Racing Champions Ertl Announces Preliminary Results for 2002 Year

    GLEN ELLYN, Ill.--Jan. 9, 2003--Racing Champions Ertl Corporation today announced preliminary results for the 2002 year. Earnings per share increases are expected to be within the Company's previously announced range of 18-25% growth from the 2001 as adjusted earnings per share of $1.16. The expected earnings performance reflects the Company's ability to maintain margins and tight cost controls during 2002 in a difficult environment for both consumers and retail buyers. Net sales for the 2002 year increased approximately 5% and net sales for the last six months of 2002 were slightly ahead of the year ago period. Sales in 2002 from the Company's six new product lines exceeded $7 million.
    Net sales for the fourth quarter of 2002 were down approximately 8% compared to the strong sales reported in the fourth quarter of 2001. The early October U.S. West Coast dock shutdown and a disappointing Christmas season for retailers contributed to the decline in sales for the fourth quarter of 2002 as compared to the prior year quarter.
    The Company has continued to effectively manage its cash flow. During the fourth quarter, debt was reduced by $19 million to a year end balance of $8 million. Year end cash balances exceeded $10 million, making the Company debt free, net of cash.
    For 2003, the Company plans to increase sales with introductions of new products and product lines and benefit from the full year impact of new product lines launched in the second half of 2002. Based on higher sales volumes, the Company also expects to increase its earnings by leveraging fixed expenses, which is expected to allow earnings per share to grow faster than net sales. For 2003, the Company continues to target potential sales increases of 10% to 15% and potential earnings per share increases of 15% to 25%. The Company also expects that its sales seasonality will result in most of the potential earnings per share increases occurring in the second half of 2003. Sales increases are dependent on a number of factors including continued success and expansion of existing product lines and successful introductions of new products and product lines.
    The Company plans to report its 2002 fourth quarter and full year audited financial results on Wednesday, February 26, 2003.

    Racing Champions Ertl (www.rcertl.com) is a leading producer and marketer of innovative collectibles and toys targeted at males of all ages. The Company's diverse product offering includes scaled die-cast replicas of John Deere agricultural equipment and NASCAR stock cars, other licensed vehicle replicas, pre-teen toys, sports trading cards, racing apparel and souvenirs, and collectible figures. These products are sold under the Company's market-focused brand names, including Racing Champions(R), Ertl(R), Ertl Collectibles(R), American Muscle(TM), AMT(R), W. Britain(R), Press Pass(R) and JoyRide Studios(TM). The Company reinforces its brands and enhances the authenticity of our products by linking them with highly recognized licensed properties including NASCAR, NHRA, John Deere, Harley-Davidson, Case, Polaris, Honda, Caterpillar, Ford, GM, Chrysler, Texaco, Universal Studios, Warner Brothers, Hit Entertainment, Nintendo, Sega and Electronic Arts. The Company's products are marketed through multiple channels of distribution, including mass retailers and specialty and hobby wholesalers and retailers, OEM dealers and to corporate accounts for promotional purposes. The Company sells through more than 20,000 retail outlets located in North America, Europe and Asia Pacific.

    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," "target," "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.