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Racing Champions Downgrades Q2 Outlook

23 June 1999

Racing Champions Revises Second Quarter Outlook

    GLEN ELLYN, Ill.--Racing Champions Corporation today announced that it expects to report a shortfall in sales for the second quarter ended June 30, 1999, of approximately $16 - 20 million. In addition to revising the sales outlook downward, the Company also intends to take a restructuring charge in the quarter of approximately $6 million, related to integration of the recent acquisition of The Ertl Company, Inc. Accordingly, the Company expects to report a loss for the quarter in the range of $.30 to $.35 per diluted share.

    Bob Dods, Chairman and Chief Executive Officer, said, "The second quarter revenue shortfall is the result of softness in sales across major product categories. Comparisons with the second quarter of 1998, NASCAR's 50th Anniversary year, were especially difficult for the Company's Precious Metals die-cast category, which recorded particularly weak sales. Sales in our direct marketing channel were also below expectations for the second quarter."

    Dods continued, "We attribute our disappointing performance for the second quarter to an overall slowdown in growth of the die-cast category, which resulted from significant emphasis on Star Wars products in the retail marketplace. On the positive side, the restructuring charge we have taken in the quarter will result in substantial cost savings to the Company as we move forward. The Ertl Company, Inc., which was acquired by Racing Champions on April 13, 1999, met management's sales expectations for its seasonally slow second quarter."

    Founded in 1989, Racing Champions (www.racingchampions.com) is a leading producer and marketer of collectibles available at more than 20,000 retail outlets throughout North America. The Company is best known for its extensive lines of officially licensed NASCAR die-cast racing replicas, Press Pass trading cards and NASCAR souvenirs and apparel, Ertl agricultural and custom imprint die cast replicas and AMT model kits. Additional high profile, licensed die-cast series include WCW, Sony Signatures, Outdoor Life and Field & Stream.