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For the three months ended September 28, 2002, net sales grew to $37,348,000 compared to the $34,154,000 recorded for the same period last year. This growth in net sales primarily occurred in our motorsports segment, with net sales of approximately $5,737,000 for the first quarter of fiscal 2003 compared to net sales of approximately $1,115,000 for the first quarter of fiscal 2002. In addition, our net sales were favorably impacted by foreign exchange fluctuations of approximately $1.1 million, the majority of which resulted from the strengthening of the Euro against the U.S. dollar. These net sales increases were partially offset by a decrease in our bicycle net sales to $31,611,000 in the first quarter of fiscal 2003 from $33,039,000 in the first quarter of fiscal 2002. This bicycle sales shortfall for the first quarter of fiscal 2003 compared to the same period last year primarily occurred in our overseas markets as certain suppliers were unable to deliver key component parts to us as scheduled.

Our net loss for the first quarter of fiscal 2003, excluding a one-time deferred financing cost write-off of approximately $1.8 million (discussed below), was $6,571,000 compared to the net loss of $4,123,000 recorded for the prior-year period. Including this one-time deferred financing charge, the net loss for the first quarter of fiscal 2003 was $8,408,000. The net loss per share for the first quarter of fiscal 2003, excluding the effect of the deferred financing cost write-off, was $0.87 per share compared to the net loss per share of $0.55 recorded for the same period last year. Our net loss for the first quarter of fiscal 2003, including the deferred financing cost write-off, was $1.11. Our fiscal 2003 first quarter net loss was higher than in the prior year as a result of weaker margins, higher motorsports-related selling costs, the write-off of deferred financing costs associated with our debt refinancing in July 2002, and higher interest expense resulting from our increased borrowings and interest rates.

Our bicycle business continued to be profitable for the first quarter of fiscal 2003 with pre-tax income of $628,000 compared to $2,997,000 for the first quarter of fiscal 2002 (excluding the effect of the deferred financing cost write-off). Bicycle margins decreased to 30.9% for the first quarter of fiscal 2003 from 33.5% for the prior year primarily as a result of product mix, and a lower percentage of foreign sales which provide a higher margin contribution. This shift in both the product and geographic mix of our bicycle sales was due to our major suppliers' inability to deliver high-end product components. Our motorsports pre-tax loss for the first quarter of fiscal 2003, excluding the effect of the one-time deferred financing cost write-off, was $7,449,000 compared to $7,200,000 for the comparable prior-year period. The increase in our motorsports loss is attributable to higher unit volume at a time when the products were yielding a negative gross margin. In addition, for the first quarter of fiscal 2003 compared to fiscal 2002, motorsports selling costs increased as a direct result of the higher volume of shipments.

In July 2002, we secured a new financing facility with Pegasus Capital Advisors, L.P., and amended our existing credit facility with The CIT Group/Business Credit, Inc. We sold to Pegasus $25.0 million of senior notes and warrants to purchase an aggregate of 2,944,552 shares of Cannondale common stock. If we repay the senior notes in full by January 26, 2004, warrants to purchase 1,972,849 shares will be cancelled. If we do not repay the senior notes in full by that date, but repay the senior notes in full by July 26, 2004, warrants to purchase 1,472,276 shares will be cancelled. We used the proceeds to pay down approximately $10.3 million of term debt, and the remaining net proceeds of approximately $11.7 million were used for working capital needs. The amended credit facility with CIT provides us with a five year revolving line of credit. The amount of the revolving line of credit is the lesser of $35.0 million or a percentage of eligible receivables and inventories. We expensed approximately $1.8 million of deferred financing costs associated with the retired debt during July 2002.

Response to our 2003 motorsports product line has been extremely strong. Motorsports bookings increased from approximately $1.8 million in the first quarter of fiscal 2002 to $7.9 million in the first quarter of fiscal 2003. In addition, our Cannibal and Speed Sport ATV's both qualified as street legal in Spain, Portugal and Germany, and the E440, our Enduro motorcycle, qualified as street legal on a pan-European basis. Including the addition of several new European motorsports retailers, our motorsports dealer base has increased by 37% since June 2002.

Likewise, our 2003 bicycle line has been extremely well received. Our European bicycle order book for the first quarter of fiscal 2003 increased by double digits over the orders from the first quarter of fiscal 2002. And, despite a challenging economy, Cannondale Japan's bicycle order book increased by double digits as well for the first quarter of fiscal 2003 compared to the same period last year. Our domestic bicycle order book for the first quarter of fiscal 2003 was the highest level in the history of our company, as was the rate of our 2003 bicycle retail sell through in the United States. Although our orders reached record levels, we were unable to fill all these orders during the quarter because of the part shortages discussed previously.

Other events from the first quarter demonstrate the great brand strength that we continue to enjoy among bicycle and motorsports enthusiasts, both here and abroad. Our new Gemini freeride models were the subject of three very favorable first-quarter reviews here in the U.S., with editors' comments ranging from, "versatile and great performing" (Mountain Biking, August), to "what today's freeriders are looking for" (Mountain Bike Action, August), to "one hell of a bike ... Of the complete freeriders we've tried, this is our favorite," (Mountain Bike, August).

The positive press wasn't limited to the Gemini, nor was it limited to American magazines. The August issue of Mountain Biking UK praised our full-suspension Scalpel 3000 mountain bike, saying it's "as light as most top-end hardtails, it'll ride more comfortably and faster than most over any terrain, it looks great and its unique features make it a conversation piece." Another Cannondale full-suspension mountain bike, the Jekyll, was similarly praised by Italy's Tutto Mountain Bike magazine in their September issue. "The 2003 Jekyll is definitely improved again. It is more versatile and is better on the downhills without compromising cross-country performance; it is the ideal bike to do everything with."

The first quarter also saw favorable magazine reviews of the Company's motorcycles and ATVs. Our E440 enduro motorcycle, for example, appeared in the July issue of Cycle World in the U.S. and in the September issue of the Italian magazine Motocross. Cycle World's Jimmy Lewis, an accomplished off-road racer, stated flatly that the motorcycle's "torque is astonishing." The E440, he wrote, "was our first sub-450cc bike to climb one of our 'Death to Weak Motors' sand hills -- twice even, and easily." Lewis wasn't the only tester who came away impressed. "Everyone who rode the Cannondale was amazed at how smooth and easy it was to ride." The staff at Italy's Motocross echoed Cycle World's enthusiasm. The E440, they wrote, had "many technical characteristics to be envied by others," and "top level handling, precision in curves and changes of direction, like you are riding on a rail."

Our Cannibal 440 ATV was featured in the August issue of Dirt Wheels magazine, where the testers all agreed that "the Cannibal had the strongest engine and revved the quickest." The result was that the Cannondale "easily won each of our drag races" and also "turned in the quickest lap times" on the motocross track. Dirt Wheels' final conclusion was that "your best chance to win on a motocross, TT, or cross country track is with the Cannondale, plain and simple."

A July 4-Wheel ATV Action review of another Cannondale ATV, the Moto 440, gave the four-wheeler high marks for being a true race machine. The staff wrote that, "In the hands of an average racer, the only thing that would keep them off the podium is their own skills, and not the machine itself." The Moto 440 is "a class winner right out of the box," and "a big step forward for the sport of ATV racing."

Cannondale Corporation (BIKE) is the world's leading manufacturer of high-performance bicycles, and is an emerging player in the off-road motorsports industry. The Company's bicycles and bicycle accessories, which include HeadShok suspension forks, cycling apparel, and cycling packs and bags, are sold in the U.S. and in more than 60 foreign countries. The Company's line of off-road motorcycles and four-wheeled sport ATVs (All-Terrain Vehicles) are sold in the U.S. and in selected foreign markets. All of the Company's products are marketed under the Cannondale brand name and "Handmade in USA" logo.

This press release contains forward-looking statements, as defined under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those anticipated as a result of various risks and uncertainties, including risks and uncertainties relating to the market acceptance of the Company's products, competition, the effectiveness of the Company's dealer networks and sales teams, the Company's motorsports operations, changes in the level of discretionary consumer spending, the timing of future part receipts which may impact the Company's ability to fill orders, as well as those risks and uncertainties discussed from time to time in the Company's periodic reports filed with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. The Company undertakes no obligation to publish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events except as required by law.


                   CANNONDALE CORPORATION AND SUBSIDIARIES
               Condensed Consolidated Statements of Operations
                    (In thousands, except per share data)
                                                First Quarter     First Quarter
                                                    Fiscal            Fiscal
                                                     2003              2002
                                                 (Unaudited)       (Unaudited)
    Net sales                                      $   37,348         $   34,154
    Cost of sales                                     30,317            27,001
    Gross profit                                       7,031             7,153
    Expenses:
       Selling, general and administrative            10,822             9,033
       Research and development                        1,248             1,269
       Write-off of deferred financing costs
        due to debt extinguishment                     1,837                --
                                                     13,907            10,302
    Operating loss                                    (6,876)           (3,149)
    Other income (expense):
       Interest expense                               (1,895)           (1,148)
       Other income                                      113                94
                                                     (1,782)           (1,054)
    Pretax loss                                       (8,658)           (4,203)
    Income tax benefit                                   250                80
    Net loss                                       $   (8,408)        $   (4,123)
    Basic and diluted loss per share                  $(1.11)           $(0.55)
    Weighted-average common shares
     outstanding                                       7,583             7,543
    Net sales:
      Bicycles                                     $   31,611         $   33,039
      Motorsports                                      5,737             1,115
                                                  $   37,348         $   34,154
    Pretax income (loss), excluding deferred
     financing cost write-off:
      Bicycles                                     $      628         $    2,997
      Motorsports                                     (7,449)           (7,200)
                                                  $   (6,821)        $   (4,203)
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SOURCE Cannondale Corporation

William A. Luca, Chief Financial Officer, Cannondale
Corporation, +1-203-749-7000


www.cannondale.com


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