FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the month of February, 2003
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Commission File Number: 333-100069
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NETEASE.COM, INC.
Suite 1901, Tower E3
The Towers, Oriental Plaza
Dong Cheng District
Beijing, People's Republic of China 100738
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F
---------------- ---------------
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1):________________
Indicate by check mark if the registrant is submitting the Form 6-K in paper
as permitted by Regulation S-T Rule 101(b)(7):________________
Indicate by check mark whether by furnishing the information contained in
this Form, the registrant is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange
Act of 1934.
Yes No X
-------------- ------------
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b):
82- N.A.
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Page 1 of 9 Pages
The index of exhibits may be found at Page 2
NETEASE.COM, INC.
Form 6-K
TABLE OF CONTENTS
Page
Signature Page 3
Press Release Regarding Fourth Quarter and Year End Exhibit 99.1, Page 4
Results dated February 26, 2003
2
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, thereunto duly authorized.
NETEASE.COM, INC.
By: /s/ Ted Sun
----------------------------------
Name: Mr. Ted Sun
Title: Chief Executive Officer and
Director
Date: February 26, 2003
3
Exhibit 99.1
Press Release
--------------------------------------------------------------------------------
Contact for Media and Investors:
Ms. Olive Wang
NetEase.com, Inc.
ir@corp.netease.com
-------------------------
8610-8518-0163, ext. 8243
Jessica Barist Cohen
Ogilvy Public Relations Worldwide
jessica.cohen@ogilvy.com
(+8610) 6443-6488 x.357
NetEase.com Reports Record Fourth Quarter and Fiscal Year 2002
Financial Results
Highlights for the Fourth Quarter 2002
Continued revenue growth of 28.7% over preceding quarter results in further
enhanced gross margins of 72.7%
Company achieves operating profit of RMB39.0 million (US$4.7 million) and net
profit of RMB43.1 million (US$5.2 million), or US$0.17 per American Depositary
Share (basic)
Highlights for Fiscal Year 2002
Substantial revenue growth of 721.8% over the preceding year driven by diverse
revenue streams
Turnaround from 2001 net loss to full year net profit of RMB16.3 million (US$2.0
million) (or RMB52.3 million (US$6.32 million) before a one-time charge in third
quarter)
(Beijing - February 26, 2003) - NetEase.com, Inc. (Nasdaq: NTES), a leading
Internet technology provider in China, today announced financial results for its
fourth quarter and fiscal year ended December 31, 2002.
For the fourth quarter ended December 31, 2002, the Company reported total
revenues of RMB95.7 million (US$11.6 million), a 28.7% increase over total
revenues of RMB74.4 million (US$9.0 million) for the preceding quarter and an
increase of RMB85.1 million (US$10.3 million) over total revenues of RMB10.6
million (US$1.3 million) for the corresponding period in 2001. The Company
reported net profit of RMB43.1 million (US$5.2 million), or US$0.17 per American
Depositary Share (basic), compared to the previous quarter's net loss of RMB9.0
million (US$1.1
4
million). The same quarter in the previous year had a net loss of
RMB41.3 million (US$5.0 million).
For the year ended December 31, 2002, the Company reported total revenues of
RMB232.6 million (US$28.1 million), a substantial increase of 721.8% over total
revenues of RMB28.3 million (US$3.4 million) for the fiscal year 2001. For the
fiscal year 2002, NetEase reported a gross profit and operating profit of
RMB149.3 million (US$18.0 million) and RMB4.0 million (US$0.5 million),
respectively, representing a turnaround from a loss on revenues of RMB34.0
million (US$4.1 million) and operating loss of RMB231.9 million (US$28.0
million) for the fiscal year 2001. The Company reported net profit of RMB16.3
million (US$2.0 million), or US$0.06 per American Depositary Share (basic),
compared to the previous year's net loss of RMB233.2 million (US$28.2 million).
For the fourth quarter ended December 31, 2002, advertising revenues continued
to grow steadily, increasing to RMB12.5 million (US$1.5 million), representing a
27.4% increase over RMB9.8 million (US$1.2 million) for the third quarter and a
305.8% increase over RMB3.1 million (US$0.4 million) for the corresponding
period a year ago. Revenues from e-commerce and other services for the quarter
were RMB83.1 million (US$10.0 million), representing a 29.8% increase over the
preceding quarter's RMB64.0 million (US$7.7 million) and an increase of RMB75.6
million (US$9.1 million) over RMB7.5 million (US$0.9 million) for the
corresponding period a year ago. This increase in revenues from e-commerce and
other services was primarily attributable to continued growth in the Company's
fee-based services. The main driver was online games, but also included wireless
short messaging services (SMS), and, to a lesser-extent, other fee-based online
premium services, such as premium e-mail, friend finding and dating services.
The user base of "Westward Journey Online version 2.0" grew steadily since it
was launched in August 2002.
The Company achieved gross profit in the fourth quarter of RMB69.6 million
(US$8.4 million), increasing 38.5% over the previous quarter's RMB50.3 million
(US$6.1 million). The corresponding quarter last year had a loss on revenues of
RMB4.3 million (US$0.5 million). Strong revenue growth also favorably impacted
gross margins, which increased from 67.6% in the preceding quarter to 72.7% in
the fourth quarter.
While the Company has had a long-term focus on controlling expenses in the past
year, total operating expenses increased to RMB30.7 million (US$3.7 million) for
the quarter as a result of NetEase's recent rapid business expansion, a 22.7%
increase from the previous quarter's RMB25.0 million (US$3.0 million) before a
one-time charge which is in connection with the class action litigation
discussed below, but a 15.1% decrease from the corresponding period a year ago
of RMB36.1 million (US$4.4 million). NetEase reported an operating profit of
RMB39.0 million (US$4.7 million) for the quarter, representing a significant
improvement over the previous quarter's operating loss of RMB10.7 million
(US$1.3 million) and the previous year's fourth quarter operating loss of
RMB40.5 million (US$4.9 million).
As of December 31, 2002, the Company's total net cash balance was RMB561.3
million (US$67.8 million), a 7.4% increase from the previous quarter's RMB522.7
million (US$63.1 million).
5
Commenting on the Company's earnings, Ted Sun, Acting Chief Executive Officer
and Director said, "Our 2002 results demonstrate NetEase's turnaround and the
success of our strategy to build on our strengths while developing new products
and services that take full advantage of the potential in China's fast growing
market. I am particularly proud of our team's ability to leverage new,
diversified revenue sources, through, for example, highly successful games and
online community services, while at the same time finding ways to grow and
develop advertising revenue."
"2002 demonstrated that NetEase has its fundamentals established and we believe
is well poised for future growth. Our strategy of focusing on China's young
Internet users not only differentiates us from our peers, but also positions us
extremely well going forward. According to a report issued in January 2003 by
China's Internet Network Information Center, for example, more than a third of
all Internet users are between the ages of 18 to 24, and more than 70 percent of
all Internet users in China are 30 years old or younger. With many industry
experts expecting China to soon become the world's largest Internet and
information economy, we believe this places NetEase extremely well." Mr. Sun
concluded, "The combination of our strong and proven strategy, our able employee
base and professional management team is a strong foundation on which to build
future continued success."
Denny Lee, NetEase's Chief Financial Officer said, "2002 was indeed a remarkable
year for NetEase. Our strong financial results for this past quarter and year
are a major accomplishment for the Company, but especially when compared to our
results just one year ago. Our achievement of both a net and operating profit
are also important financial milestones. It is our goal to ensure that these
results continue in the future and that we build on these successes to create
ongoing shareholder value."
Users of the NetEase Web sites continued to grow, with 95.7
million registered accounts at the end of the fourth quarter, an increase of
18.6% over the 80.7 million accounts at the end of the previous quarter and a
121.5% increase over the 43.2 million accounts at the same time a year ago.
The Company also announced today that the plaintiffs in the class action
litigation filed in the U.S. District Court for the Southern District of New
York have completed their confirmatory discovery in connection with the
conditional settlement of that litigation which we announced on November 6, 2002
and the parties have submitted the settlement to the District Court for
preliminary approval. If the court grants preliminary approval, then notice will
be sent to the class and the court will hold a hearing before it gives final
approval to the settlement. The litigation was initiated in October 2001 against
the Company, certain members of its current and former officers and directors,
and the underwriters of the Company's initial public offering, and claimed that
the Company and the other defendants had violated various U.S. securities laws
by misstating its revenue in the year 2000. The aggregate settlement amount is
RMB36.0 million (US$4.35 million) and has been reflected in our third quarter
and full-year financial statements as a one-time charge. The Company cannot
predict if or when this settlement will become final.
** Note: The conversion of Renminbi (RMB) into U.S. dollars in this release is
based on the exchange rate of US$1 = RMB8.2800. The percentages stated in this
press release are calculated based on RMB.**
6
About NetEase
NetEase.com, Inc. is a leading China-based Internet technology company that
pioneered the development of applications, services and other technologies for
the Internet in China. The NetEase Web sites, operated by a company affiliate,
organize and provide access to 18 content channels through distribution
arrangements with more than one hundred international and domestic content
providers. In addition, the NetEase Web sites offer a variety of products and
services, including Instant Messaging (Popo), Dating, Love, Alumni and Personal
Home Page. These products and services enable users to communicate about
interests and areas of expertise. The sites also offer online interactive
community services through 1,800 community forums. At the end of December 2002,
the number of simultaneous chat room participants reached 55,476 during peak
hours, and the number of registered users of the NetEase Web sites reached 95.7
million. The average number of daily pageviews was over 316 million in December
2002.
NetEase also offers online multi-player games, short messaging and e-mail
services, as well as auction and online mall technology services that provide
opportunities for e-commerce and traditional businesses to establish an online
e-commerce presence on the NetEase Web sites.
--------------------------------------------------------------------------------
* * *
This press release contains statements of a forward-looking nature. These
statements are made under the "safe harbor" provisions of the U.S. Private
Securities Litigation Reform Act of 1995. You can identify these forward-looking
statements by terminology such as "will," "expects," "anticipates," "future,"
"intends," "plans," "believes," "estimates" and similar statements. The accuracy
of these statements may be impacted by a number of business risks and
uncertainties that could cause actual results to differ materially from those
projected or anticipated, including risks related to: the risk that the
settlement of the class action litigation involving NetEase will not become
final for whatever reason, in which case NetEase may have to incur significant
additional expenses in defending against the litigation and possibly pay damages
in excess of the settlement amount; the risk that the online advertising market
in China will not continue to grow and will remain subject to intense
competition; the risk that NetEase will not be able to continue to successfully
monetize the user base of the NetEase Web sites and that its e-commerce and
other fee-based services revenues will not continue to grow; the risk that the
current popularity of SMS in China will not continue for whatever reason,
including SMS being superseded by other technologies for which NetEase is unable
to offer attractive products and services; the risk that NetEase may not be able
to continuously develop new and creative online services; the risk that the
online game market will not continue to grow or that NetEase will not be able to
enhance or maintain its position in that market; the risk that NetEase will not
be able to control its expenses in future periods; the risk that the trading
price of NetEase's American Depositary Shares may decrease for a variety of
reasons, some of which may be beyond the control of management; the possibility
that NetEase and its board of directors have not implemented effective or
complete steps to ensure that the circumstances which led to the restatement of
NetEase's financial statements for the year ended December 31, 2000 will not
recur; the risk that current or future appointees to management are not
effective in their respective positions; the difficulty in locating and
recruiting suitable candidates for middle and senior management positions;
NetEase's ability to develop and implement additional operational and financial
systems to manage NetEase's operations; competition in NetEase's existing and
potential markets; governmental uncertainties, general competition and price
pressures in the marketplace; uncertainty as to future profitability; the risk
that security, reliability and confidentiality concerns may impede broad use of
the Internet and e-commerce and other services; and other risks outlined in
NetEase's filings with the Securities and Exchange Commission, including its
registration statement on Form F-1, as amended. NetEase does not undertake any
obligation to update this forward-looking information, except as required under
applicable law.
7
NETEASE.COM, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
December 31, December 31, December 31,
2001 2002 2002
-------------- --------------- ---------------
RMB RMB USD (Note 1)
Assets
Current assets:
Cash 479,608,534 560,069,711 67,641,269
Restricted cash 90,308,448 1,208,305 145,931
Temporary cash investments 45,521,300 - -
Prepayments and other current assets 9,136,362 6,110,689 738,006
Due from related parties, net 2,290,204 22,448,509 2,711,173
---------------- ---------------- ---------------
Total current assets 626,864,848 589,837,214 71,236,379
Non-current rental deposit 1,087,487 1,065,912 128,733
Investment in convertible preference
shares 9,701,293 - -
Property, equipment and software, net 36,356,088 26,379,182 3,185,892
Deferred assets 783,352 - -
Deferred tax assets - 2,395,888 289,358
---------------- ---------------- ---------------
Total assets 674,793,068 619,678,196 74,840,362
================ ================ ===============
Liabilities & Shareholders' Equity
Current liabilities:
Short-term bank loans 84,000,000 - -
Accounts payable 13,116,442 3,814,614 460,702
Salary and welfare payable 9,936,211 16,023,380 1,935,191
Taxes payable 1,772,931 8,252,950 996,733
Deferred revenue - 165,115 19,941
Accrued liabilities 10,937,950 10,398,385 1,255,844
--------------- ----------------- ---------------
Total current liabilities 119,763,534 38,654,444 4,668,411
--------------- ----------------- ---------------
Commitments and contingencies
Shareholders' equity:
Ordinary shares, US$0.0001 par value:
1,000,000,000,000 shares authorized,
3,024,175,192 shares issued and
outstanding as of December 31, 2001, and
3,100,162,537 shares issued and
outstanding as of December 31, 2002 2,503,626 2,566,543 309,969
Additional paid-in capital 1,044,889,829 1,049,651,354 126,769,488
Less: Subscriptions receivable (35,100,568) (33,113,848) (3,999,257)
Deferred compensation (3,344,574) (474,739) (57,336)
Translation adjustments 217,327 228,910 27,646
Accumulated deficit (454,136,106) (437,834,468) (52,878,559)
--------------- ----------------- ----------------
Total shareholders' equity 555,029,534 581,023,752 70,171,951
--------------- ----------------- ----------------
Total liabilities and shareholders'
equity 674,793,068 619,678,196 74,840,362
=============== ================= ================
Note 1: The conversion of Renminbi (RMB) into United States dollars (USD) is
based on the noon buying rate of USD1.00=RMB8.2800 on December 31, 2002 in The
City of New York for cable transfers of Renminbi as certified for customs
purposes by the Federal Reserve Bank of New York.
8
NETEASE.COM, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Quarter Ended Year Ended
--------------------------------------------------------------------------------------------------
December 31, September 30, December 31, December 31, December 31, December 31, December 31,
2001 2002 2002 2002 2001 2002 2002
--------------------------------------------------------------------------------------------------
RMB RMB RMB USD (Note 1) RMB RMB USD (Note 1)
Revenues:
Advertising services 3,069,350 9,779,126 12,454,490 1,504,165 14,163,952 34,209,376 4,131,567
E-commerce and other
services 7,505,584 63,999,662 83,052,025 10,030,438 14,103,151 197,357,067 23,835,395
Software licensing and
related integration projects - 618,138 226,348 27,337 33,218 1,002,025 121,018
--------------------------------------------------------------------------------------------------
Total revenues 10,574,934 74,396,926 95,732,863 11,561,940 28,300,321 232,568,468 28,087,980
Sales and value-added taxes (624,998) (3,694,693) (4,809,943) (580,911) (2,274,784) (11,627,216) (1,404,253)
--------------------------------------------------------------------------------------------------
Net revenues 9,949,936 70,702,233 90,922,920 10,981,029 26,025,537 220,941,252 26,683,727
--------------------------------------------------------------------------------------------------
Cost of revenues:
Advertising, e-commerce
and other services (14,289,494) (19,940,627) (20,826,355) (2,515,260) (60,058,488) (69,769,449) (8,426,262)
Share compensation cost - (477,032) (477,029) (57,612) - (1,908,125) (230,450)
--------------------------------------------------------------------------------------------------
Total cost of revenues (14,289,494) (20,417,659) (21,303,384) (2,572,872) (60,058,488) (71,677,574) (8,656,712)
--------------------------------------------------------------------------------------------------
Gross profit (Loss on
revenues (4,339,558) 50,284,574 69,619,536 8,408,157 (34,032,951) 149,263,678 18,027,015
--------------------------------------------------------------------------------------------------
Operating expenses:
Selling, general and
administrative
expenses (29,505,098) (21,903,299) (26,717,117) (3,226,705) (181,560,624) (92,785,244) (11,205,948)
Asset impairment loss (2,766,543) - - - (2,766,543) (746,857) (90,200)
Research and development
expenses (3,065,057) (2,714,442) (3,643,946) (440,090) (11,169,454) (13,808,360) (1,667,676)
Share compensation cost (784,486) (358,700) (296,612) (35,823) (2,357,758) (1,898,733) (229,316)
Class action settlement - (36,005,385) - - - (36,005,385) (4,348,476)
--------------------------------------------------------------------------------------------------
Total operating expenses (36,121,184) (60,981,826) (30,657,675) (3,702,618) (197,854,379) (145,244,579)(17,541,616)
--------------------------------------------------------------------------------------------------
Operating profit (loss) (40,460,742) (10,697,252) 38,961,861 4,705,539 (231,887,330) 4,019,099 485,399
Other income (expenses):
Investments impairment loss - - - - (8,924,381) - -
Interest income 1,707,710 1,719,807 1,611,700 194,650 17,571,187 7,562,322 913,324
Interest expense (2,499,021) (191,924) - - (9,882,874) (1,401,041) (169,208)
Other, net (44,664) 145,506 111,430 13,458 (40,516) 3,725,370 449,924
--------------------------------------------------------------------------------------------------
Profit (loss) before tax (41,296,717) (9,023,863) 40,684,991 4,913,647 (233,163,914) 13,905,750 1,679,439
Income tax-deferred tax
credit - - 2,395,888 289,358 - 2,395,888 289,358
--------------------------------------------------------------------------------------------------
Net profit (loss) (41,296,717) (9,023,863) 43,080,879 5,203,005 (233,163,914) 16,301,638 1,968,797
==================================================================================================
Earnings (Net loss) per
share, basic (0.01) (0.01) 0.01 0.01 (0.08) 0.01 0.01
==================================================================================================
Earnings (Net loss)
per ADS, basic (1.37) (0.30) 1.39 0.17 (7.74) 0.53 0.06
==================================================================================================
Earnings (Net loss)
per share, diluted (0.01) (0.01) 0.01 0.01 (0.08) 0.01 0.01
==================================================================================================
Earnings (Net loss) per
ADS, diluted (1.37) (0.30) 1.35 0.16 (7.74) 0.52 0.06
==================================================================================================
Weighted average number of
ordinary shares outstanding,
basic 3,020,320,600 3,046,595,200 3,091,650,900 3,091,650,900 3,013,419,400 3,051,395,1003,051,395,100
==================================================================================================
Weighted average number of
ADS Outstanding, basic 30,203,206 30,465,952 30,916,509 30,916,509 30,134,194 30,513,951 30,513,951
==================================================================================================
Weighted average number of
ordinary shares outstanding,
diluted 3,020,320,600 3,046,595,200 3,185,313,400 3,185,313,400 3,013,419,4003,127,837,900 3,127,837,900
==================================================================================================
Weighted average number of
ADS Outstanding,
diluted 30,203,206 30,465,952 31,853,134 31,853,134 30,134,194 31,278,379 31,278,379
==================================================================================================
Note 1: The conversion of Renminbi (RMB) into United States dollars (USD) is
based on the noon buying rate of USD1.00=RMB8.2800 on December 31, 2002 in The
City of New York for cable transfers of Renminbi as certified for customs
purposes by the Federal Reserve Bank of New York.
9