<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   For The Quarterly Period Ended May 3, 2003


                         Commission File Number 1-14770

                            PAYLESS SHOESOURCE, INC.
             (Exact name of registrant as specified in its charter)


                DELAWARE                                    43-1813160
   (State or other jurisdiction of                       (I.R.S. Employer
    incorporation or organization)                    Identification Number)


 3231 SOUTHEAST SIXTH AVENUE, TOPEKA, KANSAS                 66607-2207
  (Address of principal executive offices)                   (Zip Code)

                                 (785) 233-5171
                         (Registrant's telephone number,
                              including area code)

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 and (2) has been subject to such filing
requirements for the past 90 days.
                                                YES   X     NO
                                                    -----      ------

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

                                                YES   X     NO
                                                    -----      ------

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

                          Common Stock, $.01 par value
                      68,055,855 shares as of June 10, 2003



<PAGE>



                         PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

                    PAYLESS SHOESOURCE, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                   (UNAUDITED)


(Dollars in millions)
<Table>
<Caption>
                                               MAY 3,        MAY 4,      FEBRUARY 1,
ASSETS                                          2003          2002          2003
------                                        --------      --------     -----------
<S>                                           <C>           <C>           <C>
Current Assets:
     Cash and cash equivalents                $   47.9      $  116.7      $   74.4
     Restricted cash                              33.0          15.5          28.5
     Inventories                                 479.2         364.4         452.5
     Current deferred income taxes                20.0          31.7          16.4
     Other current assets                         65.9          65.1          61.8
                                              --------      --------      --------
        Total current assets                     646.0         593.4         633.6

Property and Equipment:
     Land                                          8.5           7.8           7.6
     Buildings and leasehold improvements        627.9         602.4         625.4
     Furniture, fixtures and equipment           505.8         474.6         490.0
     Property under capital leases                 4.6           7.3           4.6
                                              --------      --------      --------
        Total property and equipment           1,146.8       1,092.1       1,127.6
     Accumulated depreciation
        and amortization                        (720.5)       (653.8)       (701.3)
                                              --------      --------      --------
        Property and equipment, net              426.3         438.3         426.3

Favorable leases, net                             33.1          36.0          34.3
Deferred income taxes                             25.5          30.0          29.0
Other assets                                      27.7          27.3          27.6
                                              --------      --------      --------
        Total Assets                          $1,158.6      $1,125.0      $1,150.8
                                              ========      ========      ========

LIABILITIES AND SHAREOWNERS' EQUITY
-----------------------------------

Current Liabilities:
     Current maturities of long-term debt     $   89.0      $   72.6      $   83.2
     Notes payable                                33.0          15.5          28.5
     Accounts payable                            101.6          85.8         106.4
     Accrued expenses                            130.0         148.5         123.7
                                              --------      --------      --------
        Total current liabilities                353.6         322.4         341.8

Long-term debt                                   118.7         227.0         140.7
Other liabilities                                 52.8          59.1          52.3
Minority interest                                 17.9          9.0           17.8
Total shareowners' equity                        615.6         507.5         598.2
                                              --------      --------      --------
        Total Liabilities and Shareowners'
           Equity                             $1,158.6      $1,125.0      $1,150.8
                                              ========      ========      ========
</Table>

            See Notes to Condensed Consolidated Financial Statements.

                                       2
<PAGE>



                    PAYLESS SHOESOURCE, INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
                                   (UNAUDITED)


(Dollars and shares in millions, except per share)
<Table>
<Caption>
                                                                13 WEEKS ENDED
                                                       ---------------------------------
                                                         MAY 3, 2003        MAY 4, 2002
                                                       --------------     --------------
<S>                                                    <C>                <C>
Net sales                                              $        697.7     $        738.2

Cost of sales                                                   493.3              517.2

Selling, general, and administrative expenses                   180.1              177.9
                                                       --------------     --------------

Operating profit                                                 24.3               43.1

Interest expense                                                  5.0                6.0

Interest income                                                  (0.9)              (0.5)
                                                       --------------     --------------

Earnings before income taxes and minority interest               20.2               37.6

Provision for income taxes                                        7.4               14.5
                                                       --------------     --------------

Earnings before minority interest                                12.8               23.1

Minority interest                                                 1.3                0.8
                                                       --------------     --------------

Net Earnings                                           $         14.1    $          23.9
                                                       ==============    ===============

Diluted Earnings per Share                             $         0.21    $          0.35
                                                       ==============    ===============

Basic Earnings per Share                               $         0.21    $          0.36
                                                       ==============    ===============

Diluted Weighted Average Shares Outstanding                      68.1               68.4
                                                       ==============    ===============

Basic Weighted Average Shares Outstanding                        68.0               67.2
                                                       ==============    ===============
</Table>

            See Notes to Condensed Consolidated Financial Statements.

                                       3
<PAGE>




                    PAYLESS SHOESOURCE, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (UNAUDITED)

(Dollars in millions)
<Table>
<Caption>
                                                               13 WEEKS ENDED
                                                     ----------------------------------
                                                     MAY 3, 2003            MAY 4, 2002
                                                     -----------            -----------
<S>                                                  <C>                    <C>
Operating Activities:
   Net earnings                                        $   14.1               $   23.9
   Adjustments for noncash items included
   in net earnings:
       Loss on disposal of assets                           0.3                    0.7
       Depreciation and amortization                       25.3                   25.7
       Amortization of unearned
          restricted stock                                  0.2                    0.8
       Deferred income taxes                               (0.1)                   4.5
       Minority interest                                   (1.3)                  (0.8)
       Tax benefit of stock option exercises                  --                   2.6

Changes in working capital:
   Merchandise inventories                                (26.7)                 (24.9)
   Other current assets                                    (4.0)                  (9.0)
   Accounts payable                                        (4.8)                  12.3
   Accrued expenses                                         6.3                    9.2
Other assets and liabilities, net                           3.8                    0.2
                                                       --------               --------

Total Operating Activities                                 13.1                   45.2
                                                       --------               --------

Investing Activities:
   Capital expenditures                                   (24.4)                 (23.3)
   Disposition of property and equipment                     --                    0.8
                                                       --------               --------

Total Investing Activities                                (24.4)                 (22.5)
                                                       --------               --------

Financing Activities:
   Issuance of notes payable                                4.5                    6.0
   Restricted cash                                         (4.5)                  (6.0)
   Repayment of long-term debt                            (16.2)                 (11.5)
   Net issuances (purchases) of common stock               (0.4)                  10.1
   Contributions by minority owners                         1.8                    3.2
   Other financing activities                              (0.4)                  (0.1)
                                                       --------               --------

Total Financing Activities                                (15.2)                   1.7
                                                       --------               --------

Increase (Decrease) in Cash and Cash Equivalents          (26.5)                  24.4
Cash and Cash Equivalents, Beginning of Year               74.4                   92.3
                                                       --------               --------
Cash and Cash Equivalents, End of Period               $   47.9               $  116.7
                                                       ========               ========

Cash paid during the period:
   Interest                                            $    4.5               $    6.6
   Income Taxes                                             5.9                   (0.1)
</Table>

            See Notes to Condensed Consolidated Financial Statements.

                                       4
<PAGE>

                    PAYLESS SHOESOURCE, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1. INTERIM RESULTS. These unaudited Condensed Consolidated Financial
Statements of Payless ShoeSource, Inc. (the "Company") have been prepared in
accordance with the instructions to Form 10-Q of the United States Securities
and Exchange Commission and should be read in conjunction with the Notes to
Consolidated Financial Statements (pages 20-25) in the Company's 2002 Annual
Report. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, the unaudited Condensed Consolidated
Financial Statements are fairly presented and all adjustments (consisting only
of normal recurring adjustments) necessary for a fair statement of the results
for the interim periods have been included; however, certain items are included
in these statements based upon estimates for the entire year. The results for
the three-month period ended May 3, 2003, are not necessarily indicative of the
results that may be expected for the fiscal year ending January 31, 2004.

NOTE 2. INVENTORIES. Merchandise inventories are valued by the retail method and
are stated at the lower of cost, determined using the first-in, first-out (FIFO)
basis, or market. Raw material and in-transit inventories are valued at the
lower of cost using the FIFO basis, or market. Raw materials of $13.7 million
and $15.5 million are included in Inventories at May 3, 2003 and February 1,
2003, respectively. There were no raw materials in Inventories at May 4, 2002.

NOTE 3. INTANGIBLES. Effective February 3, 2002, the Company adopted Statement
of Financial Accounting Standard ("SFAS") No. 142, "Goodwill and Other
Intangible Assets." Under SFAS 142, goodwill and other intangible assets with
indefinite lives are no longer subject to amortization. This Statement also
provides that goodwill should not be amortized, but shall be tested for
impairment annually, or more frequently if circumstances indicate potential
impairment, through a comparison of fair value to its carrying amount. In the
first quarter of fiscal 2002, the Company ceased amortization of goodwill and
completed the first step of the required two-step goodwill impairment testing.
The first step of the impairment test required the Company to compare the fair
value of each reporting unit to its carrying value to determine whether there
was an indication of impairment. If there had been an indication of impairment,
the Company would have allocated the fair value of the reporting unit to its
assets and liabilities as if the reporting unit had been acquired in a business
combination. During 2002, no impairment losses were recorded under SFAS No. 142.
The Company assesses the fair value of its relevant reporting units annually in
the first quarter. No impairment loss was recorded during the first quarter of
2003.

NOTE 4. LONG-TERM DEBT AND LINE OF CREDIT. In 2000, the Company entered into a
$600 million credit facility consisting of a $400 million term loan and a line
of credit of $200 million ("Credit Facility"). The Company's outstanding
indebtedness on its term loan declined to $200.0 million as of May 3, 2003, from
$293.3 million as of May 4, 2002. As of May 3, 2003, no amounts were drawn
against the Company's $200.0 million line of credit. The availability under the
line of credit has been reduced, however, by $13.4 million in outstanding
letters of credit.

The Company's Credit Facility is secured by a first priority security interest
in all of the capital stock of the Company's domestic subsidiaries and 65
percent of the capital stock of its first-tier foreign subsidiaries. The
indentures governing the Credit Facility require the Company to comply with
various financial and other covenants, the most restrictive of which is the
maintenance of a fixed charge coverage ratio as defined in the credit agreement.
As of May 3, 2003, the Company is in compliance with all of the covenants under
the Credit Facility. However, based on current expectations, the Company would
not meet the required fixed charge coverage ratio at the end of the second
quarter of 2003. Accordingly, the Company intends to amend its fixed charge
coverage ratio requirement.

NOTE 5. ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. In order
to mitigate the Company's exposure to fluctuations in interest rates, the
Company has entered into a series of interest rate swap agreements whereby the
Company will receive interest at the three-month London Inter-Bank Offered Rate
("LIBOR") and pay a weighted average rate of 6.9%. The interest rate swaps
expire in the second quarter of 2003.

                                       5

<PAGE>

The Company accounts for derivative instruments in accordance with Statement of
Financial Accounting Standard ("SFAS") No. 133 "Accounting for Derivative
Instruments and Hedging Activities." The Company's interest rate swap agreements
have been designated as cash flow hedging instruments. Such instruments are
those that effectively convert variable interest payments on debt instruments
into fixed payments. For qualifying hedges, SFAS No. 133 allows derivative gains
and losses to offset related results on hedged items in the consolidated
statement of operations. As the critical terms of the Company's interest rate
swap agreements match those of the related hedged obligations, the Company has
concluded that there is no ineffectiveness in its hedges. Changes in the fair
value of interest rate swap agreements designated as cash flow hedging
instruments are reported in accumulated other comprehensive income.

During the first quarter of 2003, the Company recorded an after-tax gain of $0.1
million ($0.1 million pre-tax) to other accumulated comprehensive income,
representing the decline in fair value of its interest rate swap agreements. At
May 3, 2003, the Company had a cumulative after-tax loss of $0.7 million ($1.1
million pre-tax) included in other accumulated comprehensive income related to
its interest rate swap agreements on a notional amount of $80.0 million. The
resulting liability is reflected in other current liabilities and other
liabilities in the accompanying condensed consolidated balance sheet. The
pre-tax loss is subsequently reclassified into interest expense as a yield
adjustment in the same period in which the related interest on the floating rate
debt obligations affects earnings. During the first quarter of 2003, $1.0
million of after-tax losses ($1.6 million pre-tax) included in accumulated other
comprehensive income related to interest rate swap agreements was reclassified
to interest expense. Over the course of the next twelve months, approximately
$0.7 million of after-tax losses ($1.1 million pre-tax) in accumulated other
comprehensive income related to interest rate swap agreements are expected to be
reclassified into interest expense as a yield adjustment on the Company's
variable-rate long-term debt.

NOTE 6. RESTRUCTURING CHARGE. During the fourth quarter of 2001, the Company
recorded a non-recurring charge of $70.0 million comprised of a $53.9 million
restructuring charge and a $16.1 million asset impairment charge. The cash
portion of the charge was $41.4 million. As part of the restructuring, the
Company centralized all domestic retail operations functions in Topeka, Kansas.
Four domestic division offices in Atlanta, Baltimore, Chicago, and Dallas were
closed. The Company also announced its intention to close 104 under-performing
stores, including 67 Parade stores and 37 Payless ShoeSource stores, as part of
the restructuring. The store closings differ from closings in the normal course
of business in that they have a longer remaining lease term. The remaining
Parade locations are concentrated in the Northeast and selected major
metropolitan areas. As of May 3, 2003, the Company has closed 95 stores and has
decided to continue to operate 7 of the 104 stores originally identified for
closure. The remaining two stores will be closed in 2003. The Company eliminated
a total of 230 positions in conjunction with the restructuring. The table below
provides a roll-forward of the $41.4 million reserve established as part of the
2001 non-recurring charge and the status of the reserve as of May 3, 2003. Costs
are being charged against the reserves as incurred. Reserves are reviewed for
adequacy on a periodic basis and are adjusted as appropriate based on those
reviews.

(Dollars in millions)
<Table>
<Caption>
                                        PRE-TAX 2001   CASH PAID IN                   ACCRUED AS OF     CASH PAID   ACCRUED AS OF
                                         CASH CHARGE   2001 AND 2002   ADJUSTMENTS   FEBRUARY 1, 2003    IN 2003     MAY 3, 2003
                                        ------------   -------------   -----------   ----------------   ---------   -------------
<S>                                      <C>           <C>             <C>           <C>                <C>         <C>
Store closings (including lease
    terminations and employee
    termination costs)                      $ 17.6       $  (8.5)        $ (8.0)           $ 1.1         $ (0.2)        $ 0.9
Division closings (including lease
   terminations and employee
   termination costs)                          3.3          (2.7)           1.8              2.4           (0.2)          2.2
Corporate employee termination costs           8.0          (8.0)             -                -              -             -
Professional fees                              6.4          (8.1)           2.0              0.3              -           0.3
Inventory liquidation costs (recorded
    as a component of cost of sales)           4.4          (2.4)          (2.0)               -              -             -
Other restructuring related costs              1.7          (3.1)           1.4                -              -             -
                                            ------       -------         ------            -----         ------         -----

      Total                                 $ 41.4       $ (32.8)        $ (4.8)           $ 3.8         $ (0.4)        $ 3.4
                                            ======       =======         ======            =====         ======         =====
</Table>

In 2002, the Company recorded an additional charge of $2.0 million for
professional fees and $1.4 million for relocation costs associated with
implementing the restructuring that was announced during the fourth quarter of
2001. Also, in 2002, the Company decreased its reserve for store closings by
$8.0 million, inventory liquidations by $2.0 million and increased its reserve
for division closings by $1.8 million.

                                       6

<PAGE>

During 2002, in an effort to enhance global sourcing initiatives and align with
international expansion strategies, the Company reorganized its global sourcing
structure to focus on cost reduction initiatives from procurement of materials
through distribution of product. As part of these cost reduction initiatives,
the Company is now taking ownership of certain raw materials as the materials
enter the production process. These raw materials are included in Inventories.

NOTE 7. INCOME TAXES. The Company's effective income tax rate for the first
quarter of 2003 has been reduced to 36.5 percent from 38.4 percent during the
first quarter of 2002. The reduction reflects the tax impact of actions taken to
restructure operations to support the increasing globalization of the Company's
business. Costs associated with these actions were provided for in the
restructuring charge taken in the fourth quarter of 2001 and the second quarter
of 2002.

NOTE 8. COMPREHENSIVE INCOME. The following table shows the computation of
comprehensive income:

(Dollars in millions)
<Table>
<Caption>
                                                                       13 WEEKS ENDED
                                                                ----------------------------
                                                                MAY 3, 2003      MAY 4, 2002
                                                                -----------      -----------
<S>                                                             <C>              <C>
Net Income                                                         $ 14.1          $ 23.9

Other Comprehensive Income:
     Change in fair value of derivatives                              0.1            (0.4)
     Derivative losses reclassified into interest expense             1.0             1.9
     Foreign currency translation adjustments                         2.3             1.6
                                                                   ------          ------
        Total other comprehensive income                              3.4             3.1
                                                                   ------          ------
Total Comprehensive Income                                         $ 17.5          $ 27.0
                                                                   ======          ======
</Table>

NOTE 9. EARNINGS PER SHARE. Basic earnings per share are computed by dividing
net earnings by the weighted average number of shares of common stock
outstanding during the period. Diluted earnings per share include the effect of
conversions of stock options.

NOTE 10. STOCK-BASED COMPENSATION. The Company adopted the disclosure provisions
of Statement of Financial Accounting Standards ("SFAS") No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure, an amendment of FASB
Statement No. 123." The Statement requires prominent disclosures in both annual
and interim financial statements regarding the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The Company accounts for stock compensation awards under the intrinsic
value method of Accounting Principles Board ("APB") Opinion No. 25. APB Opinion
No. 25 requires compensation cost to be recognized based on the excess, if any,
between the quoted market price of the stock at the date of grant and the amount
an employee must pay to acquire the stock. All options awarded under all of the
Company's plans are granted with an exercise price equal to the fair market
value on the date of the grant.

SFAS 123, "Accounting for Stock-Based Compensation," provides an alternative
method of accounting for stock-based compensation, which establishes a fair
value based method of accounting for employee stock options or similar equity
instruments. The Company uses the Black-Scholes option pricing model to estimate
the grant date fair value of its option grants. The fair value is recognized
over the option vesting period. The following table presents the effect on net
earnings and earnings per share had the Company adopted the fair value based
method of accounting for stock-based compensation under SFAS No. 123,
"Accounting for Stock-Based Compensation."

(Dollars in millions, except per share amounts)
<Table>
<Caption>
                                                                          13 WEEKS ENDED
                                                                   ---------------------------
                                                                   MAY 3, 2003     MAY 4, 2002
                                                                   -----------     -----------
<S>                                                                <C>             <C>
Net earnings:
    As reported                                                       $ 14.1          $ 23.9
       Less: Total stock-based employee compensation expense
       determined under fair value based method for all
       awards, net of related taxes                                   $  1.3          $  1.8
    Pro forma                                                         $ 12.8          $ 22.1
Diluted earnings per share:
    As reported                                                       $ 0.21          $ 0.35
    Pro forma                                                         $ 0.19          $ 0.32
Basic earnings per share:
    As reported                                                       $ 0.21          $ 0.36
    Pro forma                                                         $ 0.19          $ 0.33
</Table>

                                       7
<PAGE>

NOTE 11. STOCK SPLIT. The Company completed a three-for-one stock split,
effected in the form of a stock dividend, to shareholders of record on March 13,
2003, payable on March 27, 2003. The Company issued approximately 44.4 million
shares of common stock as a result of the stock split. All references to the
number of shares and per share amounts of common stock have been restated to
reflect the stock split. The Company reclassified an amount equal to the par
value of the number of shares issued to common stock from retained earnings.

NOTE 12. SEGMENT REPORTING. The Company and its subsidiaries are principally
engaged in the operation of retail locations offering family footwear and
accessories. The Company operates its business in two reportable business
segments: Payless Domestic and Payless International. These segments have been
determined based on internal management reporting and management
responsibilities. The Payless International segment includes retail operations
in Canada, South America, Central America and the Caribbean. The Company's
operations in its Central and South America regions are operated as joint
ventures in which the Company maintains a 60-percent ownership. Certain
management costs for services performed by Payless Domestic and certain royalty
fees and sourcing fees charged by Payless Domestic are allocated to the Payless
International segment. These total costs and fees amounted to $4.4 million
during each of the periods ended May 3, 2003, and May 4, 2002, respectively. The
Payless Domestic segment includes retail operations in the United States, Guam,
and Saipan. Information on the segments is as follows:

(Dollars in millions)
<Table>
<Caption>
                                      Payless Domestic    Payless International    Payless Consolidated
                                      ----------------    ---------------------    --------------------
<S>                                   <C>                 <C>                      <C>
Quarter ended May 3, 2003

Revenues from external customers           $  629.7             $   68.0                 $  697.7
Operating profit                               28.1                 (3.8)                    24.3
Total assets                                  962.8                195.8                  1,158.6

Quarter ended May 4, 2002

Revenues from external customers           $  679.0             $   59.2                 $  738.2
Operating profit                               43.5                 (0.4)                    43.1
Total assets                                  978.6                146.4                  1,125.0
</Table>


NOTE 13. RECLASSIFICATIONS. Certain reclassifications have been made to prior
year balances to conform to the current year presentation.

NOTE 14. FOREIGN CURRENCY TRANSLATION. Local currencies are the functional
currencies for all subsidiaries. Accordingly, assets and liabilities of foreign
subsidiaries are translated at the rate of exchange at the balance sheet date.
Adjustments from the translation process are accumulated as part of other
comprehensive income and are included as a separate component of shareowners'
equity. Income and expense items of these subsidiaries are translated at average
rates of exchange.

NOTE 15. CONTINGENCIES. On or about December 20, 2001, a First Amended Complaint
was filed against the Company in the U.S. District Court for the District of
Oregon, captioned Adidas America, Inc. and Adidas-Salomon AG v. Payless
ShoeSource, Inc. The First Amended Complaint seeks injunctive relief and
unspecified monetary damages for trademark and trade dress infringement, unfair
competition, deceptive trade practices and breach of contract. The Company
believes it has meritorious defenses to claims asserted in the lawsuit and has
filed an answer and a motion for summary judgment which the court granted in
part. An estimate of the possible loss, if any, or the range of loss cannot be
made.

On or about January 20, 2000, a complaint was filed against the Company in the
U.S. District Court for the District of New Hampshire, captioned Howard J.
Dananberg, D.P.M. v. Payless ShoeSource, Inc. The Complaint seeks injunctive
relief, unspecified treble monetary damages, attorneys' fees, interest and costs
for patent infringement. The Company believes it has meritorious defenses to
claims asserted in the lawsuit. An estimate of the possible loss, if any, or the
range of loss cannot be made.

NOTE 16. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS. In December 2002, the
FASB issued SFAS 148, "Accounting for Stock-Based Compensation - Transition and
Disclosure" ("SFAS 148"). SFAS 148 amends SFAS 123, "Accounting for Stock-Based
Compensation," and provides alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. SFAS 148 also amends the disclosure requirements of SFAS 123 to
require prominent disclosure in annual and interim financial statements about
the effects of stock-based compensation. The transition guidance and annual
disclosure provisions of SFAS 148 are effective for financial statements issued
for fiscal years ending after December 15, 2002. The interim disclosure
provisions of this statement are effective for financial reports containing
financial statements for interim periods beginning after December 15, 2002. The
Company has adopted the disclosure provisions of SFAS 148.

                                       8
<PAGE>

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

This discussion and analysis should be read in conjunction with the Condensed
Consolidated Financial Statements and Notes to the Condensed Consolidated
Financial Statements included in this Form 10-Q.

REVIEW OF OPERATIONS

The following discussion summarizes the significant factors affecting operating
results for the quarters ended May 3, 2003 (2003) and May 4, 2002 (2002).

NET EARNINGS

Net earnings totaled $14.1 million in the first quarter of 2003 compared with
$23.9 million in the first quarter of 2002.

The following table presents the components of costs and expenses, as a percent
of revenues, for the first quarter of 2003 and 2002.


<Table>
<Caption>
                                                                 FIRST QUARTER
                                                              ------------------
                                                              2003          2002
                                                              ----          ----
<S>                                                           <C>           <C>
Cost of sales                                                 70.7%         70.1%

Selling, general, and administrative expense                  25.8          24.1
                                                              ----          ----

Operating profit                                               3.5           5.8

Interest expense, net                                          0.6           0.7
                                                              ----          ----

Earnings before income taxes and minority interest             2.9           5.1

Effective income tax rate*                                    36.5%         38.4%
                                                              ====          ====

Earnings before minority interest                              1.8           3.1

Minority interest                                              0.2           0.1
                                                              ----          ----

Net Earnings                                                   2.0%          3.2%
                                                              ====          ====
</Table>

* Percent of pre-tax earnings


NET SALES

Net sales represent all sales during the period net of estimated returns.
Same-store sales is calculated on a weekly basis. If a store is open the entire
week in each of the two years being compared, its sales are included in the
same-store sales calculation for that week. Relocated and remodeled stores are
also included in the same-store sales calculation if they were open during the
entire week in each of the two years being compared. During the first quarter of
2003 total sales decreased 5.5% compared to the first quarter of 2002,
consisting of a 10.7% decrease in unit volume and a 5.8% increase in average
selling prices. Footwear unit volume decreased 12.5 percent and footwear average
selling prices increased 6.6 percent in the first quarter of 2003 compared to
the first quarter of 2002. Sales percent decreases are as follows:

<Table>
<Caption>
                                                    FIRST QUARTER
                                                 -------------------
                                                 2003           2002
                                                 ----           ----
<S>                                              <C>            <C>
Net Sales                                        (5.5)%         (3.9)%
Same-Store Sales                                 (6.2)%         (6.3)%
</Table>

After a positive performance in February 2003, sales were weaker than last year
during the months of March and April. Sales shortfalls were concentrated in
sandals and athletic footwear due in part to unseasonably cool weather and a
weak economy.

                                       9

<PAGE>


COST OF SALES

Cost of sales includes cost of merchandise sold and the Company's buying and
occupancy costs. Cost of sales was $493.3 million in the 2003 first quarter,
down 4.6% from $517.2 million in the 2002 first quarter. As a percentage of net
retail sales, cost of sales was 70.7 percent in the first quarter of 2003,
compared with 70.2 percent in the first quarter of 2002. The reduction in gross
margin reflects the negative leverage of occupancy costs due to negative
same-store sales.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses were $180.1 million in the first
quarter of 2003, up 1.2% from $177.9 million in the first quarter of 2002. As a
percentage of net retail sales, selling, general and administrative expenses
were 25.8 percent during the first quarter of 2003 compared with 24.1 percent in
the first quarter of 2002. The increase, as a percentage of net retail sales,
during the first quarter of 2003 reflects the negative leverage of expenses due
to lower sales.

INTEREST EXPENSE, NET

Interest expense decreased to $4.1 million in the first quarter of 2003 from
$5.5 million in the first quarter of 2002. The decrease is the result of the
repayment of $91.9 million of long-term debt during 2002 and the first quarter
of 2003 and lower interest rates on the unhedged portion of variable rate debt
during the first quarter of 2003.

EFFECTIVE INCOME TAX RATE

The Company's effective income tax rate decreased to 36.5 percent in the first
quarter of 2003 from 38.4 percent in the first quarter of 2002. The reduction
reflects the tax impact of actions taken to restructure operations to support
the increasing globalization of the Company's business and to participate in
jurisdictional tax incentive programs.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOW

Cash flow from operations during the three months ended May 3, 2003 was $13.1
million. This figure represented 1.9 percent of net sales in the first quarter
of 2003 compared with 6.1 percent in the first quarter of 2002. The decrease in
cash flow in the first quarter of 2003 is due primarily to the decrease in net
earnings and the timing of payments for inventory purchases.

Internally generated funds and continued investment from the Company's joint
venture partners are expected to continue to be the most important component of
the Company's capital resources; however, the Company may from time to time draw
on its revolving credit line to fund seasonal cash flow needs.

CAPITAL EXPENDITURES

Capital expenditures during the first quarter of 2003 totaled $24.4 million,
including $1.8 million from the Company's joint venture partners. The Company
estimates that capital expenditures for the remainder of the year will be $90.6
million, including a $5.0 million contribution from the Company's joint venture
partners in Central and South America. The Company anticipates that cash flow
from operations, the revolving credit line, and its joint venture partners will
be sufficient to finance projected capital expenditures.

                                       10

<PAGE>


FINANCING ACTIVITIES

As of May 3, 2003, no amounts were drawn against the Company's $200.0 million
line of credit. The availability under the line of credit has been reduced,
however, by $13.4 million in outstanding letters of credit. The Company's
financial commitments include required principal payments on the term loan and
required payments under operating leases and capital leases and certain royalty
payments as of May 3, 2003 as follows:

(Dollars in millions)
<Table>
<Caption>

       YEAR             TERM LOAN      OPERATING LEASES       ROYALTIES       CAPITAL LEASES        OTHER
       ----             ---------      ----------------       ---------       --------------       -------
<S>                     <C>            <C>                    <C>             <C>                  <C>
Remainder of 2003           65.9               190.0               1.3                0.6              0.3
       2004                106.0               213.2               1.5                0.7              1.1
       2005                 28.1               172.6               1.5                0.5               --
       2006                   --               142.9               1.6                0.5               --
       2007                   --               131.1               0.3                0.5               --
    Thereafter                --               211.4                --                0.1              4.0
                        --------            --------           -------            -------          -------
       Total            $  200.0            $1,061.2           $   6.2            $   2.9          $   5.4
                        ========            ========           =======            =======          =======
</Table>

The Company's royalty commitment consists of minimum royalty payments for the
purchase of branded merchandise.

The Company's term loan and line of credit comprise its Credit Facility, which
is secured by a first priority security interest in all of the capital stock of
the Company's domestic subsidiaries and 65 percent of the capital stock of its
first-tier foreign subsidiaries. The indentures governing the Credit Facility
require the Company to comply with various financial and other covenants. As of
May 3, 2003, the Company is in compliance with all of the covenants under the
credit facility. However, based on current expectations, at the end of the
second quarter ending August 2, 2003, the Company would not meet the most
restrictive of those covenants, which is the maintenance of a fixed charge
coverage ratio, as defined in the credit agreement, as amended. The Company
intends to amend its fixed charge coverage ratio requirement. While there can be
no assurances that the Company will be successful in these efforts, the Company
believes it will be able to amend the fixed charge coverage ratio requirement
based on its positive cash flow being generated from operations, the Company's
history of paying down borrowings faster than required and its ample coverage
levels under the other covenants. In addition, the company is evaluating its
capital structure.

At May 3, 2003, the Company's long-term debt, including current maturities,
declined to $207.7 million from $299.6 million at May 4, 2002. This reduction in
debt has resulted in a significant improvement in the debt to capitalization
ratio as indicated in the table below.

The Company also maintains demand notes payable of $33.0 million entered into to
efficiently finance its Latin American subsidiaries. The Company maintains cash
balances of $33.0 million in certificates of deposit as compensating balances to
collateralize the notes payable. The certificates of deposit are reflected as
restricted cash in the accompanying condensed consolidated balance sheet.

                                       11

<PAGE>


FINANCIAL CONDITION RATIOS

A summary of key financial information for the periods indicated is as follows:

<Table>
<Caption>
                                      MAY 3,          MAY 4,         FEB. 1,
                                       2003            2002           2003
                                      ------          ------         -------
<S>                                   <C>             <C>            <C>
Current Ratio                           1.8             1.8            1.9

Debt-Capitalization Ratio*             28.1%           38.3%          29.7%

Interest Coverage Ratio**               2.4x            1.6x           2.5x
</Table>

*   Debt-to-capitalization has been computed by dividing total debt by
    capitalization. Total debt is defined as long-term debt including current
    maturities, notes payable and borrowings under the revolving line of credit.
    Capitalization is defined as total debt and shareowners' equity. The
    debt-to-capitalization ratio, including the present value of future minimum
    rental payments under operating leases as debt and as capitalization, would
    be 64.6%, 69.8% and 65.4% respectively, for the periods referred to above.
    The reduction in the debt to capitalization ratio reflects payments made on
    the Company's outstanding indebtedness and an increase in equity due to the
    Company's earnings.

**  Interest coverage ratio, which is presented for the trailing 52 weeks in
    each period ended above, is defined as earnings before income taxes, gross
    interest expense, and the interest component of rent expense, divided by
    gross interest expense and the interest component of rent expense. The
    increase in the interest coverage ratio as of the first quarter of 2003
    compared to the first quarter of 2002 is primarily attributable to the $70.0
    million non-recurring charge recorded during the fourth quarter of 2001 for
    restructuring initiatives and asset impairments included in the twelve-month
    period ended May 4, 2002.

STORE ACTIVITY

At the end of the first quarter of 2003, the Company operated 5,003 stores
offering quality family footwear and accessories in 50 states, Puerto Rico,
Guam, Saipan, the U.S. Virgin Islands, Canada, Chile, Costa Rica, the Dominican
Republic, Ecuador, El Salvador, Guatemala, Honduras, Nicaragua, Panama, Peru,
and Trinidad & Tobago. The following table presents the change in store count
for the first quarters of 2003 and 2002.

<Table>
<Caption>
                                                        FIRST QUARTER
                                                      -----------------
                                                       2003        2002
                                                      -----       -----
<S>                                                   <C>         <C>
Beginning of quarter                                  4,992       4,964
Stores opened                                            60          61
Stores closed                                           (49)        (40)
                                                      -----       -----
Ending store count                                    5,003       4,985
                                                      =====       =====
</Table>

Included in the 2003 first quarter store openings are 7 net new stores in
Central America and the Caribbean operated under a joint venture agreement. This
brings total store count in this region to 128. The Company intends to open 25
to 30 additional stores in this region during the remainder of 2003. Management
believes this region represents an opportunity to open a total of 150 to 200
stores.

During the first quarter of 2003 the Company also opened 7 new stores in South
America. This brings total store count in this region to 49. These stores are
operated under a joint venture agreement. The Company intends to open 10 to 15
additional stores in this region during the remainder of 2003. The Andean region
of South America could represent approximately a 300-store opportunity.

                                       12

<PAGE>


RESTRUCTURING

During the fourth quarter of 2001, the Company recorded a non-recurring charge
of $70.0 million comprised of a $53.9 million restructuring charge and a $16.1
million asset impairment charge. The cash portion of the charge was $41.4
million. As part of the restructuring, the Company centralized all domestic
retail operations functions in Topeka, Kansas. Four domestic division offices in
Atlanta, Baltimore, Chicago, and Dallas were closed. The Company also announced
its intention to close 104 under-performing stores, including 67 Parade stores
and 37 Payless ShoeSource stores, as part of the restructuring. The store
closings differ from closings in the normal course of business in that they have
a longer remaining lease term. The remaining Parade locations are concentrated
in the Northeast and selected major metropolitan areas. As of May 3, 2003, the
Company has closed 95 stores and has decided to continue to operate 7 of the 104
stores originally identified for closure. The remaining two stores will be
closed in 2003. The Company eliminated a total of 230 positions in conjunction
with the restructuring. The table below provides a roll-forward of the $41.4
million reserve established as part of the 2001 non-recurring charge and the
status of the reserve as of May 3, 2003. Costs are being charged against the
reserves as incurred. Reserves are reviewed for adequacy on a periodic basis and
are adjusted as appropriate based on those reviews.

(Dollars in millions)
<Table>
<Caption>
                                        PRE-TAX 2001   CASH PAID IN                   ACCRUED AS OF     CASH PAID   ACCRUED AS OF
                                         CASH CHARGE   2001 AND 2002   ADJUSTMENTS   FEBRUARY 1, 2003    IN 2003     MAY 3, 2003
                                        ------------   -------------   -----------   ----------------   ---------   -------------
<S>                                     <C>            <C>             <C>           <C>                <C>         <C>
Store closings (including lease
    terminations and employee
    termination costs)                      $ 17.6       $  (8.5)        $ (8.0)           $ 1.1          $ (0.2)        $ 0.9
Division closings (including lease
    terminations and employee
    termination costs)                         3.3          (2.7)           1.8              2.4            (0.2)          2.2
Corporate employee termination costs           8.0          (8.0)             -                -               -             -
Professional fees                              6.4          (8.1)           2.0              0.3               -           0.3
Inventory liquidation costs (recorded
    as a component of cost of sales)           4.4          (2.4)          (2.0)               -               -             -
Other restructuring related costs              1.7          (3.1)           1.4                -               -             -
                                            ------       -------         ------            -----          ------         -----
      Total                                 $ 41.4       $ (32.8)        $ (4.8)           $ 3.8          $ (0.4)        $ 3.4
                                            ======       =======         ======            =====          ======         =====
</Table>

In 2002, the Company recorded an additional charge of $2.0 million for
professional fees and $1.4 million for relocation costs associated with
implementing the restructuring that was announced during the fourth quarter of
2001. Also, in 2002, the Company decreased its reserve for store closings by
$8.0 million, inventory liquidations by $2.0 million and increased its reserve
for division closings by $1.8 million.

During 2002, in an effort to enhance global sourcing initiatives and align with
international expansion strategies, the Company reorganized its global sourcing
structure to focus on cost reduction initiatives from procurement of materials
through distribution of product. As part of these cost reduction initiatives,
the Company is now taking ownership of certain raw materials as the materials
enter the production process. These raw materials are included in Inventories.

CRITICAL ACCOUNTING POLICIES

In preparing the accompanying condensed consolidated financial statements,
management makes estimates and assumptions that affect the amounts reported
within the financial statements. Actual results could differ from these
estimates. For more information regarding the Company's critical accounting
policies, estimates and judgments, see the discussion under Management's
Discussion and Analysis of Financial Condition and Results of Operations in the
Form 10-K for the year ended February 1, 2003.

                                       13

<PAGE>


ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE RISK

Interest on the Company's Credit Facility is based on the London Inter-Bank
Offered Rate ("LIBOR") plus a variable margin as defined in the credit
agreement. Therefore, the Company's future borrowing costs may fluctuate
depending upon the volatility of LIBOR. The Company currently mitigates a
portion of its interest rate risk through the use of interest rate swap
agreements, whereby the Company has agreed to exchange, at specific intervals,
the difference between fixed and variable interest amounts calculated by
reference to an agreed-upon notional amount.

FOREIGN CURRENCY RISK

Although the Company has international operating subsidiaries, the Company's
exposure to foreign currency rate fluctuations is not significant to the
financial condition or results of the Company.

ITEM 4 - CONTROLS AND PROCEDURES

The Company's principal executive officer and principal financial officer, with
the participation of the Company's management group, have evaluated the
Company's disclosure controls and procedures within 90 days of the filing date
of this Quarterly Report on Form 10-Q. Based on that evaluation, these officers
have concluded that the Company's disclosure controls and procedures are
effective. There were no significant changes in the Company's internal controls
or in other factors that could significantly affect the disclosure controls
since the date such controls were evaluated.

FORWARD-LOOKING STATEMENTS

This report contains, and from time to time the Company may publish,
forward-looking statements relating to such matters as anticipated financial
performance, business prospects, technological developments, new products,
future store openings, international expansion, possible strategic alternatives,
new business concepts, capital expenditures and similar matters. Statements
including the words "expects," "anticipates," "intends," "plans," "believes,"
"seeks," or variations of such words and similar expressions are forward-looking
statements. The Company notes that a variety of factors could cause its actual
results and experience to differ materially from the anticipated results or
other expectations expressed in its forward-looking statements. The risks and
uncertainties that may affect the operations, performance, development and
results of the Company's business include, but are not limited to, the
following: changes in consumer spending patterns; changes in consumer
preferences and overall economic conditions; the impact of competition and
pricing; changes in weather patterns; the financial condition of the suppliers
and manufacturers from whom the Company sources its merchandise; changes in
existing or potential duties, tariffs or quotas; changes in relationships
between the United States and foreign countries; changes in relationships
between Canada and foreign countries; economic and political instability in
foreign countries or restrictive actions by the governments of foreign countries
in which suppliers and manufacturers from whom the Company sources are located
or in which the Company operates stores; changes in trade and/or tax laws;
fluctuations in currency exchange rates; availability of suitable store
locations on appropriate terms; the ability to hire, train and retain
associates; general economic, business and social conditions in the countries
from which the Company sources products, supplies or has or intends to open
stores; the performance of our partners in joint ventures; the ability to comply
with local laws in foreign countries; threats or acts of terrorism or war; and
strikes, work stoppages or slowdowns by unions that play a significant role in
the manufacture, distribution or sale of product. In addition, severe acute
respiratory syndrome (SARS) or other illnesses could cause a disruption in the
Company's supply chain or consumer purchasing patterns. All subsequent written
and oral forward-looking statements attributable to the Company or persons
acting on its behalf are expressly qualified in their entirety by these
cautionary statements. The Company does not undertake any obligation to release
publicly any revisions to such forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

                                       14

<PAGE>


PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

Other than as described below, there are no material pending legal proceedings
other than ordinary, routine litigation incidental to the business to which the
Company is a party or of which any of its property is subject.

On or about December 20, 2001, a First Amended Complaint was filed against the
Company in the U.S. District Court for the District of Oregon, captioned Adidas
America, Inc. and Adidas-Salomon AG v. Payless ShoeSource, Inc. The First
Amended Complaint seeks injunctive relief and unspecified monetary damages for
trademark and trade dress infringement, unfair competition, deceptive trade
practices and breach of contract. The Company believes it has meritorious
defenses to claims asserted in the lawsuit and has filed an answer and a motion
for summary judgment which the court granted in part. An estimate of the
possible loss, if any, or the range of loss cannot be made.

On or about January 20, 2000, a complaint was filed against the Company in the
U.S. District Court for the District of New Hampshire, captioned Howard J.
Dananberg, D.P.M. v. Payless ShoeSource, Inc. The Complaint seeks injunctive
relief, unspecified treble monetary damages, attorneys' fees, interest and costs
for patent infringement. The Company believes it has meritorious defenses to
claims asserted in the lawsuit. An estimate of the possible loss, if any, or the
range of loss cannot be made.

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

(a) The annual meeting of shareowners of the Registrant was held on May 22,
2003.

(b) At the annual meeting of shareowners of the Registrant held on May 22, 2003,
action was taken with respect to the election of one director of the Registrant:
55,764,093 shares were voted for Mylle H. Mangum while authority was withheld
with respect to 7,268,694 shares. Other directors whose term of office continued
after the meeting include: Steven J. Douglass, Duane L. Cantrell, Howard R.
Fricke, Daniel Boggan Jr., Michael E. Murphy, and Robert C. Wheeler.

(c) Shareowners ratified the appointment of Deloitte & Touche LLP as the
Company's independent public accountants: 58,368,622 votes in favor, 4,609,032
votes against and 55,133 votes abstained.


ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

     NUMBER                               DESCRIPTION
     ------                               -----------

      11.1         Computation of Net Earnings Per Share*
      99.1         Certification Pursuant to Section 906 of the Sarbanes-Oxley
                   Act of 2002 of the Chairman of the Board and Chief Executive
                   Officer*
      99.2         Certification Pursuant to Section 906 of the Sarbanes-Oxley
                   Act of 2002 of the Senior Vice President, Chief Financial
                   Officer and Treasurer*

    * Filed herewith

(b) Reports on Form 8-K

On February 28, 2003, the registrant filed a Current Report on Form 8-K
furnishing under Item 12 its Press Release, dated February 28, 2003, announcing
fourth quarter results.

On May 14, 2003, the registrant filed a Current Report on Form 8-K furnishing
under Item 9 its Press Release, dated May 14, 2003, announcing first quarter
results.

                                       15

<PAGE>


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

                                              PAYLESS SHOESOURCE, INC.


Date: June 16, 2003                           By: /s/ Steven J. Douglass
                                                 -------------------------------
                                                 Steven J. Douglass
                                                 Chairman of the Board and
                                                 Chief Executive Officer



Date: June 16, 2003                           By: /s/ Ullrich E. Porzig
                                                 -------------------------------
                                                 Ullrich E. Porzig
                                                 Senior Vice President
                                                 Chief Financial Officer
                                                 and Treasurer

                                       16


<PAGE>



                                  CERTIFICATION

     I, Steven J. Douglass, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of Payless
ShoeSource, Inc., a Delaware corporation;

     2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

     3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

     4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;

     b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

     c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

     5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

     a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

     b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

     6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: June 16, 2003


                                           /s/ Steven J. Douglass
                                           -------------------------------------
                                           Steven J. Douglass
                                           Chairman of the Board and
                                           Chief Executive Officer

                                       17

<PAGE>



                                  CERTIFICATION

     I, Ullrich E. Porzig, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of Payless
ShoeSource, Inc., a Delaware corporation;

     2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

     3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

     4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;

     b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

     c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

     5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

     a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

     b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

     6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: June 16, 2003


                                           /s/ Ullrich E. Porzig
                                           -------------------------------------
                                           Ullrich E. Porzig
                                           Senior Vice President,
                                           Chief Financial Officer and Treasurer

                                       18