DAILY NEWS, BOWLING GREEN, KENTUCKYPAGE 4B - WEDNESDAY, APRIL 4, 2012 Business

New Showroom and Ownership

Give Your Home a FRESH LOOK for spring! Shop Bowling Green’s largest selection of flooring.

March Madness Spring Savings

50% OFF All In Stock Area Rugs

Tile up to

15% OFF Select carpet up to

20% OFF

1109 Lovers Lane

(270) 843-4348

Up to

By DEE-ANN DURBINThe Associated Press

Flying cars aren’t just science fictionanymore.

Woburn, Mass.-based Terrafugia Inc.said Monday that its prototype flying carhas completed its first flight, bringing thecompany closer to its goal of selling theflying car within the next year. The vehicle– dubbed the Transition – has two seats,four wheels and wings that fold up so it canbe driven like a car. Last month, it flew at1,400 feet for eight minutes. Commercialjets fly at 35,000 feet.

About 100 people have already putdown a $10,000 deposit to get a Transitionwhen they go on sale, and those numbersare likely to rise after Terrafugia introducesthe Transition to the public this week at theNew York Auto Show. But don’t expect itto show up in too many driveways. It’sexpected to cost $279,000.

And it won’t help if you’re stuck in traf-fic. The car needs a runway.

The flying car has always had a specialplace in the American imagination. Inven-tors have been trying to make them sincethe 1930s, according to Robert Mann, anairline industry analyst who owns R.W.Mann & Co. in Port Washington, N.Y.

But Mann thinks Terrafugia has comecloser than anyone to making the flying cara reality. The government has alreadygranted the company’s request to use spe-cial tires and glass that are lighter than nor-mal automotive ones, to make it easier forthe vehicle to fly. The government has alsotemporarily exempted the Transition fromthe requirement to equip vehicles withelectronic stability control, which wouldadd about 6 pounds to the vehicle. TheTransition is going through a battery ofautomotive crash tests to make sure itmeets federal safety standards.

Mann said Terrafugia was helped by theFederal Aviation Administration’s decisionfive years ago to create a separate set ofstandards for light sport aircraft. The stan-dards govern the size and speed of theplane and licensing requirements for pilots,which are less restrictive than requirementsfor pilots of larger planes. Terrafugia saysan owner would need to pass a test andcomplete 20 hours of flying time to be ableto fly the Transition, a relatively low hurdlefor pilots.

The Transition can reach around 70 mphon the road and 115 in the air, spokesmanSteven Moscaritolo said. It flies using a 23-gallon tank of automotive fuel and burns 5

gallons per hour in the air. On the ground,it gets 35 miles per gallon.

Mann questions the size of the marketfor the Transition. The general aviationmarket has been in decline for twodecades, he said, largely because of fuelcosts and the high cost of liability for man-ufacturers. Also, fewer people are learninghow to fly.

“This is not going to be an inexpensiveaircraft to produce or market,” he said. “Ithas some uniqueness, and will get somesales, but the question is, could it ever be aprofitable enterprise?”

Mann sees the Western U.S. as the mostlikely market, where people could flyinstead of driving long distances.

Terrafugia has been working on flyingcars since 2006, and has already pushedback the launch once. Last summer thecompany said it would have to delayexpected 2011 deliveries due to designchallenges and problems with parts suppli-ers.

With the appearance in New York, thecompany hopes to attract the eye of cus-tomers as well as investors.

“We are introducing ourselves as aviable company to the automotive world,”Moscaritolo said.

By BARBARA ORTUTAYThe Associated Press

NEW YORK — Groupon’sannouncement that its revenueand earnings were lower thanwhat it reported in February issparking fresh worries about theyoung company’s businessmodel.

Trouble arose when the onlinedeals company said late Fridaythat it had to revise its previouslyissued fourth-quarter results toincrease the money it set aside forrefunds to customers. A big rea-son: It is selling more expensivedeals, such as vacation packagesand Botox procedures, whichhave higher return rates.

Investors responded by sellingGroupon’s stock Monday, andshares fell 17 percent. Some ana-lysts are wondering if Groupon,which began trading publicly lessthan five months ago, will beable to leave behind its growingpains.

“We believe Groupon is now a‘show-me’ story, where a compa-ny’s ambitions are higher than thelevel of its internal planning andcontrols,” Jordan Rohan, an ana-lyst with Stifel Nicolaus, said in anote to investors. He downgradedthe company’s stock to “Sell,”from “Hold.”

“The company claims that thereturns do not threaten its expan-sion and growth,” Rohan wrote.“We prefer to wait and see.”

Internal controls are systemsthat companies have in place tomake sure that their financialreporting is accurate and that theycan meet business goals. Late Fri-day afternoon – a popular time forcompanies to release bad news –Groupon also disclosed that itsauditors found a weakness in itsinternal controls, but insisted thatits business is solid.

Founded in November 2008,Groupon pioneered the onlinedaily deals market, which offerssubscribers deep discounts oneverything from restaurant

meals to tech gadgets to week-end getaways if enough peoplebuy in. It sparked many copy-cats, including LivingSocial,Google and Facebook, thoughthe latter ended up abandoningthe effort.

In terms of mere numbers, thefinancial restatement doesn’tamount to much. The revisionlowered the company’s fourth-quarter revenue by about 3 per-cent, to $492 million. And itwidened its net loss by 4 cents, to12 cents per share. Groupon’schief financial officer, JasonChild, said the company remainsconfident in its business.

But Friday wasn’t the firsttime that Groupon has had tochange its accounting. Last year,the company got in trouble forincluding as revenue the share ithad to turn over to merchantsrunning the deal. After federalregulators questioned the fuzzymath, the company counted onlythe money it got to keep andreduced its reported revenue byroughly half. All that precededits initial public offering inNovember.

The fact that Groupon has hadto revise its numbers again raisesquestions about the company’sability to manage its financialreporting and give investors anaccurate picture of how it is far-ing.

Groupon spokesman PaulTaaffe said Monday that the com-pany understands that “there is acertain amount of skepticism inthe market” given the company’shistory.

But he said the company’s fun-damental business is strong, andsuch accounting issues are justpart of being a business that isgrowing very quickly. Groupon’srevenue nearly tripled in thefourth quarter from a year earlier,and its active subscriber basegrew fourfold to 33 million.

“Every three months, Grouponis a different company,” he said.

Terrafugia.com/APTerrafugia’s prototype flying car – dubbed the Transition – takes its first flight last month. The vehicle has two seats, four wheelsand wings that fold up so it can be driven like a car.

Flying car gets closer to reality

Revised dataat Groupon sparks worryLower earnings report for February concerns investors