CART downgrades 2003 financial forecast
Championship Auto Racing Teams Inc, the NYSE-listed Champ Car World Series promoter in Indianapolis, IN, yesterday issued a gloomy update to its financial guidance for 2003. CART has lowered its revenue expectations from sanction fees and from sponsorship and TV advertisement sales, and predicted greater losses from its six self-promoted events and increased administrative costs overall. The company now expects that it will need to raise additional capital to complete the 2004 season
Based on its experience so far this year, CART now anticipates sanction fees of $24m-$25m (down from its previous expectation of $25m-$26m) due to a reduced outlook for revenue-sharing at races whose sanction fee is determined by the commercial success of the event.
Having conducted four of six self-promoted events so far in 2003 (at Brands Hatch, EuroSpeedway, Portland and Cleveland), the company now believes the losses from all such events will be in the upper range of its previous guidance of $4.8m-$7.8m.
Sponsorship sales are also trending behind CART's previous guidance, which has been lowered from $7m-$8m to $6m-$7m.
CART has now completed six of seven scheduled CBS network races, where the TV advertising rates it can charge are higher than those for cable advertising. Based on the fact that all but one of its remaining 2003 races will be on cable, it has reduced its previous forecast to $2m-$3.0m.
Administrative and indirect expenses are expected to be approximately $1m greater than the previous guidance due to higher legal expenses than expected and the settlement of a lawsuit. These costs and other indirect expenses are now expected to be between $22m-$23m for 2003.
CART said that projections beyond 2004 were "very speculative" and that it did not expect to achieve positive cashflow any earlier than 2006. It reaffirmed that it had retained the investing banking firm of Bear, Stearns & Co to assist in exploring financing and other strategic alternatives that may be available, and stressed that there can be no assurance that this process will result in any transaction.
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