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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 29, 1998
DOW JONES & COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-7564 13-5034940
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
200 Liberty Street, New York, New York 10281
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 416-2000
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Item 2. Acquisition or Disposition of Assets.
On May 29, 1998, the company completed the sale of Telerate (formerly,
Dow Jones Markets) to Bridge Information Systems, Inc. ("Bridge"). The
purchase price, which was determined by an arms-length negotiation, was $510
million, consisting of $360 million in cash and $150 million of 5 year, 4%
preferred stock of Bridge, which is convertible into 10% of Bridge's common
equity. The sale was made pursuant to a stock purchase agreement dated
March 17, 1998 between Dow Jones & Company, Inc. and Bridge. The assets and
liabilities involved in the transaction principally included cash and cash
equivalents, accounts receivable, inventories, other current assets, other
investments, plant and property, intangible assets, deferred taxes, other
noncurrent assets, accounts payable and accrued liabilities, unearned
revenue, long-term debt and other noncurrent liabilities.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(b) Pro Forma Financial Information
The following is a presentation of unaudited pro forma financial
information of Dow Jones & Company, Inc., including an unaudited pro forma
condensed balance sheet as of March 31, 1998 and pro forma condensed
statements of income for the year ended December 31, 1997 and the quarter
ended March 31, 1998. The pro forma balance sheet has been computed
assuming the disposition of Telerate had been consummated on March 31, 1998,
while the pro forma statements of income have been computed assuming the
disposition had been consummated as of January 1, 1997.
Such unaudited pro forma financial information should be read in
conjunction with the financial statements reported in the company's Form 10-
K for the year ended December 31, 1997 and Form 10-Q for the quarterly
period ended March 31, 1998. The pro forma information is presented for
illustrative purposes only and is not necessarily indicative of the
operating results or financial position that would have occurred had the
disposition of Telerate been consummated in accordance with the assumptions
noted above, nor is it necessarily indicative of future operating results or
financial position.
In the second quarter of 1998, the company expects to record a loss on
the sale of Telerate of $136.4 million ($98 million after tax). This loss
is not reflected in the pro forma statements of income.
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UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
AS OF MARCH 31, 1998
(in thousands) Dow Jones & Co. Less: Pro Forma
(as reported) Telerate Adjustments Pro Forma
Assets:
Cash and cash equivalents $ 50,382 $ 360,000 (1) $ 410,382
Accounts receivable--trade, net 290,191 $ 75,796 214,395
Inventories 11,995 1,407 10,588
Other current assets 74,672 34,143 40,529
Total current assets 427,240 111,346 360,000 675,894
Investments in associated companies,
at equity 39,303 39,303
Other investments 94,449 39,082 150,000 (2) 205,367
Plant and property, at cost 2,488,327 1,031,265 1,457,062
Less, accumulated depreciation 1,707,056 795,934 911,122
781,271 235,331 545,940
Excess of cost over net assets of
businesses acquired, less amortization 387,786 295,708 92,078
Deferred income taxes 89,192 53,246 35,946
Other assets 15,160 3,500 11,660
Total assets $1,834,401 $ 738,213 $ 510,000 $1,606,188
Liabilities:
Accounts payable and
accrued liabilities $ 291,128 $ 108,454 $ 85,957 (3) $ 268,631
Income taxes 59,906 6,624 (38,387) (4) 14,895
Unearned revenue 270,747 24,843 245,904
Current maturities of long-term debt 5,318 5,318 -
Total current liabilities 627,099 145,239 47,570 529,430
Long-term debt 165,803 15,955 149,848
Other noncurrent liabilities 225,990 25,351 200,639
Total liabilities 1,018,892 186,545 47,570 879,917
Stockholders' Equity:
Common stocks 102,181 102,181
Additional paid-in capital 137,181 137,181
Retained earnings 719,010 (98,000) (5) 621,010
Accumulated other comprehensive income (1,958) (8,762) 6,804
956,414 (8,762) (98,000) 867,176
Less, treasury stock, at cost 140,905 140,905
Total stockholders' equity 815,509 (8,762) (98,000) 726,271
Total liabilities and
stockholders' equity $1,834,401 $ 177,783 $ (50,430) $1,606,188
See notes to unaudited pro forma financial statements.
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UNAUDITED PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(in thousands except Dow Jones & Co. Less: Pro Forma Pro Forma
per share amounts) (as reported) Telerate Adjustments (10)
REVENUES:
Information services $1,101,696 $ 751,689 $ 7,500 (6) $ 357,507
Advertising 1,011,864 1,011,864
Circulation and other 458,958 458,958
Total revenues 2,572,518 751,689 7,500 1,828,329
EXPENSES:
News, operations and development 899,868 407,399 20,262 (7) 512,731
Selling, administrative and general 895,707 299,962 14,346 (8) 610,091
Newsprint 152,478 152,478
Second class postage and carrier delivery 114,442 114,442
Depreciation and amortization 250,734 156,344 94,390
Restructuring 1,001,263 979,502 21,761
Operating expenses 3,314,492 1,843,207 34,608 1,505,893
Operating (loss) income (741,974) (1,091,518) (27,108) 322,436
OTHER INCOME (DEDUCTIONS):
Investment income 3,473 2,761 712
Interest expense (19,367) (2,422) (16,945)
Equity in losses of
associated companies (49,311) (310) (49,001)
Gain on disposition of businesses and
investments 52,595 52,595
Other, net (9,300) (8,029) (1,271)
(Loss) income before income taxes and
minority interests (763,884) (1,099,518) (27,108) 308,526
Income tax (benefit) 37,796 (93,868) (10,952) (9) 120,712
(Loss) income before minority interests (801,680) (1,005,650) (16,156) 187,814
Minority interest in earnings
of subsidiaries (452) (452)
Net (loss) income $ (802,132) $(1,005,650) $(16,156) $ 187,362
Net (loss) income per share:
- Basic $(8.36) $1.95
- Diluted (8.36) 1.93
Average shares outstanding:
- Basic 95,993 95,993
- Diluted 95,993 96,947
See notes to unaudited pro forma financial statements.
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UNAUDITED PRO FORMA STATEMENT OF INCOME
FOR THE QUARTER ENDED MARCH 31, 1998
(in thousands except Dow Jones & Co. Less: Pro Forma Pro Forma
per share amounts) (as reported) Telerate Adjustments (10)
REVENUES:
Information services $267,383 $173,374 $ 1,875 (6) $ 95,884
Advertising 244,666 244,666
Circulation and other 109,432 109,432
Total revenues 621,481 173,374 1,875 449,982
EXPENSES:
News, operations and development 217,508 99,947 5,091 (7) 122,652
Selling, administrative and general 225,759 69,184 3,712 (8) 160,287
Newsprint 39,855 39,855
Second class postage and carrier delivery 28,268 28,268
Depreciation and amortization 54,613 32,187 22,426
Operating expenses 566,003 201,318 8,803 373,488
Operating income (loss) 55,478 (27,944) (6,928) 76,494
OTHER INCOME (DEDUCTIONS):
Investment income 907 606 301
Interest expense (2,682) (436) (2,246)
Equity in losses of
associated companies (5,887) (5,887)
Other, net 15,096 155 14,941
Income (loss) before income taxes 62,912 (27,619) (6,928) 83,603
Income tax (benefit) 28,214 (8,586) (2,799) (9) 34,001
Net income (loss) $ 34,698 $(19,033) $(4,129) $ 49,602
Net income per share:
- Basic $0.36 $0.51
- Diluted 0.35 0.50
Average shares outstanding:
- Basic 96,878 96,878
- Diluted 98,248 98,248
See notes to unaudited pro forma financial statements.
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Notes to Unaudited Pro Forma Financial Statements
Balance sheet:
(1) This pro forma adjustment reflects the $360 million in cash received
from Bridge. The company's board of directors has authorized the repurchase
of shares of the company's outstanding stock for up to $300 million. On
June 4, 1998 the company repurchased four million shares of its common
stock, or roughly 4.1% of the basic shares outstanding. The shares were
purchased pursuant to a privately negotiated stock repurchase agreement with
a financial institution, which borrowed the shares. The initial purchase
price was $192.1 million, subject to a future market price adjustment.
Additionally, the company sold puts covering an aggregate of one million
shares of common stock. This transaction could obligate the company to
repurchase up to $47.8 million of its common stock over the next nine
months.
(2) Reflects the $150 million in preferred stock of Bridge received as part
of the consideration for Telerate.
(3) Reflects liabilities incurred as a result of the sale, including
employee severance, transaction fees and other charges.
(4) Represents expected tax benefits to be recorded in the second quarter
of 1998 as a result of the loss on the sale of Telerate.
(5) Represents the after-tax loss on the sale of Telerate applied to the
company's retained earnings. The loss will be recognized in the second
quarter of 1998. This loss is in addition to the $922.5 million after-tax
charge related to Telerate taken in 1997's fourth quarter, largely
reflecting a write-down of goodwill and plant and property.
Income statements:
(6) Reflects ongoing revenues directly relating to the sale of Telerate.
(7) News and operations costs previously incurred by Telerate which will be
part of Dow Jones' continuing business.
(8) Administrative and general costs previously allocated to Telerate which
will be part of Dow Jones' continuing operations.
(9) Taxes are computed at the company's statutory tax rate.
(10) Pro forma 1997 diluted earnings per share, excluding asset sales and
restructuring charges, was $1.95 per share. EBITDA, which the company
computes as operating income excluding depreciation and amortization and
restructuring charges, was $438.6 million.
First quarter 1998 diluted earnings per share, excluding asset sales, was 40
cents per share on a pro forma basis. Pro forma first quarter 1998 EBITDA
was $98.9 million.
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(c) Exhibits
(2) Stock Purchase Agreement dated as of March 17, 1998, between Dow
Jones & Company, Inc. and Bridge Information Systems, Inc.
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 hereunto duly authorized.
DOW JONES & COMPANY, INC.
Dated: June 12, 1998 By: /s/ Thomas G. Hetzel
Thomas G. Hetzel
Comptroller
(Chief Accounting Officer)