8-K

UNITED STATES

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 (Date of earliest event reported):

November 4, 2004

Internap Network Services Corporation

(Exact name of registrant as specified in its charter)

Delaware	000-27265	91-2145721
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification Number)

250 Williams Street, Atlanta, GA	30303
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (404) 302-9700

Not applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

On November 4, 2004, Internap Network Services Corporation issued a press release announcing its financial results for the quarter ended September 30, 2004. A copy of this press release is attached as Exhibit 99.1.

Item 9.01. Financial Statements and Exhibits.

(a) Financial Statements of Businesses Acquired.

None.

(b) Pro Forma Financial Information.

None.

(c) Exhibits

99.1 Press release dated November 4, 2004.

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.

	INTERNAP NETWORK SERVICES CORPORATION
Date: November 4, 2004	By:	/s/ Walter G. DeSocio
		Walter G. DeSocio
		Vice President—Chief Administrative Officer,
		General Counsel and Secretary

EXHIBIT INDEX

99.1 Press release dated November 4, 2004.

EX-99.1

Exhibit 99.1

Internap Network Services Corporation

250 Williams Street

Atlanta, Georgia 30303

Phone - 404-302-9700

Facsimile – 404-475-0520

Internap Reports Financial Results for Third Quarter 2004

ATLANTA, GEORGIA – November 4, 2004 – Internap Network Services Corporation (AMEX:IIP), the leading provider of high-performance, managed Internet connectivity solutions to business customers, today reported results of operations for the third quarter ended September 30, 2004. For the third quarter, revenues totaled $35.2 million, an increase of 2.2% compared to the third quarter of 2003 and a slight decline over the previous quarter.

Quarterly Highlights:

• Grew customer base to 1,888 customers, an increase of 88 net new customers in the quarter. Among the new customers are Agiliti, HomeBanc Mortgage Corp, E-Trade, Rogers Corp, Latham & Watkins, Knology, Port of Seattle and Eagle County Gov’t.

• Customer usage on network up 12% vs second quarter 2004

• Colocation revenue growth of 11% vs second quarter 2004

• Paid off Cisco capital lease with a restructured $17.5 million loan facility with Silicon Valley Bank that is expected to improve the company’s working capital

• Announced T-Systems partnership, to provide variety of intelligent routing solutions to leading multinational customers

• Introduction of Flow Control Xcelerator^TM (FCX), a TCP acceleration product that provides LAN-like performance over wide area networks for mission critical applications

Internap’s net loss attributable to common shareholders was $9.2 million for the quarter, or $0.03 per share, compared to $42.7 million, or $0.25 per share for the third quarter of 2003, which also included a deemed dividend of $34.6 million related to beneficial preferred stock conversion features. The net loss for the quarter excluding a restructuring charge of $5.7 million related to additional estimated real estate obligations was $3.5 million compared to $7.9 million for the third quarter of 2003. The Company ended the quarter with $57.1 million in cash.

“Third quarter results represent continued productivity improvements in a tough pricing environment. While revenue dipped slightly from the second quarter, our customer base and additional service offerings continue to grow.” said Gregory A. Peters, Internap’s president and chief executive officer. “Our customer base is one of our greatest assets and we will continue to leverage it as we transform our business by adding new technologies and enhanced IP services.”

Conference Call Information:

Internap’s third quarter teleconference will be held today beginning at 5:00 p.m. Eastern time. The dial-in numbers are 866-800-8651, passcode 93660953 for domestic callers, and 617-614-2704, passcode 93660953 for international participants. The simultaneous web cast will be available from the Investor Relations section of the web site at: www.internap.com.

Internap will provide a replay of the teleconference on its website. Internap will also provide a telephonic replay of the call by dialing 888-286-8010, passcode 59251676.

About Internap

Internap provides high performance, managed Internet connectivity solutions to business customers who require guaranteed network availability and high performance levels for business-critical applications, such as e-commerce, video and audio streaming, voice over Internet Protocol, virtual private networks and supply chain management. Internap’s proprietary route optimization technology monitors the performance of these Internet networks and allows us to intelligently route our customers’ Internet traffic over the optimal Internet path in a way that minimizes data loss and network delay. Its service level agreements guarantee performance across the entire Internet in the United States, excluding local connections, whereas conventional Internet connectivity providers typically only guarantee performance on their own network. Internap provides services to customers in various industry verticals, including financial services, entertainment and media, travel, e-commerce retail, and technology. As of September 30, 2004, Internap provided its services to 1,888 customers in the United States and abroad, including approximately 70 customers in the Fortune 1000 companies.

Internap “Safe Harbor” Statement

Certain information included in this press release constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, including, among others, statements regarding our future financial position, business strategy, projected levels of growth, projected costs and projected financing needs, are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of Internap and members of our management team, as well as the assumptions on which such statements are based, and equally are identified by the use of words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “projects,” “forecasts,” “plans,” “intends,” “should” or similar expressions. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that actual results may differ materially from those contemplated by forward-looking statements. Important factors currently known to our management that could cause actual results to differ materially from those in forward-looking statements include, but are not limited to: our ability to achieve profitability or positive free cash flow; our ability to secure adequate funding; the incurrence of additional restructuring charges; the success of our recent operational restructurings; our ability to compete against existing and future competitors; pricing pressures; our ability to deploy new access points in a cost-efficient manner; our ability to successfully complete future acquisitions; risks associated with international operations; the availability of services from Internet network service providers; failure of suppliers to deliver their products and services as agreed; failures in our network operations centers, network access points or computer systems; fluctuations in our operating results; our ability to operate in light of restrictions in our existing credit facility; our ability to protect our intellectual property; our ability to attract and retain qualified personnel; the outcome of our securities litigation; litigation due to infringement of third party intellectual property rights; evolution of the high performance Internet connectivity and services industry; our ability to respond to technological change; our ability to protect ourselves and our customers from security breaches; effects of terrorist activity; government regulation of the Internet; the dilutive effects of our stock price due to our warrants; future sales of stock; and volatility of our stock price. These risks and others are discussed in more detail in our Annual Report on Form 10-K for the year ended December 31, 2003 and our other filings with the SEC. We believe these forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time unless required by law.

Media Contact: C. David Sutton Internap (404) 302-9721 dsutton@internap.com Investor Contact: Andrew Albrecht Internap (404) 302-9841 aalbrecht@internap.com

INTERNAP NETWORK SERVICES CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

	September 30, 2004			December 31, 2003
ASSETS
Current assets:
Cash and cash equivalents	$	57,088		$	18,885
Restricted cash		76			125
Accounts receivable, net of allowance of $1,775 and $2,429, respectively		17,164			15,587
Inventory		430			492
Prepaid expenses and other assets		2,176			4,245
Total current assets		76,934			39,334
Property and equipment, net of accumulated depreciation of $138,177 and $127,812, respectively		56,744			59,337
Investments		2,005			2,371
Intangible assets, net of accumulated amortization of $17,378 and $16,941, respectively		3,069			3,488
Goodwill		36,290			36,163
Deposits and other assets		933			1,758
Total assets	$	175,975		$	142,451
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Notes payable, current portion	$	6,699		$	2,790
Revolving credit facility		—			8,392
Accounts payable		9,687			7,556
Accrued liabilities		7,079			8,585
Deferred revenue, current portion		1,769			3,674
Capital lease obligations, current portion		1,096			8,770
Restructuring liability, current portion		3,344			1,965
Total current liabilities		29,674			41,732
Notes payable, less current portion		13,542			2,275
Deferred revenue, less current portion		408			316
Capital lease obligations, less current portion		3,372			15,537
Restructuring liability, less current portion		5,770			4,441
Total liabilities		52,766			64,301
Commitments and Contingencies
Stockholders’ equity:
Series A convertible preferred stock, $0.001 par value, 3,500 shares designated; 1,751 shares outstanding with liquidation preference of $56,032 at December 31, 2003		—			51,841
Common stock, $0.001 par value, 600,000 shares authorized; 337,338 and 228,751 shares issued and outstanding, respectively		337			229
Additional paid in capital		967,430			855,240
Accumulated deficit		(844,842	)		(829,460	)
Accumulated items of other comprehensive income		284			300
Total stockholders’ equity		123,209			78,150
Total liabilities and stockholders’ equity	$	175,975		$	142,451

INTERNAP NETWORK SERVICES CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

	Three months ended September 30,						Nine months ended September 30,
	2004			2003			2004			2003
Revenues	$	35,151		$	34,379		$	107,399		$	102,796
Costs and expenses:
Direct cost of network, exclusive of depreciation shown below		18,413			19,795			55,360			57,132
Customer support		2,162			2,504			6,448			7,931
Product development		1,324			836			4,123			2,759
Sales and marketing		5,317			4,513			14,976			14,966
General and administrative		7,352			5,354			22,311			14,311
Depreciation		3,646			7,931			11,950			28,293
Amortization of intangible assets		144			362			437			3,218
Amortization of deferred stock compensation		—			—			—			390
Restructuring costs		5,692			132			5,692			1,084
(Gain) on sale and retirement of property and equipment		87			(53	)		176			(53	)
Total operating costs and expenses		44,137			41,374			121,473			130,031
Loss from operations		(8,986	)		(6,995	)		(14,074	)		(27,235	)
Other expense:
Interest expense, net		254			792			1,486			2,486
Other expense (income)		(56	)		291			(178	)		762
Total other expense		198			1,083			1,308			3,248
Net loss		(9,184	)		(8,078	)		(15,382	)		(30,483	)
Less deemed dividend related to beneficial conversion feature		—			(34,576	)		—			(34,576	)
Net loss attributable to common stockholders	$	(9,184	)	$	(42,654	)	$	(15,382	)	$	(65,059	)
Basic and diluted net loss per share	$	(0.03	)	$	(0.25	)	$	(0.06	)	$	(0.40	)
Weighted average common shares outstanding used in computing basic and diluted net loss per share		291,317			169,352			270,457			164,147

INTERNAP NETWORK SERVICES CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Nine months ended September 30,
	2004			2003
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(15,382	)	$	(30,483	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		12,387			31,511
Non-cash interest expense on capital lease obligations		904			961
Provision for doubtful accounts		1,986			1,239
Loss from equity method investment		359			762
Non-cash restructuring charge		5,692
Non-cash compensation expense		—			390
Loss (gain) on sale and retirement of property & equipment		176			(53	)
Changes in operating assets and liabilities:
Accounts receivable		(3,563	)		(1,707	)
Inventory, prepaid expenses and other assets		2,939			2,502
Accounts payable and accrued liabilities		(805	)		(4,651	)
Accrued restructuring charge		(2,984	)		(6,224	)
Deferred revenues		(1,813	)		(3,382	)
Net cash provided by (used in) operating activities		(104	)		(9,135	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(8,363	)		(3,564	)
Other		(58	)		2,053
Net cash used in investing activities		(8,421	)		(1,511	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in revolving credit facility		(8,392	)		(946	)
Principal payments on notes payable		(2,325	)		(3,888	)
Payments on capital lease obligations		(20,512	)		(2,829	)
Proceeds from notes payable		17,500			—
Proceeds from exercise of stock options and warrants		4,525			830
Proceeds from issuance of common stock		55,932			9,470
Net cash provided by (used in) financing activities		46,728			2,637
Net increase (decrease) in cash and cash equivalents		38,203			(8,009	)
Cash and cash equivalents at beginning of period		18,885			25,219
Cash and cash equivalents at end of period	$	57,088		$	17,210