UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________________ TO ________________.
COMMISSION FILE NUMBER 1-13925
CHAMPIONSHIP AUTO RACING TEAMS, INC.
------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 38-3389456
-------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
Incorporation or organization)
5350 Lakeview Parkway Drive South, Indianapolis, IN 46268
---------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(317) 715-4100
--------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $.01 par value New York Stock Exchange
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to Form
10-K [ ].
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [ X ]
On March 24, 2003 the aggregate market value of the shares of voting stock of
Registrant held by non-affiliates was approximately $48,128,298 based on a
closing sales price on the NYSE of $3.27 per share.
At March 24, 2003, the Registrant had 14,718,134 shares of common stock
outstanding.
1
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table provides information regarding each of CART's
current directors.
MARIO ANDRETTI Mr. Andretti ended a racing career in 1994,
Director since August 2002 after compiling 52 Champ Car wins over his
Age 63 CART and USAC careers with four season
championships. In 1978, he joined Phil Hill as
the only American to claim the World Drivers
Championship, winning six races en route to
the Formula One title. He showed his
versatility over his 36-year career by winning
fabled endurance races at Sebring and Daytona
as well as the Daytona and Indianapolis
500-mile races. His 407 Champ Car starts are
the most in the history of the sport, as are
his 67 pole positions. Mr. Andretti is
currently self-employed as a consultant and
spokesman for various organizations. Mr.
Andretti is a director of AWG, Ltd., a family
winery, and serves as an officer and/or a
director of various family businesses which
own and operate car dealerships, real estate,
car wash operations, petroleum
wholesale/retail marketing and entertainment
facilities.
CARL A. HAAS Since 1960, Mr. Haas has served as Chief
Director since December 1997 Executive Officer of Carl A. Haas Auto
Age 73 Imports, a company specializing in the
distribution of race cars and parts. Since
1982, Mr. Haas has also served as the Managing
Partner of Newman Haas Racing. Since 1992, he
has served as President of Carl A. Haas Racing
Teams, Ltd. and, since 1996, as the Managing
Member of Texaco Grand Prix of Houston, LLC.
Both Carl A. Haas Racing Teams, Ltd. and
Texaco Grand Prix of Houston, LLC are race
promotion organizations. In addition, Mr. Haas
also holds positions with various companies,
including, but not limited to, Carl A. Haas
Enterprises, Inc., Team Haas USA Ltd., Road
America, SCCA Pro Racing, Inc. and Milwaukee
Mile, Inc., all of which are racing related
businesses.
JAMES F. HARDYMON Mr. Hardymon retired as Chairman and Chief
Director since April 1998 Executive Officer of Textron, Inc. in January
Age 68 1999. Textron, Inc. is a public company,
supplying aerospace, automotive and industrial
components. He joined Textron in 1989 as
President and Chief Operating Officer, became
Chief Executive Officer in 1992, assumed the
additional title of Chairman in 1993. Prior to
joining Textron, Mr. Hardymon was President,
Chief Operating Officer and a director of
Emerson Electric Co., a global manufacturer of
electrical and electronic products and
systems. Mr. Hardymon is a director of Air
Products and Chemicals, Inc., Schneider
Electric SA, Lexmark International, Inc.,
Circuit City Stores, Inc. and American
Standard Companies, Inc. Mr. Hardymon is also
a member of the Advisory Boards of Investcorp
International, Inc. and Proudfoot Consulting
Company.
2
JAMES A. HENDERSON Mr. Henderson retired as Chairman of the Board
Director since July 2000 and Chief Executive Officer of Cummins, Inc.
Age 68 in 1995 after serving as Chief Executive
Officer since 1994 and its President since
1977. He received a Bachelor of Arts degree
from Princeton University in 1956, served in
the U.S. Navy and received an M.B.A. from
Harvard in 1963. He joined Cummins, Inc. in
1964. Mr. Henderson serves as a director of
SBC Communications, Inc., International Paper
Company, Ryerson Tull, Inc., Rohm and Haas
Company, and Nanophase Technologies
Corporation.
U.E. PATRICK Mr. Patrick was a founding member of CART in
Director since December 1997 November 1978 and served as its first
Age 74 President and Chief Executive Officer. Mr.
Patrick has been involved in racing since 1967
and has been a car owner since 1970, with
three Indianapolis 500 wins and the CART World
Series Championship in 1989. Mr. Patrick
currently serves as President of Patrick
Racing, Inc. He holds the position of Chairman
of the Board of Patrick Exploration, Inc., an
oil and gas exploration company, and is an
investor in several businesses.
CHRISTOPHER R. POOK Mr. Pook has served as President and CEO of
Director since January 2002 the Company since December 2001. Prior to
Age 62 joining the Company, Mr. Pook served as
President of the Grand Prix Association of
Long Beach, Inc., a subsidiary of Dover Downs,
Entertainment, Inc. In 1973, Mr. Pook
conceived the idea of running a world-class
automobile race through the city streets of
Long Beach, and his dream became a reality
when the initial event, a Formula 5000 event,
was staged in September 1975. Thereafter, the
Long Beach Grand Prix became a Formula One
race and "The Toyota Grand Prix of Long Beach"
evolved into an annual event on the World
Championship Grand Prix circuit. Following the
1983 event, Mr. Pook made a decision to change
the format of the Long Beach Grand Prix from
Formula One to CART Champ Cars. In 1996, the
Grand Prix Association of Long Beach, Inc.,
with Mr. Pook as President and Chief Executive
Officer, completed an initial public offering
of stock, and also acquired tracks in St.
Louis and Memphis. In 1998, this company was
purchased by Dover Downs Entertainment, Inc.
(NYSE: DVD). Mr. Pook has served as a member
of the Board of Directors of Dover Downs
Entertainment, Inc. since 1998. Mr. Pook is a
Member of the Board of Directors of the Los
Angeles Organizing Committee for the 2012
Olympic Games; he is Co-Chair of the Local
Organizing Committee for the 2005 FINA World
Swimming Championships and is Chairman of the
Board of the Long Beach Area Convention &
Visitors Bureau.
RAFAEL A. SANCHEZ Mr. Sanchez has served as President and CEO of
Director since June 2002 various ventures since 1998, including Sanchez
Age 54 Motorsports Group, Inc., Motorsports Americas,
Inc., Douglas Road Partners, and RAS
Development, Inc. From 1995 to 1998, Mr.
Sanchez served as the President and CEO of
Homestead-Miami Speedway. Mr. Sanchez was the
founder of the Miami Grand Prix, the street
race that ran through downtown Miami from 1983
through 1995. Mr. Sanchez developed the
Homestead-Miami Speedway.
3
FREDERICK T. TUCKER Mr. Tucker served as Deputy to the Chief
Director since May 2000 Executive Office of Motorola, Inc. from
Age 62 October 2000 until his retirement in February
2001. From January 2000 to October 2000, Mr.
Tucker was President, Semiconductor Products
Sector, and Deputy to the Chief Executive
Officer of Motorola, Inc. After joining
Motorola in 1965, Mr. Tucker served in a
number of senior management positions,
including President and General Manager of the
Automotive, Component, Computer and Energy
Sector. Prior to that, Mr. Tucker served as
Executive Vice President and General Manager
of the Automotive and Industrial Electronics
Group and Corporate Vice President and General
manager of Motorola's Bipolar Analog IC
Division in Arizona, a manufacturer of
semiconductor products. Mr. Tucker has served
as a trustee of Rochester Institute of
Technology since 1986.
DERRICK WALKER Mr. Walker is currently the President and
Director since December 1997 owner of Walker Racing, LLC, which was formed
Age 56 in 1990. In 1988, he joined Al Holbert's
Porsche Indy car project and assumed control
of the program upon the death of Al Holbert.
From 1980 to 1988, he was responsible for
Penske Racing, Inc.'s Indy car program.
The following table provides information regarding each of CART's
executive officers and certain key employees. Messrs. Pook and Lopes have
entered into employment agreements pursuant to which they hold their current
positions. All other officers are elected to serve one year terms.
NAME AGE POSITION
---- --- --------
Christopher R. Pook (1) 62 President, Chief Executive Officer
David Clare 48 Chief Operating Officer
Thomas L. Carter 47 Chief Financial Officer/Vice
President of Administration of CART,
Inc.
Steve Fusek 40 Vice President of Marketing of CART,
Inc.
John Lopes 41 Vice President of Racing Operations
of CART, Inc.
Adam Saal 39 Vice President of Communications of
CART, Inc.
J. Carlisle Peet 50 Vice President and Chief Legal
Officer of CART, Inc.
Rena Shanaman 51 Vice President of Joint Venture
Promoter Relations of CART, Inc.
Vicki O'Connor 57 President of Pro-Motion Agency, Ltd.
(Toyota Atlantic Series)
----------------
(1) See Mr. Pook's biography above.
David Clare was elected Chief Operating Officer of the Company in
January 2003. From April 2000 through December 2002, Mr. Clare was a director of
Merit/Burson-Marsteller, a leading communications company. From April 1996 to
March 2000, Mr. Clare was managing director of Event Promotion International
Limited, an event and sports marketing company. Prior to assuming the position
with Event Promotion International Limited, Mr. Clare served as
4
financial controller and various other positions in Formula 1 Constructors
Association for a period of approximately ten years.
Thomas L. Carter was elected Chief Financial Officer in October 2000
and was first named Vice President of Finance and Administration of CART, Inc.
in March 1998 after serving as Director of Finance since February 1997. From
1995 to 1996, Mr. Carter was employed by Rehman Robinson as a senior tax
manager. From 1990 to 1995, Mr. Carter was employed by Deloitte & Touche as a
senior tax consultant. From 1973 to 1989, Mr. Carter worked in various positions
with the Michigan Department of Treasury. Mr. Carter is a certified public
accountant.
Steve Fusek was named Vice President of Marketing of CART, Inc. in
December 2001. From May 1996 through September 2001, Mr. Fusek served as Vice
President of Business Operations for PacWest Racing Group, responsible for
accounting, marketing, contracts, hospitality and graphics. Prior to assuming
that position, Mr. Fusek served in various capacities with PacWest Racing Group
from 1994, including Team Coordinator and Business Manager. During 1992 and
1993, Mr. Fusek was team coordinator and had team operations responsibilities
with Walker Racing.
John Lopes was elected Vice President of Racing Operations in September
2001. Mr. Lopes graduated in 1985 from the U.S. Military Academy at WestPoint,
New York with concentrations in both engineering and international security. He
served over five years as an air/cavalry aviation officer and served as an
aviation headquarters commander in the seventh infantry division and during
Operation Just Cause in the Republic of Panama. Mr. Lopes began his career in
motor sports in 1990 while attending Duke University School of law where he
graduated with a juris-doctorate in 1993. While in law school, Mr. Lopes also
worked full-time on public relations and marketing projects in NASCAR with all
levels including Winston Cup. From 1993 to 1998, Mr. Lopes practiced law in
Dallas, Texas with the law firm of Gardere and Wynne, extending his motor sports
participation by representing drivers, teams and sponsors in the stockcar
industry. He worked with large privately held businesses as well as professional
athletes and the NBA's Dallas Mavericks. From 1998 to September 2001, Mr. Lopes
served as General Manager of TeamXtreme Racing in the Indy Racing League.
Adam Saal joined CART as the Vice President of Communications in
January 2002, as part of the management restructuring initiated by President and
CEO Christopher R. Pook. The appointment marks the second time Mr. Saal has held
the top communications and public relations position at CART, previously heading
the department in 1995 through 1996. A career motorsports professional, Mr. Saal
began with the Barber Saab Pro Series (now Barber Dodge Pro Series) in 1988 as a
public relations account executive. Later that year, Mr. Saal joined the
International Motor Sports Association (IMSA) as director of communications, his
first management position. In 1991, Mr. Saal joined Mr. Pook at the Grand Prix
Association of Long Beach as that company's vice president of communications. In
that capacity, Saal ran all of the media, public relations and communications
projects related to the annual Toyota Grand Prix of Long Beach and other company
projects. In December 1994, Saal joined CART for the first time as Director of
Public Relations and stayed with the organization through December 1996 before
leaving to start his own communications and public relations company, Saal
L.L.C., which served as the primary and exclusive public relations and
communications agency for the former CART series, the Dayton Indy Lights
Championship from January 1997 through November 2001.
J. Carlisle Peet became Vice President/Chief Legal Officer of CART,
Inc. June 2002. Mr. Peet graduated from Syracuse University School of Law in
1978. From 1981 through 2001, he served as Assistant General Counsel for three
publicly traded companies, Rollins Truck Leasing Corp., Matlack Inc., and
Rollins Environmental Services, Inc. Concurrently, from 1988 through 2001, Mr.
Peet served as Vice President and General Counsel for Rollins Leasing Corp., the
operating subsidiary of Rollins Truck Leasing Corp.
Rena Shanaman is serving in a new role beginning in January 2002, as
Vice President of Joint Venture Promoter Relations, She was first named Vice
President of Client Relations for CART, Inc. in July 1996 after serving as the
General Manager of CART's inaugural U.S. 500 on a contractual basis. Ms.
Shanaman has been involved in motorsports for more than 16 years, including the
Detroit Grand Prix, Molson Indy Vancouver and the Arrivederci, Mario tour for
racing legend Mario Andretti.
Vicki O'Connor is the founder, and has served as President, of
Pro-Motion Agency, Ltd., which has administered the Atlantic Championship Series
since 1985. From 1983 through 1984, Pro-Motion also organized the Pro Sports
2000 Series.
5
ITEM 11: EXECUTIVE COMPENSATION
The following table discloses compensation received by each person who
served as CART's Chief Executive Officer during 2002 and its four other most
highly paid executive officers for the fiscal year ending December 31, 2002, as
well as their compensation for the fiscal years ending December 31, 2001 and
2000.
SUMMARY COMPENSATION TABLE
ANNUAL LONG TERM COMPENSATION
COMPENSATION AWARDS
-------------------------- -------------------------------
SECURITIES
UNDERLYING
OTHER ANNUAL OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION SALARY ($) BONUS ($) COMPENSATION ($) SARS (#) COMPENSATION ($)
--------------------------- ---------- --------- ---------------- -------- ----------------
Christopher R. Pook (1) 2002 $375,000 $169,000 (2) 250,000 $20,000(3)
President and CEO 2001 14,423 120,000 450,000 0
Thomas L. Carter 2002 $210,000 $0 (2) 40,000 $ 5,330(3)
Chief Financial Officer 2001 200,000 20,000 50,000 3,435
Vicki O'Connor 2002 $195,700 $0 (2) 0 $ 5,285(3)
President of Pro-Motion 2001 190,000 0 5,000 6,153
Agency, Ltd. 2000 185,000 0 5,000 10,051
---------------------
(1) Mr. Pook was elected as President and CEO in December 2001. He was not
employed by CART prior to that time. He has entered into an employment
agreement whereby he will be paid a base salary of $375,000 per year.
(2) The aggregate amount of perquisite compensation to be reported herein
is less than the lesser of $50,000 or 10% of the total annual salary
and bonus reported for the named executive officer. No other annual
compensation was paid or payable to the named executive officers in the
years indicated.
(3) Includes the payment of term life insurance premiums on behalf of the
named executive officer, as follows: Mr. Pook ($2,580); Mr. Carter
($2,580); Ms. O'Connor ($2,535). Includes the contributions to defined
benefit plans on behalf of the named executive officer, as follows: Mr.
Pook ($2,750); Mr. Carter ($2,750); Ms. O'Connor ($2,750). Also
includes the payment of premiums for life and disability insurance on
behalf of Mr. Pook in the amount of $14,670.
6
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants in 2002 to
each of the named executive officers.
INDIVIDUAL GRANTS
----------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME GRANTED (1) FISCAL YEAR (2) ($/SHARE) DATE(3) VALUE ($)(4)
---- ----------- --------------- --------- ---------- ------------
Christopher R. Pook 250,000 49% $4.90 8/27/2012 $599,889
Thomas L. Carter 40,000 10% 4.90 8/27/2012 95,982
Vicki O'Connor 0 0 -- -- --
---------------------
(1) The options granted in 2002 are exercisable 33% after the first year,
66% after the second year and 100% after the third year.
(2) CART granted options representing 513,250 shares to employees in 2002.
(3) The options expire the earlier of the date set forth herein or within a
period specified in the option agreement following termination of
employment with CART.
(4) CART used a Black-Scholes model of option valuation to determine grant
date present value. CART does not advocate or necessarily agree that
the Black-Scholes model can properly determine the value of an option.
Calculations for the named officers are based on a ten-year option
term. Other assumptions used for the valuations are: interest rate of
3%; annual dividend yield of 0%; and volatility of 32%.
AGGREGATE OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides information on option exercises in 2002 by
each of the named executive officers and the values of each of such officer's
unexercised options at December 31, 2002.
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED IN-THE-
NUMBER OF UNEXERCISED OPTIONS AT MONEY OPTIONS AT
SHARES FISCAL YEAR-END FISCAL YEAR-END (1)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
Christopher R. Pook 0 0 90,000 610,000 0 0
Thomas L. Carter 0 0 33,334 81,666 0 0
Vicki O'Connor 0 0 20,834 11,666 0 0
---------------------
(1) The value of unexercised options is based upon the difference between
the exercise price and the average of the high and low market prices on
December 31, 2002 of $3.70.
7
EQUITY PLAN COMPENSATION INFORMATION
The following table sets forth information regarding outstanding
options, warrants and rights and shares reserved for future issuance under our
existing equity compensation plans as of December 31, 2002. Descriptions of the
plans are included in footnote 13 of our audited financial statements. Each of
these plans have been previously approved by the Company's stockholders.
NUMBER OF SECURITIES
NUMBER OF SECURITIES TO WEIGHTED-AVERAGE REMAINING AVAILABLE FOR
BE ISSUED UPON EXERCISE EXERCISE PRICE OF FUTURE ISSUANCE (EXCLUDING
OF OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, SECURITIES REFLECTED IN
PLAN CATEGORY WARRANTS, RIGHTS (A) WARRANTS, RIGHTS (B) COLUMN (A)) (C)
------------- -------------------- -------------------- ---------------
Equity compensation plans
approved by security holders:
(1) 1997 Employee and Director
Stock Option Plans 175,270 $18.88 none*
(2) 1997 Director Stock Option
Plan 90,000 $21.20 none*
(2) 2001 Long-Term Stock
Incentive Plan 1,136,050 $11.49 363,950
Equity compensation plans not
approved by security holders
none not applicable not applicable
---- -------------- --------------
Total 1,401,320 $13.04 363,950
========= ====== =======
---------------------
* No further options will be granted under either the 1997 Stock Option Plan or
the 1997 Director Stock Option Plan.
DIRECTOR COMPENSATION ARRANGEMENTS
The following information relates to CART's compensation and
reimbursement practices during 2002 for directors who are not CART officers and
who are not affiliated with teams participating in CART events (Messrs.
Andretti, Hardymon, Henderson, Sanchez and Tucker). CART employees and those
directors who are affiliated with teams participating in CART events do not
receive any compensation for their Board activities.
In addition to the cash compensation discussed below, members of the
Board of Directors who are not CART officers and who are not affiliated with
teams participating in CART events (Messrs. Andretti, Hardymon, Henderson,
Sanchez and Tucker) received options to purchase 10,000 shares of common stock
when first elected and options to purchase 5,000 shares upon each re-election.
During 2002, members of the Board of Directors who were not CART
officers and who were not affiliated with teams participating in CART events,
were paid an annual retainer of $25,000. All Board members were reimbursed for
expenses attendant to Board membership.
8
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table shows the amount of CART common stock beneficially
owned by any person or group known to us that is the beneficial owner of more
than 5% of CART's common stock as of April 11, 2003.
AGGREGATE NUMBER PERCENT OF
OF SHARES SHARES
NAME AND ADDRESS BENEFICIALLY OWNED OUTSTANDING
---------------- ------------------ -----------
Gerald R. Forsythe (1) 3,377,400 22.95%
Forsythe Racing, Inc.
Indeck Energy Services, Inc.
1111 South Willis Avenue
Wheeling, IL 60090
FMR Corp. (2) 1,471,600 9.99%
Edward C. Johnson, III
Abigail P. Johnson
82 Devonshire Street
Boston, MA 02109
Jonathan P. Vannini (3) 1,255,000 8.53%
828 Irwin Drive
Hillsborough, CA 94010
Fuller & Thaler Asset Management, Inc. (4) 1,145,500 7.78%
Russell J. Fuller
411 Borel Avenue, Suite 402
San Mateo, CA 94402
---------------------
(1) We have received this information regarding share ownership from the
Schedule 13D/A that was filed with the SEC on September 12, 2002, and
subsequent Form 4 filed with the SEC in February 2003. Mr. Forsythe has
agreed to vote and exchange all shares he or his affiliated entities
has acquired in excess of 15% of the outstanding stock consistent with
the recommendations of the Board of Directors of CART on all strategic
matters for a period of three years.
(2) We have received this information regarding share ownership from the
Schedule 13G that was filed with the SEC on February 13, 2003.
(3) We have received this information regarding share ownership from the
Schedule 13D/A that was filed with the SEC on November 29, 2001.
(4) We have received this information regarding share ownership from the
Schedule 13G that was filed with the SEC on February 13, 2003.
The following table shows the amount of common stock of CART
beneficially owned (unless otherwise indicated) by CART's directors, the
executive officers of CART named in the Summary Compensation Table below,
nominees, and the directors and executive officers of CART as a group. Except as
otherwise indicated, all information is as of April 11, 2003.
9
The number of shares beneficially owned by each director or executive
officer is determined under rules of the Securities and Exchange Commission, and
the information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, beneficial ownership includes any shares as to
which the individual has the sole or shared voting power or investment power and
also any shares which the individual has the right to acquire as of December 31,
2002 through the exercise of stock options or other rights. Unless otherwise
indicated, each person has sole investment and voting power (or shares such
powers with his/her spouse) with respect to the shares set forth in the
following table.
AMOUNT AND PERCENT OF
NATURE OF SHARES
NAME BENEFICIAL OWNERSHIP (1) OUTSTANDING(2)
---- ------------------------ --------------
Christopher R. Pook................................. 90,000 Vested Options 0
Mario Andretti...................................... 10,000 Vested Options 0
Carl A. Haas........................................ 300,500 Indirect (3) 2.04%
James F. Hardymon................................... 80,000 Vested Options *
James A. Henderson.................................. 1,000 Direct
20,000 Vested Options *
U.E. Patrick........................................ 100 Direct 1.01%
141,300 Indirect (4)
7,585 Vested Options
Rafael A. Sanchez................................... 10,000 Vested Options 0
Frederick T. Tucker................................. 20,000 Vested Options *
Derrick Walker...................................... 7,500 Indirect (5) *
Thomas L. Carter.................................... 3,000 Direct *
33,334 Vested Options
Vicki O'Connor...................................... 20,834 Vested Options *
All current directors and executive officers as a
group (11) persons............................... 4,100 Direct 4.96%
449,300 Indirect
291,753 Vested Options
---------------------
* Represents less than 1% of the Company's outstanding common stock.
(1) "Vested Options" are stock options which may be exercised as of
December 31, 2002.
(2) Percentages are based upon 14,718,134 shares of common stock
outstanding on April 11, 2003.
(3) The shares are held of record by Newman/Haas Racing, Carl Haas
Enterprises, Inc. and Mr. Haas' spouse.
(4) The shares are held of record by Patrick Racing, Inc.
(5) The shares are held of record by Derrick Walker Racing, Inc.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors, executive officers and holders of more than 10% of our common stock
to file with the Securities and Exchange Commission reports regarding their
10
ownership and changes in ownership of our stock. CART believes that during
fiscal 2002, its officers and directors complied with all Section 16(a) filing
requirements. In making this statement, CART has relied upon the written
representations of its directors and officers. CART believes that Gerald R.
Forsythe, a holder of more than 10% of our common stock, filed a Form 4 late,
reporting the sale of 135,000 shares of common stock in December 2002.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have historically entered into transactions with related parties,
because several of our directors and one of our significant shareholders are
team owners. We believe that it is necessary and appropriate to have team owners
involved as directors or significant shareholders of the Company because of
their unique knowledge of our business. We believe that all the transactions
which we have entered into with our directors or significant shareholders, are
comparable to the terms that we have in the past or could in the future enter
into with third parties with respect to each of these transactions. In order to
avoid conflicts of interest, any of our directors who are affiliated with an
entity that is entering into a transaction with us have not and will not vote on
any matters related to such transactions and may, in certain circumstances,
refrain from participating in any discussions related to such transactions.
The related party transactions under "Purse Distributions, Entry
Support Program and Lease Arrangements" are all payments or transactions that
are made on the identical basis to all race teams, whether they are affiliated
with directors or significant shareholders or not affiliated. The payments
payable to related parties under the caption "Team Assistance Program" relate to
further assistance that the Company is providing to race teams to assure their
participation in the 2003 race season. The amounts payable to each race team
vary, depending upon the team's ability to raise third party sponsorship, the
number of cars that the team will race in 2003, their budget and other factors.
The Company has determined that these payments are necessary in order to assure
a proper field for 2003 and believes that the amounts payable to each of the
race teams affiliated with a director is consistent with arrangements that the
Company could enter into with third parties. Both of these programs were
developed to insure the necessary participation in the series. Without this
additional funding, it is unlikely that there would have been 18 teams, which
would result in defaults under certain of the Company's agreements with
promoters and television and could have resulted in severe financial
consequences to the Company.
PURSE DISTRIBUTIONS, ENTRY SUPPORT PROGRAM AND TEAM ASSISTANCE.
We have entered into, and we will continue to enter into, transactions
with entities that are affiliated with our directors and/or 5% stockholders who
are owners of our race teams. Race teams that participate in the Champ Car World
Series receive purse distributions on a per race basis and from the year end
point fund, which amounts have been paid based solely upon their performance in
specific races. All of these payments are made to our race teams regardless of
the affiliation with our directors or significant stockholders. During 2002, we
also paid a participation payment to our race teams, including those affiliated
with directors (or directors who have resigned during the year) and/or 5%
stockholders. The following table provides information with respect to payments
made during 2002 by us to race teams that are or were affiliated with directors
and/or significant stockholders of CART:
RACE TEAM/AFFILIATED PERSON PURSE DISTRIBUTIONS PARTICIPATION PAYMENTS
--------------------------- ------------------- ----------------------
Newman/Haas Racing/Carl A. Haas $ 2,677,500 $ 380,000
Team Green/Barry E. Green 2,013,500 570,000
Chip Ganassi Racing Teams, Inc./Chip Ganassi 2,185,000 540,000
Forsythe Racing, Inc./Gerald R. Forsythe 1,532,250 380,000
Patrick Racing, Inc./U.E. Patrick 317,250 190,000
Derrick Walker Racing, Inc./Derrick Walker 317,750 190,000
In 2003, we will lease engines and provide financial assistance to
every team that participates in the Champ Car World Series, including teams
affiliated with our directors and/or 5% stockholders. The financial assistance
payments relate to two programs instituted for the 2003 season, the Entry
Support Program (ESP) and the Team Assistance Program. ESP will provide up to
$42,500 in cash payments to teams, per race, for each car entered into the
series.
11
The Company has entered into a sponsorship agreement with Ford Motor
Company, which provides in part, that Ford will lease to each of the teams Ford
vehicles for their use in 2003. For ease of administration, Ford has leased
these vehicles to the Company and the Company has subleased the vehicles to each
team on a net net basis. There is no net cost or benefit to the Company related
to this arrangement.
The Company purchased one hundred (100) race engines from Cosworth
Racing, Inc. for a total purchase price of $4.0 million and agreed to pay for
track support in the amount of $1.5 million. The Company in turn has leased
these engines to each team on the basis of $100,000 per entrant per year.
The following table lists the estimated amount of engine lease income
we will receive and Entry Support Payments we will make to related parties for
the 2003 race season.
ENGINE LEASE INCOME ESP PAYMENTS
RACE TEAM/AFFILIATED PERSON FROM TEAMS TO TEAMS
--------------------------- ------------------- ------------
Newman/Haas Racing/Carl A. Haas $200,000 $1,530,000
Forsythe Racing, Inc./Gerald R. Forsythe 200,000 1,530,000
Patrick Racing, Inc./U.E. Patrick 100,000 765,000
Derrick Walker Racing, Inc./Derrick Walker 200,000 1,530,000
TEAM ASSISTANCE PROGRAM. The Team Assistance Program will supply an
additional $30.0 million in team assistance spread over the 2003 race season as
described above. The following table sets forth the Team Assistance Program
payments to teams affiliated with directors and/or 5% stockholders.
RACE TEAM/AFFILIATED PERSON TEAM ASSISTANCE PAYMENTS
--------------------------- ------------------------
Newman/Haas Racing/Carl A. Haas* $ 2,000,000
Patrick Racing, Inc./U.E. Patrick* 1,400,000
Derrick Walker Racing, Inc./Derrick Walker 5,925,000
* These agreements would put the Company over the $30.0 million in total team
assistance the board of directors approved. The board has approved these
contracts contingent on reducing the overall team assistance so as not to exceed
$30.0 million.
PROMOTER AGREEMENTS
Some of our directors or stockholders either control or are affiliated
with others who control racing venues which stage CART and other racing events.
We have entered into the following agreements with entities associated with
directors or 5% stockholders:
Carl A. Haas, a director of the Company and a race team owner, is a
principal owner of Carl Haas Racing Teams, Ltd. and Texaco Houston Grand Prix
L.L.C. ("HGP"), each of which have entered into Promoter Agreements with respect
to Champ Car World Series races at the Wisconsin State Park Speedway in
Milwaukee, Wisconsin and at a temporary road course in Houston, Texas. In the
second quarter of 2002 the Promoter Agreement for the Milwaukee race was renewed
for the 2002 event with the promoter having the option to extend for the 2003
and 2004 years. The sanction fees payable to CART under this agreement is
similar to those paid by independent race promoters. Pursuant to the Promoter
Agreement, entities affiliated with Mr. Haas have paid sanction fees to CART of
$1.7 million. We are currently in negotiations regarding the option for the 2003
and 2004 events. In addition, we have incurred a total of $100,000 in sales
costs and $100,000 in marketing expenses in relation to our race at Wisconsin
State Park Speedway during 2002. The promoter agreement in regards to the
Houston, Texas event provided for races to be held starting in 1998 through
2003. The Houston, Texas race was not held in 2002 and will not be held in 2003
due to construction on the temporary circuit in downtown Houston. Therefore, the
promoter agreement has been terminated by mutual agreement. Carl Haas Racing
Teams, Ltd. paid a $500,000 termination fee to CART and CART has received an
option to acquire certain assets of HGP, used in operating the Houston event,
for $750,000. This option was exercised and payment was made in January 2003.
12
Gerald R. Forsythe, a race team owner and 24.9% stockholder, is a
principal owner of the entities which entered into Promoter Agreements with
respect to Champ Car World Series races in Monterrey, Mexico and Mexico City,
Mexico. These entities affiliated with Mr. Forsythe have paid sanction fees to
CART in the aggregate amount of $6.1 million for 2002. We are currently
renegotiating the remaining years of the agreements.
In addition, we have paid a total of $200,000 in sales costs and
$200,000 in marketing expenses to these entities during 2002.
In order to change the date of the Mexico City race as requested by Mr.
Forsythe's affiliated entity, we have paid another promoter $250,000. Mr.
Forsythe's affiliated entity reimbursed us for $125,000 of that expense.
Gerald R. Forsythe is also a principal owner of an entity which entered
into a Promoter Agreement with respect to Champ Car World Series races in
Rockingham, England. The agreement provided for a race to be held beginning in
2001 through 2006. Following the cancellation of the race scheduled to be run in
Germany, officials at Rockingham expressed concern regarding the viability of
running a single event in Europe. In order to assure that the Rockingham event
could move forward in 2002, we negotiated an amendment to the Promoter Agreement
which reduced the sanction fee to $2.8 million and we assumed certain costs,
including freight and transportation, in the amount of $900,000. In addition,
the terms of the future years of the agreement, 2003-2006, were subject to
renegotiation. This renegotiation has subsequently resulted in the cancellation
of the remaining years of the agreement. In addition, we have paid a total of
$100,000 in sales costs and $400,000 in marketing expenses to this entity during
2002.
Floyd R. Ganassi Jr., a former director of the Company and a race team
owner, is a principal owner of Chicago Motor Speedway, LLC and has entered into
a Promoter Agreement with respect to a Champ Car World Series race at Chicago
Motor Speedway in Cicero (Chicago), Illinois. Pursuant to the terms thereof, a
Championship race was to be held through 2003. The Chicago Motor Speedway, LLC
was to pay sanction fees to CART of $2.0 million for 2002 and $2.1 million for
2003. In 2002, the Chicago Motor Speedway, LLC announced the suspension of all
race events at Chicago Motor Speedway. We then entered into an agreement with
the Chicago Motor Speedway, LLC where we rented the track for $850,000 in 2002
and promoted the race ourselves.
OTHER TRANSACTIONS
In addition to the above, we have entered into the following
transactions with related parties:
Mr. Forsythe is also a principal owner of the entity that holds our
Mexican television rights through 2004. In return for these rights, we received
a minimum guarantee of $300,000 in 2002 and will receive a minimum guarantee of
$325,000 and $350,000 for each of the two years ending 2003 and 2004,
respectively. In addition, we will receive 70% of the net profits, if any, until
we reach $500,000, $550,000 and $600,000 for each of the three years ending
2002, 2003 and 2004, respectively.
Mr. Ganassi is also principal owner of Target Chip Ganassi Racing,
Inc., which entered into an agreement by which Target Chip Ganassi Racing Inc.
ran a third car for a portion of the 2002 season. Pursuant to the terms thereof,
we paid Target Chip Ganassi Racing, Inc. $1.7 million for running the third car,
and we received the right to sell certain sponsorship space on that car.
Ralph Sanchez, a director of the Company, is a principal owner of RAS
Development, Inc. which has entered into a five year lease agreement with the
Company for office space in Miami, Florida. Payments for this lease total
$80,292, $97,957, $99,081, $100,045, $101,008 and $16,861 for 2003, 2004, 2005,
2006, 2007 and 2008, respectively.
13
PAYMENTS TO CART
In addition to the payments described above, CART receives revenues
from its race teams, including those affiliated with CART directors and/or 5%
stockholders, for entry fees, equipment leases and other payments based solely
on participation in CART events and CART's self-promoted event. During 2002,
race teams affiliated with CART directors and/or 5% stockholders made such
payments to CART as follows:
Team Green/Barry E. Green $ 187,360
Forsythe Racing, Inc./Gerald R. Forsythe 106,636
Chip Ganassi Racing Teams, Inc./Chip Ganassi 94,805
Newman/Haas Racing/Carl A. Haas 142,368
Patrick Racing, Inc./U.E. Patrick 71,500
Derrick Walker Racing, Inc./Derrick Walker 50,050
ITEM 14. CONTROLS AND PROCEDURES
(a) Within the 90 days prior to the date of filing of this report, we carried
out an evaluation, under the supervision and with the participation of the
Company's management, including the Company's Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based
upon that evaluation, the Company's Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures are effective in
timely alerting them to material information relating to the Company (including
its consolidated subsidiaries) required to be included in our periodic SEC
filings.
(b) There have been no significant changes in our internal controls or in other
factors that could significantly affect internal controls subsequent to the date
we carried out this evaluation.
14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
DATED: May 28, 2003 CHAMPIONSHIP AUTO RACING TEAMS, INC.
------------------------------------
Registrant
By: /s/ Christopher R. Pook
----------------------------
Christopher R. Pook
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
/s/ Christopher R. Pook Chief Executive Officer May 28, 2003
------------------------------ and Director
Christopher R. Pook
/s/ Thomas L. Carter Chief Financial and May 28, 2003
------------------------------ Accounting Officer
Thomas L. Carter
/s/ Mario Andretti Director May 28, 2003
------------------------------
Mario Andretti
/s/ James F. Hardymon Director May 28, 2003
------------------------------
James F. Hardymon
/s/ James A. Henderson Director May 28, 2003
------------------------------
James A. Henderson
/s/ U.E. Patrick Director May 28, 2003
------------------------------
U.E. Patrick
15
CERTIFICATIONS
I, Christopher R. Pook, Chief Executive Officer, certify that:
1. I have reviewed this annual report on Form 10-K/A of Championship
Auto Racing Teams, Inc.;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability
to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in
this annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 28, 2003
/s/ Christopher R. Pook
------------------------
Christopher R. Pook
Chief Executive Officer
16
CERTIFICATIONS
I, Thomas L. Carter, Chief Financial Officer, certify that:
1. I have reviewed this annual report on Form 10-K/A of Championship
Auto Racing Teams, Inc.;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability
to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in
this annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 28, 2003
/s/ Thomas L. Carter
------------------------
Thomas L. Carter
Chief Financial Officer
17