AOL Latin America's Third Quarter 2003 Net Loss Narrows 28% from Year Ago and 4% from Previous Quarter.Business Editors/High-Tech Writers 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)--Nov. 11, 2003 Further Reduction to Operating Cash Utilization Company Launches New Web-Based Services 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. Tailored to Specific User Groups 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 September September: see month. 30, 2003, narrowed 28% from the same period a year ago and 4% from the second quarter of 2003. The Company reduced cash used in operating activities to $9.5 million, down 63% from $25.9 million during the prior-year period, and 33% from $14.1 million, during the second quarter of 2003. During the quarter, the Company also launched a family of segmented Web-based services in Brazil. The Company's third quarter 2003 net loss applicable to common stockholders was $28.6 million, or $0.21 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 $39.9 million, or $0.59 per share, for the comparable prior-year quarter. The number of shares outstanding, used in the per-share earnings calculation, increased to 135.1 million from 67.1 million in the prior-year period due to the January January: see month. 2003 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 by the Company's principal stock holders. The third-quarter loss compares with the Company's second quarter 2003 loss of $29.9 million, or $0.22 per share. 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 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 $24.2 million in the third quarter, narrowing from a net loss of $35.2 million on the same basis a year ago and $26.0 million in the second quarter of 2003. Total revenue was $16.3 million in the third quarter of 2003, down from $17.6 million in the third quarter of 2002 and $17.7 million in the second quarter of 2003. Subscription revenue totaled $14.8 million, down 6% compared with $15.8 million in the year-earlier quarter and down from $15.9 million in the second quarter of 2003. Reduced membership resulted in lower subscription revenues. Advertising and other revenue totaled $1.5 million in the third quarter of 2003, down 16% compared with $1.8 million in the quarter ended September 30, 2002, and $1.8 million in the second quarter of 2003. The Company had 492,000 members as of September 30, 2003, down from 625,000 members at June June: see month. 30, 2003. The decline in membership during the third quarter was due to lower levels of new member registrations, as well as the previously announced termination of members of the Banco Itau co-branded service who did not choose a paid plan, which totaled approximately 79,000 in the quarter. The reduction in the number of kiosks at Banco Itau branches and strong price competition from providers of free and paid 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 services in Brazil continue to impact member acquisition and retention. In addition, the delay in the implementation of the McDonald's McDonald’s fast-food restaurant chain throughout the world; recognized by golden arches. [Am. Culture: Misc.] See : Ubiquity marketing agreement impacted registration rates. As with the Company's previous membership reports, the 492,000 member total includes members participating in free trial periods as well as members of the co-branded Banco Itau service. AOL Latin America expects further declines in membership during the fourth quarter of 2003. "AOL Latin America continued to benefit from earlier actions to reduce the cost structure of the Company and was able to narrow losses and improve cash usage once again in the third quarter of 2003. This reduction in losses was possible even as we rolled out a family of new dial-up Refers to using the regular "dial-up" telephone network to send data from a computer to a remote network or to a remote device. The computer's digital data are converted to analog signals in the same frequency range as human voice by a modem. and broadband services See broadband and broadband service provider. in Brazil, prepared to launch the newest version of the AOL software in 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. , and saw our McInternet partnership with McDonalds begin installing McInternet stations in restaurants in Brazil. During the remainder of 2003, we will continue our dual focus on operating efficiency and providing members with the highest quality interactive experience," said Charles Charles, archduke of Austria Charles, 1771–1847, archduke of Austria; brother of Holy Roman Emperor Francis II. Despite his epilepsy, he was the ablest Austrian commander in the French Revolutionary and Napoleonic wars; however, he was handicapped by 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 Lain America America [for Amerigo Vespucci], the lands of the Western Hemisphere—North America, Central (or Middle) America, and South America. The world map published in 1507 by Martin Waldseemüller is the first known cartographic use of the name. . The new services launched in Brazil are Web-based and specifically targeted at key user groups, including young people, professionals and families. They are designed to help the Company more effectively compete in the market by offering segmentation both by audience and price. As a result of this segmentation, the Company expects its average price and its average costs to decline. The services allow subscribers to access e-mail, chat and content offerings through any standard Web browser The program that serves as your front end to the Web on the Internet. In order to view a site, you type its address (URL) into the browser's Location field; for example, www.computerlanguage.com, and the home page of that site is downloaded to you. , and do not require the use of the AOL software client installed via CD, which we expect to contribute to lower acquisition costs. AOL Argentina Argentina (ärjəntē`nə, Span. ärhāntē`nä), officially Argentine Republic, republic (2005 est. pop. 39,538,000), 1,072,157 sq mi (2,776,889 sq km), S South America. recently launched its own Web-based service, and AOL Mexico began testing a similar offering during the third quarter. Membership totals at September 30, 2003 include an insignificant number of members of the Web-based interactive services and broadband broadband Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). offerings, which were launched in the second half of the quarter. Cash used in operating activities in the third quarter of 2003 was $9.5 million, a reduction from $25.9 million, or 63%, from the third quarter of 2002 and an improvement from $14.1 million in the second quarter of this year. The improvement in cash used in operating activities was achieved largely as a result of lower costs and expenses. Cash and cash equivalents totaled $39.2 million as of September 30, 2003, benefiting from Banco Itau's $2.7 million payment to the Company in lieu of Instead of; in place of; in substitution of. It does not mean in addition to. certain marketing activities. AOL Latin America expects to continue to receive similar payments from Banco Itau in the future, although the amounts of these payments are expected to decrease. AOL Latin America now believes that based on its current operating plan, available cash will be sufficient to fund operations into at least mid- mid- pref. Middle: midbrain. 2004. For the nine months ended September 30, 2003, the Company's net loss applicable to common stockholders was $89.7 million, or $0.68 per share of class A common stock, basic and diluted, compared with a loss of $142.0 million, or $2.12 per share, in the year-ago period. Shares used in the per-share earnings 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. for the nine months ended September 30, 2003 increased to 132.1 million from 67.1 million as compared with the prior-year period as a result of the conversion of preferred stock to common stock in January 2003. Total revenue was $50.3 million for the first nine months of 2003, compared with $54.3 million in the year-ago period. Subscription revenue totaled $45.6 million, compared with $47.7 million for the nine months ended September 30, 2002. Advertising and other revenue totaled $4.7 million for the nine months ended September 30, 2003, compared with $6.6 million in the comparable period of 2002. Other Highlights Over the past several months, AOL Latin America continued to make progress on several fronts, including: Broadband in Brazil: In addition to the new Web-based services, AOL Brazil recently launched its broadband offering, AOL MAXX MAXX Maximum Access to Diagnosis and Therapy: The Electronic Library of Medicine (database) , which provides members with rich and compelling high-speed content including video, music and online games that members can enjoy through a new, user-friendly interface. AOL MAXX is available throughout Brazil. AOL 9.0 in Puerto Rico: AOL Puerto Rico launched the most compelling upgrade in its history, AOL 9.0 in October 2003. The new software includes AOL's new TopSpeed Web acceleration technology, which enhances Web-surfing speed, as well as new safety and security protections. AOL 9.0 includes new 3D animated SuperBuddy Icons and a suite of new 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 personalized per·son·al·ize tr.v. per·son·al·ized, per·son·al·iz·ing, per·son·al·iz·es 1. To take (a general remark or characterization) in a personal manner. 2. To attribute human or personal qualities to; personify. "expressions" features, as well as upgraded e-mail and VIP access to exclusive content McInternet Launch: On October 28, the Company and its existing partners, McDonalds do Brasil and Banco Itau announced the official launch of the McInternet project and the addition of Hewlett Packard of Brazil to the McInternet partnership. The group expects to rollout more than 1,200 computer access points in almost 600 McDonald's restaurants There are more than 30,000 McDonald's restaurants in 119 countries. Restaurants The first McDonald's was not a restaurant at all, but it was a sit-in stand. The company's early franchises were built to a standard pattern that did not offer seating; this was in part to prevent throughout Brazil by the second quarter of 2004. McDonald's commenced training of McInternet hosts in October, allowing for in-store support for users and for the AOL registration process. 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 Time Warner Inc. (NYSE NYSE See: New York Stock Exchange :TWX (TeletypeWriter eXchange Service) A U.S. and Canadian dial-up communications service that became part of Telex. In 1971, the Bell System sold TWX to Western Union. TWX transmitted 5-bit Murray code or 7-bit ASCII code at up to 150 bps. See Telex. ), 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) our expectation that cash on hand will allow us to continue to finance operations The execution of the joint finance mission to provide financial advice and guidance, support of the procurement process, providing pay support, and providing disbursing support.See also financial management. into at least mid-2004, (ii) future membership levels, (iii) the expected results of our agreement with McDonald's Brazil and the timing of the implementation of this agreement, (iv) our focus on cash utilization, (v) future payments that we may receive from Banco Itau if we continue to request that Banco Itau pay us in lieu of conducting marketing activities, (vi) average price charged and costs associated with members of the web-based services and (vii) future member acquisition costs. These forward-looking statements are subject to a number of risks and uncertainties, which are described in our Annual Report on Form 10-K/A for the period ended December 31, 2002, 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, the impact our continued losses will have on our ability to finance our operations, the success of our web-based services, the success of the co-branded Banco Itau service, the actions of our competitors and the impact of increased competition, the success of the marketing agreement with McDonald's Brazil, currency exchange rates, our ability to retain members, 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, our limited operating history, uncertainty regarding the success of our targeted marketing initiatives, macroeconomic mac·ro·ec·o·nom·ics n. (used with a sing. verb) The study of the overall aspects and workings of a national economy, such as income, output, and the interrelationship among diverse economic sectors. developments in Brazil and Mexico, the actions of our partners in the McInternet initiative and our ability to penetrate our markets. Actual results could differ materially from those described in the forward-looking statements.
AMERICA ONLINE LATIN AMERICA, INC. Three Months Nine Months
---------------------------------- Ended Ended
OPERATING INFORMATION September 30, September 30,
--------------------- 2003 2002 2003 2002
--------------- ---------------
(In thousands, except
per share information)
(unaudited)
CONSOLIDATED CONDENSED
OPERATING RESULTS AND EPS
--------------------------
Revenues:
Subscriptions $14,778 $15,775 $45,600 $47,693
Advertising and commerce 1,502 1,782 4,660 6,568
---------------------------------------
Total revenues 16,280 17,557 50,260 54,261
Costs and expenses:
Cost of revenues (12,882) (20,940) (44,405) (79,703)
Sales and marketing (16,450) (21,465) (50,401) (76,031)
General and administrative (6,286) (8,464) (20,092) (23,763)
---------------------------------------
Total costs and expenses (35,618) (50,869)(114,898) (179,497)
---------------------------------------
Loss from operations (19,338) (33,312) (64,638) (125,236)
Other expense, net (4,825) (1,902) (13,723) (2,794)
---------------------------------------
Loss before income taxes (24,163) (35,214) (78,361) (128,030)
Income tax (provision/benefit) 3 (24) 1 (24)
---------------------------------------
Net loss (24,160) (35,238) (78,360) (128,054)
Less: dividends on Series B and
C preferred shares (4,435) (4,653) (11,349) (13,955)
---------------------------------------
Net loss applicable to common
stockholders $(28,595)$(39,891)$(89,709)$(142,009)
=======================================
Loss per common share, basic
and diluted $(0.21) $(0.59) $(0.68) $(2.12)
=======================================
Weighted average common shares
outstanding 135,136 67,070 132,144 67,067
=======================================
AMERICA ONLINE LATIN AMERICA, INC. As of
---------------------------------- ---------------------------
BALANCE SHEETS (In thousands) September 30, December 31,
------------------------------- 2003 2002
------------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $37,899 $74,586
Short-term money market investments 1,264 915
------------- ---------
Total cash and cash equivalents 39,163 75,501
Trade accounts receivable, net
of allowances 3,020 3,567
Other receivables 1,812 2,090
Prepaid expenses and other
current assets 8,929 7,963
------------- ---------
Total current assets 52,924 89,121
Property and equipment, net 5,185 6,983
Investments, including
securities available-for-sale 109 158
Product development costs and
other intangible assets, net 57 285
Other assets 5,157 3,727
------------- ---------
TOTAL ASSETS $63,432 $100,274
============= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
(CAPITAL DEFICIENCY)
CURRENT LIABILITIES
Trade accounts payable $3,285 $8,746
Payables to affiliates 2,774 6,893
Accrued expenses and other
current liabilities 23,217 20,481
------------ --------
Total current liabilities 29,276 36,120
Senior convertible notes 160,000 160,000
Deferred revenue and other non-
current liabilities 742 1,240
------------ --------
Total liabilities 190,018 197,360
STOCKHOLDERS' EQUITY
(CAPITAL DEFICIENCY)
Preferred stock, common stock
and additional paid-in capital,
net of unearned services and
accumulated other
comprehensive loss 703,652 654,792
Accumulated deficit (830,238) (751,878)
------------ --------
Total stockholders' equity
(capital deficiency) (126,586) (97,086)
------------ --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(CAPITAL DEFICIENCY) $63,432 $100,274
============ ========
CONSOLIDATED CONDENSED CASH FLOW Three Months Nine Months
(in thousands) Ended Ended
-------------------------------- September 30, September 30,
2003 2002 2003 2002
--------------- ---------------
OPERATING ACTIVITIES (unaudited)
-------------------------------
Net loss $(24,160)$(35,238)$(78,360)$(128,054)
Net operating activity 14,699 9,387 39,711 20,377
---------------------------------------
Net cash used in operating
activities (9,461) (25,851) (38,649) (107,677)
Net cash used in investing
activities (349) (521) (1,041) (1,647)
Net cash provided by financing
activities 2,670 26,000 2,670 71,340
Effect of exchange rate changes
on cash and cash equivalents 379 (373) 682 (1,079)
---------------------------------------
Net decrease in cash and cash
equivalents (6,761) (745) (36,338) (39,063)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 45,924 8,358 75,501 46,676
---------------------------------------
CASH AND CASH EQUIVALENTS, END
OF PERIOD $39,163 $7,613 $39,163 $7,613
=======================================
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