common       Common
                                            Share -     Share -      Share -      Share -       Share -      Share -
                                             Basic      Diluted       Basic       Diluted        Basic       Diluted
                                              ----       ------        ----        ------         ----        ------
         <S>                               <C>          <C>          <C>          <C>          <C>          <C>
         Consolidated income (loss)

          Income (loss) from
           continuing operations           $(3,826)     $ (3,826)    $  1,349     $  1,349     $    522     $    522
          Income (loss) from
           discontinued operations            (892)         (892)         145          145        1,069        1,069
                                           --------     ---------    --------     --------     --------     --------
          Net income (loss) available
           for common shares and
           assumed conversions             $(4,718)     $ (4,718)    $  1,494     $  1,494     $  1,591     $  1,591
                                           ========     =========    ========     ========     ========     ========

         Weighted-average common
          shares and equivalents
          outstanding:

          Weighted-average shares
           outstanding                       6,240         6,240        6,224        6,224        6,225        6,225

          Effect of dilutive securities:
           Employee stock options                0             0            0           44            0           19
                                                                                                                                 122
                                           -------      --------     --------     --------     --------     --------
                                             6,240         6,240        6,224        6,268        6,225        6,244
                                           =======      ========     ========     ========     ========     ========

         Earnings per share:
          Income (loss) from
           continuing operations            ($0.62)      ($0.62)       $0.22        $0.22         $0.08        $0.08
          Income (loss) from
           discontinued operations           (0.14)       (0.14)        0.02         0.02          0.18         0.18
                                           -------      -------      -------      -------      --------     --------

          Net income (loss)                 ($0.76)      ($0.76)       $0.24        $0.24         $0.26        $0.26
                                           ========     ========     =======      =======      ========     ========
     </TABLE>


















                                                    

     Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
     Based Compensation"  encourages, but does not require companies to record
     compensation cost for stock-based employee compensation plans at fair
     value.  The Company has elected to continue to measure stock-based
     compensation expense using the intrinsic value method prescribed by
     Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
     Employees." Accordingly, compensation cost for stock options and restricted
     stock awards is measured as the excess, if any, of the quoted market price
     of the Company's stock at the date of the grant over the exercise price an
     employee must pay to acquire the stock.

     Stock-based compensation arising from the issuance of restricted stock and
     below market options, is being amortized to expense over the vesting period
     of the stock grant or option term and amounted to $62,000, $126,000 and
     $178,000 for 1997, 1996 and 1995, respectively.

     The following table summarizes the Company's stock option activity as of
     January 5, 1996, January 3, 1997 and January 2, 1998:












                                                                             124
<TABLE>
        <CAPTION>
                                                                                 Weighted
                                                                                 Average
                                                                                 Exercise             Option
                                                                Shares           Price             Price Range
                                                                ------           -----              ----------
           <S>                                                <C>              <C>            <C>
           Outstanding at December 30, 1994                     316,206         $  4.28       $   2.00 -  $   12.25

               Granted                                          112,000         $  4.61       $   4.00 -  $    4.88
               Exercised                                         (1,400)        $  2.61       $   2.25 -  $    2.75
               Expired                                          (36,502)        $  4.42       $   2.50 -  $   10.75
                                                                --------

           Outstanding at January 5, 1996                       390,304         $  4.37       $   2.00 -  $   12.25
                                                                -------

               Granted                                            8,000         $  4.00       $   4.00 -  $    4.00
               Exercised                                        (19,744)        $  3.52       $   2.25 -  $    3.69
               Forfeited                                        (10,386)        $  5.00       $   2.25 -  $   10.75
               Expired                                          (35,000)        $  4.68       $   4.68 -  $    4.68
                                                                --------

           Outstanding at January 3, 1997                       333,174         $  4.36       $   2.00 -  $   12.25
                                                                -------

               Granted                                          147,350         $  4.50       $   4.44 -  $    5.00
               Exercised                                        (12,628)        $  3.11       $   2.50 -  $    3.69
               Forfeited                                        (38,278)        $  5.87       $   2.50 -  $    8.50
               Expired                                           (3,000)        $  3.35       $   2.88 -  $    3.63
                                                              ----------
                                                                                                                                 125

     Outstanding at January 2, 1998                             426,618         $  4.32       $   2.00 -  $   12.25
                                                                =======         =======       ========    =========

     </TABLE>



























                                                              


     Options exercisable for shares of the Company's Class A and Class B Common
     Stock as of January 5, 1996 and January 3, 1997, and January 2, 1998, are
     as follows:

                                        Options Exercisable
                          -------------------------------------------------
                                                           Weighted Average
                                                            Exercise Price
                                                           ----------------
                          Class A    Class B              Class A  Class B
                           Common     Common               Common   Common
                           Stock      Stock     Total      Stock    Stock
                           -----      -----      ----       ----    -----

         January 5, 1996   11,400    155,470   166,870     $ 4.81   $  4.92

         January 3, 1997   11,400    181,953   193,353     $ 5.60   $  4.81

         January 2, 1998    4,900    228,586   233,486     $ 2.27   $  4.71


     The following table summarizes information about stock options outstanding
     at January 2, 1998:







                                                                             127
<TABLE>
<CAPTION>
                                                 Options Outstanding                       Options Exercisable
                                     ---------------------------------------------      ---------------------------
                                                         Weighted
                                                         Average         Weighted                         Weighted
                                                        Remaining        Average                          Average
                    Range of            Options        Contractual       Exercise         Options         Exercise
                Exercise Prices       Outstanding          Life           Price         Exercisable        Price
                 --------------        ----------          ----           -----          ----------        -----
             <C>                      <C>                 <C>           <C>               <C>             <C>
             $   2.00 -  $   3.69         147,768          1.16         $   3.15             92,586       $  3.54
             $   4.00 -  $   6.00         265,600          3.82         $   4.58            127,900       $  4.71
             $  10.75 -  $  12.50          13,250           .56         $  12.11             13,000       $ 12.13
                                       ----------                                         ---------
                                          426,618                                           233,486
                                       ==========                                         =========
</TABLE>














                                                                

     The weighted average fair value at date of grant for options granted in
     1997, 1996 and 1995 was $2.47, $1.93 and $2.81 per option, respectively.
     The weighted-average fair value of these options at the date of grant was
     estimated using the Black-Scholes option-pricing model with the following
     weighted-average assumptions for 1997, 1996 and 1995, respectively:  risk-
     free interest rates of 6.3%, 6.3% and 6.5%; dividend yields of 0%, 0% and
     0%; volatility factors of the expected market price of the Company's common
     stock of 41.0%, 47.0% and 48.0%; and a weighted-average expected life of
     the options of five years.

     Had the Company determined the stock-based compensation expense for the
     Company's stock options based upon the fair value at the grant date for
     stock option awards in 1997, 1996 and 1995, consistent with the provisions
     of SFAS No. 123, the Company's net income (loss) and net income (loss) per
     share would have been reduced to the pro forma amounts indicated below
     (dollars in thousands, except per share amounts):















                                                                             129
<TABLE>
<CAPTION>
                                                   1997                     1996                      1995
                                          ----------------------    ----------------------    ----------------------
                                          Earnings     Earnings     Earnings     Earnings      Earnings     Earnings
                                            per          per          per          per           per          per
                                           Common       Common       Common       Common        Common       Common
                                          Share -      Share -      Share -      Share -       Share -      Share -
                                           Basic       Diluted       Basic       Diluted        Basic       Diluted
                                            ----        ------        ----        ------         ----        ------
          <S>                             <C>          <C>          <C>          <C>          <C>          <C>
         Net income (loss):
          As reported                     $(4,718)     $(4,718)     $ 1,494      $  1,494     $  1,591     $  1,591
          Compensation expense for
           stock, net of tax                  (63)         (63)         (87)          (87)         (65)         (65)
                                          --------     --------     --------     ---------    ---------    ---------

         Pro forma net income (loss)       (4,781)      (4,781)       1,407         1,407        1,526        1,526
                                          ========     ========     =======      ========     ========     ========

         Pro forma earnings per share
          As reported                     $  (0.76)    $  (0.76)    $   0.24     $   0.24     $    0.26    $    0.26
          Compensation expense for
           stock, net of tax                 (0.01)       (0.01)       (0.01)       (0.01)        (0.01)       (0.01)
                                          --------     --------     ---------    ---------    ---------    ----------

         Pro forma net income (loss)
          per share                       $  (0.77)    $  (0.77)    $   0.23     $   0.23     $    0.25    $    0.25
                                          =========    =========    ========     ========     =========    =========
</TABLE>


                                                             


     The pro forma net income for 1997, 1996 and 1995 is not representative of
     the pro forma effect on net income in future years because it does not take
     into consideration pro forma compensation expense related to grants made
     prior to 1995.


12.  INCOME TAXES:
     ------------

     The provision for income taxes was calculated according to the precepts of
     Statement of Financial Accounting Standards No. 109, "Accounting for Income
     Taxes." The objective of SFAS No. 109 is to recognize the amount of taxes
     payable or refundable in the current year and to recognize the expected
     future tax consequences of events that have been included in the financial
     statements or tax returns.  SFAS No. 109 requires the identification of all
     cumulative temporary differences arising between the tax bases of assets
     and liabilities and their reported amounts in the financial statements.
     The tax effects of these temporary differences are measured using enacted
     tax rates and are reported on the consolidated balance sheet as deferred
     tax assets and liabilities.  Deferred tax assets are then reduced if it is
     more likely than not that some portion of the expected future tax benefits
     will not be realized.

     The following is a summary of the components of the provision for income
     taxes, current and long- term deferred tax assets and liabilities and a
     reconciliation of the U.S. statutory federal income tax rate to the
     effective income tax rate reflected in the consolidated income statement.

     The provision for income taxes was based on pretax income (loss) from
     continuing operations before minority interest which was subject to
                                                                             131
     taxation by the following jurisdictions.  Domestic pretax income includes
     the pretax income of U.S. based entities as well as the international
     branches of these entities (in thousands):

                                     1997           1996            1995
                                     ----           ----            ----

        Pre-Tax income (loss):
           Domestic                $   715         $1,149         $1,013
           Foreign                  (4,169)           833           (785)
                                   --------        ------         -------
           Total                   $(3,454)        $1,982         $  228


     The provision (credit) for income taxes consists of the following (in
     thousands):

                                              1997        1996        1995
                                              ----        ----        ----
        Current:
           Federal                           $1,053      $  265      $   71
           State                                307         142          51
           Foreign                              223         135         239
                                             ------      ------      ------
                                              1,583         542         361
                                             ------      ------      ------
        Deferred:
           Federal                             (859)       (102)         10
           State                               (263)        (34)         38
           Foreign                           (1,365)        137        (482)
                                             -------     ------      -------
                                             (2,487)          1        (434)
                                                                             132
                                             -------     ------      -------
        Change in valuation allowance         1,399        (218)         65
                                             ------      -------     ------

        Total                                $  495      $  325      $   (8)
                                             ======      ======      =======

     The net deferred tax asset or liability reported on the consolidated
     balance sheet consist of the following items as of January 2, 1998 and
     January 3, 1997 (in thousands):

                                                           1997       1996
                                                           ----       ----

      Net current deferred tax assets:
        Allowance for doubtful accounts and discounts    $ 1,111     $  400
        Inventory allowances and tax costing adjustments     236        246
        Deferred compensation                                279        229
        Accrued expenses, not currently deductible           283        125
        Untaxed installment receivables                      (45)      (174)
        Loss carryforwards                                   125        599
        Valuation allowance                                   --         --
                                                         -------     ------
        Total                                            $ 1,989     $1,425
                                                         -------     ------
      Net long-term deferred tax assets:
        Loss carryforwards                               $ 1,752         --
        Valuation allowance                               (1,399)        --
                                                         --------    ------
        Total                                            $   353         --
                                                         -------     ------
      Net long-term deferred tax liabilities:
 
        Property, plant and equipment                    $   621     $  769
        Investments in limited partnerships                1,198      1,155
        Untaxed installment receivables                      102         --
                                                         -------     ------
        Total                                            $ 1,921     $1,924
                                                         -------     ------
      Net deferred tax asset (liability)                 $   421     $ (499)
                                                         =======     =======

     The loss carryforward amounts shown above relate to foreign operating
     losses of approximately $6,289,000 which may be carried forward
     indefinitely.  At January 2, 1998, the Company has determined that it is
     more likely than not that $1,399,000 of the deferred tax assets resulting
     from foreign operating losses will not be realized.

     The differences between the U.S. statutory federal income tax rate and
     the effective income tax rate on pretax income from continuing operations
     before minority interest are summarized as follows:

                                                          1997    1996     1995
                                                          ----    ----     ----

     U.S. federal income tax rate                       (34.0%)  34.0%    34.0%
     State income tax, net of federal benefit             0.8%    3.6%    25.8%
     Detriment (benefit) of valuation allowance
        relating to foreign losses                        40.5%  (11.0%)   28.5%
     Non-deductible expenses and tax-exempt income        0.8%    1.5%    13.4%
     International tax rate differences                   7.7%   (0.6%)   10.3%
     Low-income housing tax credits                      (1.5%)  (9.0%)  (71.6%)
     Adjustment of prior years' estimated
       tax liabilities                                    0.0%   (2.1%)  (43.9%)

                                                           ----   ------  ------
 
     Effective income tax rate                           14.3%   16.4%    (3.5%)
                                                         =====   =====  ======

     The Company has not recorded deferred income taxes applicable to the
     undistributed earnings of foreign subsidiaries that are indefinitely
     reinvested in foreign operations.  These earnings amounted to approximately
     $3,046,000 at January 2, 1998.


13.  DISCONTINUED OPERATIONS:
     -----------------------

     On July 4, 1997, Brookfield Athletic Co., Inc. ("Brookfield"), a wholly
     owned subsidiary of the Company, sold substantially all of the assets used
     in the Brookfield business to Brookfield International, Inc. for
     $6,841,000.  The consideration paid equals the net asset value of the
     Brookfield assets as of July 4, 1997, reduced by certain liabilities that
     were assumed by Brookfield International, Inc.

     The summarized balance sheet for the discontinued operations as of January
     3, 1997 is as follows (in thousands):

               Assets
               ------

                 Current assets
                  Accounts receivable                   $   4,437
                  Inventories                               4,095
                  Prepaid expenses                            491

                                                         --------
                    Total current assets                    9,023

                  Property, plant and equipment, net          190
                  Other assets                                966
                                                         --------

                    Total assets                        $  10,179
                                                         --------

               Liabilities
               -----------

                 Current liabilities
                  Current portion of long-term debt and
                    capital lease obligations           $      36
                  Accounts payable                             30
                  Accrued expenses                            179
                                                         --------

                    Total liabilities                   $     245
                                                         --------

                 Net of discontinued operations          $9,934
                                                         ======


     As of January 3, 1997, the net assets of the discontinued operation have
     been reclassified and are reflected in current assets in the consolidated
     balance sheet as of that date.


     As a result of the Brookfield sale, the Company recorded a pre-tax loss of
     $821,000, (after tax or $0.08 per  diluted share).  The pre-tax loss
     includes $278,000 of costs incurred in connection with the disposal of
     Brookfield, agreed reduction to the selling price of $300,000, as well as
     operating losses of $243,000, incurred by Brookfield subsequent to the
     transaction measurement date.

     The results of operations for Brookfield for the fiscal years ended January
     2, 1998, January 3, 1997 and January 5, 1996 have been segregated from
     continuing operations and are reported separately as discontinued
     operations.  Prior year consolidated statements of earnings have been
     restated to present Brookfield as a discontinued operation.

     The following table summarizes Brookfield's results of operations for the
     years ended January 2, 1998, January 3, 1997 and January 5, 1996 (in
     thousands):

                                                     1997     1996      1995
                                                      ---      ---       ---

       Net revenues                                $ 2,381  $ 19,567  $ 24,439

       Costs and expenses                            3,037    19,319    22,647
                                                   -------   -------   -------

       Income (loss) before tax                       (656)      248     1,792

       Income tax expense (benefit)                   (262)      103       723
                                                   --------  -------   -------

       Income (loss) from discontinued operations     (394)      145     1,069

       Loss on disposal of Brookfield Athletic
        Co., Inc., including operating losses
        of  $243 during the phase-out
        period (net of tax benefit of $323)            (498)      --        --
                                                    --------  ------   -------

       Income (loss) from discontinued operations   $  (892)  $  145   $ 1,069
                                                    ========  ======   =======


14.  BUSINESS RESTRUCTURING AND OTHER CHARGES:
     ----------------------------------------

     Results of continuing operations for 1997 include a non-recurring charge of
     $2,766,000 ($3,089,000 after tax or $0.50 per diluted share) associated
     with the restructuring of the Company's Australian subsidiary and a non-
     recurring charge of $850,000 ($508,000 after tax or $0.08 per diluted share
     ) to reduce the carrying value of the Company's distribution facility in
     East Brookfield, Massachusetts to market.

     The restructuring charge attributable to the Company's Australian
     subsidiary consisted of asset write-downs to estimated realizable values,
     as follows:  accounts receivable of $858,000; inventory of $1,340,000; and
     prepaid expenses and other assets of $568,000.  The Company recorded a
     deferred tax valuation allowance of $999,000 relating to net operating loss
     carryforwards of the Australian subsidiary which are not expected to be
     realized.  In addition, the Company forgave $1,691,000 of intercompany
     trade receivables owed by the Australian subsidiary, resulting in a tax
     benefit of $676,000.


15.  FOREIGN OPERATIONS, GEOGRAPHIC AREAS,  AND OTHER INCOME:
     -------------------------------------------------------

     During 1997, 1996 and 1995, foreign operations of the Company included the
     international activities of Hyde International Services, Ltd., Saucony
     Sports BV, and Saucony Deutschland Vertriebs GmbH, wholly owned foreign
     subsidiaries; Saucony Canada, Ltd., a majority-owned foreign joint venture
     Saucony SP Pty Ltd., a 50%-owned foreign joint venture; and Saucony UK, a
     branch operation of Saucony, Inc.

     The condensed balance sheet of the Company's foreign operations as of
     January 2, 1998 and January 3, 1997, are as follows (in thousands):

                                                         1997        1996
                                                         ----        ----
         ASSETS:

           Current assets:
            Cash                                       $ 1,390     $ 1,830
            Accounts receivable                          4,116       4,768
            Inventories                                  5,888       8,909
           Other current assets                          1,178       1,127
            Noncurrent assets                              325       1,092
                                                       -------     -------
                                                       $12,897     $17,726
                                                       =======     =======
         LIABILITIES AND STOCKHOLDERS' EQUITY:

           Current liabilities:
            Notes payable                              $ 2,885     $ 1,935
            Current portion of long-term debt            1,308          94
            Accounts payable and accrued expenses        1,465       1,614
            Due to related parties                       8,344       7,161
            Long-term debt                                  --       1,885
            Capitalized lease obligations                   19          31
            Minority interest                              195         488
            Stockholders' equity                        (1,319)      4,518
                                                       --------    -------
                                                       $12,897     $17,726
                                                       =======     =======

     The results of foreign operations included in the consolidated statements
     of income are as follows (in thousands):

                                                 1997        1996        1995
                                                 ----        ----        ----

       Net sales to unaffiliated parties       $22,412     $23,723     $21,214
       Net sales to affiliated parties
        (eliminated in consolidation)              604         741         738
                                               -------     -------     -------

       Net sales                               $23,016     $24,464     $21,952
                                               =======     =======     =======

       Income (loss) before income
        taxes and minority interest            $(6,109)    $   677     $   632
       Income tax provision (benefit)              225          54        (179)
       Minority interest in income (loss)         (123)        308        (286)
                                               --------    -------     --------

       Net income (loss)                       $(6,211)    $   315     $ 1,097
                                               ========    =======     =======


     The foreign operations changes in stockholders' equity from 1997 to 1996,
     1996 to 1995 and 1995 to 1994 were due to the recognition of common stock
     and paid-in capital amounts offset by income or losses and accumulated
     translation adjustments.

     The following table summarizes the Company's continuing operations by
     geographic area for the years ended January 2, 1998, January 3, 1997 and
     January 5, 1996 and identifiable assets as of January 2, 1998, January 3,
     1997 and January 5, 1996 (in thousands):

                                                    1997       1996     1995
                                                    ----       ----     ----
      NET SALES TO UNAFFILIATED PARTIES:

        United States                             $65,602   $ 60,236   $51,061
        International                              28,009     31,105    27,488
                                                  -------   --------   -------
                                                  $93,611   $ 91,341   $78,549
                                                  =======   ========   =======

      INTERNATIONAL NET SALES TO UNAFFILIATED PARTIES:

        International divisions of
         United States parent company             $ 5,597   $  7,382   $ 6,274
        Foreign subsidiaries                       22,412     23,723    21,214
                                                  -------   --------   -------
                                                  $28,009   $ 31,105   $27,488
                                                  =======   ========   =======

      NET SALES BETWEEN GEOGRAPHIC AREAS:

        United States                             $   180   $     44   $   138
        International                               7,430      8,148     8,241
                                                  -------   --------   -------
                                                  $ 7,610   $  8,192   $ 8,379
                                                  =======   ========   =======

      TOTAL NET SALES:

        United States                             $65,782   $ 60,280   $51,199
        International                              35,439     39,253    35,729
        Less:  Inter-area eliminations             (7,610)    (8,192)   (8,379)
                                                  --------  ---------  --------
                                                  $93,611   $ 91,341   $78,549
                                                  =======   ========   =======

      OPERATING PROFIT (LOSS):

        United States                             $ 3,479   $  2,069   $ 2,199
        International                              (5,748)       944      (858)
        Less:  Inter-area eliminations               (297)      (228)      (50)
                                                  --------  ---------  --------
                                                  $(2,566)  $  2,785   $ 1,291
                                                  ========  ========   =======

      IDENTIFIABLE ASSETS:

        United States                             $59,828   $ 66,448   $64,395
        International                              13,142     17,741    14,754
        Less:  Inter-area eliminations            (11,346)   (12,843)   (9,678)
                                                  --------  ---------  --------
                                                  $61,624   $ 71,346   $69,471
                                                  =======   ========   =======

      Net sales to unaffiliated customers is based on the location of the
     customers.  International inter-area sales represent shipment of inventory
     to international subsidiaries and purchases of inventory from international
     subsidiaries.  These inter-area sales are generally priced to recover cost
     plus an appropriate mark-up for profit and are eliminated in the
     determination of consolidated net sales.  Operating profit consists of
     revenue less related cost of sales, selling expenses and general and
     administrative expenses, and does not include interest expense, income
     taxes or minority shareholders' interest.

     Other income (expense) consists primarily of royalty income, income from
     short-term investments, income recognized due to the sale or licensing of
     trademarks, foreign currency transaction exchange gains and losses, and
     gains or losses from the sale or disposition of assets.


16.  MAJOR CUSTOMER:
     ---------------

     For 1997, 1996 and 1995, the Company did not have a major customer account
     for more than 10% of gross sales.


17.  ACQUISITIONS:
     ------------

     Saucony Sports B.V.
     -------------------

     On December 11, 1991, the Company entered into a joint venture with a Dutch
     company to market and distribute Saucony footwear.  On December 31, 1991,
     the Company purchased 51% of the issued and outstanding stock of Saucony
                                                                             143
     Sports BV for $414,000.  On June 9, 1993, the Company increased its
     majority ownership from 51% to 76% by acquiring an additional 25% of the
     issued and outstanding common stock from the minority shareholder, for
     $210,000, which equaled the book value of the stock.  On December 22, 1997,
     the Company acquired the remaining issued and outstanding stock owned by
     the minority stockholder for $140,000 of which $30,000 has been recorded as
     goodwill.

     At January 2, 1998, January 3, 1997 and January 5, 1996, Saucony Sports BV
     had assets of $1,889,000, $1,571,000 and $1,595,000; liabilities of
     $930,000, $1,236,000 and $1,455,000; and revenues of $3,170,000, $3,084,000
     and $3,216,000, respectively.

     Saucony Canada, Inc.
     --------------------

     On March 1, 1993, the Company acquired 85% of the issued and outstanding
     stock of a Canadian distributor, Saucony Canada, Inc.  The purchase price
     of $351,000 was financed with available cash of $161,000 and the issuance
     of a note payable of $189,843.  At January 2, 1998, January 3, 1997 and
     January 5, 1996, Saucony Canada, Inc. had assets of $2,841,000, $2,102,000
     and $1,867,000; liabilities of $359,000, $851,000 and $741,000; and
     revenues of $4,199,000, $4,002,000 and $3,777,000, respectively.

     Saucony SP Pty. Ltd.
     --------------------

     Effective July 1, 1993, the Company acquired 50% of the issued and
     outstanding common stock of an Australian distributor, Saucony SP Pty.
     Ltd., for $214,000 in cash.  The agreement was completed on November 13,
     1993.  During 1995, the Company increased its investment in Saucony SP Pty.
     Ltd. by acquiring 28 shares of Cumulative Redeemable Preferred Stock ($1
    par) for $2,082,000 in exchange for an equivalent reduction in debt owed to
     the Company by Saucony SP.  The shares, which are redeemable on or after
     January 1, 1998, provide for cumulative preferential dividends and confer
     priority to the preferred shareholders, with respect to dividends and
     return of share capital and share premium.  As the fair value of assets
     acquired equaled the carrying value of the debt reduction, there was no
     impact on consolidated net income.  See Note 14 of Notes to Consolidated
     Financial Statement regarding the restructuring charge recorded in the
     fourth quarter of 1997.

     At January 2, 1998, January 3, 1997 and January 5, 1996, Saucony SP Pty.
     Ltd. had assets of $3,515,000, $9,420,000 and $7,401,000; liabilities of
     $2,692,000, $6,895,000 and $5,528,000; and revenues of $10,333,000,
     $14,024,000 and $11,661,000, respectively.

     Quintana Roo, Inc.
     ------------------

     On August 31, 1995, Quintana Roo, Inc., a newly formed subsidiary of the
     Company, acquired the assets of a bicycle and wetsuit manufacturer for
     $112,000 in cash.

     Hind Apparel
     ------------

     On December 20, 1996, the Company acquired the trade name, trademarks,
     patents and service marks of an athletic apparel manufacturer for
     $1,250,000 in cash.  The entire purchase amount has been recorded as
     goodwill.

     These acquisitions are accounted for as purchases.


18.  CONCENTRATION OF CREDIT RISK:
     ----------------------------

     Financial instruments which potentially subject the Company to credit risk
     consist primarily of cash, cash equivalents and trade receivables.

     The Company maintains cash and cash equivalents with various major
     financial institutions.  Cash equivalents include investments in commercial
     paper of companies with high credit ratings, investments in money market
     securities and securities backed by the U.S. Government.  At times such
     amounts may exceed the F.D.I.C. limits.  The Company limits the amount of
     credit exposure with any one financial institution and believes that no
     significant concentration of credit risk exists with respect to cash
     investments.

     Trade receivables subject the Company to the potential for credit risk with
     customers in the retail and distributor sectors.  To reduce credit risk,
     the Company performs ongoing evaluations of its customers financial
     condition but does not generally require collateral.  Approximately 31% of
     the Company's gross trade receivables balance was represented by 8
     customers at January 2, 1998, which exposes the Company to a concentration
     of credit risk.


19.  FAIR VALUE OF FINANCIAL INSTRUMENTS:
     -----------------------------------

     The carrying value of cash, cash equivalents, receivables, long-term debt
     and other notes payable approximates fair value.  The Company believes
     similar terms for current long-term debt and other notes payable would be
     attainable.  The fair value of marketable securities is estimated based
                                                                             146
     upon quoted market prices for these securities.  The Company enters into
     forward currency exchange contracts to hedge intercompany liabilities
     denominated in other than the functional currency.  The fair value of the
     Company's foreign currency exchange contracts is estimated based on current
     foreign exchange rates.  At January 2, 1998, the value of the Company's
     foreign currency exchange contracts to purchase U.S. dollars was $1,072,000
     and to sell U.S. dollars was $146,000.  Gains and losses on forward
     exchange contracts are deferred and offset against foreign currency
     exchange gains and losses on the underlying hedged item upon consummation
     of the transaction.  At January 2, 1998, estimated fair value of the
     Company's financial instruments approximated the carrying value.

20.  QUARTERLY INFORMATION:
     ----------------------


















                                                                             147
<TABLE>
     <CAPTION>
                                                                   (in thousands, per share amounts in dollars)

             1997                                               Quarter 1    Quarter 2    Quarter 3    Quarter 4
             ----                                                --------     --------     --------    ---------
             <S>                                             <C>          <C>           <C>          <C>
             Net sales                                          $  25,217    $  24,398    $   24,635   $   19,361
             Gross profit                                           8,585        8,550         8,422        5,883
             Income (loss) from continuing operations                 570         (120)          581       (4,857)
             Income (loss) from discontinued operations              (287)        (348)         (172)         (85)
             Net income (loss)                                        283         (468)          409       (4,942)
             Earnings per share:
               Basic                                                 0.05        (0.07)         0.07        (0.79)
               Diluted                                               0.05        (0.07)         0.07        (0.79)

             1996                                               Quarter 1    Quarter 2    Quarter 3    Quarter 4
             ----                                                --------     --------     --------    ---------

             Net sales                                          $  28,638    $  24,396    $   20,609   $   17,698
             Gross profit                                           8,788        7,542         7,207        6,112
             Income (loss) from continuing operations                 883          227           220           19
             Income (loss) from discontinued operations              (143)        (114)          383           19
             Net income (loss)                                        740          113           603           38
             Earnings per share:
               Basic                                                 0.12         0.02          0.10         0.01
               Diluted                                               0.12         0.02          0.10         0.01
     </TABLE>
                                            

     During the second quarter of 1997, the Company recorded a non-recurring
     charge of $850,000 ($508,000 after tax, $0.08 per share diluted) to reduce
     the carrying value of the Company's distribution facility in East
     Brookfield, Massachusetts to market.

     During the fourth quarter of 1997, the Company's gross profit was reduced
     due to the significant decline in gross margin realized by the Company's
     Australian subsidiary which was due to increased sales of non-current
     models.  In addition, the Company recorded a charge of $2,766,000
     ($3,089,000 after tax, or $0.50 per share diluted) associated with the
     restructuring of the Company's Australian subsidiary, which included a
     deferred tax valuation allowance of $999,000, and the Company recorded a
     deferred tax valuation allowance of $400,000 related to net operating loss
     carryforwards of the Company's German subsidiary which are not expected to
     be realized.

     Earning per share amounts for each quarter are required to be computed
     independently and, as a result, their sum may not equal the total earnings
     per share amounts for fiscal 1997 and fiscal 1996.


21.  SUBSEQUENT EVENT
     ----------------

     In March 1998, the Company entered into an agreement with its joint venture
     partners in its Australian subsidiary pursuant to which the Company will
     acquire all of the proprietary interests of such partners in the subsidiary
     for nominal consideration and the employment of the managing director of
     such subsidiary will be terminated.    The Company expects the closing to
     occur pursuant to such agreement by no later than May 1, 1998.  The
                                                                             149
     Company is in the process of reassessing its operations in Australia and is
     evaluating several alternative methods of continuing its presence in the
     Australian market.





























                                                                             150

<TABLE>


               HYDE ATHLETIC INDUSTRIES, INC. AND SUBSIDIARIES
               SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

   For the Years Ended January 2, 1998, January 3, 1997 and January 5, 1996
   ------------------------------------------------------------------------

                             (dollars in thousands)

<CAPTION>

                                                            Additions
                                                  Balance   charged to Deductions Balance
                                                 beginning  costs and     from      end
                                                  of year    expenses   reserve   of year
                                                  -------    --------    -------  -------
<S>                                              <C>        <C>       <C>       <C>

Year ended January 2, 1998:
  Allowance for doubtful accounts and discounts  $    1,234 $   5,475 $   4,677 $    2,032

Year ended January 3, 1997:
  Allowance for doubtful accounts and discounts  $    940   $   5,269 $   4,975 $    1,234

Year ended January 5, 1996:
  Allowance for doubtful accounts and discounts  $    1,147 $   4,807 $   5,014 $    940
</TABLE>

                                 EXHIBIT INDEX
                                                                             151

                                 -------------

Exhibit
Number                        Description                        Page
------                        -----------                        ----

2.0       Asset Purchase Agreement, dated June 27, 1997, between
          Brookfield International, Inc. and Brookfield Athletic Co.,
          Inc. is incorporated herein by reference to Exhibit 2.1 to
          the Registrant's Current Report on Form 8-K dated
          July 4, 1997.                                                      *

3.1       Restated Articles of Organization, as amended, of the
          Registrant are incorporated herein by  reference to
          Exhibit 4.1 to the Registrant's Registration Statement
          on Form S-8 (File No. 33-66482)                                    *

3.2       By-Laws, as amended, of the Registrant are incorporated
          herein by reference to Exhibit 3.3 to the Registrant's
          Registration Statement on Form S-2, as amended
          (File No. 33-61040) (the "Form S-2")                               *

10.1      Note Purchase Agreement between the Registrant and
          the Principal Mutual Life Insurance Company is incorporated
          herein by reference to Exhibit (4b) to the Registrant's Annual
          Report on Form 10-K for the fiscal year ended December 31,
          1988 (the "1988 10-K Report")                                      *

10.2      Credit Agreement among the Registrant, State Street Bank
          and Trust Company and CoreStates Bank, N.A., dated
          August 31, 1993 is incorporated herein by reference
                                                                             152

          to Exhibit 10.2 to the Registrant's Annual Report on Form
          10-K for the fiscal year ended December 31, 1993 (the
          "1993 10-K Report")                                                *

10.3      Guarantee of the Registrant to the Bank of Nova Scotia
          is incorporated herein by reference to Exhibit 10.3 to
          the 1993 10-K Report                                               *

10.4      Letter of Guarantee of the Registrant to State Street
          Finance Limited is incorporated herein by reference
          to Exhibit 10.4 to the 1993 10-K Report                            *

10.5**    1982 Employee Stock Option Plan, as amended, is
          incorporated herein by reference to Exhibit 10.7 to the Form S-2   *

10.6**    Amendment to the Credit Agreement among the Registrant,
          State Street Bank and Trust Company and CoreStates Bank,
          N.A., dated August 31, 1993, is incorporated herein by reference
          to Exhibit 10.06 to the Registrant's Quarterly Report on Form
          10-Q for the 39 weeks ended September 30, 1994                     *



10.7#     Trademark License Agreement, dated as of February 1, 1994,
          between the Registrant and Leif J. Ostberg, Inc. is incorporated
          herein by reference to Exhibit 10.21 of the 1993 10-K Report       *

10.8**    1993 Equity Incentive Plan, as amended.

10.9**    1993 Director Option Plan is incorporated herein by reference
          to Exhibit 10.2 to the Registrant's Quarterly Report on Form
                                                                             153

          10-Q for the thirteen weeks ended April 2, 1993, as amended
          (the "1993 Form 10-Q")                                             *

10.10**   VP Bonus Plan is incorporated herein by reference to
          Exhibit 10.19 to the Form S-2                                      *

10.11**   Compensation Agreement between the Registrant and
          James H. Noyes, Jr. is incorporated herein by reference
          to Exhibit 10.3 to the 1993 Form 10-Q                              *

10.12**   Letter Agreement dated March 30, 1995, between the Registrant
          and Principal Mutual Life Insurance Company is incorporated herein
          by reference to Exhibit 10.01 of the Registrant's Quarterly Report
          on Form 10-Q for the thirteen weeks ended March 31, 1995           *

10.13#    Second and Third Amendments to the Credit Agreement among the
          Registrant, State Street Bank and Trust Company and CoreStates
          Bank, N.A. is incorporated herein by reference to Exhibit 10.27 to
          the Registrant's Annual Report on Form 10-K for the fiscal year
          ended January 3, 1997.                                             *

21        Subsidiaries of the Registrant

23.1      Consent of Coopers & Lybrand L.L.P.

23.2      Consent of Grant Thornton

27.1      Financial Data Schedule restated for the fiscal year ended January 5,
          1996.

27.2      Financial Data Schedule restated for the fiscal year ended January 3,
                                                                             154

          1997, the three months ended April 5, 1996, the six months ended
          July 5, 1996 and the nine months ended October 4, 1996.

27.3      Financial Data Schedule restated for the fiscal year ended January 2,
          1998 and Financial Data Schedule restated for the three months
          ended April 4, 1997, the six months ended July 4, 1997 and the
          nine months ended October 3, 1997.



*         Incorporated herein by reference.

**        Management contract or compensatory plan or arrangement filed
          herewith in response to Item 14(a)(3) of the instructions to Form 10-
          K.

#         Confidential treatment previously granted as to certain portions of
          such document.













                                                                             155
































                                                                             156