CART Reports Second Quarter 2002 Results
INDIANAPOLIS, July 24 Championship Auto Racing Teams, Inc. announced financial results for its second quarter ended June 30, 2002.
The number of events held in a particular quarter affects the comparability of earnings information from quarter to quarter. CART conducted six events in the second quarter of 2002 and 2001. Indy Lights, which was discontinued for 2002, conducted four races in the second quarter of 2001. Toyota Atlantics conducted five races in the second quarter of 2002, compared to four races in the prior-year period.
Total revenues for the 2002 second quarter were $19.7 million, compared with $19.8 million in the same quarter of the prior year. Total expenses for the second quarter of 2002 rose to $25.7 million from $15.6 million in the 2001 second quarter. "Due to the changed business model, which reflects CART's evolution to a marketing driven company, it is difficult to compare revenues and expenses to prior-year results, particularly television and race promotion revenues and expenses," said Thomas Carter, CART's chief financial officer. "In addition, a one-time relocation expense of $1.3 million for the company's move to Indianapolis, Indiana from Troy, Michigan contributed to the increase in total expenses."
Net loss for the second quarter of 2002 was $3.2 million, or $0.21 per diluted share, compared with net income of $3.9 million, or $0.25 per diluted share, in the second quarter of 2001.
Christopher R. Pook, CART's president and chief executive officer, said, "While we are never pleased to report a loss, we believe the results reflect an important investment for the future of the company. We have said from the beginning that 2002 will be a transition year, and a great deal has been accomplished during the first six months to build a stable platform for future growth. We have strengthened our management team while streamlining the organization, implemented a new approach toward marketing designed to unlock greater potential, and announced a landmark Entrant Support Program that is designed to provide financial support for our teams and strengthen CART's team participation in 2003.
"Together with a great line up of Champ car drivers, we are able to present a first class, well-operated entertainment product to the public that serves as a powerful, international marketing vehicle for multi-national corporations," Pook continued. "Attendance records to date underscore the popularity and vitality of the CART FedEx Championship Series."
Three-day attendance levels for the seven races staged in the first six months of 2002 totaled nearly 900,000. Including races in Toronto and Cleveland in the beginning of the third quarter, total three-day event attendance surpassed the one million mark.
At the end of the second quarter, the company hosted its first CART-promoted race of the season; the CART Grand Prix of Chicago. "Although the financial outcome of the race did not reach our projected results, Chicago is an important geographic market to the total CART package and we remain committed to the city," added Pook.
For the six-month period ended June 30, 2002, total revenues were $25.3 million versus $26.2 million in the 2001 corresponding period. Total expenses amounted to $33.3 million in the first half of the current year, compared with $23.9 million in the corresponding prior-year period. CART recorded a net loss before the cumulative effect of an accounting change of $3.8 million, or $0.26 per diluted share, for the first half of the current year, compared with net income of $4.0 million, or $0.26 per diluted share, a year ago. CART conducted seven FedEx Championship races in the first six months of both 2002 and 2001.
CART has implemented FASB Statement No. 142, effective January 1, 2002. As a result of the implementation, CART's results for the six months ended June 30, 2002, include a write-off of $1.5 million for impairment of goodwill. The company does not anticipate future write-offs of its intangible assets, but will conduct annual reviews as required.
The company recorded a net loss after the cumulative effect of this accounting change of $4.7 million, or $0.32 per share, for the six months ended June 30, 2002.
"We are beginning to see the fruits of our labor with improvements in our television ratings which further strengthen the marketing power of the CART series. The collective effort by our television production staff to provide more exposure for our sponsors during race broadcasts has resulted in a 38% increase in overall exposure time through the first eight races compared to 2001. It has also resulted in a 35% increase in sponsor mentions during race broadcasts. Total broadcast time has increased to more than six hours per race weekend in 2002 from an average of 3.5 hours in 2001. Increases in broadcast time are the result of extended race coverage, addition of Friday qualifying and additional pre-race programming. During this transitional year, we are now seeing television revenues lower and television expenses higher than originally projected.
Recently, CART announced that despite concerted efforts by the officials and provisional receiver following EuroSpeedway's insolvency filing earlier this month, the FedEx Championship Series race scheduled for September 19 -- 21, 2002 in Lausitz, Germany has been cancelled. "In our overall geographic scheme, Europe is a strategically important international market," Pook said. "While we are disappointed to be parting with Lausitz, we will shift our focus to find another European region to supplement our Rockingham 500 race in England."
Pook continued, "As we have progressed through the year, we are also recognizing numerous other changes to our revenue and expense expectations. Given the number of elements in our business model that are new or still in a fluid state, we find it necessary to rescind our previously published guidance for 2002 and no longer believe it prudent to publish forward-looking guidance for the balance of the year. Rather, we intend to focus on re-examining our business model and executing on the tremendous opportunity CART continues to present so that the 2003 year can begin to reflect stronger value creation for our shareholders, teams and sponsors."
Carter noted that at the close of the 2002 second quarter, CART's balance sheet continued to be strong with cash and short-term investments of $118.8 million, working capital of $106.3 million and no debt.
Investor Conference Call
In conjunction with this news release, CART will host a teleconference on Wednesday, July 24th at 3:00 p.m. Central Time. The teleconference call-in number is 1-888-396-9928 from the U.S. and Canada. International callers should phone 1-630-395-0059. The password for the teleconference is 'Championship' and the call leader is Thomas Carter. All callers are asked to call in approximately five minutes prior to the starting time. A replay of the call will be available until Wednesday, July 31st until the end of business by dialing 1-800-873-2095 from the United States and Canada, or for international callers by dialing 1-402-220-5065.
About CART
Championship Auto Racing Teams, Inc. (NYSE: MPH - News) owns, operates and markets the CART FedEx Championship Series. Current points leader Cristiano da Matta, former series champions Michael Andretti, Jimmy Vasser and 19-time race winner Paul Tracy are among the stars who will battle for the 2002 FedEx Championship Series title with championship-winning teams such as Target Chip Ganassi Racing and Team KOOL Green. CART Champ Cars are thoroughbred racing machines that reach speeds in excess of 200 miles per hour, showcasing the technical expertise of manufacturers such as American Honda, Ford Motor Company, Toyota, Lola Cars, Reynard Motorsport and Bridgestone/Firestone North American Tire, LLC. The 19-race 2002 CART FedEx Championship Series will be broadcast by new television partners, CBS, FOX and SPEED Channel. CART also owns and operates its top development series, the CART Toyota Atlantic Championship. Learn more about CART's open-wheel racing series at http://www.CART.com.
Statements made in this news release that state the company's or
management's beliefs or expectations and which are not historical facts or
which apply prospectively are forward-looking statements. It is important to
note that the company's actual results could differ materially from those
contained or implied by such forward-looking statements. Among the risks and
uncertainties to be considered include, but are not limited to, CART's new
co-promoted and self-promoted events; new television and advertising
arrangements; the success of races in new venues; the current uncertain
economic environment and weak advertising market; among others. Additional
information concerning factors that could cause actual results to differ
materially from those in the forward-looking statements is contained in the
company's SEC filings made from time to time, including, but not limited to,
the Form 10-Ks and subsequent 10-Qs. Copies of those filings are available
from the company and the SEC.
Championship Auto Racing Teams, Inc.
Consolidated Statements of Income
For the Three Months Ended June 30, 2002 and 2001
(In Thousands, Except Earnings Per Share)
Qtr ended Qtr ended
June 30, 2002 June 30, 2001
Revenues
Sanction fees $11,822 $13,299
Sponsorship revenue 2,825 3,453
Television revenue 2,058 1,580
Race promotion revenue 1,798 --
Engine leases, rebuilds and wheel sales -- 312
Other 1,170 1,141
Total revenues 19,673 19,785
Expenses
Race distributions 6,328 4,620
Race expenses 2,471 2,746
Race promotion expense 3,087 --
Cost of engine rebuilds and wheel sales -- 115
Television expense 4,640 --
Administrative and indirect expenses 7,470 7,745
Relocation expense 1,305 --
Depreciation and amortization 354 402
Total expenses 25,655 15,628
Operating income (loss) (5,982) 4,157
Interest income, net 1,115 1,965
Income (loss) before income taxes (4,867) 6,122
Income tax expense (benefit) (1,704) 2,173
Net income (loss) $(3,163) $3,949
Earnings (loss) per share:
Basic $(0.21) $0.25
Diluted $(0.21) $0.25
Weighted average shares outstanding:
Basic 14,718 15,547
Diluted 14,718 15,547
Championship Auto Racing Teams, Inc.
Consolidated Statements of Income
For the Six Months Ended June 30, 2002 and 2001
(In Thousands, Except Earnings Per Share)
YTD YTD
June 30, 2002 June 30, 2001
Revenues
Sanction fees $14,527 $15,889
Sponsorship revenue 5,105 6,407
Television revenue 2,263 1,839
Race promotion revenue 1,798 --
Engine leases, rebuilds and wheel sales -- 583
Other 1,584 1,506
Total revenues 25,277 26,224
Expenses
Race distributions 7,350 5,361
Race expenses 4,322 4,572
Race promotion expense 3,087 --
Cost of engine rebuilds and wheel sales -- 214
Television expense 4,712 --
Administrative and indirect expenses 11,795 12,965
Relocation expense 1,305 --
Depreciation and amortization 688 804
Total expenses 33,259 23,916
Operating income (loss) (7,982) 2,308
Interest income, net 2,201 3,940
Income (loss) before income taxes (5,781) 6,248
Income tax expense (benefit) (2,023) 2,218
Net income (loss) before effect of
accounting change $(3,758) $4,030
Cumulative effect of accounting change $(956) $--
Net income (loss) after effect of
accounting change $(4,714) $4,030
Earnings (loss) per share before cumulative
effect of accounting changes:
Basic $(0.26) $0.26
Diluted $(0.26) $0.26
Earnings (loss) per share after cumulative
effect of accounting changes:
Basic $(0.32) $0.26
Diluted $(0.32) $0.26
Weighted average shares outstanding:
Basic 14,718 15,655
Diluted 14,718 15,658
Championship Auto Racing Teams, Inc.
Consolidated Balance Sheets
As of June 30, 2002 and December 31, 2001
(In Thousands)
(Unaudited)
June 30, December 31,
2002 2001
Assets
Current Assets
Cash and cash equivalents $13,902 $27,765
Short-term investments 104,907 87,621
Accounts receivable - net 10,949 5,195
Current portion of notes receivable 254 --
Prepaid expenses 1,464 2,805
Inventory 95 70
Deferred income taxes 4,807 2,856
Total current assets 136,378 126,312
Notes receivable -- --
Property and equipment - net 5,627 4,832
Goodwill - net -- 1,470
Noncurrent Deferred Tax 510 --
Other Assets 479 327
Total Assets $142,994 $132,941
Liabilities and stockholders' equity
Current liabilities
Accounts payable $3,735 $3,009
Accrued liabilities:
Race expenses and point
awards 1,463 --
Television expense 4,257 --
Royalties 83 222
Payroll 2,639 4,298
Taxes -- 110
Other 5,912 5,558
Deferred revenue 11,956 1,511
Total current liabilities 30,045 14,708
Deferred income taxes -- 297
Stockholders' equity
Capital stock 147 147
Additional paid-in capital 87,765 87,765
Retained earnings 24,313 29,028
Unrealized gain on investments 724 996
Total stockholders' equity 112,949 117,936
Total liabilities and stockholders' equity $142,994 $132,941