<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



                                    FORM 10-Q


(Mark One)
(X)      Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934 for the quarterly period ended September 30, 1998.

( )      Transition report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934 for the transition period ______ to ______.

                           Commission File No. 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)

               755 West Big Beaver Rd., Suite 800, Troy, MI 48084
               --------------------------------------------------
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (248) 362-8800
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

      COMMON STOCK $0.01 PAR VALUE                  15,171,666 SHARES
      ----------------------------                  -----------------
                CLASS                        OUTSTANDING AT NOVEMBER 1, 1998



                         This report contains 22 pages.


                                       1
<PAGE>   2



                                TABLE OF CONTENTS



<TABLE>
<CAPTION>
PART I  - FINANCIAL INFORMATION                                                             PAGE

<S>                                                                                       <C>
     ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS.

             Consolidated Balance Sheets at September 30, 1998 and December 31, 1997       3

             Consolidated Statements of Operations for the Three and Nine Months 
             Ended September 30, 1998 and 1997                                             4

             Consolidated Statement of Stockholders' Equity (Deficit) for the 
             Nine Months Ended September 30, 1998                                          5

             Consolidated Statements of Cash Flows for the Nine Months Ended
             September 30, 1998 and 1997                                                   6

             Notes to Consolidated Financial Statements                                    7

     ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
             FINANCIAL CONDITION AND RESULTS OF OPERATIONS.                               13


PART II - OTHER INFORMATION

     ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.                                            21

     SIGNATURES                                                                           22
</TABLE>


                                       2

<PAGE>   3

                      CHAMPIONSHIP AUTO RACING TEAMS, INC.
                           CONSOLIDATED BALANCE SHEETS
                 AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                                         SEPTEMBER 30, 1998   DECEMBER 31, 1997
                                                                            (Unaudited)
                                                                         ------------------   ------------------
<S>                                                                      <C>                  <C>     
ASSETS
Current assets:
   Cash and cash equivalents                                               $  54,116              $  1,164
   Short-term investments                                                     24,742                     -
   Accounts receivable (net of allowance of $155 and $0 at
     September 30, 1998 and December 31, 1997, respectively)                   9,488                 3,156
   Current portion of notes receivable                                           824                     -
   Prepaid expenses                                                              985                   751
   Inventory                                                                     133                     -
   Deferred income taxes                                                          31                 4,683
                                                                           ---------            ----------
        Total current assets                                                  90,319                 9,754

Notes receivable                                                               3,350                    49

Property and equipment (net)                                                   5,139                 2,236

Other assets (net)                                                             5,547                   309
                                                                           ---------            ----------
        Total assets                                                       $ 104,355            $   12,348
                                                                           =========            ==========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
   Accounts payable                                                        $     977            $    1,889
   Accrued liabilities:
      Race expenses and point awards                                           2,728                 9,500
      Payroll                                                                    492                   431
      Taxes                                                                    2,116                   491
      Other                                                                    2,639                   293
Unearned revenue                                                              12,505                 2,352
Current portion of long-term debt                                                130                   130
                                                                           ---------            ----------
        Total current liabilities                                             21,587                15,086

Long-term debt                                                                   217                   314

Deferred income taxes                                                            250                     -

Minority interest                                                               (114)                   (7)

Stockholders' equity (deficit)
    Preferred Stock, $.01 par value; 5,000,000 shares
      authorized, none issued and outstanding at September 30, 1998 
      and December 31, 1997
    Common stock, $.01 par value; 50,000,000 shares authorized,
      15,171,666 and 10,199,998 shares issued and outstanding at 
      September 30, 1998 and December 31, 1997, respectively                     151                   102
  Additional paid-in capital                                                  89,196                15,975
  Accumulated deficit                                                         (7,340)              (19,122) 
  Unrealized gain on investments                                                 408                     -
                                                                           ---------             ---------
        Total stockholders' equity (deficit)                                  82,415                (3,045)
                                                                           ---------             ---------
        Total liabilities and stockholders' equity (deficit)               $ 104,355             $  12,348
                                                                           =========             =========
</TABLE>



See accompanying notes to consolidated financial statements.


                                       3


<PAGE>   4


                      CHAMPIONSHIP AUTO RACING TEAMS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
         FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                   (UNAUDITED)
                    (IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<TABLE>
<CAPTION>

                                                         THREE MONTHS                NINE MONTHS
                                                      ENDED SEPTEMBER 30,         ENDED SEPTEMBER 30,
                                                       1998          1997          1998         1997
                                                     --------      ---------     --------      --------
<S>                                                  <C>           <C>           <C>           <C>     
REVENUES:

         Sanction fees                               $ 10,143      $ 10,295      $ 25,385      $ 24,248
         Sponsorship revenue                            4,942         1,867        12,705         6,186
         Television revenue                             1,643         2,409         4,324         5,240
         Engine leases, rebuilds and wheel sales          767            --         1,721            --
         Other                                          2,515           936         5,940         3,899
                                                     --------      --------      --------      --------

         Total revenues                                20,010        15,507        50,075        39,573

EXPENSES:

         Race and franchise fund distributions          5,999        13,379        12,873        28,939
         Race expenses                                  1,830         2,678         3,966         6,117
         Cost of engine rebuilds and wheel sales          218            --           522            --
         Administrative and indirect expenses           6,441         5,004        15,852        10,653
         Compensation expense                              --        12,200            --        12,200
         Depreciation and amortization                    228           141           556           362
         Minority interest                                (71)           12          (107)         (205)
                                                     --------      --------      --------      --------

         Total expenses                                14,645        33,414        33,662        58,066

OPERATING INCOME (LOSS)                                 5,365       (17,907)       16,413       (18,493)
         Interest income (net)                            912           130         2,145           321
                                                     --------      --------      --------      --------
INCOME (LOSS) BEFORE INCOME TAXES                       6,277       (17,777)       18,558       (18,172)
         Income tax expense (benefit)                   2,312        (2,919)        6,776        (2,971)
                                                     --------      --------      --------      --------
NET INCOME (LOSS)                                    $  3,965      $(14,858)     $ 11,782      $(15,201)
                                                     ========      ========      ========      ========
         EARNINGS PER SHARE:
                       BASIC                         $   0.26      $  (1.46)     $   0.85      $  (1.49)
                                                     ========      ========      ========      ========
                       DILUTED                       $   0.26      $  (1.46)     $   0.84      $  (1.49)
                                                     ========      ========      ========      ========
        WEIGHTED AVERAGE SHARES OUSTANDING:
                       BASIC                           15,172        10,200        13,859        10,200
                                                     ========      ========      ========      ========
                       DILUTED                         15,438        10,200        14,009        10,200
                                                     ========      ========      ========      ========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       4


<PAGE>   5



                      CHAMPIONSHIP AUTO RACING TEAMS, INC.
            CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
                                   (UNAUDITED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                        Common Stock          Additional                  Unrealized
                                     ------------------        Paid-In      Accumulated     Gain on     Stockholders'
                                     Shares      Amount        Capital        Deficit     Investments  Equity(Deficit)
                                     ------      ------       ----------    -----------   -----------  ---------------

<S>                                  <C>         <C>          <C>           <C>           <C>          <C>      
BALANCES, DECEMBER 31, 1997           10,200       $ 102       $ 15,975       $(19,122)      $  --       $ (3,045)
Unrealized gain                           --          --             --             --         408            408

Net income                                --          --             --         11,782          --         11,782
Stock redemption                          --          --
                                         (67)         (1)          (150)            --          --           (151)
Stock issuance (net of issuance
  costs)                               5,038          50         73,371             --          --         73,421
                                     -------       -----       --------       --------       -----       --------

BALANCES, SEPTEMBER 30, 1998          15,171       $ 151       $ 89,196       $ (7,340)      $ 408       $ 82,415
                                     =======       =====       ========       ========       =====       ========
</TABLE>


See accompanying notes to consolidated financial statements.


                                       5
<PAGE>   6



                      CHAMPIONSHIP AUTO RACING TEAMS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                   (UNAUDITED)
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                                             1998            1997
                                                                           --------       ---------
<S>                                                                        <C>            <C>      
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)                                                       $ 11,782       $(15,201)
   Adjustments to reconcile net income (loss) to net cash provided by
   operating activities:
       Depreciation and amortization                                            556            362
       Compensation expense                                                      --         12,200
       Gain from sale of property and equipment                                  (6)          (158)
       Deferred income taxes                                                  4,902         (2,973)
       Minority interest in loss of subsidiaries                               (107)          (205)
       Changes in assets and liabilities that (used) provided cash:
          Accounts receivable                                                (6,332)        (3,020)
          Prepaid expenses                                                     (234)          (731)
          Inventory                                                            (133)            (1)
          Other assets                                                           10             (5)
          Accounts payable                                                     (913)         2,197
          Accrued liabilities                                                (2,739)        12,850
          Unearned revenue                                                   10,153         (1,198)
                                                                           --------       --------

                         Net cash provided by operating activities           16,939          4,117

CASH FLOWS FROM INVESTING ACTIVITIES:
   Acquisitions                                                              (5,315)            --
   Purchase of short-term investments                                       (24,334)            --
   Issuance of notes receivable (net)                                        (4,125)            --
   Acquisition of property and equipment                                     (3,432)          (602)
   Proceeds from sale of property and equipment                                  62             --
   Acquisition of trademark                                                     (16)           (42)
                                                                           --------       --------

                         Net cash used in investing activities              (37,160)          (644)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Payments on long-term debt                                                   (97)          (108)
   Issuance of common stock (net)                                            73,421            840
   Redemption of common stock                                                  (151)          (210)
   Capital contributions to subsidiaries by minority stockholder                 --            225
                                                                           --------       --------

                         Net cash provided by financing activities           73,173            747
                                                                           --------       --------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                    52,952          4,220

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                              1,164            630
                                                                           --------       --------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                 $ 54,116       $  4,850
                                                                           ========       ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the period for:
    Income taxes                                                           $    250       $     15
                                                                           ========       ========
    Interest                                                               $     25       $     37
                                                                           ========       ========
</TABLE>
See accompanying notes to consolidated financial statements 


                                       6


<PAGE>   7

                      CHAMPIONSHIP AUTO RACING TEAMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


1.  BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation - The accompanying unaudited consolidated financial
statements have been prepared by management and, in the opinion of management,
contain all adjustments, consisting of normal recurring adjustments, necessary
to present fairly the financial position of Championship Auto Racing Teams, Inc.
and subsidiaries (the "Company") as of September 30, 1998 and the results of its
operations and its cash flows for the three months and nine months ended
September 30, 1998 and 1997.

The unaudited consolidated financial statements should be read in conjunction
with the consolidated financial statements included in the Company's
registration statement filed on Form S-1 with the Securities and Exchange
Commission.

Because of the seasonal concentration of racing events, the results of
operations for the three months and nine months ended September 30, 1998 and
1997 are not indicative of the results to be expected for the year.

Principles of Consolidation - The 1997 consolidated financial statements include
the financial statements of CART, Inc. (a Michigan corporation) and its
wholly-owned subsidiary corporations CART Properties, Inc. and CART Licensed
Products, Inc. In addition, the 1997 consolidated financial statements include
the financial statements of CART Licensed Products, L.P., a 55% owned
subsidiary. As of March 13, 1998, and April 1, 1998, the consolidated unaudited
financial statements also include the financial statements of American Racing
Series, Inc. ("ARS"), a wholly-owned subsidiary and Pro-Motion Agency Ltd.
("Pro-Motion"), a wholly-owned subsidiary, respectively (see Note 2). All
significant intercompany balances have been eliminated in consolidation.

Revenue Recognition - As of January 1, 1998, the Company changed its method of
accounting for revenue recognition for certain other revenue. Previously, other
revenue was recognized when received, with the majority being received in the
first quarter of the year with the commencement of the race season. Under the
new method, the Company will recognize these revenues pro-rata over the race
season. The Company believes the new method is preferable as it provides a
better matching of revenues and expenses.

Earnings Per Share - Basic earnings per share ("EPS") excludes dilution and is
computed by dividing earnings available to common stockholders by the
weighted-average number of common shares outstanding for the period. Diluted EPS
assumes the issuance of common stock for all potentially dilutive equivalent
shares outstanding.

Short-term Investments - The Company's short-term investments are categorized as
available-for-sale, as defined by Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities"


                                       7

<PAGE>   8


                      CHAMPIONSHIP AUTO RACING TEAMS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


("SFAS No. 115"). Unrealized holding gains and losses are reflected as a net
amount in a separate component of stockholders' equity until realized. For the
purpose of computing realized gains and losses, cost is identified on a specific
identification basis.

Other Assets - Other assets consist mainly of goodwill, representing the excess
of the purchase price of ARS and B.P. Automotive, Ltd. ("BP") and Pro-Motion
(see Note 2) over the net tangible and identifiable intangible assets of these
acquisitions. Goodwill is stated at cost and is amortized on a straight-line
basis over 40 years.

Accounting Pronouncements - The Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income," beginning
January 1, 1998. The effect of this pronouncement is shown in the table below:
<TABLE>
<CAPTION>

                                                           Three Months Ended   Nine Months Ended
                                                           September 30, 1998   September 30, 1998
                                                              (Unaudited)          (Unaudited)
                                                           ------------------   ------------------
<S>                                                              <C>               <C> 
Unrealized gain on investments, beginning of period              $ 61              $ --
                                                                                  
Current - period change                                           347               408
                                                                 ----              ----
Unrealized gain on investments, end of period                    $408              $408
                                                                 ====              ====
</TABLE>


Reclassifications - Certain reclassifications have been made to the 1997
consolidated financial statements in order for them to conform to the 1998
presentation.


2.  INITIAL PUBLIC OFFERING AND ACQUISITIONS

Initial Public Offering - In March 1998, the Company completed its initial
public offering ("IPO") of 5,038,000 shares of common stock (including 705,000
shares issued upon exercise of the underwriters' over allotment option). The
initial offering price was $16 per share with proceeds to the Company of $74.9
million, net of underwriting discount. A portion of the net proceeds from the
IPO were used to acquire ARS and BP for $10 million (see Acquisition of ARS and
BP), and to pay accrued point awards to franchise race teams aggregating $9.5
million. The remaining net proceeds will be used for working capital and general
corporate purposes, including the expansion of the Company's business through
the acquisition or development of race related businesses and properties.

Acquisition of ARS and BP - On March 13, 1998, the Company acquired 100% of the
outstanding common stock of ARS and certain assets of BP (entities related
through certain common ownership). ARS operates the PPG-Dayton Indy Lights
Championship ("Indy Lights"), a support series to CART. BP supplies certain
equipment to Indy Lights competitors and earns commission income on the sale of
chassis and spare parts to the teams. At closing of the acquisition, the Company
paid $7 million in cash and issued options to purchase 100,000 shares of the
Company's common stock at an exercise price of $16.00 per share which vests one
year from closing if certain performance criteria are met for 1998.


                                       8


<PAGE>   9


                      CHAMPIONSHIP AUTO RACING TEAMS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


In addition, the Company will pay an additional purchase price of up to $3
million upon satisfaction by ARS of certain performance criteria during
1998-2000. The excess of the initial purchase price of $7 million over the net
book value of the net assets acquired has been allocated to the tangible and
intangible assets based on the Company's estimate of the fair market value of
the net assets acquired. The operating results of ARS and BP have been included
in the Company's consolidated financial statements since the date of
acquisition.

Acquisition of Pro-Motion - On April 10, 1998, the Company acquired 100% of the
outstanding common stock of Pro-Motion, an entity previously owned by a director
of the Company, a race team owner and stockholder for $533,700 in cash.
Pro-Motion operates the KOOL/Toyota Atlantic Championship open-wheel series, a
support series to CART. The excess of the initial purchase price over the net
book value of the net assets acquired has been allocated to the tangible and
intangible assets based on the Company's estimate of the fair market value of
the net assets acquired. The operating results of Pro-Motion have been included
in the Company's financial statements since April 1, 1998.

Pro forma Results - The following unaudited pro forma summary for the three
months and nine months ended September 30, 1998 and 1997 assume the acquisitions
of ARS, BP and Pro-Motion occurred as of January 1, 1997.
<TABLE>
<CAPTION>

                                                     Three Months                        Nine Months
                                                   Ended September 30,                 Ended September 30,
                                                 1998              1997              1998              1997
                                                 ----              ----              ----              ----
                                                        (In Thousands, Except Earnings Per Share)
-----------------------------------------------------------------------------------------------------------
<S>                                           <C>              <C>                <C>              <C>     
Revenues                                      $20,010          $ 18,284           $51,408          $ 44,875
Net Income (Loss)                               3,965            (8,909)           12,049            (2,874)
Earnings per share:
     Basic                                    $   .26          $   (.84)          $   .84          $   (.27)
                                              =======          ========           =======          ========
     Diluted                                  $   .26          $   (.84)          $   .83          $   (.27)
                                              =======          ========           =======          ========
Weighted Average Shares Outstanding:
     Basic                                     15,172            10,638            14,296            10,638
                                              =======          ========           =======          ========
     Diluted                                   15,438            10,638            14,446            10,638
                                              =======          ========           =======          ========
-----------------------------------------------------------------------------------------------------------------
</TABLE>

Pro forma adjustments for the periods presented have also been made to reduce
certain benefits paid to franchise members, including the reimbursement of
travel expenses, director's fees and other race related payments in connection
with the Company's reorganization, effective January 1, 1998. Additional cost
savings that the Company expects to realize through the integration of the ARS,
BP and Pro-Motion acquisitions have not been included.

3.  STOCK OPTION PLAN

In December 1997, the Board of Directors of the Company (the "Board")
authorized, and the stockholders of the Company approved, a stock incentive plan
for executive and key management employees of the Company and its subsidiaries,
including a limited number of outside consultants and advisors, effective as


                                       9

<PAGE>   10


                      CHAMPIONSHIP AUTO RACING TEAMS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


of the completion of the IPO (the "Stock Option Plan"). Under the Stock Option
Plan, key employees, outside consultants and advisors (the "Participants") of
the Company and its subsidiaries (as defined in the Stock Option Plan) may
receive awards of stock options (both Nonqualified Options and Incentive
Options, as defined in the Stock Option Plan). A maximum of 2,000,000 shares of
common stock will be subject to the Stock Option Plan. Options granted will vest
pro-rata over a three-year period. No stock option may be exercisable after ten
years from the date of the grant, subject to certain conditions and limitations.
The purpose of the Stock Option Plan is to provide the Participants (including
officers and directors who are also key employees) of the Company and its
subsidiaries with an increased incentive to make significant contributions to
the long-term performance and growth of the Company and its subsidiaries.
Concurrent with the IPO, an aggregate 1,088,100 options to acquire common stock
were granted under the Stock Option Plan at the initial offering price of $16.00
per share.

In addition, in December of 1997, the Board and the stockholders of the Company
approved a Director Option Plan permitting the granting of non-qualified stock
options ("Director NQSOs") for up to 100,000 shares of common stock to directors
of the Company who are neither employees of the Company nor affiliates of a race
team which participates in CART race events (an "Independent Director"). Each
person who is first elected or appointed to serve as an Independent Director of
the Company is automatically granted an option to purchase 10,000 shares of
Company common stock. In addition, each individual who is re-elected as an
Independent Director is automatically granted an option to purchase 5,000 shares
of Company common stock each year on the date of the annual meeting of
stockholders. Each of the options automatically granted upon election,
appointment or re-election as an Independent Director are exercisable at a price
at least equal to the fair market value of the common stock on the date of
grant. In addition, each Independent Director may elect to receive stock options
in lieu of any director's fees payable to such individuals.

All Director NQSOs are immediately exercisable upon grant. The exercise price
for all options may be paid in cash, shares of common stock or other property.
If an Independent Director dies or becomes ineligible to participate in the
Director Option Plan due to disability, his Director NQSOs expire on the first
anniversary of such event. If an Independent Director retires with the consent
of the Company, his Director NQSOs expire 90 days after his retirement. In no
event may a Director NQSO be exercised more than ten years from the date of
grant. As of September 30, 1998, there were 10,000 Director NQSOs issued and
outstanding.





                                       10


<PAGE>   11

                      CHAMPIONSHIP AUTO RACING TEAMS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4.  PROPERTY AND EQUIPMENT

Property and equipment consists of the following at September 30, 1998 and
December 31, 1997.
<TABLE>
<CAPTION>
                                        (In Thousands)
                             SEPTEMBER 30, 1998  DECEMBER 31, 1997
                                    (Unaudited)  
                             ------------------  -----------------
<S>                          <C>                 <C>
Engines                                 $ 2,296           $    --
Machinery and office equipment            2,653             1,899
Vehicles                                  1,890             1,616
Tooling                                      13                --
Leasehold improvements                        5                 1
Construction in progress                     --                65
Pop-off valves                              253               162
                                        -------           -------

Total                                     7,110             3,743

Less accumulated depreciation            (1,971)           (1,507)
                                        -------           -------

Property and equipment (net)            $ 5,139           $ 2,236
                                        =======           =======
</TABLE>


5.  SHORT-TERM INVESTMENTS

The following is a summary of the estimated fair value of available for sale
short-term investments by balance sheet classification:

<TABLE>
<CAPTION>

                                                         GROSS UNREALIZED
SEPTEMBER 30, 1998                                      -----------------
(IN THOUSANDS)(UNAUDITED)        COST    FAIR VALUE       GAIN       LOSS
--------------------------------------------------------------------------------
<S>                            <C>       <C>           <C>       <C>
U.S. Treasury securities                                $   --     $   --

U.S. agencies securities        16,032     16,135           103        --

Corporate bonds                  8,551      8,607            56        --
                                ------    -------        ------    ------

Total short-term investments   $24,583    $24,742        $  159    $   --
                               =======    =======        ======    ======  
</TABLE>



Contractual maturities range from less than one year to two years. The weighted
average maturity of the portfolio does not exceed one year.


                                       11
<PAGE>   12



                      CHAMPIONSHIP AUTO RACING TEAMS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



6.  COMMON STOCK

In March 1998, at the request of a race team owner, the Company rescinded the
sale of an aggregate of 66,666 shares of common stock it issued in December 1997
at a total price of $151,000.

7.  NOTES RECEIVABLE

In May 1998, the Company entered into an agreement with a promoter whereby the
Company provided financing for a CART sanctioned event in Brazil. The note
receivable of $4.2 million relating to costs incurred by the Company during the
1998 event will be repaid in five equal yearly installments over the life of the
sanction agreement. The note receivable has a stated 5% per annum interest rate
and is partially secured by letters of credit issued by the City of Rio de
Janeiro, Brazil.

8.  COMMITMENT

In June 1998, the Company entered into a nine year agreement with ISL Worldwide
("ISL"). The contract appoints ISL as the Company's exclusive worldwide
marketing agent for the sale of all sponsorships of its open wheel racing
series, the FedEx Championship Series, the PPG-Dayton Indy Lights Championship,
and the KOOL/Toyota Atlantic Championship.


                                       12

<PAGE>   13



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS.


OVERVIEW

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

THE REORGANIZATION

         The Company was formed in December 1997 to serve as a holding company
for CART, Inc. and its subsidiaries. CART, Inc. previously issued 25.5 shares of
its common stock to racing teams who met certain participation requirements.
Each outstanding share of common stock of CART, Inc. was acquired by the Company
in exchange for 400,000 shares of common stock of the Company (the
"Reorganization"). The Reorganization was completed in anticipation of, and to
facilitate the IPO. As part of the Reorganization and pursuant to a three-year
agreement among each of the Company's current stockholders, effective January 1,
1998, the payment of certain items to franchise members including reimbursement
of travel expenses on a per race basis, directors fees and other race-related
payments were discontinued.

RESULTS OF OPERATIONS

Three Months Ended September 30, 1998 Compared to Three Months Ended September
30, 1997

         Revenues. Total revenues for the quarter ended September 30, 1998 were
$20.0 million, an increase of $4.5 million, or 29% from the same period in the
prior year. This increase was due to higher sponsorship revenue, engine leases,
rebuilds and wheel sales, and other revenue, partially offset by a decrease in
sanction fees and television revenue, as described below.

         Sanction fees for the quarter ended September 30, 1998 were $10.1
million, a decrease of $152,000, or 2%, from the same period in the prior year.
This decrease was the result of seven events taking place in the third quarter
of 1998 compared to eight events in the same period in the prior year, partially
offset by annual sanction fee escalations for certain events from 1997 to 1998.

         Sponsorship revenue for the quarter ended September 30, 1998 was $4.9
million, an increase of $3.1 million, or 165%, from the same period in the prior
year. This increase was primarily attributable to a new sponsorship agreement
entered into with Federal Express, an agreement with ISL Worldwide that
guarantees certain sponsorship income for the 1998 season and the additional
sponsorship revenues attributable to the acquisition of ARS in March 1998 and
Pro-Motion in April 1998.

         Television revenue for the quarter ended September 30, 1998 was $1.6
million, a decrease of $766,000, or 32%, from the same period in the prior year.
Television revenue is recognized on a per race basis. The per race revenue
recognition for television has decreased in 1998 compared to 1997, as the total
number of races has increased from 17 races to 19 races in 1998, thereby,
decreasing the per race revenue accrual. The additional races will be held in
the fourth quarter. Also, the decrease in television revenue was partially due
to seven races being held in the third quarter of 1998 compared to eight races


                                       13

<PAGE>   14

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS.


in the same period in the prior year. Finally, the decrease is also attributable
to a slightly lower profit sharing portion of the Company's contract with ESPN
due to having two fewer network events in 1998.

         Engine leases, rebuilds and wheel sales revenue for the quarter ended
September 30, 1998 was $767,000. There is no corresponding revenue in the prior
period as this revenue was earned by ARS, which was acquired in March 1998.

         Other revenue for the quarter ended September 30, 1998 was $2.5
million, an increase of $1.6 million, or 169%, from the same period in the prior
year. This increase was partially attributable to a change in accounting method
for membership and credential revenue. In 1997, membership and credential
revenue was recognized when the income was received, mainly in the first
quarter. During 1998, the income is accrued over the race season to reflect this
income as it is earned and to record these revenues at the time of recording
corresponding expenses. In addition, the increase is partially due to the
Reorganization that was effective January 1, 1998. As part of the
Reorganization, the Company now receives membership income from franchise
members and is recognizing this income over the race season. Finally, the
increase in other revenue was also from an increase in net royalty revenues
related to the Company's expanded licensed products venture and additional other
revenues from ARS and Pro-Motion that did not exist in the same period in the
prior year.

         Expenses. Total expenses for the quarter ended September 30, 1998 were
$14.6 million, a decrease of $18.8 million, or 56%, from the same period in the
prior year. This decrease was due to a decrease in race distributions, race
expenses and compensation expense, partially offset by an increase in
administrative and indirect expenses as described below.

         Race distributions for the quarter ended September 30, 1998 were $6.0
million, a decrease of $7.4 million, or 55%, from the same period in the prior
year. This decrease is partially due to the Reorganization that was effective
January 1, 1998. In 1997, certain payments were made to franchise members that
have been discontinued for the 1998 season. The decrease was also due to seven
races being held in the third quarter of 1998 compared with eight races held in
the same period in the prior year.

         Race expenses for the quarter ended September 30, 1998 were $1.8
million, a decrease of $848,000, or 32%, from the same period in the prior year.
This decrease is partially due to the Reorganization that was effective on
January 1, 1998. In 1997, certain payments were made to franchise members that
have been discontinued for the 1998 season. The decrease was also due to seven
races being held in the third quarter of 1998 compared with eight races held in
the same period in the prior year. The decrease is partially offset by the
increase in race expenses from ARS and Pro-Motion that were not included in the
same period in the prior year as these companies were acquired in 1998.

         Cost of engine rebuilds and wheel sales for the quarter ended September
30, 1998 were $218,000. There is no corresponding expense in the prior period as
this expense is from ARS and BP, which were acquired in March 1998.



                                       14

<PAGE>   15

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

         Administrative and indirect expenses for the quarter ended September
30, 1998 were $6.4 million, an increase of $1.4 million, or 29%, from the same
period in the prior year. This was primarily attributable to an increase in
marketing and advertising, sales costs related to sponsor sales, development of
a creative services department in 1998 and increased administrative expenses
related to the Company's expanded licensed products venture. The addition of ARS
and Pro-Motion administrative expenses contributed to the increase, as there
were no corresponding expense in the prior period since these companies were
acquired in 1998.

         Compensation expense for the quarter ended September 30, 1998 was $0, a
decrease of $12.2 million. This non-cash compensation expense related to the
issuance of the Company's stock in 1997 to race teams at below fair market
value. No such expense was incurred in the current year.

         Operating income for the quarter ended September 30, 1998 was $5.4
million, an increase in income of $23.3 million from the corresponding period in
the prior year due to the factors described above.

         Interest income (net) for the quarter ended September 30, 1998 was
$912,000, compared to interest income (net) of $130,000 for the corresponding
period in the prior year. The increase of $782,000 or 602% is primarily
attributable to interest earned on the invested proceeds from the initial public
offering that occurred in March 1998.

         Income tax expense for the quarter ended September 30, 1998 was $2.3
million, compared to income tax benefit of $2.9 million for the corresponding
period in the prior year.

          Net income for the quarter ended September 30, 1998 was $4.0 million,
an increase of $18.8 million from the corresponding period in the prior year as
a result of the factors described above.

         Comprehensive income for the quarter ended September 30, 1998 was
$347,000, an increase of $347,000 from the corresponding period in the prior
year as a result of unrealized gain on investments.


Nine Months Ended September 30, 1998 Compared to Nine Months Ended September 30,
1997

         Revenues. Total revenues for the nine months ended September 30, 1998
were $50.1 million, an increase of $10.5 million, or 27% from the same period in
the prior year. This increase was due to higher sanction fees, sponsorship,
engine leases, rebuilds and wheel sales, and other revenue, partially offset by
a decrease in television revenue, as described below.

         Sanction fees for the nine months ended September 30, 1998 were $25.4
million, an increase of $1.1 million, or 5%, from the same period in the prior
year. This increase was due to annual sanction fee escalations for certain
events from 1997 to 1998, partially offset by one less race in the nine months
ended September 30, 1998 compared to the same period in 1997.

                                       15
<PAGE>   16

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

         Sponsorship revenue for the nine months ended September 30, 1998 was
$12.7 million, an increase of $6.5 million, or 105%, from the same period in the
prior year. This increase was primarily attributable to a new sponsorship
agreement entered into with Federal Express, an agreement with ISL Worldwide
that guarantees certain sponsorship income for the 1998 season and the
additional sponsorship revenues attributable to the acquisition of ARS in March
1998 and Pro-Motion in April 1998.

         Television revenue for the nine months ended September 30, 1998 was
$4.3 million, a decrease of $916,000, or 18%, from the same period in the prior
year. Television revenue is recognized on a per race basis. The decrease in
television revenue was due to a decrease in the per race revenue recognition, as
the total number of races has increased from 17 races to 19 races in 1998,
thereby, decreasing the per race revenue accrual. The additional races will be
held in the fourth quarter. The decrease is also due to one less race in the
nine months ended September 30, 1998 as compared to the same period in 1997.
Finally, the decrease is also attributable to a slightly lower profit sharing
portion of the Company's contract with ESPN due to having two less network
events in 1998.

         Engine leases, rebuilds and wheel sales revenue for the nine months
ended September 30, 1998 was $1.7 million. There is no corresponding revenue in
the prior period as this revenue was earned by ARS, which was acquired in March
1998.

         Other revenue for the nine months ended September 30, 1998 was $5.9
million, an increase of $2.0 million, or 52%, from the same period in the prior
year. The increase was due to an increase in net royalty revenues related to the
Company's expanded licensed products venture and additional other revenues from
ARS and Pro-Motion that did not exist in the same period in the prior year as
they were not acquired until 1998. In addition, the increase is partially due to
the Reorganization that was effective January 1, 1998. As part of the
Reorganization, the Company now receives membership income from franchise
members and is recognizing this income over the race season. This overall
increase was partially offset by a decrease due to a change in accounting method
for membership and credential revenue. In 1997, membership and credential
revenue was recognized when the income was received, mainly in the first
quarter. During 1998, the income is accrued over the race season to reflect this
income as it is earned and to record these revenues at the time of recording
corresponding expenses.

         Expenses. Total expenses for the nine months ended September 30, 1998
were $33.7 million, a decrease of $24.4 million, or 42%, from the same period in
the prior year. This decrease was due to a decrease in race distributions, race
expenses and compensation expense, partially offset by an increase in
administrative and indirect expenses as described below.

         Race distributions for the nine months ended September 30, 1998 were
$12.9 million, a decrease of $16.1 million, or 56%, from the same period in the
prior year. This decrease is due to the Reorganization that was effective
January 1, 1998. In 1997, certain payments were made to franchise members that
have been discontinued for the 1998 season.

         Race expenses for the nine months ended September 30, 1998 were $4.0
million, a decrease of $2.2 million, or 35%, from the same period in the prior
year. This decrease is due to the Reorganization that was effective on January
1, 1998. In 1997, certain payments were made to franchise members that have been
discontinued for the 1998 season. The decrease is partially offset by the
increase in race expenses from ARS and Pro-Motion that were not included


                                       16



<PAGE>   17


                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS.


in the same period in the prior year as these companies were acquired in 1998.

         Cost of engine rebuilds and wheel sales for the nine months ended
September 30, 1998 were $522,000. There is no corresponding expense in the prior
period as this expense is from ARS and BP, which were acquired in March 1998.

         Administrative and indirect expenses for the nine months ended
September 30, 1998 were $15.9 million, an increase of $5.2 million, or 49%, from
the same period in the prior year. This was primarily attributable to an
increase in marketing and advertising, sales costs related to sponsor sales,
development of a creative services department in 1998 and increased
administrative expenses related to the Company's expanded licensed products
venture. In addition, ARS and Pro-Motion administrative expenses contributed to
the increase, as there are no corresponding expenses in the prior period since
these companies were acquired in 1998.

         Compensation expense for the nine months ended September 30, 1998 was
$0, a decrease of $12.2 million. This non-cash compensation expense related to
the issuance of the Company's stock in 1997 to race teams at below fair market
value. No such expense was incurred in the current year.

         Operating income for the nine months ended September 30, 1998 was $16.4
million, an increase of $34.9 million from the corresponding period in the prior
year due to the factors described above.

         Interest income (net) for the nine months ended September 30, 1998 was
$2.1 million, compared to interest income (net) of $321,000 for the
corresponding period in the prior year. The increase of $1.8 million or 567% is
primarily attributable to interest earned on the invested proceeds from the
initial public offering that occurred in March 1998.

         Income tax expense for the nine months ended September 30, 1998 was
$6.8 million, compared to income tax benefit of $3.0 million for the
corresponding period in the prior year.

         Net income for the nine months ended September 30, 1998 was $11.8
million, an increase of $27.0 million, from the corresponding period in the
prior year as a result of the factors described above.

         Comprehensive income for the nine months ended September 30, 1998 was
$408,000, an increase of $408,000 from the corresponding period in the prior
year as a result of unrealized gain on investments.


SEASONALITY AND QUARTERLY RESULTS

         The Company derives a substantial portion of its total revenues during
the CART Championship season. As a result, the Company's business has been, and
is expected to remain, seasonal, based upon the CART Championship schedule. The
Company's quarterly results vary relative to the number of races held during the
quarter. In addition, the mix between the type of race (street course,
superspeedway, etc.), its location and the sanction fees attributed to those
races will affect quarterly results.


                                       17



<PAGE>   18


                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS.


         The revenues from any race in the CART Championship will significantly
affect the Company's results of operations for a particular quarter.
Consequently, changes in race schedules from year to year, with races held in
different quarters, will result in fluctuations in quarterly results and affect
comparability.


LIQUIDITY AND CAPITAL RESOURCES

         The Company has relied on cash flow from operations to finance working
capital, investments and capital expenditures.

         The Company's bank borrowing with a commercial bank consists of a fixed
rate installment note incurred in connection with the acquisition of a mobile
medical unit that is transported to each North American race. The note bears
interest at a rate of 8.25% per annum and matures on May 1, 2001. The note is
secured by the Company's mobile medical unit. Interest is payable monthly. As of
September 30, 1998, the current portion of this note was $130,000 and the
long-term portion was $217,000.

         The Company also has a $1.5 million revolving line of credit with a
commercial bank. As of September 30, 1998, there was no outstanding borrowing
under the line of credit. The line of credit contains no 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 the Company's deposits
with the bank.

         In March 1998, the Company sold 5,038,000 shares of its common stock in
conjunction with its IPO. The initial offering price was $16.00 per share with
proceeds to the Company of $74.9 million, net of underwriting discounts.

         The Company's cash balance on September 30, 1998 was $54.1 million, a
net increase of $52.9 million from December 31, 1997. This increase was
primarily the result of net cash provided by operations of $16.9 million and net
financing activities of $73.2 million, which was offset by net cash used in
investing activities of $37.2 million.

         The Company's current capital expenditure budget for the next 12 months
is approximately $1.3 million. However, the Company intends to expand its
business through the acquisition or development of racing-related businesses and
properties. The Company currently has no agreements with respect to any
acquisitions, but it regularly engages in discussions relating to potential
acquisitions. The Company believes that the proceeds of the IPO, cash flow from
operations and available borrowings under its bank facilities will be sufficient
to fund these anticipated capital expenditures and other cash needs.

                                       18

<PAGE>   19


                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS.


YEAR 2000 COMPLIANCE

General
-------
The Year 2000 ("Y2K") compliance issue is primarily the result of computer
programs using a two-digit format, as opposed to four digits, to indicate the
year. Such computer systems will be unable to interpret dates beyond the year
1999, which could cause a system failure or other computer errors, leading to a
disruption in the operation of such systems.

Project
-------
The Company's Y2K project covers both traditional computer systems and
infrastructure and computer-based hardware, such as fax machines, postage
machines and phone systems. The Y2K project has six phases: Awareness,
Assessment, Detailed Analysis and Planning for Upgrades and Testing, System
Upgrades and Testing, Implementation, and Post Implementation. Work for phases I
and II is proceeding concurrently. The Post Implementation Phase includes the
Company's contingency plan where users will have developed fall back procedures,
and be ready to implement, manual procedures for conduction of company business,
record keeping, follow-up data entry and system recovery in the event of system
failure.

Risks
-----
Based on its assessment of its major information technology systems, the
Company expects that all necessary modifications and/or replacements will be
completed in a timely manner to ensure that all systems are Y2K compliant.
However, the Company does not currently anticipate any disruption in its
operations as the result of any failure by the Company to be in compliance.

Interfaces with Third Parties
-----------------------------
The Company's Y2K project also considers the readiness of significant vendors
and suppliers. The Company does not have any suppliers or vendors that are
material to its operations as a whole. Contact with vendors and suppliers
concerning their Y2K compliance is starting to commence.

Costs
-----
Total costs relating to Y2K compliance for the Company is expected to be
approximately $35,000 to $50,000 and funded through the Company's normal
operating budget. Such cost estimates are based upon presently available
information and may change as the Company continues with its Y2K project.


SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

         Except for the historical information contained herein, certain matters
discussed in this Form 10-Q are forward-looking statements which involve risks
and uncertainties that could cause actual results to differ materially from
those predicted in the forward-looking statements. The following factors, among
others, in some cases have affected and could cause actual results and plans for
future periods to differ materially from those expressed or implied in any such
forward looking statements: competition in the sports and entertainment


                                       19

<PAGE>   20

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS.


industry, participation by race teams, continued industry sponsorship, continued
participation by suppliers and event promoters, regulation of tobacco and
alcohol advertising and sponsorship, competition by the Indy Racing League, and
liability for personal injuries.












                                       20

<PAGE>   21




                      CHAMPIONSHIP AUTO RACING TEAMS, INC.

                           PART II - OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K.

    (a)  Exhibits.
             The following exhibits are filed herewith.

             EXHIBIT NUMBER           DESCRIPTION OF EXHIBIT
             --------------           ----------------------
                  27.1                Financial Data Schedule




    (b)  Reports on Form 8-K.
             The Company was not required to file a Form 8-K during the three 
             months ended September 30, 1998.


    (c)  Other.
             Any matter to be brought before the Company's 1999 annual meeting 
             of stockholders shall be set forth in a notice, delivered to the 
             Company's Secretary, on or prior to February 22, 1999. The Company 
             intends to exercise discretionary voting authority on all matters 
             brought before such meeting as to which advance notice was not 
             properly delivered to the Company.


                                       21

<PAGE>   22




                                   SIGNATURES


Pursuant to the requirements 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.

                                         CHAMPIONSHIP AUTO RACING TEAMS, INC.


   Date:  11/9/98                               By: /s/RANDY K. DZIERZAWSKI
         -------------------------           --------------------------------
                                             Randy K. Dzierzawski
                                             Chief Financial Officer





                                       22