===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9
Solicitation/Recommendation Statement under Section 14(d)(4)
of the Securities Exchange Act of 1934
Telocity Delaware, Inc.
-----------------------
(Name of Subject Company)
Telocity Delaware, Inc.
-----------------------
(Name of Person Filing Statement)
Common Stock, par value $0.001 per share
----------------------------------------
(Title of Class of Securities)
87971D
(CUSIP Number of Class of Securities)
Edward Hayes
------------
Executive Vice President,
Chief Financial Officer
Telocity Delaware, Inc.
10355 North DeAnza Blvd.
Cupertino, California 95014
(408) 863-6600
(Name, address, and telephone numbers of person authorized to receive notices
and communications on behalf of the persons filing statement)
With Copies to
Diane Holt Frankle, Esq.
Gray Cary Ware & Friedenrich LLP
400 Hamilton Avenue
Palo Alto, California 94301-1825
(650) 833-2000
[X] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
Preliminary communication filed as part of this Schedule.
1. Press Release, dated January 25, 2001, reporting revenues for the fourth
quarter and year-ended December 31, 2000.
===============================================================================
Telocity Contacts:
Bill Chandler Lynne Farris
Director of Corporate Communications Director of Investor Relations
(408) 863-5983 (408) 863-6643
TELOCITY REVENUES INCREASE 63% SEQUENTIALLY IN FOURTH QUARTER
Subscriber Base Reaches Approximately 48,000
CUPERTINO, Calif. (January 25, 2001) -- Telocity (Nasdaq NM: TLCT), a leading
provider of residential broadband services nationwide, today announced financial
results for the fourth quarter and year-ended December 31, 2000.
For the fourth quarter, subscribers doubled to 47,911 from 23,494 in the third
quarter ended September 30, 2000.
Revenues for the fourth quarter grew to $4.7 million from $2.9 million in the
third quarter, which represents a 63% increase on a sequential basis.
For the year ended December 31, 2000, revenues increased to $9.4 million from
$0.2 million for the year ended December 31, 1999. The company did not begin
generating revenues until the third quarter of 1999.
"We are pleased that we were able to meet our subscriber growth and earnings
targets during the quarter, despite significant challenges in the marketplace
and uncertainties around our continued funding," said Patti Hart, Chief
Executive Officer of Telocity. "Our hard work culminated last month with the
signing of a definitive agreement with HUGHES Electronics, wherein they agreed
to acquire all the outstanding shares of Telocity for $180 million in cash, or
$2.15 per share. Through this agreement, we believe that we can continue to
build on our strengths and realize our mission of becoming the leading provider
of lifestyle-enhancing broadband services to and throughout the home."
The loss before interest, taxes, depreciation, and amortization (EBITDA) was
$(33.3) million in the fourth quarter, compared with an EBITDA loss of $(28.6)
million for the third quarter of 2000. As anticipated, the company's operating
expenses increased during the quarter, with cash-based marketing and sales
expenses returning to levels previously associated with the company's growth.
Net loss for the fourth quarter ended December 31, 2000, excluding the
amortization of stock-based compensation, was $(38.1) million, or $(0.50) per
share, based on 77.0 million shares outstanding. On a sequential basis, this
compares with a net loss, excluding amortization of stock-based compensation, of
$(32.0) million, or $(0.42) per share, based on 75.5 million shares outstanding
for the third quarter ended September 30, 2000.
As of December 31, 2000, the company reported a net installable backlog of
13,645, almost double the third quarter backlog of 7,234 subscribers.
At December 31, 2000, the company had cash and cash equivalents of $44.4
million.
Telocity's Chief Financial Officer Ned Hayes said, "During the quarter, we were
able to reach our subscriber target through organic growth, and we capitalized
on certain, unique market conditions that enabled us to transition thousands of
DSL customers from ailing ISPs relatively late in the quarter. These late-in-
the-quarter subscriber additions provided upside to our subscriber growth, but
provided no significant revenue benefit in the quarter. We obviously look
forward to these revenue streams in future quarters.
"Further, given conditions in the capital markets today, we are also pleased
with our ability to enter into a strategic acquisition agreement with HUGHES,"
added Mr. Hayes. "In light of the volatility and uncertainty in the markets
today, we believe the agreement is in the best interests of all our
shareholders."
Following necessary regulatory approvals and satisfaction of customary
conditions, HUGHES' offer to purchase all shares of Telocity common stock is
expected to close at the beginning of the second calendar quarter. Following
the closing of the tender offer, HUGHES will merge its wholly owned subsidiary
with Telocity and remaining stockholders will receive the same consideration
paid to stockholders who tendered their shares. Once the transaction is
completed, Telocity is expected to help strengthen DIRECTV's ability to emerge
as the first national provider of wire and wireless broadband access nationwide.
Telocity stockholders are advised to read the tender offer statement and the
solicitation/recommendation statement regarding the acquisition referenced in
this press release, which will be filed with the Securities and Exchange
Commission upon the commencement of the tender offer. The tender offer
statement (including an offer to purchase, letter of transmittal and related
tender offer documents) and the solicitation/recommendation statement will
contain important information which should be read carefully before any decision
is made with respect to the offer. Telocity stockholders may obtain a free copy
of the tender offer statement and the solicitation/recommendation statement when
it is available and other documents filed by HUGHES and Telocity with the SEC at
the SEC's Web site at www.sec.gov. The tender offer statement and the
solicitation/recommendation statement and these other documents may also be
obtained by Telocity stockholders without cost to them from Telocity.
Telocity and the Telocity logo are trademarks of Telocity, Inc.
All other marks belong to their owners.
Quarterly Teleconference Information
Management will host a teleconference on Thursday, January 25, 2001 at 2:00 pm
PST to discuss the company's fourth quarter and year 2000 financial results. A
live webcast will also be available at www.telocity.net under the Investor
----------------
Relations section. For access to two-week telephone replay that begins at 7:00
pm PST, please dial 1-719-457-0820, passcode #419452. For additional
information, please contact Lynne Farris, Director of Investor Relations, at
408.863.6643.
About Telocity
Telocity is a leading nationwide provider of integrated residential broadband
services. Telocity improves today's dial-up, or narrowband, experience through
faster and reliable services that enhance Internet surfing, shopping, and
communications. Telocity intends to expand its broadband services to include
value-added services such as firewall, multiple computer support, unified
messaging and other voice services, on-line photo albums and home video.
Telocity currently provides high-speed broadband services through digital
subscriber line (DSL) technology. As Telocity expands its services, Telocity
intends to choose the most reliable, flexible and cost- effective broadband
access technologies (including DSL, cable, and wireless) available in each local
market. Telocity's current broadband footprint covers
over 140 major U.S. metropolitan statistical areas (MSAs) across the United
States. For more information, contact Telocity at phone 408-863-6600; fax
408-777-1451; www.telocity.net, or mail at 10355 N. DeAnza Blvd.; Cupertino, CA
----------------
95014.
Safe Harbor Statement
Investors are cautioned that statements that are not strictly historical
constitute forward-looking statements, including, without limitation, statements
regarding the expected acquisition of Telocity by HUGHES, statements regarding
value-added services and the expectations therefor, current or future financial
performance, management's plans and objectives for future operations, product
plans and performance, management's assessment of market factors, and statements
regarding the strategy and plans of Telocity and its strategic partners. In
accordance with the Private Securities Litigation Reform Act of 1995, important
factors that could cause Telocity's actual results to differ materially from
those expressed or implied by such forward-looking statements include but are
not limited to the pending acquisition of Telocity by HUGHES, the highly
competitive and evolving nature of the broadband market, the availability of
financing, the ability to satisfy the conditions to the tender offer and merger,
the successful deployment of Telocity's rollout plans and strategies, customer
demand for Telocity's services in target markets, the pricing environment for
Telocity's basic and value-added services, and the success of the company's
strategic relationships. Readers are encouraged to review Telocity's recent
filings with the Securities and Exchange Commission, including Telocity's
current quarterly report on Form 10-Q, Registration Statement on Form S-8,
prospectus filed under Rule 428(b)(4), final amended Registration Statement on
Form S-1, and its other filings with the Securities and Exchange Commission,
copies of which may be accessed through the SEC's web site at
http://www.sec.gov. Descriptions of risk factors are not intended to be
complete.
[Financial Statements Follow]
# # #
================================================================================
TELOCITY (DELAWARE), INC.
Financial Highlights
(Dollars in thousands, except share and per share data)
Three Months Ended Twelve Months Ended
12/31/00 9/30/00 12/31/00 9/30/00
Revenues $ 4,659 $ 2,851 $ 9,352 $ 4,822
Operating Expenses:
Network and products costs 10,064 8,228 29,090 22,705
Sales, general and administrative 23,615 18,357 89,739 80,819
Research and Development 4,246 4,873 18,336 16,516
Amortization of stock based compensation 14,572 6,607 26,665 14,172
Depreciation and amortization 5,477 4,811 15,592 11,115
Total operating expenses 57,974 42,876 179,422 145,327
Loss from operations (53,315) (40,025) (170,070) (140,505)
Net interest income (expense) 636 1,379 2,794 1,470
Net loss $ (52,679) $ (38,646) $ (167,276) $ (139,035)
Basic and diluted net loss per common share (1) $(0.68) $(0.51) $(2.79) $(3.62)
Weighted average shares used in computing net loss
per share 76,983,273 75,529,306 60,079,659 43,127,459
Pro Forma Information:
Pro forma net loss (2) $ (38,107) $ (32,039) $ (140,611) $ (124,863)
Diluted pro forma net loss per share (3) $(0.50) $(0.42) $(1.94) $(1.98)
Shares used in computing diluted pro forma net loss
per share (3) 76,983,273 75,529,306 72,405,384 63,160,175
Other Data:
EBITDA (4) $ (33,266) $ (28,607) $ (127,813) $ (115,218)
(1) Basic and diluted net loss per share is after taking effect of deemed
dividend and accretion on mandatorily redeemable convertible preferred stock of
$341,000 and $16,750,000 for the quarters ended March 31, 2000, and December 31,
1999, respectively.
(2) Pro forma net loss excludes the effect of the amortization of deferred
stock compensation, deemed dividend and accretion on mandatorily redeemable
convertible preferred stock.
(3) Diluted pro forma net loss per share, assumes the conversion of
Telocity's preferred stock, which converted to common stock upon the closing of
its initial public offering, as if the conversion occurred as of the beginning
of the period or the date of issuance, if later.
(4) EBITDA is defined as earnings (losses) before interest, taxes,
depreciation, amortization, non-cash stock based compensation and other non-
operating income or expenses.
================================================================================
================================================================================
December 31 December 31
2000 1999
Selected Balance Sheet Data:
Cash and cash equivalents (A) $ 44,398 $ 66,978
Working capital (2,159) 53,729
Net property and equipment 46,028 22,272
Total assets 133,060 140,071
Current liabilities 52,923 20,275
Long-term obligations 7,124 12,058
Total stockholders' equity $ 73,013 $107,738
(A) Cash and cash equivalents at December 31, 2000 includes restricted cash
of $5,976,000.
================================================================================
# # #