UNITED STATES
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTIONS 13 OR 15(d)
For the quarterly period ended September 30, 2002
Commission file number: 0-31010
AT&T LATIN AMERICA CORP.
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Delaware (State or Other Jurisdiction of Incorporation) |
22-3687745 (I.R.S. Employer Identification No.) |
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2020 K Street, N.W. Washington, D.C (Address of principal executive offices) |
20006 (Zip code) |
Registrant’s telephone number including area code: (202) 689-6300
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 o
As of November 14, 2002, 45,569,017 shares of the registrant’s Class A common stock, par value $0.0001 per share, and 73,081,595 shares of the registrant’s Class B common stock, par value $0.0001 per share, were outstanding.
INDEX
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Part I — Financial Information
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Item 1. Financial Statements
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Consolidated Balance Sheets as of
September 30, 2002 (Unaudited) and December 31, 2001
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3 | ||||
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Unaudited Consolidated Statements of Operations
for the Three and Nine Months Ended September 30, 2002 and
2001
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4 | ||||
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Unaudited Consolidated Statement of Changes in
Stockholders’ Equity (Deficit) for the Nine Months Ended
September 30, 2002
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5 | ||||
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Unaudited Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 2002 and 2001
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6 | ||||
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Notes to Consolidated Financial Statements
(Unaudited)
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7 | ||||
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Item 2. Management’s Discussion and
Analysis of Financial Condition and Results of Operations
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23 | ||||
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Item 3. Quantitative and Qualitative
Disclosure about Market Risk
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38 | ||||
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Item 4. Controls and Procedures
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39 | ||||
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Part II — Other Information
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39 | ||||
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Item 1. Legal Proceedings
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39 | ||||
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Item 2. Changes in Securities and Use of
Proceeds
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40 | ||||
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Item 3. Defaults Upon Senior Securities
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40 | ||||
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Item 4. Submission of Matters to a Vote of
Security Holders
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40 | ||||
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Item 5. Other Information
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40 | ||||
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Item 6. Exhibits and Reports on Form 8-K
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41 | ||||
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Signatures
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42 | ||||
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Certifications
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43 | ||||
2
PART I — FINANCIAL INFORMATION
AT&T LATIN AMERICA CORP.
| September 30, | December 31, | |||||||||
| 2002 | 2001 | |||||||||
| (Unaudited) | ||||||||||
| (In thousands) | ||||||||||
| ASSETS | ||||||||||
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Current Assets:
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||||||||||
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Cash and cash equivalents
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$ | 47,219 | $ | 28,186 | ||||||
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Accounts receivable, net of $8,262 and $8,250 of
allowance for bad debts at September 30, 2002 and
December 31, 2001, respectively
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32,744 | 41,973 | ||||||||
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Recoverable taxes
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15,853 | 15,219 | ||||||||
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Prepaid expenses and other current assets
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33,563 | 26,816 | ||||||||
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Total current assets
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129,379 | 112,194 | ||||||||
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Property and equipment, net
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371,149 | 493,568 | ||||||||
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Goodwill, net of accumulated amortization of
$66,383 at December 31, 2001
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35,000 | 759,067 | ||||||||
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Other intangible assets, net of accumulated
amortization of $14,560 and $10,598 at September 30, 2002
and December 31, 2001, respectively
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19,038 | 24,130 | ||||||||
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Recoverable taxes
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13,221 | 24,841 | ||||||||
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Other assets
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35,655 | 31,511 | ||||||||
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Total assets
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$ | 603,442 | $ | 1,445,311 | ||||||
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LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY |
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Current liabilities:
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||||||||||
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Current maturities of debt
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$ | 219,838 | $ | 87,051 | ||||||
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Accounts payable and accrued expenses (including
$5,937 and $4,434 due to AT&T Corp. or affiliates at
September 30, 2002 and December 31, 2001, respectively)
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67,942 | 80,595 | ||||||||
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Other current liabilities
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21,668 | 51,956 | ||||||||
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Total current liabilities
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309,448 | 219,602 | ||||||||
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Long-term debt (including $603,937 and $475,757
due to AT&T Corp. or affiliates at September 30, 2002
and December 31, 2001, respectively)
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629,305 | 575,091 | ||||||||
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Deferred interest (including $27,471 and $30,172
due to AT&T Corp. or affiliates at September 30, 2002
and December 31, 2001, respectively)
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27,471 | 31,010 | ||||||||
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Other liabilities
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2,544 | 6,289 | ||||||||
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Mandatorily Redeemable 15% Series B
Cumulative Preferred Stock (held by a wholly-owned subsidiary of
AT&T Corp.)
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239,940 | 215,232 | ||||||||
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Total liabilities
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1,208,708 | 1,047,224 | ||||||||
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Commitments and contingencies (Note 6)
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— | — | ||||||||
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Stockholders’ (deficit) equity:
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||||||||||
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Common stock (including 68.3% economic interest
owned by AT&T Corp., representing 95.2% voting power at
September 30, 2002)
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11 | 11 | ||||||||
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Additional paid in capital
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925,021 | 918,337 | ||||||||
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Unearned restricted stock
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(2,667 | ) | (2,627 | ) | ||||||
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Accumulated deficit
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(1,427,374 | ) | (446,429 | ) | ||||||
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Accumulated other comprehensive (loss) income
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(89,995 | ) | (61,323 | ) | ||||||
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Stockholder loan
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(10,262 | ) | (9,882 | ) | ||||||
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Total stockholders’ (deficit) equity
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(605,266 | ) | 398,087 | |||||||
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Total liabilities and stockholders’
(deficit) equity
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$ | 603,442 | $ | 1,445,311 | ||||||
The accompanying footnotes are an integral part of these
3
AT&T LATIN AMERICA CORP.
| Three Months Ended | Nine Months Ended | |||||||||||||||||
| September 30, | September 30, | |||||||||||||||||
| 2002 | 2001 | 2002 | 2001 | |||||||||||||||
| (In thousands, except per share data) | ||||||||||||||||||
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Revenue:
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||||||||||||||||||
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Data-Internet services
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$ | 24,674 | $ | 22,367 | $ | 78,314 | $ | 61,323 | ||||||||||
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Voice services
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15,243 | 16,893 | 47,738 | 43,254 | ||||||||||||||
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Total revenue
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39,917 | 39,260 | 126,052 | 104,577 | ||||||||||||||
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Cost of revenue
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24,376 | 31,904 | 79,335 | 86,208 | ||||||||||||||
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Selling, general and administrative expenses
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26,323 | 32,420 | 84,208 | 98,993 | ||||||||||||||
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Depreciation and amortization
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43,607 | 25,241 | 85,977 | 74,696 | ||||||||||||||
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Impairment loss on goodwill
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413,469 | — | 413,469 | — | ||||||||||||||
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Loss from operations
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(467,858 | ) | (50,305 | ) | (536,937 | ) | (155,320 | ) | ||||||||||
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Interest expense
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35,459 | 21,501 | 89,703 | 56,217 | ||||||||||||||
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Interest income
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— | 109 | 410 | 872 | ||||||||||||||
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Other (expense) income, net
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(28,826 | ) | (8,172 | ) | (82,442 | ) | (15,492 | ) | ||||||||||
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Loss before provision for income taxes, minority
interest income, extraordinary loss on debt restructuring and
cumulative effect of change in accounting principle
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(532,143 | ) | (79,869 | ) | (708,672 | ) | (226,157 | ) | ||||||||||
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Provision for income taxes
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204 | — | 204 | — | ||||||||||||||
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Minority interest income
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15 | 169 | 195 | 438 | ||||||||||||||
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Loss before extraordinary loss on debt
restructuring and cumulative effect of change in accounting
principle
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(532,332 | ) | (79,700 | ) | (708,681 | ) | (225,719 | ) | ||||||||||
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Extraordinary loss on debt restructuring
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— | — | (4,479 | ) | — | |||||||||||||
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Cumulative effect of change in accounting
principle
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— | — | (267,785 | ) | — | |||||||||||||
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Net loss
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$ | (532,332 | ) | $ | (79,700 | ) | $ | (980,945 | ) | $ | (225,719 | ) | ||||||
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Basic and diluted loss per common share before
extraordinary loss on debt restructuring and cumulative effect
of change in accounting principle
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$ | (4.48 | ) | $ | (0.69 | ) | $ | (5.98 | ) | $ | (1.94 | ) | ||||||
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Extraordinary loss per common share on debt
restructuring
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— | — | (0.04 | ) | — | |||||||||||||
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Cumulative effect of change in accounting
principle loss per common share
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— | — | (2.25 | ) | — | |||||||||||||
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Basic and diluted net loss per common share
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$ | (4.48 | ) | $ | (0.69 | ) | $ | (8.27 | ) | $ | (1.94 | ) | ||||||
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Weighted average common shares outstanding
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118,740 | 116,296 | 118,595 | 116,296 | ||||||||||||||
The accompanying footnotes are an integral part of these
4
AT&T LATIN AMERICA CORP.
| Accumulated | ||||||||||||||||||||||||||||||||
| Other | Total | |||||||||||||||||||||||||||||||
| Common Stock | Additional | Unearned | Comprehensive | Stockholders’ | ||||||||||||||||||||||||||||
| Paid In | Restricted | Accumulated | Income | Stockholder | Equity | |||||||||||||||||||||||||||
| Stock | Amount | Capital | Stock | Deficit | (Loss) | Loan | (Deficit) | |||||||||||||||||||||||||
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Balance December 31, 2001
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118,305 | $ | 11 | $ | 918,337 | $ | (2,627 | ) | $ | (446,429 | ) | $ | (61,323 | ) | $ | (9,882 | ) | $ | 398,087 | |||||||||||||
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Interest accretion on stockholder loan
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— | — | — | — | — | — | (380 | ) | (380 | ) | ||||||||||||||||||||||
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Stock issued to employees
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435 | — | 420 | (420 | ) | — | — | — | — | |||||||||||||||||||||||
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Warrants issued to parent company
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— | — | 6,264 | — | — | — | — | 6,264 | ||||||||||||||||||||||||
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Accretion of unearned restricted stock
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— | — | — | 380 | — | — | — | 380 | ||||||||||||||||||||||||
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Net loss
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— | — | — | — | (980,945 | ) | — | — | (980,945 | ) | ||||||||||||||||||||||
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Foreign currency translation adjustments
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— | — | — | — | — | (28,577 | ) | — | (28,577 | ) | ||||||||||||||||||||||
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Net unrealized loss on derivative instruments
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— | — | — | — | — | (95 | ) | — | (95 | ) | ||||||||||||||||||||||
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Balance September 30, 2002
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118,740 | $ | 11 | $ | 925,021 | $ | (2,667 | ) | $ | (1,427,374 | ) | $ | (89,995 | ) | $ | (10,262 | ) | $ | (605,266 | ) | ||||||||||||
The accompanying footnotes are an integral part of these
5
AT&T LATIN AMERICA CORP.
| Nine Months Ended | ||||||||||||
| September 30, | ||||||||||||
| 2002 | 2001 | |||||||||||
| (In thousands) | ||||||||||||
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Cash flows from operating activities:
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Net loss
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$ | (980,945 | ) | $ | (225,719 | ) | ||||||
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Adjustment to reconcile net loss to net cash used
in operating activities:
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||||||||||||
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Depreciation and amortization
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85,977 | 74,696 | ||||||||||
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Cumulative effect of change in accounting
principle
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267,785 | — | ||||||||||
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Impairment loss on goodwill
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413,469 | — | ||||||||||
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Bad debt expense
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3,215 | 4,383 | ||||||||||
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Unrealized foreign exchange loss
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87,243 | 59,927 | ||||||||||
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Minority interest income
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(195 | ) | — | |||||||||
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Other issuance of stock options
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— | 189 | ||||||||||
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Preferred stock accretion
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24,708 | 21,421 | ||||||||||
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Loss on debt restructuring
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4,479 | — | ||||||||||
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Stockholder loan accretion
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(380 | ) | — | |||||||||
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Unearned restricted stock accretion
|
380 | — | ||||||||||
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Accrued interest characterized as debt
|
26,593 | — | ||||||||||
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Changes in assets and liabilities net of effect
of acquisitions:
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||||||||||||
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Accounts receivable
|
6,014 | (26,390 | ) | |||||||||
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Recoverable taxes
|
10,986 | (8,127 | ) | |||||||||
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Prepaid and other assets
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(6,747 | ) | (3,395 | ) | ||||||||
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Other assets
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(1,926 | ) | (26,709 | ) | ||||||||
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Accounts payable and accrued expenses
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(12,584 | ) | (4,076 | ) | ||||||||
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Other current liabilities
|
(30,289 | ) | — | |||||||||
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Deferred interest
|
26,632 | — | ||||||||||
|
Other liabilities
|
(3,550 | ) | 9,107 | |||||||||
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