AOL Latin America's Second Quarter 2003 Net Loss Narrows 33% from Year-Ago Period; Reduced Cash Utilization.Business Editors FORT LAUDERDALE Fort Lauderdale (lô`dərdāl), residential, commercial, and resort city (1990 pop. 149,377), seat of Broward co., SE Fla., on the Atlantic coast; settled around a fort built (c.1837) in the Seminole War, inc. 1911. , Fla.--(BUSINESS WIRE)--Aug. 5, 2003 America Online See AOL. Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. , Inc. (Nasdaq:AOLA AOLA America Online Latin America ) today announced that its net loss for the quarter ended June June: see month. 30, 2003, narrowed 33% from the same period a year ago and 4% from the first quarter of 2003. This represents the 12th straight quarter of narrowed losses and reflects an important reduction in cash utilization from the year-ago period. Additionally, AOL (A division of Time Warner, Inc., New York, NY, www.aol.com) The world's largest online information service with access to the Internet, e-mail, chat rooms and a variety of databases and services. Latin America now believes its available cash will be sufficient to fund operations into mid- mid- pref. Middle: midbrain. 2004. The Company's second quarter 2003 net loss applicable to common stockholders totaled $29.9 million, or $0.22 per class A common share, basic and diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. , compared with a loss of $44.6 million, or $0.66 per share, for the quarter ended June 30, 2002. Shares used in the computation Computation is a general term for any type of information processing that can be represented mathematically. This includes phenomena ranging from simple calculations to human thinking. of earnings per share increased to 135.1 million from 67.1 million in the year-ago period as a result of the previously announced conversion of preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. to class A common stock in January January: see month. 2003. The second-quarter loss also represents an improvement from the Company's first quarter 2003 loss of $31.2 million, or $0.25 per share. AOL Latin Lat·in n. 1. a. The Indo-European language of the ancient Latins and Romans and the most important cultural language of western Europe until the end of the 17th century. b. America's net loss before dividends on preferred stock was $26.0 million in the second quarter, narrowing from a net loss of $39.9 million on the same basis a year ago and $28.2 million in the first quarter of 2003. Total revenue was $17.7 million in the second quarter of 2003, down slightly from $18.5 million in the second quarter of 2002, due primarily to year-over-year weakness in advertising and other revenue as well as currency devaluation Currency devaluation A deliberate downward adjustment in the official exchange rates established, or pegged, by a government against a specified standard, such as another currency or gold. . However, the Company's second-quarter 2003 total revenue increased from $16.3 million in the first quarter of 2003 as a result of currency appreciation and higher advertising revenue. Subscription revenue totaled $15.9 million, down 2% from $16.2 million in the prior-year quarter, and up 6% from $15.0 million in the first quarter of 2003. Advertising and other revenue totaled $1.8 million in the second quarter of 2003, down 21% from $2.3 million in the quarter ended June 30, 2002, and up 36% from $1.3 million in the first quarter of 2003. Although advertising and other revenue increased from the first quarter of 2003, the Company expects continued softness in online advertising going forward. AOL Latin America had approximately 625,000 members at June 30, 2003, down 170,000, or 21%, from 795,000 at the end of the first quarter of 2003. The decline was due in large part to the previously announced plan to terminate approximately 90,000 members of the Banco Itau co-branded service who did not choose a paid plan as well as the termination of members who were not paying on a timely basis. As with the Company's previous membership reports, the 625,000 total includes members participating in the services' free trial periods as well as members of the co-branded Banco Itau service. The Company now expects further declines in membership over the remainder of 2003. This is a result of expected further terminations during the third quarter of Itau members who fail to select a paid plan, lower than expected registrations in a significant number of Banco Itau branches under our revised marketing agreement with Itau and the delayed implementation of the previously announced marketing agreement with McDonalds in Brazil Brazil (brəzĭl`), Port. Brasil, officially Federative Republic of Brazil, republic (2005 est. pop. 186,113,000), 3,286,470 sq mi (8,511,965 sq km), E South America. until the third quarter of 2003. Reduced Cash Utilization Cash used in operating activities in the second quarter narrowed 63% to $14.1 million, an improvement from $38.0 million used in the prior-year period. This also represented an improvement of 7% from $15.1 million used in the first quarter of this year. The reductions in cash utilization were achieved primarily as a result of lower network costs, which were driven by our ability to negotiate better terms with major telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. providers as well as a resizing of our network to appropriately serve our paying member base. Lower marketing costs also helped improve operating cash utilization as the Company continued to focus its marketing efforts on a more targeted approach. AOL Latin America, based on its current operating plan which it expects will result in further reductions to marketing and sales expenses as well as network costs, now believes its available cash will be sufficient to fund operations into mid-2004. Cash and cash equivalents totaled $45.9 million at June 30, 2003. Charles Herington, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of AOL Latin America, said: "AOL Latin America's net loss improved once again in the second quarter as we focused on the overall efficiency of our operations and - as always - on providing the highest quality interactive experience. We continued to work on reducing cash usage during the quarter and saw substantial improvement from last year's performance in this important area. The Company is also moving forward with some exciting new initiatives, including a new marketing partnership with McDonald's in Brazil that will provide online access in hundreds of McDonald's locations throughout the country." For the first six months of the year, total revenue was $34.0 million, down from $36.7 million in the first half of 2002, driven by both lower advertising and other revenue and lower subscription revenues. Subscription revenue totaled $30.8 million, down 3% from $31.9 million in the six months ended June 30, 2002. Advertising and other revenue totaled $3.2 million in the six months ended June 30, 2003, down 34% from $4.8 million in the comparable period of 2002. For the six months ended June 30, 2003, the net loss applicable to common stockholders was $61.1 million, or $0.47 per share of class A common stock, basic and diluted, compared with a loss of $102.1 million, and $1.52 per share in the prior year period. Shares used in the computation of earnings per share increased from 67.1 to 130.2 million versus the year-ago period as a result of the conversion of preferred stock to class A common stock in January 2003. Other Highlights Over the past several months, AOL Latin America continued to make progress on several fronts, including: NASDAQ Listing: The Company received notice from the NASDAQ Stock Market Nasdaq stock market The first electronic stock market listing over 5000 companies. The Nasdaq stock market comprises two separate markets, namely the Nasdaq National Market, which trades large, active securities and the Nasdaq Smallcap Market that trades emerging growth companies. in July that it had regained compliance with the continued listing requirements Listing requirements Requirements, including minimum shares outstanding, market value, and income, that are laid down by an exchange for any stock to be listed for trading. of the NASDAQ SmallCap Market. New AOL Version: During the second quarter, AOL Mexico debuted a newer version of AOL. In the first 30 days of the launch, more than 45% of the weekly sessions in Mexico used this new version. The most popular version of AOL to date in Mexico, it features updated software that provides improved ease-of-use, greater reliability and e-mail security and enhancements to popular AOL features such as e-mail, instant messaging Exchanging text messages in real time between two or more people logged into a particular instant messaging (IM) service. Instant messaging is more interactive than e-mail because messages are sent immediately, whereas e-mail messages can be queued up in a mail server for seconds or and Buddy List A list of colleagues, workgroup members, friends, etc., that you might wish to communicate with via instant messaging. See instant messaging. (R) features. Content Programming: AOL Latin America continued to offer members a variety of high-value content features, announcing a new online chat service together with Claxson Interactive, giving consumers in Mexico and Argentina the opportunity to join a combined AOL and El Sitio Latin internet portal founded in 1997, by Roberto Vivo-Chaneton and Roberto Cibrian-Campoy. Founded in Argentina, El Sitio was considered one of the principal Spanish language internet companies of the late 1990s dot-com boom. chat community. In addition, AOL Latin America relaunched channels throughout the region with new services such as dictionaries and translators This is primarily a list of notable Western translators. Please feel free to add translators from other languages, cultures and areas of specialization. Large sublists have been split off to separate articles. . AOL Puerto Rico Puerto Rico (pwār`tō rē`kō), island (2005 est. pop. 3,917,000), 3,508 sq mi (9,086 sq km), West Indies, c.1,000 mi (1,610 km) SE of Miami, Fla. held chats featuring political candidates and musicians as well as added new content such as Clase.net, a multi-platform educational service for youths, and Clasificados Online.com - Media Online Inc., a Spanish language Spanish language, member of the Romance group of the Italic subfamily of the Indo-European family of languages (see Romance languages). The official language of Spain and 19 Latin American nations, Spanish is spoken as a first language by about 330 million persons online classifieds service. Cannes Lions Award: AOL Brazil won a Silver Lion award at the recent Cannes Lions International Advertising Festival The Cannes Lions International Advertising Festival (IAF) is generally regarded as the most prestigious international advertising festival. The five to seven day festival is held annually in the city of Cannes, France, usually in the third week of June, with 2007 marking in France. The prestigious award recognized AOL Brazil's creative efforts in developing an advertising promotion for its ecotourism e·co·tour·ism n. Tourism involving travel to areas of natural or ecological interest, typically under the guidance of a naturalist, for the purpose of observing wildlife and learning about the environment. site. Competing against advertising agencies and other Internet Service Providers Internet service provider (ISP) Company that provides Internet connections and services to individuals and organizations. For a monthly fee, ISPs provide computer users with a connection to their site (see data transmission), as well as a log-in name and password. , AOL Brazil was the only ISP (1) See in-system programmable. (2) (Internet Service Provider) An organization that provides access to the Internet. Connection to the user is provided via dial-up, ISDN, cable, DSL and T1/T3 lines. to win an award in the Cyber category this year. Interactive Marketing: The Company announced interactive marketing agreements with a number of global and regional brands, including: Editora Abril Editora Abril is a Brazilian publisher. It was founded in 1950 by Victor Civita. The magazine publishes titles like Veja, Nova (cosmopolitan magazine), Placar, Estilo de Vida (InStyle), Claudia, Boa Forma, Manequim, Exame and the Brazilian issue of the Playboy magazine. , one of the largest publishers in Brazil; Nestle do Brasil; and Ford Motors in Brazil. Audi in Mexico chose AOL Mexico as its exclusive Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the platform to announce events and sports news, while Burger King of Mexico and Warner Music jointly launched an exciting set of promotions to win music-based prizes. About AOL Latin America America Online Latin America, Inc. (Nasdaq:AOLA) is the exclusive provider of AOL-branded services in Latin America and has become one of the leading Internet and interactive services providers in the region. AOL Latin America launched its first service, America Online Brazil, in November 1999, and began as a joint venture of America Online, Inc., a wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of AOL Time Warner Inc. (NYSE NYSE See: New York Stock Exchange :AOL), and the Cisneros Group The Cisneros Group of Companies is one of the largest, privately held media, entertainment, telecommunications and consumer products organizations in the world. The Group owns or holds interests in companies ranging from broadcast television, networks and pay television businesses of Companies. Banco Itau, a leading Brazilian bank is also a minority stockholder of AOL Latin America. The Company combines the technology, brand name, infrastructure and relationships of America Online, the world's leader in branded interactive services, with the relationships, regional experience and media assets of the Cisneros Group of Companies, one of the leading media groups in the Americas. The Company currently operates services in Brazil, Mexico and Argentina and serves members of the AOL-branded service in Puerto Rico. It also operates a regional portal accessible at http://www.aola.com. America Online members worldwide can access content and offerings from AOL Latin America through the International Channels on their local AOL services. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. This release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995, including statements regarding (i) the expected growth in the Company's membership base later this year, (ii) future expenses, (iii) the expected benefits of consolidating its advertising needs with one advertising agency and (iv) the Company's liquidity. These forward-looking statements are subject to a number of risks and uncertainties, which are described in our Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the period ended December 31, 2001, and from time to time in other reports we file with the SEC, as well as the following risks and uncertainties: our limited cash position, our ability to maintain the listing of our stock on the Nasdaq SmallCap Market, the impact that our continued losses will have on our ability to finance our operations, the ability of Banco Itau to successfully market the co-branded AOL service in Brazil, our limited operating history, uncertainty relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc our ability to convert our subscribers into paying subscribers, uncertainty regarding the success of our targeting marketing initiatives and technology designed to improve validation See validate. validation - The stage in the software life-cycle at the end of the development process where software is evaluated to ensure that it complies with the requirements. , the actions of our competitors, and our ability to penetrate our markets. Actual results could differ materially from those described in the forward-looking statements.
-------------------- -------------------
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- --------------------
2003 2002 2003 2002
----------- --------- --------- ----------
( In thousands, except per share
information)
CONSOLIDATED CONDENSED
OPERATING RESULTS AND EPS
----------------------------
Revenues:
Subscriptions $15,864 $16,231 $30,822 $31,918
Advertising and commerce 1,821 2,315 3,158 4,786
----------- --------- --------- ----------
Total revenues 17,685 18,546 33,980 36,704
Costs and expenses:
Cost of revenues (14,954) (26,353) (31,523) (58,762)
Sales and marketing (17,412) (24,123) (33,951) (54,567)
General and administrative (6,841) (6,466) (13,806) (15,152)
----------- --------- --------- ----------
Total costs and expenses (39,207) (56,942) (79,280) (128,481)
Loss from operations (21,522) (38,396) (45,300) (91,777)
Other expense, net (4,477) (1,508) (8,898) (1,039)
----------- --------- --------- ----------
Loss before income taxes (25,999) (39,904) (54,198) (92,816)
Income taxes (29) - (2) -
----------- --------- --------- ----------
Net loss (26,028) (39,904) (54,200) (92,816)
Less: dividends on Series B
and C preferred shares (3,882) (4,651) (6,915) (9,303)
----------- --------- --------- ----------
Net loss applicable to
common stockholders $(29,910) $(44,555) $(61,115) $(102,119)
=========== ========= ========= ==========
Loss per common share,
basic and diluted $(0.22) $(0.66) $(0.47) $(1.52)
=========== ========= ========= ==========
Weighted average common
shares outstanding 135,135 67,070 130,246 67,065
=========== ========= ========= ==========
As of
----------- ---------
BALANCE SHEETS ( In thousands) June 30 Dec. 31,
2003 2002
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $45,535 $74,586
Short-term money market investments 389 915
----------- ---------
Total cash and cash equivalents 45,924 75,501
Trade accounts receivable, net of allowances 3,803 3,567
Other receivables 1,929 2,090
Prepaid expenses and other current assets 6,737 7,963
----------- ---------
Total current assets 58,393 89,121
Property and equipment, net 5,649 6,983
Investments, including securities
available-for-sale 155 158
Product development costs and other intangible
assets, net 76 285
Other assets 5,336 3,727
----------- ---------
TOTAL ASSETS $69,609 $100,274
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
CURRENT LIABILITIES
Trade accounts payable $4,060 $8,746
Payables to affiliates 3,907 6,893
Accrued expenses and other current liabilities 20,817 20,481
----------- ---------
Total current liabilities 28,784 36,120
Senior convertible notes 160,000 160,000
Deferred revenue and other non-current
liabilities 943 1,240
----------- ---------
Total liabilities 189,727 197,360
STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
Preferred stock, common stock and additional
paid-in capital , net of unearned services and
accumulated other comprehensive loss 685,961 654,792
Accumulated deficit (806,079) (751,878)
----------- ---------
Total stockholders' equity (capital deficiency) (120,118) (97,086)
----------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(CAPITAL DEFICIENCY) $69,609 $100,274
=========== =========
CONSOLIDATED CONDENSED CASH FLOW (in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2003 2002 2003 2002
--------- --------- --------- ---------
OPERATING ACTIVITIES
-------------------------------
Net loss $(26,028) $(39,904) $(54,200) $(92,816)
Net operating activity 11,967 1,856 25,011 10,990
--------- --------- --------- ---------
Net cash used in operating
activities (14,061) (38,048) (29,189) (81,826)
Net cash used in investing
activities (348) (568) (692) (1,126)
Net cash provided by financing
activities - 27,999 - 45,340
Effect of exchange rate changes
on cash and cash equivalents (183) (769) 304 (706)
--------- --------- --------- ---------
Net decrease in cash and cash
equivalents (14,592) (11,386) (29,577) (38,318)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 60,516 19,744 75,501 46,676
--------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, END
OF PERIOD $45,924 $8,358 $45,924 $8,358
========= ========= ========= =========
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