AOL Latin America Announces Results for Third Quarter of 2004; Forecast for Available Cash Extended Into the Third Quarter of 2005.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. -- 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 applicable to common stockholders for the quarter ended September September: see month. 30, 2004, narrowed 17% from $28.6 million to $23.6 million and cash used in operating activities declined 67% from $9.5 million to $3.1 million from the same period a year ago. Net loss applicable to common stockholders narrowed by 12% from $26.9 million in the second quarter of 2004 and cash used in operating activities increased by 35% from $2.3 million during the same period. Based on these results and its current operating budget Noun 1. operating budget - a budget for current expenses as distinct from financial transactions or permanent improvements budget items, operating cost, operating expense, overhead - the expense of maintaining property (e.g. , the Company has extended its forecast for available cash and believes that cash on hand will now be sufficient to fund operations into the third quarter of 2005. Third-Quarter Results The Company's third-quarter 2004 net loss applicable to class A common stockholders, which includes dividends to preferred stockholders, was $23.6 million, or $0.17 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 $28.6 million, or $0.21 per share, in the same period a year ago. This third quarter 2004 loss also compares with a second quarter 2004 net loss applicable to common stockholders of $26.9 million, or $0.20 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 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. was $19.3 million in the third quarter of 2004, narrowing from a net loss of $24.2 million in the prior-year period and a net loss of $22.8 million in the second quarter of 2004. Total revenue was $12.8 million in the third quarter of 2004, down 21% from $16.3 million in the third quarter of 2003 but up slightly from $12.7 million in the second quarter of 2004. Subscription revenue totaled $11.6 million, down 21% from $14.8 million in the year-ago period and down 3% compared to $12.0 million in the second quarter of 2004. Reduced membership resulted in lower subscription revenues. Advertising and other revenue totaled $1.2 million in the 2004 third quarter, down 23% from $1.5 million in the year-ago period but up 58% from $728,000 in the second quarter of 2004. The Company expects total revenue to decrease further in the fourth quarter of 2004 as a result of continued declines in membership. Membership The Company had 400,000 members as of September 30, 2004, down from 418,000 members as of June June: see month. 30, 2004. The decline in membership was driven by lower levels of new member registrations, which were insufficient to offset membership turnover. New member registrations continue to be negatively impacted by 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 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. and Mexico Mexico, city, Mexico Mexico or Mexico City, Span. Ciudad de México (Méjico), city (1990 pop. 8,236,960; 1991 met. area est. 20,899,000), central Mexico, capital and largest city of Mexico. . They were also impacted in the third quarter by the general banking strike in Brazil, which slowed new-member acquisition efforts through the Banco Itau channel. The Company expects a smaller membership decline in the fourth quarter of 2004. As with the Company's previous membership reports, the 400,000 membership total includes members participating in free trial periods and retention programs, as well as members of the Banco Itau service. Totals include members of the AOL country services, 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. As of September 30, 2004, approximately 19% of the membership total subscribed to the Company's Web-based interactive services and 8.5% subscribed to the Company's broadband service See broadband and broadband service provider. . Cash Utilization Cash used in operating activities in the third quarter of 2004 was $3.1 million, down 67% from $9.5 million used in the third quarter of 2003 but an increase of 35% from $2.3 million in the second quarter of 2004. The improvement in cash used in operating activities as compared to the year-ago period was achieved largely as a result of the Company's reduced losses, driven primarily by lower marketing and telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. costs as well as improved working capital performance. Cash and cash equivalents totaled $26.3 million as of September 30, 2004, compared with $27.9 million at the end of the second quarter of 2004, a net decrease of $1.6 million. As in recent quarters, the Company's cash and cash equivalents position benefited from a payment from Banco Itau 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 received $1.1 million from Banco Itau in the 2004 third quarter, representing the current quarter's payment and a partial prepayment Prepayment 1. The payment of a debt obligation prior to its due date. 2. The excess payment over a scheduled debt repayment amount. Notes: 1. Examples include deferred expenses such as rent and early loan repayments. 2. for the fourth quarter. The Company expects to continue to receive payments from Banco Itau in the future, although in smaller amounts. AOL Latin America also received $777,000 from McDonald's McDonald’s fast-food restaurant chain throughout the world; recognized by golden arches. [Am. Culture: Misc.] See : Ubiquity in Brazil for its failure to meet August 2004 contractual targets as part of the joint McInternet initiative. Total cash utilization in the fourth quarter of 2004 and in future quarters is expected to be greater than the third quarter's, which benefited from the McDonald's and Banco Itau payments. The Company believes that under its current operating budget, cash on hand will now be sufficient to fund operations into the third quarter of 2005. Management Comments 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 Latin America, said: "AOL Latin America's two areas of focus during the third quarter continued to be cash preservation and serving the needs of our members. Reduced losses and the current operating budget have allowed us to extend our forecast for available cash into the third quarter of 2005. Regarding our interactive services, in Mexico the new AOL 9.0 software launch has been well-received. The Company's broadband offerings also continue to attract members, highlighted by the third-quarter launch in Brazil of a new broadband service designed specifically for small businesses." Nine-Month Results For the first nine months of 2004, the Company's net loss applicable to class A common stockholders was $71.5 million, or $0.53 per share of class A common stock, basic and diluted, compared with a loss of $89.7 million, or $0.68 per share, for the first nine months of 2003. Total revenue was $39.5 million in the first nine months of 2004, which compares with $50.3 million in the year-ago period. Subscription revenue totaled $37.1 million, compared with $45.6 million in the prior-year period, and advertising and other revenue was $2.4 million vs. $4.7 million a year ago. About AOL Latin America America Online Latin America, Inc. (Nasdaq:AOLA) is the exclusive provider of AOL-branded services in Latin America. 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 are AOL Latin America's principal stockholders. 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 and regional experience of the Cisneros Group of Companies, one of the leading media groups in the Americas A·mer·i·cas , the See America. . The Company currently operates services in Brazil, Mexico and 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. and serves members of the AOL-branded service 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. . 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 the third quarter of 2005, (ii) future membership and revenue levels, (iii) 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, and (iv) future cash utilization. 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, 2003, 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, our declining membership base, the actions of our competitors and the impact of increased competition, currency exchange rates, our ability to attract and 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, 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, Mexico and Argentina 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.
----------------------------------
OPERATING INFORMATION
----------------------------------
CONSOLIDATED CONDENSED OPERATING RESULTS AND EPS
------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- --------------------
2004 2003 2004 2003
--------- --------- --------- ----------
(In thousands, except per share information)
(Unaudited) (Unaudited)
------------------- --------------------
Revenues:
Subscriptions $11,649 $14,778 $37,101 $45,600
Advertising and commerce 1,152 1,502 2,429 4,660
--------- --------- --------- ---------
Total revenues 12,801 16,280 39,530 50,260
Costs and expenses:
Cost of revenues (8,119) (12,882) (26,120) (44,405)
Sales and marketing (13,420) (16,450) (37,945) (50,401)
General and administrative (6,264) (6,286) (18,309) (20,092)
Impairment of Argentina VAT
receivable - - (4,009) -
--------- --------- --------- ---------
Total costs and expenses (27,803) (35,618) (86,383) (114,898)
Loss from operations (15,002) (19,338) (46,853) (64,638)
Other expense, net (4,316) (4,825) (12,594) (13,723)
--------- --------- --------- ---------
Loss before income taxes (19,318) (24,163) (59,447) (78,361)
Income tax (provision) benefit (29) 3 (88) 1
--------- --------- --------- ---------
Net loss (19,347) (24,160) (59,535) (78,360)
Less: dividends on Series B
and C preferred shares (4,259) (4,435) (12,008) (11,349)
--------- --------- --------- ---------
Net loss applicable to common
stockholders $(23,606) $(28,595) $(71,543) $(89,709)
========= ========= ========= =========
Loss per common share,
basic and diluted $(0.17) $(0.21) $(0.53) $(0.68)
========= ========= ========= =========
Weighted average common
shares outstanding 135,257 135,136 135,242 132,144
========= ========= ========= =========
As of
---------------------------
AMERICA ONLINE LATIN AMERICA, INC. September 30, December 31,
BALANCE SHEETS (In thousands) 2004 2003
---------------------------------- ------------- ------------
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $25,898 $32,633
Short-term money market investments 446 268
------------- ------------
Total cash and cash equivalents 26,344 32,901
Trade accounts receivable, net of
allowances 1,519 2,267
Other receivables 347 243
Prepaid expenses and other current assets 7,130 8,796
------------- ------------
Total current assets 35,340 44,207
Property and equipment, net 2,781 4,771
Investments, including securities
available-for-sale 604 194
Product development costs and other
intangible assets, net 30 50
Other assets 1,175 6,517
------------- ------------
TOTAL ASSETS $39,930 $55,739
============= ============
LIABILITIES AND CAPITAL DEFICIENCY
CURRENT LIABILITIES
Trade accounts payable $2,260 $3,264
Payables to affiliates 4,457 1,349
Accrued expenses and other current
liabilities 19,526 22,586
------------- ------------
Total current liabilities 26,243 27,199
Senior convertible notes 160,000 160,000
Deferred revenue and other non-current
liabilities 1,159 1,499
------------- ------------
Total liabilities 187,402 188,698
CAPITAL DEFICIENCY
Preferred stock, common stock and
additional paid-in capital, net of
unearned services and accumulated other
comprehensive loss 764,679 719,658
Accumulated deficit (912,151) (852,617)
------------- ------------
Total capital deficiency (147,472) (132,959)
------------- ------------
TOTAL LIABILITIES AND CAPITAL DEFICIENCY $39,930 $55,739
============= ============
CONSOLIDATED CONDENSED CASH FLOW INFORMATION (in thousands)
-----------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- --------------------
2004 2003 2004 2003
--------- --------- --------- ----------
(Unaudited) (Unaudited)
------------------- --------------------
OPERATING ACTIVITIES
--------------------
Net loss $(19,347) $(24,160) $(59,535) $(78,360)
Net operating activity 16,235 14,701 49,302 39,711
--------- --------- --------- ----------
Net cash used in operating
activities (3,112) (9,459) (10,233) (38,649)
Net cash used in investing
activities (12) (349) (115) (1,041)
Net cash provided by financing
activities 1,072 2,670 3,550 2,670
Effect of exchange rate
changes on cash and cash
equivalents 531 377 241 682
--------- --------- --------- ----------
Net decrease in cash and cash
equivalents (1,521) (6,761) (6,557) (36,338)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 27,865 45,924 32,901 75,501
--------- --------- --------- ----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $26,344 $39,163 $26,344 $39,163
========= ========= ========= ==========
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