PAGE 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------- ---------------
Commission file number 1-7564
DOW JONES & COMPANY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-5034940
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 LIBERTY STREET, NEW YORK, NEW YORK 10281
(Address of principal executive offices) (Zip Code)
(212) 416-2000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
The number of shares outstanding of each of the issuer's classes of common
stock on March 31, 2000: 67,486,861 shares of Common Stock and 21,169,927
shares of Class B Common Stock.
PAGE 2
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Dow Jones & Company, Inc.
==========================================================================
(in thousands, except Quarters Ended March 31
per share amounts) 2000 1999
- --------------------------------------------------------------------------
Revenues:
Advertising $368,619 $255,774
Information services 67,074 92,526
Circulation and other 115,059 113,782
- --------------------------------------------------------------------------
Total revenues 550,752 462,082
- --------------------------------------------------------------------------
Expenses:
News, operations and development 131,395 138,335
Selling, administrative and general 166,420 145,413
Newsprint 41,711 37,395
Print delivery costs 48,842 43,109
Depreciation and amortization 26,875 25,016
- --------------------------------------------------------------------------
Operating expenses 415,243 389,268
- --------------------------------------------------------------------------
Operating income 135,509 72,814
Other income (deductions):
Investment income 2,803 2,875
Interest expense (347) (1,581)
Equity in losses of associated companies (9,030) (3,691)
Gain on disposition of
businesses and investments 13,769 10,618
Other, net 648 450
- --------------------------------------------------------------------------
Income before income taxes and
minority interests 143,352 81,485
Income taxes 55,999 29,963
- --------------------------------------------------------------------------
Income before minority interests $ 87,353 $ 51,522
Minority interests 1,317
- --------------------------------------------------------------------------
Net income $ 88,670 $ 51,522
==========================================================================
Per share:
Net income per share:
- Basic $.99 $.56
- Diluted .98 .56
Weighted-average shares outstanding:
- Basic 89,206 91,394
- Diluted 90,198 92,164
Cash dividends declared $.25 $.24
- --------------------------------------------------------------------------
Comprehensive income $122,350 $ 64,845
==========================================================================
<FN>
See notes to condensed consolidated financial statements.
PAGE 3
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
Dow Jones & Company, Inc.
==========================================================================
Three Months Ended March 31
(in thousands) 2000 1999
- --------------------------------------------------------------------------
Operating Activities:
Net income $ 88,670 $ 51,522
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 26,875 25,016
Gain on disposition of businesses
and investments (13,769) (10,618)
Changes in assets and liabilities 41,071 (32,685)
Other, net 6,380 6,618
- --------------------------------------------------------------------------
Net cash provided by operating activities 149,227 39,853
- --------------------------------------------------------------------------
Investing Activities:
Additions to plant and property (48,964) (54,556)
Businesses and investments acquired,
net of cash received (10,232) (9,836)
Disposition of businesses and investments 20,260 13,250
Other, net 1,367 239
- --------------------------------------------------------------------------
Net cash used in investing activities (37,569) (50,903)
- --------------------------------------------------------------------------
Financing Activities:
Cash dividends (22,468) (22,077)
Repurchase of treasury stock, net of
put premiums (89,497) (71,529)
Proceeds from sales under stock
compensation plans 11,089 5,028
- --------------------------------------------------------------------------
Net cash used in financing activities (100,876) (88,578)
- --------------------------------------------------------------------------
Effect of exchange rate changes on cash 675 (447)
- --------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 11,457 (100,075)
Cash and cash equivalents at beginning of year 86,388 142,877
- --------------------------------------------------------------------------
Cash and cash equivalents at March 31 $ 97,845 $ 42,802
==========================================================================
<FN>
See notes to condensed consolidated financial statements.
PAGE 4
CONDENSED CONSOLIDATED
BALANCE SHEETS
Dow Jones & Company, Inc.
==========================================================================
March 31 December 31
(in thousands) 2000 1999
- --------------------------------------------------------------------------
Assets:
Cash and cash equivalents $ 97,845 $ 86,388
Accounts receivable-trade, net 272,011 314,289
Newsprint inventory 6,763 9,407
Deferred income taxes 10,010 9,885
Other current assets 44,175 36,020
- --------------------------------------------------------------------------
Total current assets 430,804 455,989
- --------------------------------------------------------------------------
Investments in associated companies,
at equity 57,911 50,959
Other investments 209,923 174,727
Plant and property, at cost 1,487,398 1,443,351
Less, accumulated depreciation 788,175 766,939
- --------------------------------------------------------------------------
699,223 676,412
Goodwill, less accumulated amortization 76,457 83,099
Deferred income taxes 73,718 73,552
Other assets 16,202 15,821
- --------------------------------------------------------------------------
Total assets $1,564,238 $1,530,559
==========================================================================
Liabilities:
Accounts payable and accrued liabilities $ 251,516 $ 309,964
Income taxes 86,210 40,315
Unearned revenue 238,407 228,251
- --------------------------------------------------------------------------
Total current liabilities 576,133 578,530
Long-term debt 149,960 149,945
Other noncurrent liabilities 257,151 248,594
- --------------------------------------------------------------------------
Total liabilities 983,244 977,069
- --------------------------------------------------------------------------
Stockholders' Equity:
Common stock 102,181 102,181
Additional paid-in capital 138,322 137,487
Retained earnings 875,719 809,517
Accumulated other comprehensive income (loss) 31,482 (2,198)
- --------------------------------------------------------------------------
1,147,704 1,046,987
Less, treasury stock, at cost 566,710 493,497
- --------------------------------------------------------------------------
Total stockholders' equity 580,994 553,490
- --------------------------------------------------------------------------
Total liabilities and stockholders' equity $1,564,238 $1,530,559
==========================================================================
<FN>
See notes to condensed consolidated financial statements.
PAGE 5
NOTES TO FINANCIAL STATEMENTS
Dow Jones & Company, Inc.
1. The accompanying unaudited condensed consolidated financial statements
reflect all adjustments considered necessary by management to present fairly
the company's consolidated financial position as of March 31, 2000, and
December 31, 1999, and the consolidated results of operations for the three-
month periods ended March 31, 2000 and 1999 and the consolidated cash flows
for the three-month period then ended. All adjustments reflected in the
accompanying unaudited condensed consolidated financial statements are of a
normal recurring nature. The results of operations for the respective interim
periods are not necessarily indicative of the results to be expected for the
full year.
2. The first quarter of 2000 included a net gain of $9.5 million, or $.10 per
diluted share, from the sale of its subsidiary, Dow Jones Financial Publishing
Corp., which publishes Investment Advisor, Asset Management, Property and
Realty Stock Review.
3. On July 1, 1999, the company formed a 50-50 joint venture, Dow Jones
Reuters Business Interactive LLC (Factiva), with Reuters Group Plc, into which
Dow Jones contributed a significant portion of its interactive business unit.
The company's share of the joint venture's results is included in Equity in
Losses of Associated Companies.
4. The first quarter of 1999 included a net gain of $10.6 million, or $.12
per diluted share, from the sale of a portion of the company's minority
interest in OptiMark Technologies, Inc.
5. On January 1, 2000, the company exchanged a 49% interest in The Wall
Street Journal Europe for a 22% interest in Handelsblatt, Germany's leading
business newspaper. In addition, Dow Jones contributed its indirect holdings
in the Czech business publisher Economia and the German financial news agency
VWD. Dow Jones' interest in Economia declined to 12% and in VWD to 17%.
Minority interests largely represent von Holtzbrinck group's 49% share of
losses in the contributed businesses.
6. In the first quarter of 2000, the company repurchased 1.5 million shares
of its common stock at an aggregate price of $93.3 million. As of March 31,
2000, 1.7 million shares under puts were outstanding at strike prices (net of
put premiums received) ranging from $51.07 to $60.66 per share, with exercise
dates through February 23, 2001. As of March 31, 2000, approximately $184.1
million remained under board authorization, after reserving for the exercise
of outstanding puts.
7. Certain prior year amounts have been reclassified to conform to current
year presentation.
PAGE 6
8. Comprehensive income was computed as follows:
=============================================================================
Quarters Ended March 31
(in thousands) 2000 1999
- -----------------------------------------------------------------------------
Net income $ 88,670 $51,522
Foreign currency translation
adjustments (1,454) (456)
Unrealized gain on investments 35,134 13,779
- -----------------------------------------------------------------------------
Comprehensive income $122,350 $64,845
=============================================================================
9. Diluted earnings per share have been computed as follows:
=============================================================================
(in thousands, except Quarters Ended March 31
per share amounts) 2000 1999
- -----------------------------------------------------------------------------
Net income $88,670 $51,522
Weighted-average shares
outstanding - basic 89,206 91,394
Stock options 569 660
Other, principally
contingent stock rights 423 110
- -----------------------------------------------------------------------------
Weighted-average shares
outstanding - diluted 90,198 92,164
Diluted earnings per share $.98 $.56
=============================================================================
10. Various libel actions and other legal proceedings that have arisen in the
ordinary course of business are pending against the company and its
subsidiaries. In the opinion of management, the ultimate outcome to the
company and its subsidiaries as a result of legal proceedings is adequately
covered by insurance or, if not covered, would not have a material effect on
the company's financial statements taken as a whole.
PAGE 7
NOTES TO FINANCIAL STATEMENTS (cont.)
Dow Jones & Company, Inc.
11. The table below compares revenues, income before income taxes and minority
interests and EBITDA by business segment for the quarters ended March 31, 2000
and 1999. EBITDA is computed by the company as operating income excluding
depreciation, amortization and restructuring charges. EBITDA is a measure
used by the company's management in determining a business unit's performance.
EBITDA may be calculated differently by other companies and investors should
not view the company's calculation of EBITDA as an alternative to GAAP
measurements such as operating income, net income and cash flows provided by
or used in operating, investing and financing activities.
SEGMENT INFORMATION
=============================================================================
Quarters Ended March 31
(in thousands) 2000 1999
- -----------------------------------------------------------------------------
Revenues:
Print publishing $391,017 $290,608
Electronic publishing 79,083 97,537
Community newspapers 80,652 73,937
-------- --------
Consolidated revenues $550,752 $462,082
- -----------------------------------------------------------------------------
Income before income taxes and
minority interests:
Print publishing $118,722 $ 52,469
Electronic publishing 9,864 13,487
Community newspapers 17,846 13,993
Corporate (10,923) (7,135)
-------- --------
Consolidated operating income 135,509 72,814
Equity in losses of associated companies (9,030) (3,691)
Gain on disposition
of businesses and investments 13,769 10,618
Other income, net 3,104 1,744
-------- --------
Income before income taxes and
minority interests $143,352 $ 81,485
- -----------------------------------------------------------------------------
EBITDA:
Print publishing $135,411 $ 66,813
Electronic publishing 15,604 19,792
Community newspapers 22,176 18,360
Corporate (10,807) (7,135)
-------- --------
Consolidated EBITDA $162,384 $ 97,830
EBITDA Margin:
Print publishing 34.6% 23.0%
Electronic publishing 19.7% 20.3%
Community newspapers 27.5% 24.8%
All segments 29.5% 21.2%
=============================================================================
PAGE 8
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
FOR THE QUARTERS ENDED MARCH 31, 2000 AND 1999
Net income in the first three months of 2000 was $88.7 million, or $.98 per
diluted share, compared with $51.5 million, or $.56 per diluted share, a year
earlier. Earnings in 2000 included an after-tax gain of $9.5 million, or $.10
per diluted share, on the sale of Dow Jones Financial Publishing Corp., a
wholly-owned subsidiary. In the first quarter of 1999, the company sold a
portion of its minority interest in OptiMark Technologies, Inc. and realized a
net gain of $10.6 million, or $.12 per diluted share. Excluding the gains in
both years, earnings per diluted share in 2000 doubled to $.88 from $.44.
The increase in earnings largely was due to improved print publishing
operating income ($.41 per diluted share), a lower effective tax rate ($.04),
enhanced earnings at community newspapers ($.02), and the positive impact of
share repurchases ($.02). These were partially offset by reduced earnings at
electronic publishing ($.03) and SmartMoney ($.02), as the company continued
to invest in the growth of these businesses.
Operating income of $135.5 million was up 86% from $72.8 million earned in
1999's first quarter. EBITDA margin (defined as operating income excluding
depreciation, amortization and restructuring charges) was 29.5% in the first
quarter of 2000 compared to 21.2% in the like 1999 quarter.
Revenues in the first three months rose $88.7 million, or 19.2%, to $550.8
million, mostly due to a 44% rise in advertising revenue. Advertising linage
jumped 42.7% at The Wall Street Journal. First quarter 2000 expenses grew $26
million, or 6.7%, from a year ago. The rise in expenses primarily was volume-
related, particularly newsprint usage, print delivery costs and sales
incentives. Promotional spending on branding campaigns across all businesses
and costs associated with international expansion also contributed to the
higher expense level. Newsprint expense in the first quarter rose 11.5%, as
newsprint usage jumped 22%, propelled by greater demand for advertising at The
Wall Street Journal, partially offset by a drop of 8.9% in the average price
per ton. The company employed approximately 8,200 employees at March 31,
2000, down 0.8% from a year ago.
On July 1, 1999, the company formed a 50-50 joint venture, Dow Jones Reuters
Business Interactive LLC (Factiva), into which the company contributed a
significant portion of its Dow Jones Interactive business. The company's
share of Factiva's results is reported in Equity in Losses of Associated
Companies. Prior to July 1, 1999, results of the interactive business
contributed to Factiva were included in the company's information services
revenues, expenses and operating income.
If the company's one-half share of Factiva results were included, consolidated
revenues of $579 million in 2000's first quarter would have increased 25% from
1999's like period, expenses of $444.8 million would have been 14.3% higher,
and operating income of $134.1 million would have risen 84%. The EBITDA
margin would have been 28.0% in the first quarter of 2000, compared with 21.2%
a year earlier.
PAGE 9
SEGMENT DATA
The company's business and financial news are reported in two segments: print
publishing and electronic publishing. The results of the company's Ottaway
Newspapers subsidiary, which publishes 19 daily newspapers and 15 weekly
newspapers in 11 states in the U.S., are reported in the community newspapers
segment.
Print publishing includes the operations of The Wall Street Journal and its
international editions, Barron's and other periodicals, as well as U.S.
television operations (results of the company's international television
ventures are included in Equity in Losses of Associated Companies). Print
publishing accounted for approximately 70% of first quarter's revenues.
Approximately 8% of print publishing revenues are earned by international
publications. Revenues, particularly advertising, for the print publications
are historically seasonal with the fourth quarter typically being the
strongest in terms of total volume followed by the second, the first and the
third quarters.
Electronic publishing includes the operations of Dow Jones Newswires, Dow
Jones Indexes, WSJ.com, dowjones.com and Dow Jones Interactive and other (the
company's 50% share of Factiva's results are reported in the Equity in Losses
of Associated Companies).
PRINT PUBLISHING
=============================================================================
Quarters Ended March 31
(in thousands) 2000 1999
- -----------------------------------------------------------------------------
U.S. Publications:
Advertising $281,923 $185,631
Circulation and other 78,129 78,624
International Publications:
Advertising 20,313 15,005
Circulation and other 10,652 11,348
- -----------------------------------------------------------------------------
Total revenues 391,017 290,608
Operating expenses 272,295 238,139
- -----------------------------------------------------------------------------
Operating income $118,722 $ 52,469
- -----------------------------------------------------------------------------
EBITDA $135,411 $ 66,813
EBITDA margin 34.6% 23.0%
=============================================================================
Print publishing operating income in the first three months of 2000 increased
$66.3 million from $52.5 million in 1999's first quarter. EBITDA doubled from
a year ago. Operating income benefited from strong advertising linage, with
double-digit gains across all major publications.
Revenues in the first quarter grew $100.4 million, or 35%, from a year ago.
U.S. revenue rose 36%, driven by advertising revenue growth of 52%, largely
from the strength of Wall Street Journal advertising, where linage jumped
42.7%. Barron's advertising pages grew 28.8%. Advertising linage for The
Wall Street Journal Europe increased 26.6% and The Asian Wall Street Journal
linage rose 30.6%. U.S. television revenue was up 75% compared with the first
quarter of 1999, also buoyed by significant gains in advertising. In the
first quarter of 2000, circulation and other revenues declined $1.2 million,
or 1.3%.
PAGE 10
General linage for The Wall Street Journal, which made up 61% of total linage,
rose 48.8% in the first three months of 2000, largely benefiting from strong
technology advertising. The technology component of general advertising
increased 141%. General linage, excluding technology, was up 15.5%.
Financial advertising linage, which comprised 26% of total Journal linage grew
45.7% in the first quarter of 2000, reflecting brand advertising and strength
in security issuances (IPO's). Classified and other advertising, which
comprised the remaining 13% of linage, increased 14.4%. The growth is a
result of strong real estate advertising, partly through the Weekend Journal
section and modest growth in employment advertising.
Circulation revenue for U.S. print publications declined $1.6 million, or
2.2%, from the first quarter of 1999. The U.S. Wall Street Journal's three-
month ABC paid circulation averaged 1,835,000 in 2000, an increase from
1,795,000 a year earlier, chiefly due to the expansion of third-party amenity
distributions to hotels and airlines. The Statement of Total Circulation
(STC) provides circulation data which is reviewed by independent accountants,
and also information on the quality and character of the publication's paid
circulation, including complimentary and third party amenity copies,
subscription terms and price. Preliminary STC circulation for The Wall Street
Journal was 1,957,000 for the quarter ended March 31, 2000, compared with
1,900,000 a year earlier. Barron's average paid first quarter circulation was
320,000 up from 316,000 in 1999's first quarter.
First quarter circulation revenue for international publications was down 3.6%
from the like 1999 period, partly due to a decline at the Far Eastern Economic
Review and a stronger U.S. dollar in 2000. Average combined circulation for
the international editions of The Wall Street Journal at March 31, 2000 was
154,000, up 6.9% from a year ago.
Print publishing expenses in the quarter rose $34.2 million, or 14.3%, from a
year earlier. The increase chiefly was due to compensation (part of which was
tied to advertising revenue gains), promotional spending (a portion of which
was linked to the Journal's branding campaign), and costs related to
international expansion. Newsprint expense rose 14.5%, driven by usage
increases of 25%, partially offset by the benefit of reduced prices in 2000.
At March 31, 2000, the number of full-time employees in the print publishing
segment was up 8.7% from a year ago, primarily due to expanded news coverage
worldwide.
ELECTRONIC PUBLISHING
=============================================================================
Quarters Ended March 31
(in thousands) 2000 1999
- -----------------------------------------------------------------------------
Revenues $79,083 $97,537
Expenses 69,219 84,050
- -----------------------------------------------------------------------------
Operating income $ 9,864 $13,487
- -----------------------------------------------------------------------------
EBITDA $15,604 $19,792
EBITDA margin 19.7% 20.3%
=============================================================================
Operating income for electronic publishing was down $3.6 million, or 27%, from
1999's first quarter. In 2000's first quarter, EBITDA fell $4.2 million, or
21%, from a year ago.
PAGE 11
First quarter 2000 revenues were down $18.5 million, or 18.9%. Operating
expenses declined 17.6% from 1999's first quarter to $69.2 million. The year-
over-year comparisons are distorted by the impact of the company contributing
the bulk of the Dow Jones Interactive business to the Factiva joint venture,
effective July 1, 1999. Factiva's results are recorded in Equity in Losses of
Associated Companies.
The information included in the following table and related discussion include
Factiva's results on a pro forma basis as if the venture was formed on January
1, 1999.
=============================================================================
Quarters Ended March 31
(in thousands) 2000 1999
- -----------------------------------------------------------------------------
Dow Jones Newswires:
North America $ 46,326 $40,665
International 9,646 10,213
- -----------------------------------------------------------------------------
Total Newswires 55,972 50,878
Factiva 29,486 27,696
WSJ.com 11,504 5,382
dowjones.com 949
Dow Jones Indexes 3,381 3,241
Other 6,014 10,340
- -----------------------------------------------------------------------------
Total revenues 107,306 97,537
Operating expenses 98,817 84,050
- -----------------------------------------------------------------------------
Operating income $ 8,489 $13,487
- -----------------------------------------------------------------------------
EBITDA $ 15,582 $19,792
EBITDA margin 14.5% 20.3%
=============================================================================
Electronic publishing first quarter operating income declined $5 million, or
37%, from 1999. Revenues grew $9.8 million, or 10%, but operating expenses
increased $14.8 million, or 17.6%. EBITDA fell $4.2 million, or 21%. The
growth in expenses mainly was due to the company's promotion of interactive
products, including "dot-com" development costs and expansion of Newswires
businesses, principally internationally.
Dow Jones Newswires revenue in the first quarter of 2000 increased $5.1
million, or 10%, due to a 13.9% revenue gain in North America. The gain in
North America was partly driven by new revenue from on-line trading sites of
institutional customers such as DLJdirect and Merrill Lynch Online.
International revenues declined $.6 million, or 5.6%, as cancellations of
Telerate-related terminals in Europe and Asia were partly offset by new
distribution channels with Reuters and Bloomberg as well as third-party
wholesale agreements in Asia. Since April 1999, the company initiated 24,100
user trials on Reuters and Bloomberg, of which about 16,300 were completed as
of March 31, 2000. Approximately 41% of the completed trials continued as
paid subscribers with about 61% former Telerate customers and 39% new
customers. At March 31, 2000, there were 317,000 newswires terminals compared
with 299,000 a year ago. In 2000's first quarter, the mix between North
America and international revenue was roughly 83% to 17% compared with 80% to
20% a year earlier.
PAGE 12
The transition from Dow Jones Interactive to Factiva complicates comparisons;
the Factiva amounts present the company's 50% share of Factiva revenue had
Factiva existed from the beginning of January 1999. The difference between
the company's pro forma half of Factiva revenue and the company's wholly-owned
Dow Jones Interactive revenues for the first half of 1999 is reflected in
"other", and in part reflects the decline in the "other" category. The
company's share of Factiva revenue increased 6.5%, to $29.5 million compared
with $27.7 million a year earlier. A contractual reduction in fees from a
third-party agreement slowed Factiva's revenue growth.
WSJ.com first quarter revenue was $11.5 million, more than double last year's
first quarter. Advertising and subscription revenue increased 167% and 65%,
respectively, from a year ago. The mix of advertising revenue versus
subscription revenue was 60% advertising to 40% subscription in 2000's first
quarter. At March 31, 2000, there were 438,000 subscribers to WSJ.com
compared with 283,000 a year ago and 375,000 at year-end 1999. The
accelerated growth in subscriptions is in part due to new direct mail and
educational program offers. The company expects the growth to be tempered in
the second quarter as students go on summer break. In the first quarter of
2000, the average number of unique visitors who accessed at least one page of
WSJ.com subscriber-only content over the course of a 24-hour business day was
97,000.
Revenue for dowjones.com, launched at the end of May 1999, was $.9 million in
the first quarter of 2000. As of April 1, 2000, Dow Jones and Excite At Home
Corp., an Internet-access and content provider, formed a new company,
Work.com, which plans to develop a business portal, primarily designed to
target small and midsize business Internet users. Work.com is expected to be
launched in the second half of 2000. The company's share of operating losses
in 2000 is expected to be approximately $15 million, pretax, or $.10 per
diluted share, as it plans to spend significantly on marketing and development
costs.
Dow Jones Indexes revenue in the first quarter was $3.4 million, an increase
of 4.4%, from the like 1999 period. Volume in DIAMONDS, which trade on the
American Stock Exchange, was up nearly 250% from a year ago. Assets based on
Dow Jones Indexes grew to $238 billion at March 31, 2000 from $38 billion a
year ago, predominantly due to growth of Dow Jones STOXX in Europe. (The
company's share of results from Dow Jones STOXX, Ltd. is included in Equity in
Losses of Associated Companies).
[CAPTION]
COMMUNITY NEWSPAPERS
=============================================================================
Quarters Ended March 31
(in thousands) 2000 1999
- -----------------------------------------------------------------------------
[S] [C] [C]
Advertising $56,997 $51,489
Circulation and other 23,655 22,448
- -----------------------------------------------------------------------------
Total revenues 80,652 73,937
Operating expenses 62,806 59,944
- -----------------------------------------------------------------------------
Operating income $17,846 $13,993
- -----------------------------------------------------------------------------
EBITDA $22,176 $18,360
EBITDA margin 27.5% 24.8%
=============================================================================
[/TABLE]
PAGE 13
Community newspapers operating income rose $3.9 million, or 28%, from the
first quarter of 1999. Community newspapers contributed 6.1% of the rise in
consolidated operating income in the first quarter of 2000. EBITDA grew $3.8
million, or 21%.
Revenue during the first three months grew $6.7 million, or 9.1%. Advertising
revenue increased $5.5 million, or 10.7%, while circulation revenue was up $.5
million, or 2.4%, from 1999's first quarter. Advertising linage for the daily
papers increased 7.7% from last year's first quarter; linage for the non-
dailies was up .9%. Average circulation in 2000 for the 19 dailies was
540,000, a decline of 1.6% from 1999's quarter. Expenses in the quarter were
up $2.9 million, or 4.8%, reflecting volume-related growth due to increased
revenues. Employee compensation expense, which is a major cost component of
the segment, was up 3.1% from 1999's first quarter.
OTHER INCOME/DEDUCTIONS
Net investment income was $2.5 million in the first three months, up from $1.3
million in 1999's like period. The increase reflects higher capitalized
interest, largely related to The Wall Street Journal color expansion project.
Long-term debt outstanding at March 31, 2000 was $150 million, the same as a
year ago.
The company's first quarter share of losses from equity investments was $9
million in 2000 compared with $3.7 million in 1999. The wider loss in 2000
primarily was due to SmartMoney (from development costs for SmartMoney.com);
the company's 50% share of Factiva losses (effective July 1, 1999) and reduced
earnings at F.F. Soucy, the company's newsprint mill affiliate (largely due to
lower newsprint prices).
In the first quarter of 2000, the company sold its subsidiary, Dow Jones
Financial Publishing Corp. for a pretax gain of $13.8 million (after-tax of
$9.5 million, or $.10 per diluted share). The first quarter of 1999 included
a net gain of $10.6 million, or $.12 per diluted share, from the sale of a
portion of the company's minority interest in OptiMark Technologies, Inc.
(The pretax and after-tax gains in 1999 were nearly equivalent due to the
utilization of a tax loss carryforward.)
TELEVISION
Television includes income from U.S. television operations reported in the
print publishing segment and losses from international television reported in
equity results. The total pretax earnings were $.4 million in 2000's first
quarter versus losses of $3.2 million a year ago. Since 1998, television
results have benefited from the company's worldwide alliance with CNBC,
particularly enhancing U.S. television revenues.
INCOME TAXES
The effective income tax rate (including minority interest) for the first
quarter of 2000 was 38.7%, compared with 36.8% in the first quarter of 1999.
The lower effective rate in 1999 resulted from the tax-free gain on the sale
of OptiMark Technologies, Inc. shares. Excluding the impact of investment
gains in both quarters, the effective tax rates were 39.5% in 2000 and 42.3%
in 1999. At March 31, 2000, the company had available approximately $488
million of capital loss carryforward (a deferred tax asset of $184 million),
which was fully reserved through a valuation allowance. The company may
utilize the carryforward through 2003.
PAGE 14
FINANCIAL POSITION
During the first three months of 2000, the company repurchased 1.5 million
shares of its common stock for an aggregate $93.3 million, with an average
price per share of $62.22. Additionally, the company holds 1.7 million shares
subject to put options which may require the company to repurchase up to $85.7
million of its common stock (net of premiums) through February 2001. These
obligations can be settled on a net share basis. In 1998, the company's board
of directors authorized the repurchase of up to $800 million of the company's
common stock over a three-year period. (Since initial approval in June 1998,
the company has repurchased 10.8 million shares.) As of March 31, 2000, the
remaining authorization was $184.1 million, after reserving for the exercise
of outstanding put options.
Cash provided by operations in the first three months of 2000 was up $109.4
million, or 274%, from the like 1999 period due to enhanced earnings and
timing of income tax payments. Trade accounts receivable provided $43.6
million of cash, reflecting improved collections from 1999's first quarter.
In addition to the repurchase of the company's stock in 2000, the company
funded capital expenditures of $49 million (including $20.1 million for the
print expansion project), dividends of $22.5 million and various investments
in affiliated companies of $10.2 million.
The company has guaranteed payment under certain circumstances of certain
annual minimum payments for data acquired by Telerate (now wholly-owned by
Bridge Information Systems, Inc.) from Cantor Fitzgerald Securities and Market
Data Corporation under contracts entered into during the period when Telerate
was a subsidiary of the company. The annual minimum payments average
approximately $50 million per year through October 2006. Bridge has agreed to
indemnify the company if the company is required to make any payments under
the guarantee.
At March 31, 2000, the company had long-term notes of $150 million, which are
due December 1, 2000 and are not redeemable prior to maturity. Upon maturity,
the outstanding debt will be repaid through borrowings from either the
issuance of commercial paper or the company's revolving credit facility, or
through issuance of long-term debt. As such these notes are classified as
long term.
The company is considering the issuance of a tracking stock for some or all of
its Internet assets.
PAGE 15
INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS
Management's Discussion and Analysis and other sections of this Quarterly
Report include forward-looking statements that reflect the company's current
expectations or beliefs concerning future results and events. In addition, the
company may from time to time make additional forward-looking statements,
either orally or in writing. The company cautions readers that the company's
targets and objectives, and the results expected or anticipated by forward-
looking statements, including, without limitation, statements relating to the
company's future business prospects, revenues, income, working capital,
liquidity, capital needs and interest costs and similar items, are subject to
certain risks and uncertainties which could cause actual results and events to
differ materially from those anticipated in the forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
global economic and business conditions, and the strong tendency of economic
downturns to negatively impact advertising sales and sales of the company's
products and services; the intense competition faced by the company's products
and services in the markets for financial news and information, and related
advertising revenues, from newspapers, specialized business and financial
magazines, technology publications, Internet-based publications and services
(including both free and paid competitive Internet services that feature or
include business and financial news and information), financial television
programming and other new media that may develop; the extent to which the
company is able to increase its circulation and advertising revenues from its
international print publications, in the face of competition from local
publications and from other international publications; the extent to which
the company is able to achieve its revenues and earnings targets for
distribution of its newswires, taking into account in particular the rate of
addition of new subscribers outside the U.S. and cancellations of Telerate-
related terminals; the extent to which the company is able to achieve and
maintain a diversified advertising base for its print publications; any
delays that could occur in expanding the company's newspaper page and color
printing capacity, which could result in insufficient capacity to carry
advertisements; the company's ability to expand production and service
capacity for electronic publishing products on a timely basis to support
growth of operations and user traffic; business conditions (growth or
consolidation) in the financial services industry, and the tendency of
consolidation to negatively impact the market for the company's products and
services and advertising; increased competition in the market for electronic
business information and research services and Factiva's ability to develop
competitive country-specific interfaces and increase its market share and
revenues on a global basis; with respect to the company's Internet services
that rely partly or entirely on advertising revenues, the amount of user
traffic on those services and the pricing of advertising on Internet sites
generally; risks associated with the development of television channels in
competitive foreign markets, including the ability to produce or obtain
desired programming, to sell advertising time at desired rates, to achieve
sufficient distribution and to attract audiences; risks associated with the
ability to sell advertising time at desired rates in the U.S. television
market; rapid technological changes and frequent new product introductions
prevalent in electronic publishing, and the extent to which the company is
able to introduce new and enhanced services and products to meet shifts in
market demand; any damage to or technical failure of the company's computer
infrastructure systems or software that causes interruptions of operations;
cost of newsprint; the company's ability to attract and retain qualified
personnel in the tight labor market that exists; the company's ability to
negotiate collective bargaining agreements with its labor unions without work
interruptions; adverse verdicts in legal proceedings, including libel actions;
adverse developments relating to commitments and contingencies and/or
investments held by the company; risks associated with foreign operations,
including currency and political risks; and such other risk factors as may
have been or may be included from time to time in the company's reports filed
with the Securities and Exchange Commission.
PAGE 16
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Annual Meeting of Stockholders on April 19, 2000, there were
represented in person or by proxy 60,218,730 shares of Common Stock (carrying
one vote per share) and 19,696,117 shares of Class B Common Stock (carrying
ten votes per share). At the Annual Meeting:
1) the holders of the Common Stock, voting separately as a class, elected
as directors:
FOR VOTES WITHHELD
Harvey Golub 59,745,135 473,595
David K. P. Li 59,735,687 483,043
</TABLE
2) the holders of the Common Stock and the Class B Common Stock, voting
together, elected as directors:
FOR VOTES WITHHELD
Roy A. Hammer 251,195,983 5,983,917
Frank N. Newman 256,646,914 532,986
James H. Ottaway, Jr. 254,028,922 3,150,978
3) the holders of the Common Stock and the Class B Common Stock, voting
together, approved the appointment of PricewaterhouseCoopers LLP, independent
certified public accountants, as auditors for 2000 by a vote of 256,918,598
votes in favor; 83,486 votes against and 177,816 abstentions.
4) the holders of the Common Stock and the Class B Common Stock, voting
together, failed to approve a stockholder proposal to establish cumulative
voting in the election of directors by a vote of 224,558,107 votes against;
27,339,863 votes in favor; 585,659 abstentions and 4,696,271 broker non-votes.
In addition, the following directors continued in office after the
meeting: Rand V. Araskog, Christopher Bancroft, William C. Cox, Jr., Leslie
Hill, Irvine O. Hockaday, Jr., Vernon E. Jordan, Jr., Peter R. Kann, M. Peter
McPherson and William C. Steere, Jr.
PAGE 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits filed:
Exhibit
Number Document
- ------- --------
* 27 Financial Data Schedule
<FN>
* Securities and Exchange Commission and New York Stock Exchange copies
only.
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the period for which this report
is filed.
PAGE 18
SIGNATURE
---------
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.
DOW JONES & COMPANY, INC.
-------------------------
(Registrant)
Date: May 15, 2000 By: /s/ Raymond Baumkirchner
-------------------------
Vice President of Finance