Q4 results

[sgw2]

Just the facts, no commentary.

http://biz.yahoo.com/prnews/030311/cltu025_1.html

Summary:

"For the twelve months ended December 31, 2002, CART conducted 19 races, compared with 20 events in the 2001 season. Total revenues were $57.2 million for the 2002 year, versus $70.3 million in 2001. Total expenses amounted to $81.9 million for 2002, compared with $78.8 million a year earlier."

revenues down $23.1 M, expenses up $3.1 M in FY02.

Cash:

"CART continues to maintain a strong balance sheet with cash and short-term investments of $86.3 million, working capital of $92.3 million and no debt."

This is down from $102,950 M working capital in Q3. So CART has about $10.6 M less cash to work with starting 2003.

Q3 report can be found here
http://www.edgar-online.com/bin/cobr...08525&x=28&y=8

[impact500]

"This is down from $102,950 M working capital in Q3. So CART has about $10.6 M less cash to work with starting 2003."

Cash went from $103 million at the end of Sept. to $86 million at the end of Dec. This is a $17 million drop, not $10 million. Working capital is an accounting calculation (current assets minus current liabilities). It's cash in the bank that is critical as they face the costs of ESP 1, ESP 2, TV time and race promotions.

[Snrub]

Revenue - expenses = $25 Million loss for 2002, vs. $8.5M in 2001.

2003 ain't gonna be any prettier. 2004 needs to show that CART can be reasonably run. (loss like 2001)

[indycool]

The $24.7 million loss for '02 is about what many people expected. The small loss in the fourth quarter must be due to taking the Miami losses in the third quarter and not paying ESP and ESP II until first quarter, '03.

Something that must play into it in some form is that CART has seven lawsuits/arbitration filings going right now as near as I can tell -- Rodriguez (at trial), Road America (hearing in May), three Heitzler-related suits (two go to trial in Sept., one next January), Judd (status unknown) and Della Penna (status unknown).

There must be $50 million in potential liabilities plus attorney fees in those alone.

[impact500]

The litigation risk is real indeed. Thus far CART has seemed to have booked no reserves. So from an accounting point of view, it is as if there are no lawsuits pending that have a prospect of costing CART money. That outcome seems unlikely. Making a reasonable estimate however is difficult.

It is unclear to me where the $17 million of cash went in Oct/Dec. Only a small part of it can be explained by the operating loss ($2 million). Perhaps some ESP 1 and 2 has been spent and capitalized. Property and equipment increased by $5 million - cars and engines?

The cash balance is the key here. If the full ESP 1 and 2 costs are still ahead of us, adequate cash to fund 2004 becomes questionable unless a sugar daddy shows up.

[indycool]

Good question, impact500. The property and equipment increases must be ESP 1 and 2 to get some of those teams started. But the board allotted $30 million, so there's more that's going to show up in first quarter, '03.

By the way, sgw2 and impact500, nothing's showing up on Edgar to read the full report. Does this mean that it's just a news release until the annual comes out in a couple weeks?

[impact500]

"Does this mean that it's just a news release until the annual comes out in a couple weeks?"

Correct. The numbers will not change but there will be greater detail. The property and equipment increase could be non-ESP items too. Hopefully the 10K will help clarify. It becomes significant in trying to project the cash balance at Dec. 2003. That will determine the viablity of TV buys and team support for 2004.

[sgw2]

FYI,

CART did worse than shown in Q4. They are listing just over $10 M in tax refund due as income for the quarter. In reality CART lost $34 M in FY '02, but the tax refund offset that.

(In reality this money will simply be used in lieu of FY '03 quarterly tax payments. So in reality no monies will be returned CART. Still this is an asset, as taxes will drain $10 M less from CART.)

impact500 is correct on the cash being down to $86 M. If the burn is as high as most observers expect, roughly $55 M for FY '03, then CART has a serious problem surviving beyond this year. A lot of cost cutting has gone on, and RA's removal will help by at least $2 M (no need for network TV, one fewer race of ESP to pay out). Thus I expect Pook to do better than the project $55 M losses; I now peg the red ink in the $44-48 M range. That will leave $35-40 M in the bank for FY '04. Is it enough? I dunno.

Watch the numbers in May when the Q1 '04 and annual report come out. Until then we are guessing.

[Fogelhund]

sgw2 - Not sure about being off the hook for the TV costs for Road America. This depends on the their contract.

[indycool]

Understand, sgw2, on the $10m tax credit. When Rio stiffed CART a few years ago, they listed it as a receivable rather than a loss, so it showed as an asset.

As for TV and RA, CART and networks (depending on who's paying) have complained for years about the cost of producing a telecast on a four-mile road course. So, RA being off the schedule must be a gain to the bottom line in that respect.

The cash burn will largely be determined by the success of the CART promotions and co-promotions. Denver and St. Pete almost hafta be co-promotions with Dover Downs. The startup costs hafta be a huge cash drain. CART's in court with RA. It's taking all the risk at Portland. It's got expense for lights at Milwaukee and Cleveland.

As in poker, the rent money's on the table.