Racing Champions Fourth Quarter Sales

    GLEN ELLYN, Ill.--Jan. 8, 2002--Racing Champions today announced that its preliminary net sales results for the 2001 fourth quarter will now approximate mid-single digit growth, which exceeds the previous outlook announced on October 23, 2001 of relatively flat sales for the 2001 fourth quarter.
    Also, based on preliminary results, recent trends related to improved operating margins and lower interest expenses experienced in the first three quarters of 2001, continued during the fourth quarter. The combination of the increased sales and margins are anticipated to yield fourth quarter profits that will now exceed the earnings per share, excluding special charges, of $0.15, achieved in the prior year fourth quarter.

    Debt Reduction

    As a result of strong cash flow during the fourth quarter, debt was reduced by $14.9 million, through scheduled and voluntary payments on the Company's term loan, bringing 2001 year-to-date term debt payments to $35.0 million, versus the $14.0 million in required term payments. At December 31, 2001, the outstanding amount on the Company's term loan was $62.0 million. There were also no amounts outstanding during 2001 on the Company's $15.0 million revolving line of credit. As of December 31, 2001 the Company had over $15.0 million in cash.

    Class Action Lawsuit Settled

    The Company also announced the settlement of the securities class action lawsuit that was brought against the Company in 2000. The United States District Court approved the terms of the $1.8 million settlement and dismissed all claims with prejudice against all defendants. The Company maintained insurance coverage adequate to cover the settlement amount, which was one of the lowest securities class action settlements on record over the past 12 months.

    Founded in 1989, Racing Champions (www.rcertl.com) is a leading producer and marketer of innovative collectibles and toys sold in multiple channels of distribution and available at more than 20,000 retail outlets. The Company sells Racing Champions(R) NASCAR and NHRA die-cast racing replicas, souvenirs and apparel; American Muscle(TM) collectible die-cast vehicle replicas; officially licensed die-cast and preschool products based on automobiles, trucks, agricultural, heavy equipment, and powered recreational and sport vehicles under the Ertl(R) brand; AMT(TM) model kits; and Press Pass(R) trading cards. High-profile licensing partners include NASCAR(R), NHRA(R), John Deere(R), Case IH(R), Polaris(R), Honda(R), Caterpillar(R), Ford(R), GM(R), Chrysler(R), Texaco(R), and Warner Brothers(R).

    Certain statements contained in this release contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the use of forward-looking words or phrases such as "anticipate," "believe," "could," "expect," "intend," "may," "planned," "potential," "should," "will" and "would." Such forward-looking statements are inherently subject to known and unknown risks and uncertainties. Such uncertainties and other operational matters are discussed further in the Company's quarterly and annual filings with the Securities and Exchange Commission. The Company's actual results and future developments could differ materially from the results or developments expressed in, or implied by, these forward-looking statements. The Company undertakes no obligation to make any revisions to the forward-looking statements contained in this release or to update them to reflect events or circumstances occurring after the date of this release.