EXHIBIT 99.1
Investor Contact:
Dow Jones & Company
Mark Donohue
200 Liberty Street
Director, Investor Relations
New York, NY 10281
(609) 520-5660
Media Contact:
Nicole Pyhel
Senior Manager, Corporate Communications
(609) 520-4057
DOW JONES REPORTS REVENUE AND PROFIT FOR THIRD QUARTER 2004
Provides 4thQuarter Outlook
NEW YORK (October 14, 2004)¾Dow Jones & Company (NYSE: DJ) today reported that it earned 15 cents per diluted share during the third quarter of 2004, compared with 35 cents per diluted share in the third quarter of 2003. Excluding the special items explained herein, the Company earned 15 cents per diluted share during the third quarter of 2004, up 7% over the 14 cents per diluted share earned in the third quarter of 2003.
Revenue rose 5.0% in the third quarter of 2004 to $394.9 million compared to third quarter of 2003. Operating income was up 21.5% over last year to $20.4 million and operating margins were 5.2% in 2004 up from 4.5% in 2003. Results were driven by improved revenue, profit and margins at Electronic Publishing and Ottaway Community Newspapers.
Special Items: In the third quarter of 2004, the Company recorded special items which net to zero cents per share as a special gain of two cents per share related to a tax benefit was offset by a loss of two cents per share for accretion of discount on a contract-guarantee obligation. In the third quarter of 2003, special items netted to a gain of 21 cents per share and included a gain of 24 cents per share related to a net tax benefit, partially offset by a charge of 3 cents per share for accretion of discount on a contract-guarantee obligation.
Commenting on third quarter results, Peter R. Kann, chairman and chief executive officer of Dow Jones, said: “Our results were negatively affected by very weak technology advertising, which led to a 6% decline in ad linage at The Wall Street Journal in the quarter, after four consecutive quarterly gains. Thus, B2B advertising remains volatile. Nonetheless, we’re pleased to have more than offset this decline as we increased total company revenue and operating income. Strong advertising yield, continued improvements in Electronic Publishing and Ottaway Community Newspapers, and stringent cost management across the company all contributed.”
Mr. Kann continued: “Our focus remains on controlling spending, improving quality, enhancing our products, and investing in growth opportunities to maximize our revenue and profitability in any advertising environment. The latest example of this is our recently announced launch of a Weekend Edition of the Journal scheduled for September 2005.”
Dow Jones also said that it expects earnings per share before special items in the fourth quarter of 2004, to be up slightly over the 43 cents per share earned in the fourth quarter of 2003. This assumes fourth quarter 2004 linage at the U.S. Wall Street Journal will be down slightly compared to the fourth quarter of 2003. Based on currently anticipated special items in the fourth quarter of 2004, the Company expects reported earnings per share to be in the low 40 cents per share range, compared with 54 cents per share in the fourth quarter of 2003. Please refer to the attached table for a reconciliation of the Company’s fourth quarter earnings before and after special items.
Segment Results
Print Publishing revenue declined $4.0 million, or 1.9%, in the third quarter of 2004 versus the same period a year ago. Advertising linage at the U.S. Wall Street Journal decreased 6.0% (down 10.2% in September) while linage at the international editions of the Journal decreased 20.0% (down 28.4% in September). Barron’s advertising pages decreased 5.1% in the quarter (down 2.8% in September with one less issue). The print publishing segment had an operating loss of $16.6 million in the third quarter, seasonally its weakest quarter, compared to a loss of $11.5 million in third quarter of 2003.
Electronic Publishing revenue in the third quarter of 2004 increased 23.1% from the same period a year ago to $97.6 million with operating income up 26.9% to $21.7 million, driven by the acquisitions of Alternative Investor Group in March 2004 and vwd, a German business wire, in April 2004, together with improved performance in all business segments. Operating margin of 22.2% was up over the previous year’s 21.5%. Terminal counts at Newswires were up 2.8% compared to last year. Paid subscribers to The Wall Street Journal Online grew to 701,000 as of September 30, 2004, up 2.2% from the prior year period.
Ottaway Community Newspapers’ revenue in the third quarter of 2004 increased 5.6% from the same period a year ago to $87.6 million with operating income up 7.9% to $23.5 million. Operating margin of 26.8% was up over last year’s 26.2%. Advertising linage increased 4.9% in the third quarter (linage was up 8.8% in September).
The Company ended the third quarter with $197 million in debt, compared with $215 million at the end of the second quarter of 2004 and $194 million at the end of the third quarter of 2003.
As previously announced, the Company will host an earnings conference call at 10 a.m. ET today. The call can be accessed via a live Web cast through the Investor Relations section of the Company’s Web site, www.dowjones.com, or through a listen-only, dial-in conference line, by dialing 877-407-3140. A replay of the conference call and the full text of the prepared remarks will be available on the Company’s Web site in the Investor Relations section shortly after the call concludes.
Dow Jones & Company (NYSE: DJ; dowjones.com) publishes The Wall Street Journal and its international and online editions, Barron's and the Far Eastern Economic Review, Dow Jones Newswires, Dow Jones Indexes and the Ottaway group of community newspapers. Dow Jones is co-owner with Reuters Group of Factiva, with Hearst of SmartMoney and with NBC Universal of CNBC television operations in Asia and Europe. Dow Jones also provides news content to CNBC and radio stations in the U.S.
Information Relating To Forward-Looking Statements:
This press release contains forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those anticipated, including the cyclical nature of the Company's business and the strong, negative impact of economic downturns on advertising revenues, particularly in the Company’s core advertising market-B2B advertising; the risk that inconsistent trends across major advertising categories, such as technology and finance, will continue; the risk that advertising levels will not return to the pre-boom, pre-bust levels that the Company considers normal levels; the Company's ability to limit and manage expense growth, especially in light of its prior cost cutting and its planned growth initiatives, such as the new Weekend Edition; the uncertainties relating to the Company’s guarantee to Cantor Fitzgerald Securities and Market Data Corporation; the intense competition the Company's existing products and services, and its planned new Weekend Edition, face; the risk that the Company's initiatives, such as the new Weekend Edition, to attract more consumer advertising, and other diversified advertising, to The Wall Street Journal will not succeed; the risk that the new Weekend Edition will compete against its own current consumer advertising sections, such as the Weekend Journal and Personal Journal, for consumer advertising revenues; the risk that readers do not respond favorably to the new Weekend Edition; with respect to Newswires, the negative impact of consolidations and layoffs in the financial services industry on sales; and such other risk factors as may be included from time to time in the Company's reports filed with the Securities and Exchange Commission and posted in the Investor Relations section of the Company’s web site (www.dowjones.com). This press release includes certain non-GAAP financial measures as defined under SEC rules. As required by SEC rules , we have attached to this press release a reconciliation of those measures to the most directly comparable GAAP measures. This reconciliation is also available on the Investor Relations page of our web site (www.dowjones.com).
Dow Jones & Company
Earnings Summary
5
(Unaudited)
(in thousands, except per share amounts) | Quarters Ended September 30 | Nine Months Ended September 30 |
| | 2004 | 2003 | 2004 | 2003 |
Reported results: | | | | |
Revenues | $394,892 | $375,946 | $1,234,303 | $1,127,762 |
| | | | | |
Operating income | 20,428 | 16,816 | 110,477 | 87,619 |
| | | | | |
Net income | 12,067 | 28,577 | 63,924 | 126,347 |
| | | | | |
Effective tax rate* | 37.4% | (25.3)% | 41.1% | 15.3% |
| | | | | |
Diluted EPS | $.15 | $.35 | $.78 | $1.54 |
| | | | | |
Excluding items described in Note 2: | | | | |
Operating income | $ 20,428 | $ 16,816 | $ 107,716 | $ 69,211 |
| | | | |
Net income | 12,237 | 11,382 | 64,395 | 43,320 |
| | | | | |
Effective tax rate* | 41.5% | 38.2% | 40.4% | 39.5% |
| | | | | |
Diluted EPS | $.15 | $.14 | $.78 | $.53 |
| | | | | |
EPS percentage change | 7.1% | 133.3% | 47.2% | 32.5% |
*The effective income tax rate is net of minority interests.
See notes to financial information on page 10.
Reconciliation of Fourth Quarter Earnings Outlook
| | Quarters Ended December 31, |
| | 2004 Guidance | 2003 Actual |
Reported earnings per share | Low 40 cents per share range | $.54 |
Adjusted to remove: | | |
Contract guarantee | (.02) | (.03) |
Gain on non-monetary exchange of interests in WSJ Europe and Handelsblatt | ____________ | .14 |
EPS before special items | Slightly over 43 cents per share | $.43 |
**Based on special items currently anticipated.
Condensed Consolidated Statements of Income
6
(Unaudited)
(in thousands, except per share amounts) | Quarters Ended September 30 | Nine Months Ended September 30 |
| | 2004 | 2003 | 2004 | 2003 |
Revenues: | | | | |
Advertising | $212,148 | $208,897 | $ 694,683 | $ 622,733 |
Information services | 84,906 | 71,278 | 242,251 | 214,194 |
Circulation and other | 97,838 | 95,771 | 297,369 | 290,835 |
Total revenues | 394,892 | 375,946 | 1,234,303 | 1,127,762 |
| | | | | |
Expenses: | | | | |
News, production and technology | 134,056 | 122,487 | 386,665 | 357,862 |
Selling, administrative and general | 140,012 | 137,143 | 434,026 | 400,938 |
Newsprint | 28,382 | 26,438 | 84,960 | 76,971 |
Print delivery costs | 46,416 | 46,904 | 141,285 | 141,529 |
Depreciation and amortization | 25,598 | 26,158 | 79,651 | 81,251 |
Restructuring charges and September 11 related items, net | _______ | _______ | (2,761) | (18,408) |
Operating expenses | 374,464 | 359,130 | 1,123,826 | 1,040,143 |
| | | | | |
Operating income | 20,428 | 16,816 | 110,477 | 87,619 |
| | | | | |
Other income (deductions): | | | | |
Investment income | 76 | 7,258 | 332 | 7,511 |
Interest expense | (964) | (664) | (2,412) | (1,862) |
Equity in (losses) earnings of associated companies | (13) | (16) | 1,386 | 306 |
Gain on disposition of investment | | | 3,260 | |
Gain on resolution of Telerate sale loss contingencies | | | | 59,821 |
Contract guarantee | (1,651) | (2,306) | (5,455) | (7,375) |
Other, net | 759 | 1,258 | (506) | 1,909 |
| | | | | |
Income before income taxes and minority interests | 18,635 | 22,346 | 107,082 | 147,929 |
Income taxes | 7,209 | (5,779) | 44,694 | 22,841 |
| | | | | |
Income before minority interests | 11,426 | 28,125 | 62,388 | 125,088 |
Minority interests | 641 | 452 | 1,536 | 1,259 |
| | | | | |
Net income | $ 12,067 | $ 28,577 | $ 63,924 | $ 126,347 |
| | | | | |
Net income per share: | | | | |
- Basic | $.15 | $.35 | $.78 | $1.55 |
- Diluted | .15 | .35 | .78 | 1.54 |
Weighted-average shares outstanding: | | | | |
- Basic | 81,918 | 81,507 | 81,825 | 81,568 |
- Diluted | 82,295 | 81,865 | 82,239 | 81,864 |
See notes to financial information on page 10.
Dow Jones & Company
Segment Information
7
(Unaudited)
(dollars in thousands) | Quarters Ended September 30 | Nine Months Ended September 30 |
| | 2004 | 2003 | 2004 | 2003 |
Revenues: | | | | |
Print publishing | $209,604 | $213,586 | $ 700,940 | $ 662,295 |
Electronic publishing | 97,644 | 79,352 | 280,227 | 238,551 |
Community newspapers: | | | | |
Comparable operations | 87,644 | 83,008 | 237,175 | 223,883 |
Newly-acquired operations | ________ | ________ | 15,961 | 3,033 |
| | | | | |
Consolidated revenues | $394,892 | $375,946 | $1,234,303 | $1,127,762 |
| | | | | |
Percentage change in revenues excluding newly-acquired operations | 2.1% | 3.7% | 6.2% | (2.7)% |
| | | | | |
Operating (loss) income: | | | | |
Print publishing | $(16,589) | $(11,491) | $ 5,324 | $ (10,598) |
Electronic publishing | 21,692 | 17,098 | 63,152 | 50,012 |
Community newspapers: | | | | |
Comparable operations | 23,491 | 21,766 | 61,826 | 54,990 |
Newly-acquired operations | | | 3,798 | 857 |
Corporate | (8,166) | (10,557) | (26,384) | (26,050) |
| | | | | |
Segment operating income | 20,428 | 16,816 | 107,716 | 69,211 |
Restructuring charges and September 11 related items, net | _______ | _______ | 2,761 | 18,408 |
| | | | | |
Consolidated operating income | $ 20,428 | $ 16,816 | $ 110,477 | $ 87,619 |
| | | | | |
Operating margin: | | | | |
Print publishing | (7.9)% | (5.4)% | 0.8% | (1.6)% |
Electronic publishing | 22.2 | 21.5 | 22.5 | 21.0 |
Community newspapers: | | | | |
Comparable operations | 26.8 | 26.2 | 26.1 | 24.6 |
Newly-acquired operations |
|
| 23.8 | 28.3 |
| | | | | |
Segment operating margin | 5.2 | 4.5 | 8.7 | 6.1 |
| | | | | |
Depreciation and amortization (D&A): | | | | |
Print publishing | $ 15,396 | $ 16,312 | $ 49,938 | $ 51,700 |
Electronic publishing | 7,294 | 6,543 | 20,904 | 20,121 |
Community newspapers: | | | | |
Comparable operations | 2,867 | 3,132 | 7,899 | 8,924 |
Newly-acquired operations |
| | 786 | 75 |
Corporate | 41 | 171 | 124 | 431 |
| | | | | |
Consolidated D&A | $ 25,598 | $ 26,158 | $ 79,651 | $ 81,251 |
See notes to financial information on page 10.
Dow Jones & Company
Supplemental Segment Revenue Information
8
(Unaudited)
(in thousands) | Quarters Ended September 30 | Nine Months Ended September 30 |
| | 2004 | 2003 | 2004 | 2003 |
Print Publishing: | | | | |
U.S. Publications: | | | | |
Advertising | $128,213 | $129,790 | $ 444,930 | $ 406,745 |
Circulation and other | 62,750 | 63,562 | 194,807 | 197,274 |
| | | | | |
International Publications: | | | | |
Advertising | 10,159 | 12,138 | 36,075 | 33,272 |
Circulation and other | 8,482 | 8,096 | 25,128 | 25,004 |
| | | | | |
Total | 209,604 | 213,586 | 700,940 | 662,295 |
| | | | | |
Electronic Publishing: | | | | |
Dow Jones Newswires: | | | | |
Domestic | 50,021 | 42,739 | 143,369 | 127,971 |
International | 15,515 | 10,920 | 40,928 | 32,171 |
Total Newswires(*) | 65,536 | 53,659 | 184,297 | 160,142 |
Consumer Electronic Publishing(**) | 19,258 | 16,254 | 57,320 | 49,207 |
Dow Jones Indexes/Ventures | 12,850 | 9,439 | 38,610 | 29,202 |
| | | | | |
Total | 97,644 | 79,352 | 280,227 | 238,551 |
| | | | | |
Community Newspapers: | | | | |
Advertising | | | | |
Comparable operations | 65,583 | 60,748 | 175,251 | 162,323 |
Newly-acquired operations | _______ | _______ | 13,517 | 2,616 |
Total advertising | 65,583 | 60,748 | 188,768 | 164,939 |
| | | | | |
Circulation and other | | | | |
Comparable operations | 22,061 | 22,260 | 61,924 | 61,560 |
Newly-acquired operations | _______ | _______ | 2,444 | 417 |
Total circulation and other | 22,061 | 22,260 | 64,368 | 61,977 |
| | | | | |
Total | 87,644 | 83,008 | 253,136 | 226,916 |
| | | | | |
Total segment revenues | $394,892 | $375,946 | $1,234,303 | $1,127,762 |
(*) The increase in Dow Jones Newswires revenue in the third quarter and nine months of 2004 was largely due to acquisitions.
(**) Includes WSJ.com, related vertical sites, licensing/business development and radio/audio.
See notes to financial information on page 10.
Dow Jones & Company
Statistical Information
9
(Unaudited)
| | Quarters Ended September 30 | Nine Months Ended September 30 |
Advertising Volume Year-Over-Year Percentage Change: | 2004 | 2003 | 2004 | 2003 |
The Wall Street Journal | | | | |
General | 1.7% | 12.5% | 3.2% | (1.8)% |
Technology | (35.7) | 12.0 | (23.0) | (7.8) |
Financial | (10.0) | (12.8) | 13.9 | (23.0) |
Classified | 11.0 | 10.5 | 9.8 | 12.3 |
Total | (6.0) | 7.1 | 1.3 | (4.7) |
| | | | | |
The Asian Wall Street Journal | (20.6) | 29.0 | (3.6) | 8.7 |
The Wall Street Journal Europe | (19.4) | 23.6 | 0.5 | 16.2 |
Barron’s | (5.1) | (8.9) | 12.2 | (16.7) |
| | | | | |
Ottaway Newspapers (*) | | | | |
Daily | 2.8 | (2.5) | 3.0 | (2.0) |
Non-daily | 14.5 | 2.4 | 13.7 | 1.8 |
Total | 4.9 | (1.7) | 4.9 | (1.4) |
| | | | | |
Wall Street Journal advertising as a percentage of total Journal linage: | | | | |
General | 44.0% | 40.7% | 41.8% | 41.0% |
Technology | 14.4 | 21.1 | 15.1 | 19.8 |
Financial | 15.1 | 15.7 | 18.5 | 16.5 |
Classified | 26.5 | 22.5 | 24.6 | 22.7 |
| | September 30 | September 30 |
Other statistics: | 2004 | 2003 |
Dow Jones Newswires terminals | 297,000 | 289,000 |
WSJ.com subscribers | 701,000 | 686,000 |
WSJ.com unique visitors/business day | 142,000 | 123,000 |
Average monthly unique visitors to the Journal Network (**) | 4,607,000 | n/a |
Average monthly page views to the Journal Network (**) | 69,696,000 | n/a |
(*) Percentages exclude divested/newly-acquired operations.
(**) Beginning in the second quarter of 2004, page views and unique visitors statistics for the Journal Network have been calculated using a new measurement technology. Prior year figures are not available on a comparable basis. The Journal Network consists of WSJ.com and related vertical sites.
Dow Jones & Company
Notes to Financial Information
10
1. The Company’s calculation of net income, operating income and earnings per share excluding special items may not be comparable to similarly titled measures reported by other companies, since companies and investors may differ as to what type of events warrant adjustment. Net income, operating income and earnings per share excluding special items are not measures of performance under generally accepted accounting principles and should not be construed as substitutes for consolidated net income, operating income and earnings per share as a measure of performance. However, management uses these measures in comparing the Company’s historical performance and believes that they provide meaningful and comparable information to investors to assist in their analysis of the Company’s performance relative to prior periods and its competitors.
2. The following table reconciles reported results to income adjusted for special items for the third quarter and the nine months ended September 30, 2004 and 2003.
| | Quarters Ended September 30 |
| | 2004 | 2003 |
(in millions, except per share amounts) | Operating | Net | EPS | Operating | Net | EPS |
| | | | | | | |
Reported income | $20.4 | $12.1 | $.15 | $16.8 | $28.6 | $.35 |
| | | | | | | |
Adjusted to remove: | | | | | | |
Included in non-operating income: | | | | | | |
Contract guarantee (a) | | (1.7) | (.02) | | (2.3) | (.03) |
Certain income tax matters (b) | ____ | 1.5 | .02 | ____ | 19.5 | .24 |
Adjusted | $20.4 | $12.2* | $.15 | $16.8 | $11.4 | $.14 |
| | Nine Months Ended September 30 |
| | 2004 | 2003 |
(in millions, except per share amounts) | Operating | Net | EPS | Operating | Net | EPS |
| | | | | | | |
Reported | $110.5 | $63.9 | $.78 | $87.6 | $126.3 | $1.54 |
| | | | | | | |
Adjusted to remove: | | | | | | |
Included in operating income: | | | | | | |
Reversal of lease obligation | | | | | | |
reserve – WFC (c) | 2.8 | 1.7 | .02 | | | |
Gain from business interruption | | | | | | |
insurance claim (c) | | | | 18.4 | 11.1 | .14 |
Included in non-operating income: | | | | | | |
Contract guarantee (a) | | (5.5) | (.06) | | (7.4) | (.09) |
Gain on resolution of Telerate sale | | | | | | |
loss contingencies (d) | | | | | 59.8 | .73 |
Gain on disposition of investment (e) | | 1.8 | .02 | | | |
Certain income tax matters (b) | _____ | 1.5 | .02 | ____ | 19.5 | .24 |
| | | | | | |
Adjusted | $107.7 | $64.4 | $.78 | $69.2 | $ 43.3 | $ .53* |
* The sum of the individual amounts does not equal the total due to rounding.
Dow Jones & Company
Notes to Financial Information
11
(a) Contract guarantee:
Under the terms of the Company's 1998 sale of Telerate to Bridge Information Systems (Bridge), Dow Jones retained its guarantee of payments under certain circumstances of certain minimum payments for data acquired by Telerate from Cantor Fitzgerald Securities (Cantor) and Market Data Corporation (MDC). The annual minimum payments average approximately $50 million per year through October 2006 under certain conditions. Bridge agreed to indemnify Dow Jones for any liability Dow Jones incurred under the contract guarantee with respect to periods subsequent to Bridge's purchase of Telerate. In 2000, based in part on uncertainty with Bridge's solvency as well as other factors, the Company established a reserve of $255 million representing the net present value of the total minimum payments of about $300 million from 2001 through October 2006, using a discount rate of 6%. Bridge filed for bankruptcy in February 2001 but made payments for th is data for the post-petition periods through October 2001, when Telerate ceased operations, went out of business, sold certain assets and rejected its contracts with Cantor and MDC. The Company is now in litigation with Cantor and MDC with respect to their claims for amounts due under the contract guarantee. The Company has various substantial defenses to these claims and the litigation is proceeding.
Earnings in 2004 and 2003 included charges related to the accretion of the discount on the reserve balance. These charges totaled $1.7 million and $2.3 million in the third quarters of 2004 and 2003, respectively. For the first nine months of 2004 and 2003, charges related to the accretion of discount totaled $5.5 million and $7.4 million, respectively.
(b) Certain income tax matters:
2004 Income tax matters
Income tax expense in the third quarter 2004 included a special tax benefit of $1.5 million, or $.02 per diluted share, as a result of a favorable resolution of a federal tax matter during the quarter. The Company adjusted its tax accounts for loss contingencies which were resolved favorably.
2003 Income tax matters
In the third quarter of 2003, the Internal Revenue Service (“IRS”) completed its audit of the Company’s tax returns for the 1995 through 1998 tax periods, which had been amended for additional tax refunds. In October 2003, the Company received notification that the Congressional Joint Committee on Taxation had approved these claims for tax refunds of approximately $24 million. The Company received these refunds plus interest of approximately $6.7 million in the fourth quarter of 2003. Pursuant to the settlement of these claims, in the third quarter of 2003, the Company released $25 million of tax provisions no longer needed for loss contingencies and recorded interest income of $6.7 million ($4.0 million, net of taxes). The Company also recorded a provision of $9.5 million in the third quarter for loss contingencies relating to recent developments in certain other tax matters. The net effect of these items was an increase in net income of $19.5 million, or $.24 per diluted share.
(c) Restructuring charges and September 11 related items, net:
Reversal of lease obligation reserve – World Financial Center (WFC):
In the fourth quarter 2001, the Company recorded a charge of $32.2 million as a result of its decision to permanently re-deploy certain personnel and abandon four of seven floors that were leased at its World Financial Center headquarters. This charge primarily reflected the Company’s rent obligation through 2005 on this vacated space.
In the first quarter 2004, the Company decided to extend the term of its lease for one of the floors that was previously abandoned and re-occupy this floor with personnel from another New York location, whose lease term was expiring. As a result, the Company reversed $2.8 million ($1.7 million, net of taxes, or $.02 per diluted share) of the remaining lease obligation reserve of the previously abandoned floor at WFC.
Dow Jones & Company
Notes to Financial Information
12
Gain from business interruption insurance claim
In the second quarter of 2003, the Company recorded a gain of $18.4 million ($11.1 million after taxes, or $.14 per diluted share) reflecting the settlement of its business interruption insurance claim for loss of operating income suffered as a result of the terrorist attacks on the World Trade Center on September 11, 2001.
(d) Gain on resolution of Telerate sale loss contingencies:
In the first quarter of 2003, the Company recorded a gain of $59.8 million ($.73 per diluted share) on the resolution of certain loss contingencies resulting from the sale of its former Telerate subsidiary to Bridge Information Systems (Bridge). The reserve for loss contingencies was established as part of the loss on sale of Telerate in 1998 and related to various claims that arose out of the Stock Purchase Agreement, including a purchase price adjustment related to working capital, an indemnification undertaking and other actual and potential claims and counter-claims between the Company and Bridge. In February 2001, Bridge declared bankruptcy. In March 2003, these matters were resolved by the bankruptcy court, and the Company’s contingent liabilities were thereby extinguished.
(e) Gain on disposition of investment:
On April 2, 2004, simultaneous with the Company’s acquisition of the remaining interest in the news operations of Vereinigte Wirtschaftsdienste GmbH (“VWD”), VWD sold its non-news assets to a third party, resulting in cash proceeds to Dow Jones of $6.7 million. Dow Jones was a minority shareholder in VWD.
As a result of this sale, the Company recorded an after-tax gain of $1.8 million, or $.02 per diluted share, in the second quarter of 2004.
3. The Company made the following acquisitions during the first nine months of 2004 and 2003.
Acquisition of Remaining Interest in VWD news operations in 2004
On April 2, 2004, the Company acquired the remaining interest in the news operations of Vereinigte Wirtschaftsdienste GmbH (“VWD”), a German newswires business, for $12.1 million. The acquired business consists of financial newswires and business newsletters, which have been combined into the Company’s Dow Jones Newswires business, under the brand name Dow Jones-VWD News. Dow Jones was a minority shareholder in VWD.
Acquisition of Alternative Investor in 2004
On March 19, 2004, the Company completed its acquisition of Alternative Investor from Wicks Business Information for $85 million plus net working capital. The $85 million purchase price could be increased by $5 million, payable in 2008, based on the performance of the acquired business. The acquisition was funded by the issuance of debt under the Company’s commercial paper program.
Alternative Investor is a provider of newsletters, databases and industry conferences for the venture-capital and private-equity markets, and has been combined into the Company’s Dow Jones Newswires business.
Acquisition of The Record of Stockton, California in 2003
On May 5, 2003, the Company's Ottaway Newspaper subsidiary acquired The Record of Stockton, California from Omaha World-Herald Company for $144 million in cash, plus net working capital. The Record has daily paid circulation of 59,271 and Sunday circulation of 72,698.
Dow Jones & Company
Notes to Financial Information
13
4. Restructuring charges and September 11 related items, net are not included in segment expenses, as management evaluates segment results exclusive of these items. For information purposes, the reversal of the lease obligation reserve in 2004 and the gain from insurance claim in 2003 allocable to each segment for the nine months ended September 30, 2004 and 2003 were as follows:
(in thousands) | Nine Months Ended September 30 |
| | 2004 | 2003 |
| | | |
Print Publishing | $2,631 | $17,422 |
Electronic Publishing | 125 | 951 |
Community newspapers | | |
Corporate | 5 | 35 |
| | | |
Total income | $2,761 | $18,408 |
5. The Company's business and financial news and information operations are reported in two segments: print publishing and electronic publishing. The results of the Company's Ottaway Newspapers subsidiary, which publishes 15 daily newspapers and more than 30 weeklies and shoppers in nine states in the U.S., are reported in the community newspaper segment. Print publishing includes the global operations of The Wall Street Journal and its international editions, as well as Barron's and U.S. television operations (results of the Company's international television ventures are included in equity in (losses) earnings of associated companies). Electronic publishing includes the operations of Dow Jones Newswires, Consumer Electronic Publishing and Dow Jones Indexes/Ventures.
6. Summarized financial information for 50% held equity-basis investments in associated companies were as follows (amounts are at 100% levels):
(in thousands) | Quarters Ended September 30 | Nine Months Ended September 30 |
| | 2004 | 2003 | 2004 | 2003 |
Factiva | | | | |
Revenues | $65,570 | $59,162 | $195,741 | $183,119 |
Operating income | 3,418 | 3,045 | 13,987 | 7,937 |
Depreciation and amortization | 2,642 | 2,942 | 9,084 | 9,357 |
| | | | | |
SmartMoney | | | | |
Revenues | $12,276 | $12,056 | $ 37,350 | $ 36,400 |
Operating loss | (201) | (1,227) | (787) | (2,255) |
Depreciation and amortization | 114 | 208 | 536 | 1,103 |
| | | | | |
CNBC International(*) | | | | |
Revenues | $ 9,087 | $ 9,432 | $ 29,573 | $ 27,584 |
Operating loss | (8,290) | (4,698) | (23,285) | (17,624) |
Depreciation and amortization | 744 | 931 | 2,485 | 2,897 |
(*) Includes the results of CNBC Europe and CNBC Asia.
