DETROIT (March 6,
2002) - Championship Auto Racing Teams, Inc. (NYSE:MPH) today
provided financial guidance for the year ending December 31,
2002. The company noted that the following statements are
based on current expectations and do not include the proposed
FedEx Championship Series race in Miami, Florida, for October
2002. These statements are forward-looking, and actual results
may differ materially as a result of the factors more
specifically referenced below.
The company estimates that:
" Revenues for the year will total approximately $68.0 million
to $71.0 million
" An operating loss of between $1.0 million and $4.5 million
will be incurred
" Net income, benefiting from approximately $4.4 million in
interest income will range
from a profit of $2.2 million or $0.15 per diluted share to a
loss of $78,000 or $0.01 per share.
"This is clearly a transition year for CART, with a changed
business model, new management structure and an uncertain
economic environment," said Christopher R. Pook, president and
chief executive officer. "Nevertheless, we are confident that
we have the right elements in place to succeed for the
long-term and that we will show significant progress in 2002
toward evolving CART to a marketing driven company and
achieving sustainable operating profitability."
"We will continue to enhance our race schedule to provide
optimum marketing opportunities for our sponsors,
manufacturers and vendors," Pook continued. "In 2002 we have
added a second race in Mexico at the Autodromo Hermanos
Rodriguez in Mexico City and a third race in Canada at the
Circuit Gilles Villeneuve in Montreal, Quebec. Domestically,
we are reducing the number of races concentrated in the
Midwest and adding a race in the western United States in
Pook added: "The race season ahead challenges CART to
demonstrate our skills as great race promoters. We are taking
on the opportunities and risks of new television arrangements
in an extremely soft advertising environment. We are also
working with lower sponsor revenue, in the face of a tougher
economic environment. We have conservatively framed our
business outlook for the year against this backdrop,
recognizing that CART enters 2002 with a business and
financial model that provides less visibility than previously
available to us. At the same time, we come to these challenges
with tremendous experience and a history of successful
execution that underpins our enthusiasm. As an example, I want
to build pre-race excitement with sponsors, the news media and
the fans for CART races, so we have established a new Advance
Program department that will initiate a two-seater Champ Car
program that will run in advance of our events. This program
allows our key constituents to experience the thrill of a
Champ Car ride first hand with a professional driver and
generates media attention leading up to the race."
Thomas L. Carter, CART's chief financial officer stated, "We
are joint venturing with three of our venues as co-promoters.
In this model, we are accepting lower sanction fees with the
expectation of greater upside return by sharing in the profits
of the race. Leveraging the strength of the CART brand and
Chris Pook's experience as a successful promoter, we are
stepping up to the plate and acting as promoter for our race
in Chicago and offering a broad array of marketing
opportunities for advertisers, vendors and sponsors."
"Our growth ambitions are supported by an excellent balance
sheet," Carter concluded. At year-end, December 31, 2001, CART
had $115.4 million in cash and short-term investments and
working capital of $111.6 million with no long-term debt."
Projections for the year are based on the following
Sanction fees are expected to range from $43.0 million to
$44.0 million. This is down from 2001 sanction fees of $47.2
million, and reflects 18 races in 2002 compared with 20 races
last year. While 20 races have been announced for the 2002
schedule, the company is accounting for the self-promoted race
in Chicago as a separate revenue source under "race promotion
revenue" and has not included any financial impact of the
recently announced Miami race New venues for 2002, included in
sanction fees, are Denver, Mexico City and Montreal. In 2002,
the company will not return to race at Nazareth, Pennsylvania;
Brooklyn, Michigan; Detroit, Michigan and Houston, Texas.
Sponsorship revenue is expected to be approximately $10.0
million, down from $12.3 million in 2001 and reflecting the
previously announced discontinuance of the Indy Light Series
and reduced fees from other sponsors.
Television revenue in 2002 is forecast to range from $8.0
million to $9.0 million, reflecting gross receipts, less
commissions, on estimated advertising revenues, international
rights and video production. Television revenue for 2002 is
not comparable to 2001 revenue of $5.2 million, when the
company received fees for its television rights with no
related expenses. (See "Television Expenses")
Race promotion revenue, a new category reflecting the
CART-promoted race in Chicago, is expected to be between $4.0
million and $5.0 million. Included in this revenue line are
management forecasts for all the commercial rights associated
with promoting a CART event, such as admissions, event
sponsorship and hospitality sales.
No engine lease, rebuild or wheel sale revenue is projected in
2002 due to the discontinuance of the Indy Lights Series in
Other revenue in 2002 is projected to be about $3.0 million,
down from $4.2 million in 2001, principally reflecting the
discontinuance of the Indy Lights Series and fewer teams.
Total expenses in 2002 are expected to be between $72.0
million and $72.5 million, compared with $78.8 million in
2001. The components affecting expense spending are
anticipated as follows:
Race payments should be about $18.4 million, nearly unchanged
from 2001. Savings from the discontinuance of the Indy Lights
Series are expected to be offset by an increased purse and a
higher year-end point fund for the Toyota Atlantic Series and
greater reimbursements to CART teams.
Race expenses are projected to total $11.0 million, up from
$10.6 million in 2001, largely reflecting increased
safety-related and technical inspection expenses and staffing.
Television expenses, a new category for 2002, will approximate
$9.9 million, reflecting forecasts for production cost and
time-buy expenses under new television agreements with
Fox/SPEED Channel and CBS, as well as international feed
Race promotion expenses, also a new category, are forecast to
be between $3.0 and $3.5 million. These expenses include all
costs associated with promoting a CART event.
Administration and other indirect expenses are expected to be
held to about $28.0 million, down from $35.6 million in 2001.
The decrease is predominantly attributed to severance payments
made in 2001 and also reflects the elimination of CART's
Entertainment Division and certain other costs. These
decreases are offset in part by the addition of the Advance
Program and Joint Venture departments. The Advance Program
department will be overseeing the two-seater car program, and
the Joint Venture department will be spear-heading all
co-promoted and self-promoted races.
Depreciation and amortization in 2002 is projected to total
$1.7 million compared with $1.5 million in 2001. This is based
on anticipated capital expenditures of approximately $4.0
million. CART said that it is still evaluating the impact on
goodwill of adopting SFAS 141 and 142. At this time, however,
the company said it has no expectations that a write down of
goodwill will be necessary nor does it currently anticipate
any impairment of goodwill going forward, although future
reviews are required by SFAS 142 on a quarterly basis.
The company currently has authorization to repurchase up to
2.5 million shares of its outstanding common stock in open
market or privately negotiated transactions. Through December
31, 2001, CART had repurchased 1.1 million shares. For per
share calculation purposes, in 2002, CART is assuming
15,000,000 shares on a fully diluted basis.
CART noted that financial results for any given quarter vary
based on the number of races held during the quarter, the mix
of races, sanction fees and advertising revenues.
Consequently, changes in race schedules from year to year can
significantly alter the comparability of quarterly results.
Therefore, CART only provides guidance on an annual, rather
than quarterly basis.
Pook also noted that negotiations with potential engine
suppliers continue regarding CART's previously announced
change in engine specifications beginning in 2003.
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