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, 1996
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, 1996: 75,645,210 shares of Common Stock and
21,904,491 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.
Quarters Ended March 31
============================================================================
(in thousands except
per share amounts) 1996 1995
- ----------------------------------------------------------------------------
REVENUES:
Information services $278,359 $263,047
Advertising 193,479 182,121
Circulation and other 112,996 100,190
- ----------------------------------------------------------------------------
Total revenues 584,834 545,358
- ----------------------------------------------------------------------------
EXPENSES:
News, operations and development 194,722 172,484
Selling, administrative and general 195,923 188,109
Newsprint 44,904 33,329
Second class postage and carrier delivery 26,626 25,610
Depreciation and amortization 53,707 51,470
- ----------------------------------------------------------------------------
Operating expenses 515,882 471,002
- ----------------------------------------------------------------------------
Operating income 68,952 74,356
OTHER INCOME (DEDUCTIONS):
Investment income 1,087 1,230
Interest expense (3,744) (4,635)
Equity in earnings of associated companies 1,666 1,408
Other, net 253 12,910
- ----------------------------------------------------------------------------
Income before income taxes 68,214 85,269
Income taxes 32,346 40,022
- ----------------------------------------------------------------------------
Income before minority interests 35,868 45,247
Minority interests in losses of subsidiaries 1,757 1,184
- ----------------------------------------------------------------------------
NET INCOME $ 37,625 $ 46,431
============================================================================
PER SHARE:
Net income $.39 $.48
Cash dividends .24 .23
============================================================================
Weighted average shares outstanding 97,435 96,672
============================================================================
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) 1996 1995
- ----------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net income $ 37,625 $ 46,431
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 53,707 51,470
Changes in assets and liabilities 14,386 19,042
Other, net 8,574 (6,828)
- ----------------------------------------------------------------------------
Net cash provided by operating activities 114,292 110,115
- ----------------------------------------------------------------------------
INVESTING ACTIVITIES:
Additions to plant and property (49,138) (48,880)
Businesses and investments acquired, net of
cash received (18,381) (50,825)
Disposition of businesses and investments 20,125
Other, net 4,369 2,513
- ----------------------------------------------------------------------------
Net cash used in investing activities (63,150) (77,067)
- ----------------------------------------------------------------------------
FINANCING ACTIVITIES:
Cash dividends (23,385) (22,229)
Reduction of long-term debt (46,843) (15,463)
Other, net 11,041 7,322
- ----------------------------------------------------------------------------
Net cash used in financing activities (59,187) (30,370)
- ----------------------------------------------------------------------------
Effect of exchange rate changes on cash 258 (160)
- ----------------------------------------------------------------------------
(Decrease) increase in cash and cash equivalents (7,787) 2,518
Cash and cash equivalents at beginning of year 13,667 10,888
- ----------------------------------------------------------------------------
Cash and cash equivalents at March 31 $ 5,880 $ 13,406
============================================================================
See notes to condensed consolidated financial statements.
PAGE 4
CONDENSED CONSOLIDATED
BALANCE SHEETS
Dow Jones & Company, Inc.
March 31 December 31
============================================================================
(in thousands) 1996 1995
- ----------------------------------------------------------------------------
ASSETS:
Cash and cash equivalents $ 5,880 $ 13,667
Accounts receivable--trade, net 281,725 272,601
Inventories 12,984 12,752
Other current assets 76,500 72,235
- ----------------------------------------------------------------------------
Total current assets 377,089 371,255
- ----------------------------------------------------------------------------
Investments in associated companies,
at equity 119,651 122,587
Other investments 201,070 71,777
Plant and property, at cost 2,076,659 2,049,566
Less, accumulated depreciation 1,386,997 1,359,585
- ----------------------------------------------------------------------------
689,662 689,981
Excess of cost over net assets of
businesses acquired, less amortization 1,298,707 1,308,623
Deferred income taxes 11,786
Other assets 22,499 22,691
- ----------------------------------------------------------------------------
Total assets $2,708,678 $2,598,700
============================================================================
LIABILITIES:
Accounts payable and accrued liabilities $ 240,342 $ 274,112
Income taxes 92,140 67,940
Unearned revenue 263,394 234,168
Current maturities of long-term debt 5,318 5,318
- ----------------------------------------------------------------------------
Total current liabilities 601,194 581,538
Long-term debt 207,104 253,935
Deferred income taxes 35,763
Other noncurrent liabilities 167,341 161,476
- ----------------------------------------------------------------------------
Total liabilities 1,011,402 996,949
- ----------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Common stocks 102,181 102,181
Additional paid-in capital 136,006 134,017
Retained earnings 1,519,027 1,504,787
Unrealized gain on investments 71,189
Cumulative translation adjustment (5,366) (5,586)
- ----------------------------------------------------------------------------
1,823,037 1,736,280
Less, treasury stock at cost 125,761 134,529
- ----------------------------------------------------------------------------
Total stockholders' equity 1,697,276 1,601,751
- ----------------------------------------------------------------------------
Total liabilities and stockholders' equity $2,708,678 $2,598,700
============================================================================
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, 1996, and
December 31, 1995, and the consolidated results of operations and the
consolidated cash flows for the three-month periods ended March 31, 1996 and
1995. 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 company holds a minority interest in United States Satellite
Broadcasting Company, Inc. (USSB), a provider of direct satellite television
programming. On placement of an initial public offering by USSB on February
1, 1996, the fair value of the company's investment in USSB became readily
determinable as defined in Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities."
The resultant unrealized gain was recorded directly to Stockholders' Equity,
net of deferred taxes. As of March 31, 1996, the market value of the
company's available-for-sale investments in which the fair value is readily
determinable, principally USSB, was $149.8 million yielding a gross
unrealized gain of $120 million.
3. Supplementary cash flow data:
Three Months Ended March 31
===========================================================================
(in thousands) 1996 1995
- ---------------------------------------------------------------------------
Interest payments $ 440 $ 4,217
Income tax payments 8,602 10,996
===========================================================================
4. Certain 1995 amounts have been reclassified for comparative purposes.
PAGE 6
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
FOR THE FIRST QUARTERS ENDED MARCH 31, 1996 AND 1995
Net income in the first quarter of 1996 was $37.6 million, or $.39 per
share, a decline of $8.8 million, or 19%, from $46.4 million, or $.48 per
share, earned in the first quarter of 1995.
The first quarter of 1995 included a net enhancement of one cent per
share consisting of a gain of six cents per share from the sale of 80% of
the company's interest in SportsTicker, a sports information service; and a
loss of five cents per share on an operating lease. Excluding the effect of
these items, first-quarter 1996 net income decreased 17.6%. First-quarter
1996 earnings were adversely affected by significantly higher newsprint
prices, increased spending on worldwide television operations, a fall-off in
financial information services segment operating income and lower Wall
Street Journal advertising linage.
The 19% decline in net income in the first quarter 1996 is not expected
to be indicative of full-year results. As the year continues, comparisons
and results should benefit from incremental revenue of products introduced
within the past year and new products to be introduced in 1996. Also, the
rate of increase in newsprint expense, compared to 1995, is expected to
subside as 1996 unfolds due to the significant escalation in newsprint
prices during the last nine months of 1995 and a modest decline in prices
seen in this year's second quarter.
First-quarter operating income of $69 million decreased $5.4 million,
or 7.3%, from the like 1995 period. All segments of the company reported a
downturn in operating income. The operating margin fell to 11.8% from
13.6%. Excluding the pretax loss of $8.4 million on an operating lease in
1995, operating income would have decreased 16.7%.
Revenues of $584.8 million in the first quarter of 1996 were up $39.5
million, or 7.2%. Revenues in 1996 were balanced roughly 50-50 between
print and electronic information. Expenses rose $44.9 million, or 9.5%, to
$515.9 million largely due to an increase in excess of 30% in the average
price of newsprint and continued investment in new products and expanded
content. Newsprint expense, which contributed about a quarter of the rise
in expenses this quarter, increased $11.6 million, or 34.7%. The company
employed 11,486 full-time employees at March 31, 1996, up 8.1% from 10,625
at March 31, 1995, reflecting higher staffing levels in product development
and expanded sales efforts.
SEGMENT DATA
The company's operations are divided into the following three segments:
financial information services, business publishing and community
newspapers. Financial information services includes Dow Jones Telerate and
Dow Jones' financial news services, such as Dow Jones News Service, the AP-
Dow Jones news wires and Federal Filings. This segment serves primarily the
worldwide financial services industry - including traders and brokers - with
real-time business and financial news, quotes, trading systems and
analytical tools. Financial information services comprised about 41% of the
company's revenue in the first quarter of 1996.
PAGE 7
Business publishing contains the company's Print Publications as well
as its Business Information Services and its Television and Multimedia
groups. Business publishing serves companies, business consumers and
private investors by providing news and information in a wide variety of
print and electronic media. Business publishing accounted for roughly 48%
of the company's revenue in the first quarter.
The community newspapers segment consists of the company's Ottaway
Newspapers Inc. subsidiary, which publishes 19 daily newspapers in
communities throughout the United States. The community newspapers segment
accounted for 11% of the company's first-quarter revenue.
The following table compares revenues and operating income for these
business segments for the 1996 and 1995 quarters ended March 31:
============================================================================
% Increase
(in thousands) 1996 1995 (Decrease)
- ----------------------------------------------------------------------------
Revenues:
Financial information services $241,752 $233,135 3.7
Business publishing 278,547 252,733 10.2
Community newspapers 64,535 59,490 8.5
- ----------------------------------------------------------------------------
Operating Income:
Financial information services $ 46,111 $ 49,141 (6.2)
Business publishing 24,334 25,273 (3.7)
Community newspapers 3,797 4,753 (20.1)
============================================================================
FINANCIAL INFORMATION SERVICES
Financial information services segment operating income of $46.1
million decreased $3 million, or 6.2%, from the comparable 1995 quarter.
First-quarter 1996 operating income benefited from fluctuations in foreign
currency exchange rates, primarily in the Asia/Pacific region. Excluding
this benefit, first-quarter financial information services segment operating
income would have decreased $5.9 million, or 12.1%.
Financial information services revenue rose $8.6 million, or 3.7%, to
$241.8 million. Domestic revenues were up 2.7%, and revenues from foreign
operations grew 4.4%, or 1.4% excluding the benefit from changes in foreign
currency exchange rates. Worldwide revenue growth was hindered by
consolidations in the financial services community. Also, growth overseas
was constricted by Japan's struggling banking sector.
Operating expenses for the financial information services segment of
$195.6 million were up $11.6 million, or 6.3%, in the first quarter of 1996.
Excluding the effect of foreign currency exchange rate fluctuations,
operating expenses would have increased $10.4 million, or 5.6%. At March
31, 1996, the number of full-time employees in this segment was up 13.4%
from a year earlier, largely due to expanded sales efforts and additional
staffing in product development.
PAGE 8
BUSINESS PUBLISHING
Business publishing segment operating income of $24.3 million for the
first three months of 1996 declined $0.9 million, or 3.7%, from 1995's first
quarter. Excluding the loss on operating lease in the first quarter of
1995, operating income would have decreased 27.8%.
Revenues for the business publishing segment of $278.5 million were
$25.8 million, or 10.2%, more than the comparable 1995 period. Advertising
revenue from Print Publications increased 5.5% despite an advertising linage
decline of 2% for The Wall Street Journal. General advertising linage,
which comprised about half of total Wall Street Journal linage in the first
quarter of 1996, fell 17.1% largely due to reduced advertising by the
automotive and personal computer industries. Financial linage, which
composed about 38% of total Journal linage, grew 29.9%. Classified and
other Journal linage was off 1.9%. Advertising rates for the domestic
Journal were raised 5% on average effective January 1, 1996. Barron's
national advertising pages rose 19.8%. Advertising revenue for
international print publications, including the Asian and European Wall
Street Journals and the Far Eastern Economic Review, grew 4.8%.
Circulation revenue for the business publishing segment was up 8.6%
from the like 1995 quarter. Average circulation for The Wall Street Journal
in the first quarter 1996 was 1,833,000, up slightly from 1995's first
quarter. Barron's average circulation was up about 4% to 301,000 and
combined circulation for the Asian and European Journals increased about 5%
to 114,000. Business Information Services group revenues grew 25.4%,
chiefly due to volume gains in the company's News/Retrieval operation and
the inclusion of a full-quarter's revenue for IDD Enterprises, L.P. (IDD) in
1996. The company acquired a controlling interest in IDD at the end of
February 1995.
Business publishing operating expenses rose $26.8 million, or 11.8%, in
the first quarter. Excluding the $8.4 million loss on an operating lease in
1995, expenses would have increased $35.2 million, or 16.1%. Newsprint
expense increased roughly a third due to the steep increase in newsprint
prices in the last nine months of 1995. Business Information Services
expenses increased 42.9%. Expenses in 1996 included three months of
expenses for IDD, versus one month in the like 1995 quarter; as well as
increased selling and royalty expenses for News/Retrieval. Expenses for the
Television and Multimedia group were up $5.6 million, reflecting three
months of operations for European Business News, which began broadcasting on
February 27, 1995. Also, expenses included production costs of the
company's "Emerging Powers" series which aired on the Public Broadcasting
Service in January 1996.
In the first quarter 1996 the company's television operations,
including operating losses less the minority partner's share of losses in
European Business News, and equity losses from Asia Business News, posted a
pretax loss of $10.6 million compared with a loss of $7.8 million in the
comparable 1995 quarter. The number of full-time employees in the business
publishing segment increased 6.6% from March 31, 1995 due to the expansion
of Television and Business Information Services operations.
PAGE 9
COMMUNITY NEWSPAPERS
First-quarter 1996 operating income at the community newspapers segment
of $3.8 million decreased $1 million, or 20.1%, compared with the like 1995
quarter. Community newspapers revenue of $64.5 million increased $5
million, or 8.5%. Advertising revenue rose 7% largely due to rate increases
and the inclusion of results for the Salem (Mass.) Evening News which was
acquired at the end of 1995's first quarter. Advertising linage was up
slightly. Circulation revenue increased 11.4% from the first quarter of
1995, primarily the result of rate increases. Operating expenses in the
first quarter of 1996 were up $6 million, or 11%, to $60.7 million. The
increase in expenses was chiefly the result of higher newsprint expense and
the inclusion of Salem (Mass.) Evening News.
OTHER INCOME/DEDUCTIONS
Interest expense in 1996's first quarter declined $0.9 million, or
19.2%, from the first quarter of 1995. Long-term debt outstanding,
including current maturities, at March 31, 1996, was $212.4 million compared
with $285.4 million a year earlier and $259.3 million at year-end 1995.
Equity in earnings of associated companies increased to $1.7 million
compared with earnings of $1.4 million in the year-ago quarter. A favorable
increase in earnings from the company's newsprint mill affiliates of $2.9
million was largely offset by the company's share of additional losses from
its television operation in Asia, Asia Business News; and its start-up
venture to develop a commercial real estate on-line service in the United
States, DJA Partners. In the last half of 1995, the company increased its
ownership of Asia Business News to just under 50% from roughly 30%.
Other, net in 1996's first quarter declined $12.7 million. Other
income for the first quarter of 1995 included a pretax gain of $13.4 million
from the sale of 80% of the company's interest in SportsTicker, a sports
information service.
FINANCIAL POSITION
In the first quarter of 1996, the company recorded an unrealized gain
on investments of $71.2 million, net of deferred taxes of $48.8 million, as
a separate component of Stockholders' Equity. The recognition of this
significant unrealized gain was a result of the February 1, 1996 initial
public offering by United States Satellite Broadcasting Company, Inc.
(USSB), which made the fair value of the company's investment in USSB
readily determinable as defined in Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities."
The working capital ratio, excluding unearned revenue, was 1.1 to 1 at
March 31, 1996 and December 31, 1995. In the first three months of 1996
funds provided by operations were $114.3 million compared with $110.1
million for the comparable 1995 period. During 1996's first quarter, funds
provided by operations were used to pay cash dividends of $23.4 million,
fund capital expenditures of $49.1 million and invest $18.4 million in new
equity ventures. The company also paid down $46.8 million of its long-term
debt.
PAGE 10
The company and ITT Corporation's purchase of WNYC-TV for $207 million
in cash is still pending Federal Communications Commission approval. The
purchase is expected to be finalized by the end of the 1996's second quarter
and will be financed through commercial paper borrowings.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Annual Meeting of Stockholders on April 17, 1996, there were
represented in person or by proxy 62,180,683 shares of Common Stock
(carrying one vote per share) and 21,082,262 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
James Q. Riordan 61,455,994 724,689
Richard D. Wood 61,455,819 724,864
2) the holders of the Common Stock and the Class B Common Stock,
voting together, elected as directors:
FOR VOTES WITHHELD
Christopher Bancroft 272,179,594 823,709
Peter R. Kann 272,185,481 817,822
Carl M. Valenti 272,186,242 817,061
Jane C. MacElree 272,180,183 823,120
3) the holders of the Common Stock and the Class B Common Stock,
voting together, failed to approve a stockholder proposal to eliminate
pension benefits for outside directors by a vote of 234,849,422 votes
against; 26,160,578 votes in favor; 7,766,488 abstentions and 4,226,815
broker non-votes.
In addition, the following directors continued in office after the
meeting: Rand V. Araskog, Kenneth L. Burenga, William C. Cox, Jr., Irvine
O. Hockaday, Jr., Vernon E. Jordan, Jr., David K. P. Li, James H. Ottaway,
Jr., Donald E. Petersen, Warren H. Phillips, Martha S. Robes and Carlos
Salinas de Gortari.
PAGE 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits filed:
Financial Data Schedule (Exhibit 27)
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter for which
this report is filed.
PAGE 12
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 13, 1996 By Thomas G. Hetzel
----------------------
Comptroller
(Chief Accounting Officer)