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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, 1999
NETWORK SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-22967 52-1146119
(State or other jurisdiction (Commission File (I.R.S. Employer
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
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ITEM 5. OTHER EVENTS.
On February 10, 1999, the Company announced its 1998 fourth quarter and
annual revenue and earnings.
A copy of the Company's press release, announcing its earnings and
revenues 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, uncertainty of Internet governance and regulation, increased
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 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 January 4, 1999, as amended, Annual Report on Form 10-K for the year
ended December 31, 1997 and the Quarterly Reports on Form 10-Q for the periods
ended March 31, 1998, June 30, 1998 and September 30, 1998.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
99.1 Text of Press Release
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 11, 1999 By: /s/ Robert J. Korzeniewski
------------------------
Robert J. Korzeniewski
Chief Financial Officer, Acting Chief
Operating Officer and Authorized
Signatory
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NETWORK SOLUTIONS, INC.
INDEX TO EXHIBITS
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Exhibit Description
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<S> <C>
99.1 Text of Press Release
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[NETWORK SOLUTIONS LOGO]
NETWORK SOLUTIONS ANNOUNCES RECORD 1998
FOURTH QUARTER AND ANNUAL REVENUE AND EARNINGS
Fourth Quarter 1998 Highlights Year Over Year
Net new registrations 621,000 - up 137 percent
International net new registrations 168,000 - up 91 percent
Revenue $31.3 million - up 117 percent
Net income $3.7 million - up 113 percent
Earnings per share of $.22 versus $.11 - up 100 percent
HERNDON, VA., FEBRUARY 10, 1998 - Network Solutions, Inc. (NASDAQ:
NSOL) today reported record net revenues for the fourth quarter ended December
31, 1998 of $31,257,000, an increase of 117 percent over net revenues of
$14,430,000 for the fourth quarter of 1997. Net income increased to $3,718,000
or $0.22 per share on a diluted basis, compared to $1,743,000 or $0.11 per share
for the fourth quarter of 1997. Income from operations increased to $6,401,000,
compared to $3,208,000 for the fourth quarter of 1997.
For the year ended December 31, 1998, net revenues were $93,652,000,
an increase of 107 percent over net revenues of $45,326,000 for the comparable
1997 period. Net income increased to $11,235,000 or $0.67 per share on a diluted
basis, compared to $4,231,000 or $0.31 per share for the year ended December 31,
1997. Income from operations increased to $19,344,000, compared to $7,702,000
for the year ended December 31, 1997.
Network Solutions registered a record 621,000 net new Internet
domain names in the fourth quarter of 1998, up 137 percent from the fourth
quarter 1997 total of 262,000 names and up 22 percent from the third quarter
1998 total of 507,000. The cumulative total of net registrations grew 118
percent from 1.5 million at December 31, 1997, to nearly 3.4 million at December
31, 1998. In the fourth quarter of 1998, the number of net new international
registrations in .com, .net and .org totaled 168,000, up 91 percent from the
fourth quarter 1997 total of 88,000 and up 22 percent from the third quarter
1998 total of 138,000.
(more)
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"Network Solutions' revenue more than doubled in 1998 as we
registered more than 1.9 million net new domain names," said Michael A. Daniels,
chairman and acting chief executive officer, Network Solutions. "The growth
helped us increase our entire registration base by 118 percent in 1998, bringing
total registrations of 1.5 million domain names at the end of 1997 to a new high
of nearly 3.4 million domain names at the close of 1998."
"In the fourth quarter we saw continued growth in dot com Web
addresses, increasing our entire registration base 21 percent in the past
quarter alone. This growth contributed to our ninth consecutive quarter of
increasing profitability," said Robert Korzeniewski, chief financial officer and
acting chief operating officer, Network Solutions. "Our business model generated
over $63 million in operating cash flow in 1998, nearly six times our reported
net income of $11 million on nearly $94 million in revenue. These results
highlight the strength of our capital structure with $145 million in cash and
investments with virtually no debt."
Network Solutions' Consulting Services reported revenues of $3.3
million in the fourth quarter, up 47 percent from third quarter 1998 revenues of
$2.3 million and up 117 percent from fourth quarter 1997 revenues of $1.5
million. For the year ended December 31, 1998, Consulting Services' revenues
were $8 million, an increase of 22 percent over revenues of $6.5 million for the
comparable 1997 period. Since 1998, Consulting Services has expanded its
operations with new offices in Atlanta, Los Angeles and New York to increase
local support for clients of its Internet and enterprise network services.
Highlights include:
- - Branding of Network Solutions as the DOT COM PEOPLE(TM) - In 1998, Network
Solutions launched an advertising campaign branding Network Solutions as
the DOT COM PEOPLE. The campaign included television advertising to raise
awareness of Network Solutions and a product line of Internet services for
small businesses.
- - Introduction of new products and services - Network Solutions introduced
six new products in 1998: REGISTRATIONPLUS,(TM) a five-step process for
domain name registrations and reservations; the DOT COM TOOLKIT,(TM) DOT
COM MAIL(TM) and DOT COM PROMOTIONS(TM) - all aimed at providing small
businesses with additional resources to build and brand their online
identity, communicate with their customers and set up and promote their
Web business; and country-code top-level domain name registration
services and RealName registrations to identify and retrieve individual
Web pages - two complementary Internet identity services.
- - Expansion of Domestic Premier Program - Network Solutions increased the
total number of distribution channel companies to more than 150 members
and launched two new channel programs with Internet Service Providers and
Web hosting companies: 1) The Alliance Program, which gives Network
Solutions and participating companies the ability to serve as reciprocal
distribution channels for their respective services. To date NSI has
signed alliance agreements with MindSpring, EarthLink, ValueWeb and most
recently NetCom; and 2) An Affiliate program to expand its relationships
with local and regional ISPs and Web hosting companies. Currently, there
are more than 3,500 affiliate members on board.
- - International Marketing Strategies - Network Solutions created an
International Premier program that now includes more than 85 Internet
companies in 22 countries including most recently Germany, India, Ireland
and Italy. In addition, Network Solutions enhanced its presence in both
China and Japan: signing a Strategic Bilateral Agreement with China's
Internet registry, Computer Network Information Center, to jointly promote
Web address registrations in the .com, .net, .org and .cn domains; and
announcing its initial entry into the Japanese market through a strategic
agreement with ASCII Corporation.
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WorldNIC-JP is a Japanese version of Network Solutions' simplified
registration service for global Web addresses ending in .com, .net and
.org.
- - Acquisition and Investments - Network Solutions made one acquisition and
two investments in 1998. Early in the year, the Company acquired idNames
which helps large companies protect their brand names in all the open
country code top-level domains. Later in the year, Network Solutions made
an investment in Centraal Corporation to support the development of
RealNames technology which complements Network Solutions' Internet
identity business. A second investment was in Critical Path, which
provides the back office infrastructure for Network Solutions' business
e-mail solution, DOT COM MAIL.
- - Portal Agreements with Yahoo! and Netscape - In December, Network
Solutions signed agreements with Yahoo! and Netscape aimed at expanding
its brand awareness and promoting Web address registrations to the global
Internet community.
Network Solutions, Inc., (NASDAQ: NSOL) is the worldwide leader in
Internet domain name registration services with nearly 3.4 million net
registrations at year end. Internet domain names are unique identities that
enable businesses, other organizations and individuals to communicate and
conduct commerce on the Internet. Pursuant to an agreement with the U.S.
Department of Commerce, Network Solutions currently acts as the exclusive
registrar for all Web addresses within the .com, .net, .org and .edu top-level
domains (TLDs). Network Solutions also offers search and registration services
in country-code TLDs around the world. In addition, Network Solutions provides
enterprise network services that focus on assisting large commercial
organizations in the evolution and management of their enterprise networks.
For Network Solutions, Media: Cheryl Regan, [email protected], 703/742-4847.
Investor Relations: Sean McClorey, [email protected], 703/326-6090.
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, uncertainty of Internet governance and
regulation, increased 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 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 January 4, 1999, as amended, Annual Report on Form 10-K for the
year ended December 31, 1997 and Quarterly Reports on Form 10-Q for the periods
ended March 31, 1998, June 30, 1998 and September 30, 1998.
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NETWORK SOLUTIONS, INC.
STATEMENTS OF OPERATIONS
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THREE MONTHS ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1997 1998 1997 1998
(UNAUDITED) (AUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net revenue $14,430,000 $31,257,000 $45,326,000 $93,652,000
Cost of revenue 7,330,000 12,079,000 25,798,000 38,530,000
Gross profit 7,100,000 19,178,000 19,528,000 55,122,000
Research and development expenses 558,000 1,928,000 1,653,000 4,821,000
Selling, general and administrative expenses 4,375,000 12,706,000 12,268,000 37,144,000
Interest income (1,157,000) (1,880,000) (2,211,000) (6,303,000)
Other expenses 116,000 23,000 116,000 116,000
Income before income taxes 3,208,000 6,401,000 7,702,000 19,344,000
Provision for income taxes 1,465,000 2,683,000 3,471,000 8,109,000
Net income $ 1,743,000 $ 3,718,000 $ 4,231,000 $11,235,000
Earnings per common share:
Basic $ 0.11 $ 0.23 $ 0.32 $ 0.70
Diluted $ 0.11 $ 0.22 $ 0.31 $ 0.67
Shares used in computing earnings per
common share
Basic 15,720,000 16,249,000 13,305,000 15,979,000
Diluted 16,134,000 17,156,000 13,483,000 16,698,000
</TABLE>
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NETWORK SOLUTIONS, INC.
STATEMENTS OF FINANCIAL POSITION
<TABLE>
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DECEMBER 31, DECEMBER 31,
1997 1998
(AUDITED) (UNAUDITED)
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ASSETS
Current assets:
Cash and cash equivalents $ 41,146,000 $ 12,862,000
Short-term investments 40,200,000 118,808,000
Accounts receivable, net 5,792,000 22,628,000
Prepaids and other assets 1,005,000 4,001,000
Deferred tax asset 20,153,000 40,508,000
Restricted assets 25,873,000 -
Total current assets 134,169,000 198,807,000
Furniture and equipment, net 6,146,000 16,005,000
Long-term investments - 13,590,000
Deferred tax asset 8,128,000 14,831,000
Goodwill, net 1,177,000 634,000
Total Assets $ 149,620,000 $ 243,867,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 6,426,000 $ 28,287,000
Due to parent 1,250,000 4,766,000
Income taxes payable 5,042,000 5,409,000
Current portion of capital lease obligations 842,000 834,000
Deferred revenue, net 43,789,000 93,720,000
Internet fund liability 25,873,000 -
Total current liabilities 83,222,000 133,016,000
Capital lease obligations 1,081,000 247,000
Long-term deferred revenue, net 17,662,000 35,474,000
Total liabilities 101,965,000 168,737,000
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value,
authorized 10,000,000 shares;
none issued and outstanding in 1997 and 1998 - -
Class A common stock, $.001 par value; authorized
100,000,000 shares; 3,795,000 and 4,570,186
issued and outstanding in 1997 and 1998 4,000 4,000
Class B common stock, $.001 par value; authorized
30,000,000 shares; 11,925,000 issued and
outstanding in 1997 and 1998 12,000 12,000
Additional paid-in capital 56,451,000 72,332,000
Retained Earnings (Accumulated deficit) (8,812,000) 2,423,000
Accumulated other comprehensive income - 359,000
Total stockholders' equity 47,655,000 75,130,000
Total Liabilities and Stockholders' Equity $ 149,620,000 $ 243,867,000
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