CART 2nd Quarter
2002 Financial Statement
by Mark
Cipolloni
July 24, 2002
INDIANAPOLIS, July 24 /PRNewswire-FirstCall/
-- Championship Auto Racing Teams, Inc. (NYSE: MPH) (CART)
today 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.
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