Varsity Brands Narrows Q1 Loss on 26.7% Sales Increase

Varsity Brands, Inc. announced that revenues for the first quarter of 2003 increased to $23.7 million, or 26.7%, from $18.7 million in revenues for the first quarter of 2002. This increase was primarily due to higher attendance at the Company’s regional and national cheerleading and dance team championships.

The Company reported a net loss of $2.6 million, or ($0.28) per share, for the first quarter of 2003, as compared to a net loss of $5.9 million, or ($0.62) per share, for the first quarter of 2002. The decrease in the net loss is due to a combination of higher revenues earned at the Company’s regional and national cheerleading and dance team championships combined with an increase in the gross profit margin as a result of spreading certain fixed production costs over a higher revenue base. The reduction of the net loss was also due to an increase in the Company’s expected effective income tax rate in 2003 as compared to 2002. The change in the rate is due to the availability of net operating loss carryforwards in 2002 as compared to 2003. This change resulted in the Company realizing a greater income tax benefit in the first quarter of 2003 as compared to 2002.

The Company’s camps and events segment produced a $4.3 million, or 32.6%, increase in revenues during the first quarter of 2003 as compared to the first quarter of 2002. The increase in revenues was directly attributable to higher attendance at the Company’s regional and national cheerleading and dance team championships. The Company’s uniform and accessories segment produced a $0.7 million, or 13.2%, increase in revenues during the first quarter of 2003 as compared to the first quarter of 2002. The increase was attributable to an overall strong increase in product sales at the Company’s national championships combined with increased sales of dance and recital wear to the studio dance market. Such increases were offset by slight decreases in sales of the Company’s other uniform and accessories lines.

The Company believes that it remains on target to deliver the earnings per share that it initially stated it would deliver in February of this year. Specifically, the Company continues to expect that it will deliver, based upon the Company incurring a normal income tax expense, fully diluted earnings per share in the range of $0.57 to $0.65 for 2003.

On April 22, 2003, the Company announced the signing of a definitive merger agreement pursuant to which the Company will be acquired by Varsity’s Senior Management and a wholly owned subsidiary of an affiliate of Leonard Green & Partners, L.P., a private merchant banking firm. Under the terms of the agreement, Varsity’s stockholders will receive $6.57 per share upon the closing of the merger, other than those members of Varsity’s Senior Management who will exchange a portion of their equity holdings in Varsity for equity in the surviving corporation. The balance of Senior Management’s equity holdings will be acquired or cancelled for the same consideration that all of the Company’s other stockholders are receiving for their equity interest in Varsity. The closing of the transaction is subject to certain terms and conditions customary for transactions of this type, including but not limited to receipt of stockholder approval, anti-trust clearance, if applicable, and the successful completion of a tender offer for at least a majority of the Company’s outstanding 10.5% senior notes due 2007. Stockholder approval will be solicited by Varsity by means of a proxy statement that will be mailed to stockholders upon completion of the requisite Securities and Exchange Commission filing and review process. Certain members of Varsity’s current and former management including Jeffrey Webb, Varsity’s chief executive officer, and certain members of Varsity’s Board Directors, who collectively own approximately 47% of the Company’s outstanding common stock have agreed to vote their shares in favor of the merger. The Company presently anticipates consummating the transaction in the third quarter of 2003.

Commenting on the results today, Jeffrey G. Webb, Varsity’s President and CEO said, “We are extremely pleased with the results of our first quarter. We were pleasantly surprised by the significant increase in the number of participants at our national championships this year. We are also excited about the recently announced merger agreement with Leonard Green which we believe brings significant value to our stockholders.”

                              VARSITY BRANDS, INC.
                              Financial Highlights
                  (Dollars in thousands except per share data)

                                                         First Quarter
                                                        Ended March 31,
                                                     2003              2002
    OPERATING RESULTS:
    Net Revenues                                   $23,688           $18,693
    Cost of revenues                                14,493            12,129
    Gross Profit                                     9,194             6,564
    Selling, general and administrative expenses    11,631            10,715
    Loss from operations                            (2,436)           (4,151)
    Other expense                                    1,912             2,126
    Loss from continuing operations before
     income taxes and discontinued operations       (4,348)           (6,277)
    Income taxes (benefit)                          (1,700)             (410)
    Net loss                                       $(2,648)          $(5,867)