Varsity Brands Swings to Profits in 2002; Sales Up 6.0%

Varsity Brands, Inc. announced net income of $9.9 million, or $0.92 per share on a fully diluted basis, for the year ended December 31, 2002. Net income for the year ended December 31, 2002 included an income tax benefit of $0.7 million.

Assuming an income tax expense of $3.6 million based upon statutory federal and state income tax rates, the Company’s earnings per share would have been $0.52 per share on a fully diluted basis. For the year ended December 31, 2001, the Company reported a net loss of $8.5 million, or $(0.90) per share. The 2001 net losses are primarily attributable to the June 2001 sale of the Company’s Riddell Group Division and the termination of the Company’s license to sell Umbro branded products during the fourth quarter of 2001. These losses were offset by an extraordinary gain of $4.0 million, net of expenses and applicable taxes, on the repurchase of approximately $40.7 million of its 10.5% Senior Notes.

For the year ended December 31, 2002, income from continuing operations improved to $9.8 million, or $0.91 per share on a fully diluted basis, from $0.6 million, or $0.07 per share, for the year ended December 31, 2001. These improvements were primarily the result of revenue growth, higher gross margin rates, a decline in selling, general and administrative expenses as a percentage of sales, and a decline in net interest expense. Income taxes for 2002 consisted of state income tax expense and federal tax benefits from net operating loss carryforward utilization and the reversal of the Company’s remaining deferred tax asset valuation allowance. Income taxes for 2001 were accrued based on a blended federal and state rate.

Based on the Company’s outlook for the upcoming fiscal year, the Company believes it is well positioned to deliver earnings per share in the range of $0.57 to $0.65 per share on a fully diluted basis. This expectation assumes that the Company would incur a normal income tax expense based upon expected earnings.

Revenues for the year ended December 31, 2002 increased $8.9 million, or 6.0%, to $156.4 million from $147.5 million in 2001, even after the lingering, negative impact of September 11th on the Company’s group tour business. Camps and events revenue increased by $3.1 million, or 5.3%, as compared to the same period in the prior year. Exclusive of the effects of September 11 on the group tour business, the Company’s total revenues would have increased 7.1%, and the Company’s camps and events segment would have experienced revenue increases of 8.0% for the year ended December 31, 2002. The Company’s group tour business, which takes performing bands and choirs to Europe, experienced a decline in its revenue caused by the delaying or canceling of certain 2002 tours as a result of the events of September 11th. Uniforms and accessories increased $5.7 million, or 6.5%, for the year as compared to the year ended December 31, 2001.

Commenting on the results today, Jeffrey G. Webb, Varsity’s President and CEO said, “We have just completed our first full fiscal year of operations since the sale of the Riddell Group Division and the discontinuance of the Umbro license with a number of successes. We realized increases in revenues, profitability and cash flows, while at the same time reducing our overall debt load. Such successes were achieved despite operating in a difficult economic climate. We look forward to continued success in 2003. We have already realized a significant increase in attendance at our 2003 national cheerleading, dance team and college championships and we are excited about the possibilities of our new line of Select soccer uniforms and equipment that will be marketed directly to our customers.”

In December 2002, the Company entered into a trademark license agreement with Select Sport A/S, a Danish corporation. Under the terms of the agreement, the Company has the right to distribute Select branded soccer uniforms and equipment within the United States. The Company will manufacture and distribute custom-made soccer uniforms and equipment. The Company will market its new line directly to high school, junior high schools and soccer clubs throughout the United States through a combination of a new proprietary sales force, direct mailings and a new website, soccergear.com, which it is anticipated will be launched by the end of the first quarter of 2003.

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

                                          Fourth Quarter       Year Ended
                                        Ended December 31,    December 31,
                                          2002     2001      2002      2001
    OPERATING RESULTS:
    Net Revenues                         $19,145  $16,753  $156,404  $147,549
    Cost of revenues                      11,787    9,887    91,916    86,968
    Gross Profit                           7,358    6,866    64,488    60,581
    Selling, general
     and administrative expenses          10,034   10,043    47,396    46,594
    Income from operations                (2,676)  (3,177)   17,092    13,987
    Interest expense, net                  1,891    2,810     8,040    10,346
    Income from continuing operations
     before income taxes and
     discontinued operations              (4,567)  (5,987)    9,052     3,641
    Income taxes (benefit)                (1,625)    (215)     (735)    3,010
    Income from continuing operations     (2,942)  (5,772)    9,787       631
    Discontinued operations                   --    5,106        --   (13,173)
    Income (loss) before extraordinary
     items                                (2,942)    (666)    9,787   (12,542)
    Extraordinary items                       --    2,561       140     4,047
    Net income (loss)                    $(2,942)  $1,895    $9,927   $(8,495)