How healthy is CART? Legitimate question, not a troll.

[MrIndy]

How do you all perceive the health of CART? Personally, I am with many others that we don't want to see them really die but they have taken some harsh blows this year, so how healthy to you all see CART as being today?

[AdamM]

Cart is a case study in how not to run an effective organization, but Cart isn't going away. They have a ton of money in the bank waiting for what, I honestly don't think anyone at Cart knows for sure, but it's there.

[Professor Joe]

It really depends on three things:

The damage as a result of the Texas debacle - both in terms of credibility in the domestic market and in terms of the "terms" of the final legal settlement.

The success of their overseas venues - cart sees these venues as cash cows. Early reports on ticket sales are mixed.

The TV deal.

If these all break positively, cart will be OK. They still are slow to make decisions, but they seem to be making better ones when the finally get around to it.

If these all break negatively, I will be glad that I don't own any MPH.

[DanH]

CART seems to have better attendance at the street races. With their current talks to bring races to the streets of D.C. and Denver, I think they may now have the right direction in mind.

The overseas ovals would give them the handling data and practice they would need for Indianapolis.

[IRLCREW]

This pretty much says it all. They are losing money in every aspect of the opreation from Atlantics, engine leases to lawsuits from TMS. I dont know???

OVERVIEW

The following discussion and analysis of the financial condition and
results of operations should be read in conjunction with the unaudited
consolidated financial statements of the Company, including the respective notes
thereto which are included in this Form 10-Q.

RESULTS OF OPERATIONS

Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000

REVENUES. Total revenues for the three months ended March 31, 2001 were
$6.4 million, a decrease of $1.4 million or 18% from the same period in the
prior year. This was due to decreased sponsorship revenue, engine leases,
rebuilds and wheel sales and other revenue partially offset by an increase in
sanction fees, as described below.

Sanction fees for the three months ended March 31, 2001 were $2.6 million,
an increase of $1.2 million, or 81%, from the same period in the prior year due
to increased sanction fees for our inaugural race in Monterrey, Mexico. We
staged one race during the first quarter of 2001 and 2000.

Sponsorship revenue for the three months ended March 31, 2001 was $3.0
million, a decrease of $1.9 million, or 40%, from the same period in the prior
year. This decrease was primarily attributable to the loss of guaranteed
sponsorship income from our former sponsor partner.

Television revenue for the three months ended March 31, 2001 was $259,000,
a decrease of $1,000 from the same period in the prior year.

Engine leases, rebuilds and wheel sales for the three months ended March
31, 2001 was $271,000, a decrease of $180,000, or 40%, from the same period in
the prior year. This decrease was due to having fewer Indy Lights entries in the
first quarter of 2001 compared to the same period in the prior year.

Other revenue for the three months ended March 31, 2001 was $365,000 a
decrease of $438,000, or 55%, from the same period in the prior year. This
decrease was primarily attributable to a reduction in royalty revenue and entry
fees, memberships and credential income from Toyota Atlantics due to zero races
being held in the three months ended March 31, 2001 compared to two races in the
same period in the prior year.

EXPENSES. Total expenses for the three months ended March 31, 2001 were
$8.3 million, an increase of $2.1 million, or 34%, from the same period in the
prior year. This increase was due to an increase in race expenses and
administrative and indirect expenses, partially offset by a decrease in race
distributions and cost of engine rebuilds and wheel sales as described below.

Race distributions for the three months ended March 31, 2001 were $741,000,
a decrease of $79,000, or 10%, from the same period in the prior year. The
decrease was due to zero Toyota-Atlantic races being held in the three months
ended March 31, 2001 compared to two races being held in the same period in the
prior year, partially offset by an increase in Indy Lights race distributions
due to one race being held in the three months ended March 31, 2001 compared to
zero races being held in the same period in the prior year.


11--------------------------------------------------------------------------------12


Race expenses for the three months ended March 31, 2001 were $1.8 million,
an increase of $398,000, or 28%, from the same period in the prior year. The
increase was partially due to new programs and personnel in the Race Operations,
Electronics, Logistics and Safety departments.

Cost of engine rebuilds and wheel sales for the three months ended March
31, 2001 were $99,000, a decrease of $37,000, or 27%, from the same period in
the prior year. This decrease is due to fewer Indy Lights entries in the three
months ended March 31, 2001, when compared to the same period in the prior year.

Administrative and indirect expenses for the three months ended March 31,
2001 were $4.8 million, an increase of $1.3 million, or 37%, from the same
period in the prior year. This increase was primarily attributable to an
increased investment in strategic planning, personnel and Public Relations and
Marketing and Advertising expenditures that are focused on building our
long-term strategic plan and branding awareness.

Severance expense for the three months ended March 31, 2001 was $386,000.
This expense relates to an employee severance agreement. There was no
corresponding expense for the same period in the prior year.

Depreciation and amortization expense for the three months ended March 31,
2001 was $402,000, compared to depreciation and amortization expense of $287,000
for the same period in the prior year.

OPERATING INCOME (LOSS). Operating loss for the three months ended March
31, 2001 was $1.8 million, a decrease of $3.5 compared to operating income of
$1.7 million for the same period in the prior year.

INTEREST INCOME (NET). Interest income (net) for the three months ended
March 31, 2001 was $2.0 million compared to interest income (net) of $1.5
million from the same period in the prior year. The increase of $480,000 was
primarily attributable to reinvestment of cash flows from operations.

INCOME BEFORE INCOME TAXES. Income before income taxes for the three months
ended March 31, 2001 was $126,000, compared to $3.1 million from the same period
in the prior year.

INCOME TAX EXPENSE. Income tax expense for the three months ended March 31,
2001 was $45,000, compared to $1.1 million from the same period in the prior
year.

NET INCOME. Net income for the three months ended March 31, 2001 was
$81,000 compared to net income of $2.0 million from the same period in the prior
year.

SEASONALITY AND QUARTERLY RESULTS

A substantial portion of our total revenues during the race season is
expected to remain seasonal, based on our race schedule. Our quarterly results
vary based on the number of races held during the quarter. In addition, the mix
between the type of races (street course, superspeedway, etc.) and the sanction
fees attributed to those races will affect quarterly results. During the three
month period ended March 31, 2001, both CART and Indy Lights held a race in
Monterrey, Mexico. During the three month period ended March 31, 2000, CART and
Toyota Atlantics held one and two races, respectively, in Homestead, Florida.


12--------------------------------------------------------------------------------13


LIQUIDITY AND CAPITAL RESOURCES

We have relied on the proceeds from our initial public offering and cash
flow from operations to finance working capital, investments and capital
expenditures during the past year.

We have a $1.5 million revolving line of credit with a commercial bank. As
of March 31, 2001, there was no outstanding balance under the line of credit.
The line of credit contains no significant covenants or restrictions. Advances
on the line of credit are payable on demand and bear interest at the bank's
prime rate. The line is secured by our deposits with the bank.

Our cash balance on March 31, 2001 was $40.3 million, a net increase of
$20.8 million from December 31, 2000. This increase was primarily the result of
net cash provided by operating activities of $14.8 million, and investing
activities of $6.0 million.

We anticipate capital expenditures of approximately $2.5 million during the
next twelve months. We believe that existing cash, cash flow from operations and
available bank borrowings will be sufficient for capital expenditures and other
cash needs. In addition, we may incur additional expenditures to increase our
marketing budget, build our strategic plan and infrastructure and expand our TV
relationships or otherwise to increase the visibility and appeal of our
products.

Subsequent to year end, we canceled the 2001 race in Brazil due to default
of our agreement by the City of Rio de Janeiro. The note receivable from our
Brazilian promoter was to be repaid in equal annual installments over the life
of the sanction agreement. Due to the uncertainty of future races in Brazil, a
letter of credit was received from the Brazilian promoter to secure payment of
the remaining balance of the note receivable by May 15, 2001.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

With the exception of historical information contained in this Form 10-Q,
certain matters discussed are forward-looking statements. These forward-looking
statements involve risks that could cause the actual results and plans for the
future to differ from these forward-looking statements. The following factors,
and other factors not mentioned, could cause the forward-looking statements to
differ from actual results and plans:

- competition in the sports and entertainment industry
- participation by race teams
- continued industry sponsorship
- regulation of tobacco and alcohol advertising and sponsorship
- competition by the IRL
- liability for personal injuries
- negotiation of television contract
- renewal of sanction agreements

[JoeBob]

They are arguably (and arguing seems to be the point) the most healthy open wheel series in North America. They have a consistent field of 25 well prepared cars and drivers. (Plus a few teams that don't show up for every race) They have three committed engine manufacturers, and the most spectators outside of NASCAR and Indianapolis.

With events like Mexico, Long Beach, Motegi, Cleveland, Toronto, Chicago, Mid-Ohio, Road America, Vancouver, Australia and Fontana. It is hard to be unhealthy. Any series in the world would love to have crowds like these races draw.

Throw in a few races that draw about 50k, like Houston, Detroit, Portland, and Michigan and you have a very solid base. (And this is with Germany and England as unknowns, and at least one will draw very well)

The biggest problem facing CART is lack of the "marquee" event. That just can't be created overnight. However, if CART decided to award points for Indy (and Phoenix, just to make things fun) they'd be the just fine. With a 3.5L engine in their series and the IRL, they have everything they need.

[PDX_HP]

I don't think CART is as healthy as they could be. Most CART fans acknowledge the poor management decisions in the past but it's a long ways from being on life support. I agree that the lack of a "marquee" race hurts it...that's why losing Indy hurt so bad. However, they have a lot of rally fine venues and great three day attendance. Their international venues seem to be pretty solvent as well. We'll see how Germany and the UK fall out.

I'm curious about how healthy the IRL is? TG doesn't release financial statements but I'm curious how much money the series makes and how much TG personally finances.

[Racemind]

CART is like a giant oceanliner with a committee behind the wheel. They've glanced off a few icebergs, but ship doesn appear to be sinking so far. The committee members all agree that they should avoid the icebergs, but they can't agree how to do it and continue to bicker about what's causing the iceberg to hit the ship in the first place.

If there is any damage, it would be below the water line and may not affect the ship right away. Meanwhile, some committee members are making ship-to-shore calls to sell their portion of the ship and make arrangements for a helicopter ride to another ship.

[don7031]

Currently CART is a cash cow, but despite having money in the bank and operating in the black, CART could still be out of business sooner rather than later.

Going public has placed CART in a difficult situation as they strive to show annual growth which is dependent on holding more events and/or increasing sanctioning fees. The owners had a 20 race ceiling. Certainly there isn't room for many more events especially if they're international. So in turn there isn't room for growth in terms of race count which leaves sanctioning fees. CART is bleeding tracks domestically because the sanctioning fees have grown beyond what some promoters are willing or able to pay. Sure CART has dropped tracks rather than the other way around, but that is just of case of I'm not fired, I quit. Additionally, a case can be made for all domestic ovals except for Milwaukee switching over to the IRL when their current CART contracts end. And as Cleveland demonstrated at their last contract signing, the road courses aren't immune.

Mix in owner unrest. Owners with primarily domestic sponsors aren't happy with the shift abroad. Just ask Penske. And it's not like open wheel is a sponsor rich environment. The owners have seen their role diminish and of course many are choosing to no longer have a financial stake in CART. As Tony George is fond of saying, "every CART owner is a potential IRL owner". The IRL is becoming a viable option for those who become disenchanted with CART.

Stir in decreased attendance and TV ratings. Just a couple years ago CART was setting attendance records, now they can't even sell out Long Beach. This series is rapidly becoming a very expensive version of TransAm.

What this adds up to is a recipe for an implosion if the dominoes start falling. Lose races, lose owners, lose sponsors, lose fans, lose more races, lose more sponsors, lose more owners, lose more fans and down the toilet the series goes.

[Railbird]

oops! I thought this was the IRL board...

Glad to see folks so concerned

[Benchracer]

Some say CART can't fold,they have to much money behind them.


Wasn't there a lot of rich people on the Titanic !


There is a lot of truth to what people say about the IRL however it seems that CART keeps tripping over their own "lack of direction" IMHO

Making the IRL management look better
... win by default

[Disciple]

I have no comment at this juncture.

(Insert suppressed snicker here)

[Nasty500]

Originally posted by don7031:
Currently CART is a cash cow, but despite having money in the bank and operating in the black, CART could still be out of business sooner rather than later.

Going public has placed CART in a difficult situation as they strive to show annual growth which is dependent on holding more events and/or increasing sanctioning fees. The owners had a 20 race ceiling. Certainly there isn't room for many more events especially if they're international. So in turn there isn't room for growth in terms of race count which leaves sanctioning fees. CART is bleeding tracks domestically because the sanctioning fees have grown beyond what some promoters are willing or able to pay. Sure CART has dropped tracks rather than the other way around, but that is just of case of I'm not fired, I quit. Additionally, a case can be made for all domestic ovals except for Milwaukee switching over to the IRL when their current CART contracts end. And as Cleveland demonstrated at their last contract signing, the road courses aren't immune.

Mix in owner unrest. Owners with primarily domestic sponsors aren't happy with the shift abroad. Just ask Penske. And it's not like open wheel is a sponsor rich environment. The owners have seen their role diminish and of course many are choosing to no longer have a financial stake in CART. As Tony George is fond of saying, "every CART owner is a potential IRL owner". The IRL is becoming a viable option for those who become disenchanted with CART.

Stir in decreased attendance and TV ratings. Just a couple years ago CART was setting attendance records, now they can't even sell out Long Beach. This series is rapidly becoming a very expensive version of TransAm.

What this adds up to is a recipe for an implosion if the dominoes start falling. Lose races, lose owners, lose sponsors, lose fans, lose more races, lose more sponsors, lose more owners, lose more fans and down the toilet the series goes.

A bit overdramitic dont you think!
CART seems to be playing to its strengths, dropping circuits were attendance is low and adding races were there is more potential. Youll see more of it next year.
I think its a bad idea for the IRL to go where CART has left. All of those circuits have done less than CART (Phoenix,Homestead,) and New Hampshire is gone. Nazareth is a dog. If the IRL goes there it will be a dog with different fleas.

[DerMannVonIndy]

How healthy is the IRL?

7.
8.
9.
...

How long will the (snicker) sponsors stick around for this?

[KnockOff]

(Launch control flips the cover up from the toggle.....)

[Old Clunker]

Originally posted by JoeBob:
They are arguably (and arguing seems to be the point) the most healthy open wheel series in North America. They have a consistent field of 25 well prepared cars and drivers. (Plus a few teams that don't show up for every race) They have three committed engine manufacturers, and the most spectators outside of NASCAR and Indianapolis.

With events like Mexico, Long Beach, Motegi, Cleveland, Toronto, Chicago, Mid-Ohio, Road America, Vancouver, Australia and Fontana. It is hard to be unhealthy. Any series in the world would love to have crowds like these races draw.

Throw in a few races that draw about 50k, like Houston, Detroit, Portland, and Michigan and you have a very solid base. (And this is with Germany and England as unknowns, and at least one will draw very well)

The biggest problem facing CART is lack of the "marquee" event. That just can't be created overnight. However, if CART decided to award points for Indy (and Phoenix, just to make things fun) they'd be the just fine. With a 3.5L engine in their series and the IRL, they have everything they need.

I think you said it pretty well, JoeBob, but the part about the "marquee" event doesn't seem to be a problem any more. They are back at the Indianapolis race in a great big way and race fans know it for sure now. It does put quite a stress point on the IRL club advertising commitee though when they try to convince their customers that finishing 7th, 8th, 9th, in their own home in house and it's all mine race, is the sign of a strong talented race group.

CART is doing a fine job and as lousy as it is it is still the best show in town. Especially Indianapolis.

Old Clunker


[This message has been edited by Old Clunker (edited 06-06-2001).]

[cmego]

I think CART's doing ok ,they just need to focus a little more.
For purely selfish reasons, I hope they never become like Nword, it nice being able to go in the paddock and talk to and get autographs from drivers.
I will say again though, there needs to be an end to the holy war, we will never win over the casual fan otherwise.

------------------
"Racing is not for sucks!"

[TxIndyFan]

Doesn't this thread belong on the CART side?

------------------
If you do what you've always done, you'll get what you've always gotten

[BigIrlFan]

I just hope when CArt fales the IRl gets Cleaveland back. OH YEah.

[BigIrlFan]

I just hope when CArt fales the IRl gets Cleaveland back. OH YEah.

[MrIndy]

Many thanks for all the replies. I asked because I don't follow CART and hear a lot of things and really wanted the answer. I would consider it a sad day if CART were to fold.

Many of you provided input but the best was the real statement of financial status of CART taken from the SEC filings. Within these statements, I see some areas of very real concern:

INCOME BEFORE INCOME TAXES. Income before income taxes for the three months
ended March 31, 2001 was $126,000, compared to $3.1 million from the same period
in the prior year.

INCOME TAX EXPENSE. Income tax expense for the three months ended March 31,
2001 was $45,000, compared to $1.1 million from the same period in the prior
year.

NET INCOME. Net income for the three months ended March 31, 2001 was
$81,000 compared to net income of $2.0 million from the same period in the prior
year.

Folks, this is very, very bad and CART stockholders should be getting worried. If you do not understand how bad these statements are, I would strongly advise you not go into business in the near future.

If I were to grade CART health right now on a 10 point scale with 10 being the healthiest and a 1 being near death, I would have to struggle to get above a 3 or 4 and that is giving them the benefit of doubt.

Somethin' else (I need all the plugs I can get) is there $1.5 mil revolving line of credit. I am shocked it is so low. They should have enough for at least 12 months of operating expenses and they are well short of that.

Thanks once again for all of your input.

[step33]

Thanks OC,

BUT, we are talking about CART, Inc aka MPH. How much did MPH get from IMS?

OH, that's right....NOTHING.

IMO, CART isn't on life support. But, they definetly have the flu. If they would just quit running around without a shirt on everytime the temp drops to 50 and it rains, they wouldn't get sick all the time.

In spite of themselves, they aren't doing bad. If they would just abondon all of their unhealthy markets and concentrate on the street circus events, I'd be happy

------------------
"I'm hyper enough as it is"

[Grinder-Tank]

How long will money continue to come into CART? With it's formula far away from financial responsibility, the IRL formula may well zap the dough out of CART as sponsors see more bang for their buck on the other side.

[RightRear]

Originally posted by IRLCREW:
REVENUES. Total revenues for the three months ended March 31, 2001 were
$6.4 million, a decrease of $1.4 million or 18% from the same period in the
prior year. This was due to decreased sponsorship revenue, engine leases,
rebuilds and wheel sales and other revenue partially offset by an increase in
sanction fees, as described below.
11

Wheel Sales??????? Since when did CART become a high performance distribution company? I do not mean this as a joke. What are they doing selling wheels?

[DaveL]

Originally posted by Grinder-Tank:
the IRL formula may well zap the dough out of CART as sponsors see more bang for their buck on the other side.

Excite@Home doesn't see much bang for the buck right now. Go to Cheever's website and see for yourself.

[indyracer56]

I think the wheel sales have to do with the Indy Lights series.

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"Don't Drive Faster Then Your Guardian Angel Can Fly!"

[Racemind]

Originally posted by DaveL:
Excite@Home doesn't see much bang for the buck right now. Go to Cheever's website and see for yourself.

Poorly-managed internet companies don't see any "bang for the buck" ANYWHERE they look right now because they don't have any bucks. Now, explain to me again how this is the IRL's fault?

[Mista Bone]

1) CART is becoming a better run company with the continued additions of non racing directors and board memebers.

2) Joe is now has serious control with being named president. This has not happened under CART management before. People have always said one man needs to lead CART and that man needs control. Everyone likes Joe and he is building trust and getting control.

3) A TV contract will be in place for next year. CART will have the Eurosport international package as well.

4) CART continues to add home run races that pay big fees and pull big crowds while dropping less successful events. Last year St. Louis and Homestead were dropped to add Mexico, England, and Germany. That is a huge positive swing. Next year Montreal and Denver will be added. Mexico City, Washington, and Tampa are all good additions as well. Nazareth will be dropped and possibly Detroit. That is a good move as Detroit is a tough course to pass on and Nazareth has had bad racing and low attendance. More people will now attend the Michigan race. The Texas contract will probably be cancelled and Brazil will not be back on the schedule until 2003.

5) CART has great team sponsor support. With the addition of foreign races there comes foreign sponsors. Next year will be a big year after a year in Mexico, England, and Germany.

6) The 3 engine companies are into the sport. There are 20 cars every race that can win. There are 3 engine companies that are very close and into the sport for 2 more years. These companies pump a lot of money into CART.

7) The Indy 500 participation going forward is a media exposure and sponsor win for CART.

So for the next 2.5 years CART is in a very strong position. They like any company have tons of things to address and not everything can be done at once. Many things can go wrong (like a race cancellation) and they will have to deal with it. Sponsors can leave and teams could fold but that is part of the business.

[StatMan]

MrIndy's statment in the topic is right: it is a legitimate question and not a troll. The location of the topic is wrong: this belongs on the CART board.

Whoever said they are a case study in How to Not Run an Effective Organization is right. I don't think the IRL needs CART but there are people who do and it's going to stick around in my opinion.

-StatMan

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I have never met a statistic I didn't memorize

[sf-indy-fan]

DaveL wrote:

Excite@Home doesn't see much bang for the buck right now.

Dave, I like your TF posts and you seem like a genuine, non-trolling, non-flame-baiting racefan (and a nice guy to boot), and I don't want to get into a urinating competition, however...

Judging from the blank sidepods on Jimmy Vasser's car at Milwaukee last Sunday, it seems like Pat Patrick is having the same sort of sponsorship troubles that Eddie Cheever's having. (Great paint job, though)

This thread was NOT one of those "gee isn't the IRL peachy" threads that the CART supporters here (often correctly) punch holes in. It was an honest, concerned inquiry into the health of CART.

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"It's not about second" - Greg Ray