-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ue7SxYDlwz07OkpagS+hRW3swCPfGQkwBsL7xAX+AoESX6RkLxpAANf1Slqwixm6 OCdUuD8OQNRKvkyHlmUYeQ== 0000950133-00-000409.txt : 20000211 0000950133-00-000409.hdr.sgml : 20000211 ACCESSION NUMBER: 0000950133-00-000409 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000210 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000210 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NETWORK SOLUTIONS INC /DE/ CENTRAL INDEX KEY: 0001030341 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 521146119 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-22967 FILM NUMBER: 532188 BUSINESS ADDRESS: STREET 1: 505 HUNTMAR PARK DR CITY: HERNDON STATE: VA ZIP: 20170 BUSINESS PHONE: 7037420400 MAIL ADDRESS: STREET 1: 505 HUNTMAR PARK DRIVE CITY: HERNDON STATE: VA ZIP: 20170 FORMER COMPANY: FORMER CONFORMED NAME: NETWORK SOLUTIONS INC /DE/ DATE OF NAME CHANGE: 19970702 8-K 1 NETWORK SOLUTIONS, INC. FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report: February 10, 2000 NETWORK SOLUTIONS, INC. (Exact name of registrant as specified in its charter) Delaware 0-22967 52-1146119 (State or other (Commission File (I.R.S. Employer Jurisdiction of Incorporation) Number) Identification Number) 505 Huntmar Park Drive, Herndon, Virginia 20170 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (703) 742-0400 2 ITEM 5. OTHER EVENTS. On February 10, 2000, the Company announced its 1999 fourth quarter and annual financial results. A copy of the Company's press release, announcing such financial results is attached hereto as Exhibit 99.1 and incorporated by reference herein. This report and the Company's press release attached hereto contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those stated or implied by such forward-looking statements. The potential risks and uncertainties include, among others, increased competition, including price competition in the domain name registration business, customer acceptance of new products and services offered by the Company in addition to or as enhancements of its registration services, risks associated with the Company's international business, uncertainty of Internet privatization, uncertainty of future revenue and profitability and fluctuations in its quarterly operating results. More information about potential factors that could affect the Company's business and financial results is included in the Company's filings with the Securities and Exchange Commission, especially in the Company's Registration Statement on Form S-3 filed on December 22, 1999, as amended, Annual Report on Form 10-K for the year ended December 31, 1998, and Quarterly Reports on Form 10-Q for the periods ended March 31, 1999, June 30, 1999, and September 30, 1999, which are on file with the Securities and Exchange Commission (http://www.sec.gov). ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. 99.1 Text of Press Release dated February 10, 2000 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. NETWORK SOLUTIONS, INC. Date: February 10, 2000 By: /s/ JONATHAN W. EMERY ------------------------- Jonathan W. Emery Senior Vice President, General Counsel and Secretary 3 NETWORK SOLUTIONS, INC. INDEX TO EXHIBITS Exhibit Description - ------- ----------- 99.1 Text of Press Release dated February 10, 2000 EX-99.1 2 PRESS RELEASE DATED FEBRUARY 10, 2000 1 NETWORK SOLUTIONS ANNOUNCES RECORD 1999 FOURTH QUARTER AND ANNUAL REVENUE AND EARNINGS
Financial Highlights Fourth Quarter 1999 Full Year 1999 Net new registrations 1.6 million 5.0 million International net new registrations 539,000 1.5 million Net revenue $75.9 million $220.8 million Cash from operations $90.3 million $198.6 million Net income $9.0 million $26.9 million Earnings per share $0.25 per share $0.77 per share
Herndon, Va., February 10, 2000 - Network Solutions, Inc. (NASDAQ: NSOL) today reported record net revenue of $75.9 million for the three months ended December 31, 1999, up 143 percent from $31.3 million in the quarter one year ago. Operating income increased 160 percent to $11.8 million in the quarter versus $4.5 million for the fourth quarter of 1998. Net income increased 142 percent to a record $9.0 million or $0.25 per share on a diluted basis, compared to $3.7 million or $0.11 per share for the same quarter last year. Net revenue was $220.8 million in 1999 versus $93.7 million last year, an increase of 136 percent. Operating income grew 171 percent to $35.7 million from $13.2 million in 1998. For 1999, net income increased 139 percent to $26.9 million or $0.77 per share on a diluted basis, compared to $11.2 million or $0.34 per share last year. Network Solutions' Registrar (NSI Registrar) registered a record 1.6 million net new domain names in the fourth quarter of 1999, up 161 percent from the fourth quarter 1998 total of 621,000 names and up 23 percent from the third quarter 1999 total of 1.3 million. For 1999, the NSI Registrar registered 5.0 million net new domain names versus 1.9 million in 1998. Network Solutions' cumulative total of net registrations grew 140 percent from nearly 3.4 million at December 31, 1998 to over 8.1 million at December 31, 1999. In the fourth quarter of 1999, the number of the NSI Registrar's net new international registrations in .com, .net and .org totaled 539,000, up 220 percent from the fourth quarter 1998 total of 168,000. For 1999, the NSI Registrar registered more than 1.5 million net new international registrations versus 532,000 in 1998. Non-NSI Registrars registered an additional 890,000 names with Network Solutions' Registry in 1999. Currently, 26 additional registrars are operational and registering domain names in .com, .net and .org. "In the fourth quarter, we began to see the tremendous untapped potential for Internet identities worldwide as new registrations grew 50 percent from the previous quarter," said Jim Rutt, chief executive officer, Network Solutions. "In addition to growth in new registrations, we sold value added services to approximately 17 percent of our Registrar's 1.6 million registrations in the quarter." 2 "Cash from operations grew 213 percent to $199 million in 1999, of which $90 million was in the fourth quarter alone," said Robert Korzeniewski, chief financial officer, Network Solutions. "Upon the completion of our latest common stock offering and based on our most recent balance sheet, we will have cash and investments of approximately $850 million, which is a powerful war chest for strategic investments and acquisitions during the year. We also enter 2000 with a balance sheet that has never been stronger with $362 million of deferred revenue." 1999 and recent highlights include: * NSI, DoC and ICANN Agreements - In November 1999, Network Solutions, the U.S. Department of Commerce (DoC) and the Internet Corporation for Assigned Names and Numbers (ICANN) entered into a series of wide-ranging agreements relating to the future of the Internet's domain name system. Under the terms of the agreements, Network Solutions was made an accredited registrar through November 2004 with a right to renew indefinitely, and will also operate the registry for .com, .net and .org for at least four years. If the ownership of NSI's registrar and registry operations is separated by May 2001 in accordance with the agreement, the term of the registry agreement will extend an additional four years to November 2007. * NSI Registry Multiyear Offering - On January 15, 2000, NSI's Registry began offering all registrars the ability to register domain names in one-year increments from 1 to 10 years. For its role in the domain name registration process, the NSI Registry collects $6 per registration per year, unless increased to cover higher registry costs. * Strategic Marketing Agreements - Network Solutions expanded its worldwide distribution channel programs with small business, financial services and technology leaders, entering into agreements with Yupi.com, Yahoo! (NASDAQ: YHOO), UPS (NYSE: UPS), Netscape, Microsoft (NASDAQ: MSFT), Looksmart (NASDAQ: LOOK), InfoSpace (NASDAQ: INSP), IBM (NYSE: IBM), Hewlett Packard (NYSE: HWP), GTE SuperPages.com?, Go2Net, Inc. (NASDAQ: GNET), eFax (NASDAQ: EFAX), AltaVista and American Express (NYSE: AXP), among others. * NSI Registrar Alliance, Premier and Affiliate Channels - Network Solutions expanded its relationships with some of the world's leading Internet Service Providers and Web hosting companies, enhancing its affiliations with its key Alliance partners EarthLink (NASDAQ: ELNK), Interliant, Inc. (NASDAQ: INIT) and Interland. The NSI Registrar signed agreements with over 150 new channel partners in 1999 for a total of 240 partners. Among them are global telecommunications providers including British Telecom (NYSE: BTY), Telecom Italia (NYSE: TI), KPN Telecom (NYSE: KPN), China Telecom (NYSE: CHL), Korea Telecom (NYSE: KTC), Singapore Telecom, and Hong Kong Telecom. The NSI Registrar also added over 30,000 Affiliate members during 1999 for a current total of 41,000 Affiliates. 3 * New Product Offerings - In 1999, Network Solutions launched the dot com directoryTM, the Company's find engine for online businesses. Since launch, Network Solutions has logged 20 million impressions. In addition, to serve the large number of small businesses coming online, Network Solutions introduced the dot com essentialsT service in 1999, a turnkey package that gives small businesses and individuals tools they need to establish a professional online presence including a Web address, a dot com mailT e-mail service, a dot com biz cardT one-page Web site, and a listing in the dot com directory. IdNamesT announced additional corporate services to meet the growing needs of global companies including anonymous registrations and maintenance services. Through its acquisition of ImageCafe, Network Solutions allows small businesses to design professional Web sites. * Legal and Regulatory Decisions - Recently, the United States Supreme Court declined to hear a petition by William Thomas, et al, challenging the company's right to charge fees for its registration services. The Court's denial ends a series of legal actions that started in October 1997. Additionally, the NSI Registry, which serves as the administrator of the primary root zone server for the Internet, was held by the U.S. Court of Appeals for the 2nd Circuit (New York), in the NameSpace (formerly PG Media) decision, to be immune from antitrust liability with respect to its refusal to add new generic Top Level Domains (gTLDs) to the root zone file under the direction of the National Science Foundation. In addition, the United States Department of Justice's Antitrust Division and the European Commission recently closed their respective investigations of Network Solutions, in each case without any enforcement action. About Network Solutions Founded in 1979, Network Solutions, Inc. (NASDAQ: NSOL) pioneered the development of registering Web addresses ending in .com, .net, .org and .edu and is the world's leading Registrar with more than 8.1 million net registrations. Separately, Network Solutions plays a critical role in the infrastructure of the Internet through its Registry business. Network Solutions' Registry customers include all the Registrars of domain names ending in .com, .net and .org. Network Solutions also provides Internet Technology Services that assist large commercial organizations in the evolution and management of their Internet technologies. For more information, see the www.netsol.com/nsi Web site. Statements in this announcement other than historical data and information constitute forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those stated or implied by such forward-looking statements. The potential risks and uncertainties include, among others, increased competition, including price competition, in the domain name registration business, customer acceptance of new products and services offered by the company in addition to or as enhancements of its registration services, risks associated with acquisitions and investments, risks associated with the company's international business, potential volatility in the company's stock price, uncertainty of Internet privatization, uncertainty of future revenue and profitability and fluctuations in its quarterly operating results. More information about potential factors that could affect the company's business and financial results is included in the company's filings with the Securitie s and Exchange Commission, especially in the company's Registration 4 Statement on Form S-3 filed on December 22, 1999, as amended, and previous Securities and Exchange filings. For Network Solutions, Media: Cheryl Regan, cregan@netsol.com, 703/742-4847, Investor Relations: Sean McClorey, smcclorey@netsol.com, 703-326-6090, Customer Service, 703/742-4777 5 Network Solutions, Inc. Statements of Operations
Three Months Ended Twelve Months Ended December 31, December 31, 1998 1999 1998 1999 Net revenue $31,257,000 $75,926,000 $93,652,000 $220,811,000 Cost of revenue 12,079,000 27,566,000 38,530,000 81,606,000 Gross profit 19,178,000 48,360,000 55,122,000 139,205,000 Research and development expenses 1,928,000 3,624,000 4,821,000 10,989,000 Selling, general and administrative expenses 12,706,000 32,936,000 37,144,000 92,517,000 Interest income (1,880,000) (3,616,000) (6,303,000) (9,928,000) Other expenses 23,000 7,000 116,000 52,000 Income before income taxes 6,401,000 15,409,000 19,344,000 45,575,000 Provision for income taxes 2,683,000 6,394,000 8,109,000 18,689,000 Net income $3,718,000 $9,015,000 $11,235,000 $26,886,000 Earnings per common share: Basic $0.11 $0.27 $0.35 $0.81 Diluted $0.11 $0.25 $0.34 $0.77 Shares used in computing earnings per common share Basic 32,498,000 33,598,000 31,958,000 33,338,000 Diluted 34,312,000 35,627,000 33,396,000 34,953,000
6 Network Solutions, Inc. Statements of Financial Position
December 31, December 31, 1998 1999 ASSETS Current assets: Cash and cash equivalents $12,862,000 $196,589,000 Short-term investments 118,808,000 112,523,000 Accounts receivable, net 22,628,000 31,916,000 Income taxes receivable - 16,193,000 Prepaids and other assets 4,001,000 8,809,000 Deferred tax asset 40,508,000 102,563,000 Total current assets 198,807,000 468,593,000 Furniture and equipment, net 16,005,000 57,406,000 Long-term investments 13,590,000 62,475,000 Deferred tax asset 14,831,000 28,197,000 Goodwill, net 634,000 6,379,000 Total assets $243,867,000 $623,050,000 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $28,287,000 $52,957,000 Due to SAIC 4,766,000 30,177,000 Income taxes payable 5,409,000 1,045,000 Current portion of capital lease obligations 834,000 247,000 Deferred revenue, net 93,720,000 255,307,000 Total current liabilities 133,016,000 339,733,000 Capital lease obligations 247,000 - Long-term deferred revenue, net 35,474,000 106,332,000 Other long-term liabilities - 639,000 Total liabilities 168,737,000 446,704,000 Commitments and contingencies - -
7 Stockholders' equity: Preferred stock, $.001 par value, authorized 10,000,000 shares; none issued and outstanding in 1998 and 1999 - - Common stock, $.001 par value; authorized 210,000,000 shares; 33,882,000 issued and outstanding in 1999 - 34,000 Class A common stock, $.001 par value; authorized 100,000,000 shares in 1998; 9,140,000 issued and outstanding in 1998 9,000 - Class B common stock, $.001 par value; Authorized 30,000,000 shares in 1998; 23,850,000 issued and outstanding in 1998 24,000 - Additional paid-in capital 72,331,000 117,289,000 Retained earnings 2,407,000 29,293,000 Accumulated other comprehensive income 359,000 29,730,000 Total stockholders' equity 75,130,000 176,346,000 Total liabilities and stockholders' equity $243,867,000 $623,050,000
8 Network Solutions, Inc. Statements of Cash Flows
Twelve Months Ended December 31, December 31, 1998 1999 Cash flows from operating activities: Net income $11,235,000 $26,886,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,754,000 12,223,000 Provision for uncollectible accounts receivable 2,247,000 - Deferred income taxes (27,317,000) (95,823,000) Tax benefit associated with stock options 5,607,000 34,843,000 Change in operating assets and liabilities: Increase in accounts receivable (19,083,000) (9,288,000) Increase in income taxes receivable - (16,193,000) Increase in prepaid and other assets (2,996,000) (4,808,000) Increase in accounts payable and accrued liabilities 21,861,000 22,655,000 Increase (decrease) in income taxes payable 367,000 (4,364,000) Increase in deferred revenue 67,743,000 232,445,000 Net cash provided by operating activities 63,418,000 198,576,000 Cash flows from investing activities: Purchase of furniture and equipment (13,070,000) (52,778,000) Acquisition of businesses, net of cash acquired - (3,936,000) Redemption (purchase) of short-term investments (77,990,000) 9,479,000 Purchase of long-term investments, net (13,590,000)( 11,656,000) Proceeds from maturity of long-term investments - 9,350,000 Net cash used in investing activities (104,650,000) (49,541,000) Cash flows from financing activities: Net transactions with SAIC 3,516,000 25,411,000 Repayment of capital lease obligations (842,000) (834,000) Issuance of common stock pursuant to stock plans 10,274,000 10,115,000 Net cash provided by financing activities 12,948,000 34,692,000 Net increase in cash and cash equivalents (28,284,000) 183,727,000 Cash and cash equivalents, beginning of period 41,146,000 12,862,000 Cash and cash equivalents, end of period $12,862,000 $196,589,000
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