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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, 1994
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, 1994: 77,984,223 shares of Common Stock and
22,145,518 shares of Class B Common Stock.
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<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
Dow Jones & Company, Inc.
<CAPTION>
Quarter Ended March 31
============================================================================
(in thousands except
per share amounts) 1994 1993
- ----------------------------------------------------------------------------
<S> <C> <C>
REVENUES:
Information services $229,906 $209,246
Advertising 174,673 165,532
Circulation and other 94,633 88,657
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Total revenues 499,212 463,435
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EXPENSES:
News, operations and development 145,610 137,816
Selling, administrative and general 167,885 162,467
Newsprint 23,645 25,500
Second class postage and carrier delivery 23,897 23,775
Depreciation and amortization 49,425 48,527
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Operating expenses 410,462 398,085
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Operating income 88,750 65,350
OTHER INCOME (DEDUCTIONS):
Investment income 1,135 1,306
Interest expense (4,333) (5,833)
Equity in (losses) earnings of associated companies (2,832) 278
Other, net 1,000 (393)
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Income before income taxes 83,720 60,708
Income taxes 40,538 29,762
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Income before cumulative effect of
accounting change 43,182 30,946
Cumulative effect of accounting change (3,007)
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NET INCOME $ 40,175 $ 30,946
============================================================================
PER SHARE:
Income before cumulative effect of
accounting change $.43 $.31
Cumulative effect of accounting change (.03)
Net income .40 .31
Cash dividends .21 .20
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Weighted average shares outstanding 99,971 100,245
============================================================================
See notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
Dow Jones & Company, Inc.
<CAPTION>
Three Months Ended March 31
============================================================================
(in thousands) 1994 1993
- ----------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 40,175 $30,946
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 49,425 48,527
Gain on sale of investment (3,097)
Cumulative effect of accounting change 3,007
Equity in losses (earnings) of associated
companies, net of distributions 2,832 2,722
Changes in assets and liabilities:
Accounts receivable--trade and
unearned revenue 2,541 (2,022)
Inventory, other current assets and accounts
payable and accrued liabilities (17,213) (18,797)
Federal and state income taxes 33,699 8,305
Other, net 1,061 (507)
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Net cash provided by operating activities 112,430 69,174
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INVESTING ACTIVITIES:
Additions to plant and property (35,506) (36,453)
Disposition of plant and property 1,439 1,066
Businesses and investments acquired, net of
cash received (35,581) (12,724)
Disposition of investment 5,000
Loan to investees (1,044) (250)
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Net cash used in investing activities (65,692) (48,361)
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FINANCING ACTIVITIES:
Cash dividends (20,988) (20,078)
Increase in long-term debt 73,538 24,313
Reduction of long-term debt (100,000)
Purchase of treasury stock (22,716)
Proceeds from sales under stock purchase plans 9,616 2,561
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Net cash used in financing activities (37,834) (15,920)
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EFFECT OF EXCHANGE RATE CHANGES ON CASH 320 (951)
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INCREASE IN CASH AND CASH EQUIVALENTS 9,224 3,942
Cash and cash equivalents at beginning of year 5,652 16,416
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Cash and cash equivalents at March 31 $ 14,876 $20,358
============================================================================
See notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
PAGE 4
CONDENSED CONSOLIDATED
BALANCE SHEETS
Dow Jones & Company, Inc.
<CAPTION>
March 31 December 31
============================================================================
(in thousands) 1994 1993
- ----------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 14,876 $ 5,652
Accounts receivable--trade, net 217,858 192,855
Newsprint inventory 6,923 7,576
Other current assets 58,538 62,378
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Total current assets 298,195 268,461
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Investments in associated companies,
at equity 83,910 70,653
Other investments 77,468 55,009
Plant and property, at cost 1,707,933 1,675,753
Less, Allowance for depreciation 1,118,885 1,081,286
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589,048 594,467
Excess of cost over net assets of
businesses acquired, less amortization 1,337,526 1,347,757
Other assets 13,423 13,192
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Total assets $2,399,570 $2,349,539
============================================================================
LIABILITIES:
Accounts payable and accrued liabilities $ 185,687 $ 204,561
Federal and state income taxes 89,432 56,739
Unearned revenue 231,947 204,220
Current maturities of long-term debt 5,318 5,318
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Total current liabilities 512,384 470,838
Long-term debt 234,652 261,073
Other noncurrent liabilities 129,515 124,798
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Total liabilities 876,551 856,709
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STOCKHOLDERS' EQUITY:
Common stocks 102,181 102,181
Additional paid-in capital 135,806 135,109
Retained earnings 1,328,720 1,309,533
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1,566,707 1,546,823
Less, Treasury stock, at cost 43,688 53,993
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Total stockholders' equity 1,523,019 1,492,830
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Total liabilities and stockholders' equity $2,399,570 $2,349,539
============================================================================
See notes to condensed consolidated financial statements.
</TABLE>
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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, 1994, and
December 31, 1993, and the consolidated results of operations and the
consolidated cash flows for the three-month periods ended March 31, 1994 and
1993. 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. Statement of Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits," was adopted by the company as of
January 1, 1994. The cumulative effect from this change in accounting
principle was a charge against earnings of $3,007,000.
<TABLE>
3. Supplementary cash flow data:
<CAPTION>
Three Months Ended March 31
===========================================================================
(in thousands) 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C>
Interest payments $4,762 $ 4,777
Income tax payments 9,738 25,526
===========================================================================
</TABLE>
4. Certain of the 1993 amounts have been reclassified for comparative
purposes.
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ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
FOR THE FIRST QUARTER ENDED MARCH 31, 1994 AND 1993
Net income in 1994's first quarter was $40.2 million, or $.40 per
share, an increase of $9.3 million, or 29.8%, from $30.9 million, or $.31
per share, earned in the first quarter of 1993. Earnings in the first
quarter of 1994 included the cumulative effect of the adoption of Statement
of Financial Accounting Standards (SFAS) No. 112, "Employers' Accounting for
Postemployment Benefits," which reduced net income by $3 million, or $.03
per share. SFAS No. 112 requires the accrual, during the years that an
employee renders service, of the costs of providing certain postemployment
benefits. Previously, most of these expenses had been accrued by the
company at termination. The annual expense of postemployment benefits under
SFAS No. 112 is not expected to be materially different from previous
levels.
Excluding the cumulative effect of this change in accounting, first-
quarter 1994 net income of $43.2 million was 39.5% better than earnings in
the first quarter a year ago. The improvement in earnings from 1993
resulted primarily from significant operating income gains at all segments
combined with lower interest expense.
SEGMENT DATA
The following table compares revenues and operating income by business
segment for the 1994 and 1993 quarters ended March 31:
<TABLE>
<CAPTION>
============================================================================
(in thousands) 1994 1993 % Increase
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Information services $229,906 $209,246 9.9
Business publications 213,523 199,116 7.2
Community newspapers 55,783 55,073 1.3
- ----------------------------------------------------------------------------
Operating Income:
Information services $ 48,144 $ 34,460 39.7
Business publications 41,505 31,794 30.5
Community newspapers 4,426 3,758 17.8
============================================================================
</TABLE>
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PAGE 7
OPERATING INCOME
Operating income in 1994's first quarter of $88.8 million increased
$23.4 million, or 35.8%, from the like 1993 period. The operating margin
increased to 17.8% from 14.1% in the first quarter of 1993, as revenues grew
7.7% while operating expenses increased only 3.1%.
The information services segment, which includes the company's Dow
Jones/Telerate and Business Information Services groups, reported a $13.7
million, or 39.7%, increase in operating income from the comparable 1993
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quarter. First-quarter 1994 operating income benefitted from fluctuations
in foreign currency exchange rates, primarily in the Asia/Pacific region.
Excluding this benefit, first-quarter 1994 information services segment
operating income would have increased $12.3 million, or 35.7%.
Dow Jones/Telerate group operating income climbed 45.8%. Revenue
growth of 9.7% significantly outpaced a 2.9% increase in expenses.
Operating income at the Business Information Services group was off 1.9%, in
part due to increased development costs.
Operating income for the business publications segment increased $9.7
million, or 30.5%, from 1993's first quarter. Revenues rose 7.2%, while
costs were held to a 2.8% increase. Community newspapers segment operating
income was up $.7 million, or 17.8%, compared with the first quarter of
1993.
REVENUES
Revenues increased $35.8 million, or 7.7%, to $499.2 million in 1994's
first quarter. Information services revenue rose $20.7 million, or 9.9%, to
$229.9 million. Dow Jones/Telerate group revenues increased 9.7% from the
like quarter a year ago. Revenues from Dow Jones/Telerate's foreign
operations grew 10.2%, while domestic revenues were up 8.9%. Worldwide
volume gains, resulting from both increases in the number of terminals and
enhanced and expanded services, caused approximately four-fifths of the
revenue increase. Business Information Services group revenues increased
11.5%.
First-quarter revenues for business publications were $14.4 million, or
7.2%, more than the comparable 1993 period. Advertising revenue rose 6.8%,
and circulation revenue was up 7.5%. Wall Street Journal advertising linage
increased 1.7%, but was flat on a per-issue basis, with one more publishing
day in 1994's first quarter. Financial linage rose 8.7% in 1994's first
quarter, but general advertising linage was down 5.3%. Journal average
circulation in the first quarter 1994 was 1,842,000 down 0.5% from 1993's
first quarter. Barron's first-quarter national advertising pages increased
12.3%, while its average circulation increased 8.4% from the first quarter
of 1993 to 293,000. Advertising revenue for overseas publications grew
almost 35%, and combined circulation for the Asian and European Journals
increased about 6% from 1993's first quarter to 104,000.
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Community newspapers revenue increased $.7 million, or 1.3%.
Advertising revenue grew 1.1% due to rate increases, with advertising linage
down 1.1%. Circulation revenue for this segment was up 2.6% from the year-
ago quarter, with average daily circulation during the quarter down
slightly.
EXPENSES
Operating expenses increased $12.4 million, or 3.1%, in the first
quarter of 1994. Information services segment operating expenses were up $7
million, or 4%, from the year-ago quarter in part reflecting costs
associated with the enhancement of information and increased depreciation
expense. At March 31, 1994, the number of full-time employees in the
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information services segment was down 1.3% from year-end 1993 and 1.2% from
March a year ago.
Business publications' expenses were up $4.7 million, or 2.8%, in the
quarter. Increases in operations and selling expenses were partially offset
by a decrease in newsprint expense, which was largely due to increased
discounts from newsprint suppliers. The number of full-time employees at
the segment was essentially unchanged from 1993's year end. Expenses at
Ottaway Newspapers, the company's community newspapers segment, were flat in
1994's first quarter. This segment also benefitted from lower newsprint
prices.
At March 31, 1994, the company employed 9,903 full-time employees, down
1% from 10,006 at year-end 1993.
OTHER INCOME / DEDUCTIONS
Interest expense in 1994's first quarter decreased $1.5 million, or
25.7%, from the first-quarter 1993. Long-term debt outstanding, excluding
current maturities, at March 31, 1994, was $234.7 million compared with
$359.1 million a year earlier and $261.1 million at year-end 1993.
Equity in losses of associated companies was $2.8 million compared with
earnings of $.3 million in the year-ago quarter. First-quarter 1994
included start-up losses for several new equity investments. Also, the
company's newsprint mill affiliates had equity losses of $.5 million, a
negative swing from earnings of $.5 million in 1993's first quarter.
INCOME TAXES
The effective income tax rate for the first quarter of 1994 declined to
48.4% from 49% in the first quarter a year ago. The lower effective rate in
1994 resulted from the lesser impact of nondeductible goodwill amortization
on significantly higher pretax earnings this quarter, offsetting the effect
of a higher federal income tax rate. The Omnibus Budget Reconciliation Act,
enacted in August 1993, increased the federal corporate income tax rate to
35% from 34%.
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PAGE 9
FINANCIAL POSITION
The working capital ratio, excluding unearned revenue, was 1.1 to 1 at
March 31, 1994, up from 1 to 1 at December 31, 1993. During 1994's first
quarter funds provided by operations increased to $112.4 million from $69.2
million for the like 1993 period. This increase in cash from operations was
largely attributable to increased earnings and lower tax payments (the
result of the timing of payments) in the first quarter of 1994 versus 1993's
first quarter.
During the first quarter of 1994 the company paid cash dividends of $21
million and made capital expenditures of $35.5 million. Investments totaled
$35.6 million and included an additional investment in a newsprint
affiliate, as well as investments in U.S. Satellite Broadcasting Company,
Inc. and VWD-Vereinigte Wirtschaftsdienste GmbH, a German news agency. The
company retired its 7.7%, $100 million notes payable on February 1, 1994, by
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issuing commercial paper. Cash and cash equivalents totaled $14.9 million
at March 31, 1994, an increase of $9.2 million from December 31, 1993.
The debt-to-equity ratio at March 31, 1994, was 15.4% compared to 24.9% a
year earlier and 17.5% at December 31, 1993.
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PAGE 10
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Annual Meeting of Stockholders on April 20, 1994, there were
represented in person or by proxy 69,764,542 shares of Common Stock
(carrying one vote per share) and 19,852,724 shares of Class B Common Stock
(carrying ten votes per share). At the Annual Meeting:
<TABLE>
1) the holders of the Common Stock, voting separately as a class,
elected as directors:
<CAPTION>
FOR VOTES WITHHELD
<S> <C> <C>
David K. P. Li 69,142,471 622,071
Rene C. McPherson 69,170,083 594,459
</TABLE>
2) the holders of the Common Stock and the Class B Common Stock,
voting together, elected as directors:
<TABLE>
<CAPTION>
FOR VOTES WITHHELD
<S> <C> <C>
James H. Ottaway, Jr. 267,637,097 654,685
Warren H. Phillips 267,636,623 655,159
Martha S. Robes 267,635,676 656,106
</TABLE>
3) the holders of the Common Stock and the Class B Common Stock,
voting together, failed to approve a stockholder proposal to establish one-
year terms for directors by a vote of 226,580,059 votes against, 36,128,484
votes in favor, 3,585,905 abstentions and 1,997,334 broker non-votes.
4) the holders of the Common Stock and the Class B Common Stock,
voting together, failed to approve a stockholder proposal to establish a
confidential voting policy by a vote of 220,375,693 votes against,
42,134,298 votes in favor, 3,783,957 abstentions and 1,997,834 broker non-
votes.
In addition, the following directors continued in office after the
meeting: Rand V. Araskog, Bettina Bancroft, Kenneth L. Burenga, William C.
Cox Jr., Irvine O. Hockaday Jr., Vernon E. Jordan Jr., Peter R. Kann, Donald
E. Petersen, James Q. Riordan, Carl M. Valenti and Richard D. Wood.
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PAGE 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits filed:
None.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter for which
this report is filed.
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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 11, 1994 By Thomas G. Hetzel
-------------------------
Comptroller
(Chief Accounting Officer)
