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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 June 30, 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 June 30, 1994: 77,625,127 shares of Common Stock and
22,118,654 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 Six Months Ended
June 30 June 30
==========================================================================================
(in thousands except
per share amounts) 1994 1993 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Information services $239,726 $214,294 $ 469,632 $423,540
Advertising 186,856 180,318 361,529 345,850
Circulation and other 97,571 92,431 192,204 181,088
- ------------------------------------------------------------------------------------------
Total revenues 524,153 487,043 1,023,365 950,478
- ------------------------------------------------------------------------------------------
EXPENSES:
News, operations and development 155,519 141,079 301,129 278,895
Selling, administrative and general 170,660 164,546 338,545 327,013
Newsprint 26,541 27,939 50,186 53,439
Second class postage and carrier delivery 24,443 24,278 48,340 48,053
Depreciation and amortization 50,717 47,577 100,142 96,104
- ------------------------------------------------------------------------------------------
Operating expenses 427,880 405,419 838,342 803,504
- ------------------------------------------------------------------------------------------
Operating income 96,273 81,624 185,023 146,974
OTHER INCOME (DEDUCTIONS):
Investment income 1,256 1,342 2,391 2,648
Interest expense (3,890) (5,813) (8,223) (11,646)
Equity in losses of associated companies (3,319) (354) (6,151) (76)
Other, net (2,583) (1,932) (1,583) (2,325)
- ------------------------------------------------------------------------------------------
Income before income taxes 87,737 74,867 171,457 135,575
Income taxes 41,717 35,060 82,255 64,822
- ------------------------------------------------------------------------------------------
Income before cumulative effect of
accounting change 46,020 39,807 89,202 70,753
Cumulative effect of accounting change (3,007)
- ------------------------------------------------------------------------------------------
NET INCOME $ 46,020 $ 39,807 $ 86,195 $ 70,753
==========================================================================================
PER SHARE:
Income before cumulative effect of
accounting change $.46 $.40 $.89 $.71
Cumulative effect of accounting change (.03)
Net income .46 .40 .86 .71
Cash dividends declared .42 .40 .63 .60
==========================================================================================
Weighted average shares outstanding 100,015 99,768 99,973 100,017
==========================================================================================
See notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
Dow Jones & Company, Inc.
<CAPTION>
Six Months Ended June 30
==========================================================================
(in thousands) 1994 1993
- --------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 86,195 $ 70,753
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 100,142 96,104
Gain on sale of investment (3,097)
Cumulative effect of accounting change 3,007
Equity in losses of associated companies,
net of distributions 7,829 3,179
Changes in assets and liabilities:
Accounts receivable-trade and unearned
revenue (281) (7,927)
Inventory, other current assets and accounts
payable and accrued liabilities (9,629) (23,766)
Federal and state income taxes (8,658) (14,805)
Other, net 1,781 969
- --------------------------------------------------------------------------
Net cash provided by operating activities 177,289 124,507
- --------------------------------------------------------------------------
INVESTING ACTIVITIES:
Additions to plant and property (85,127) (74,760)
Disposition of plant and property 4,635 1,831
Businesses and investments sold,
net of cash given 5,185 100
Businesses and investments acquired,
net of cash received (38,427) (13,192)
Investee loans (2,603) (50)
- --------------------------------------------------------------------------
Net cash used in investing activities (116,337) (86,071)
- --------------------------------------------------------------------------
FINANCING ACTIVITIES:
Cash dividends (42,021) (40,054)
Increase in long-term debt 89,810 47,278
Reduction of long-term debt (100,000) (14,500)
Purchase of treasury stock (20,078) (43,349)
Proceeds from sales under stock
purchase plans 14,309 6,701
- --------------------------------------------------------------------------
Net cash used in financing activities (57,980) (43,924)
- --------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (1,544) (1,568)
- --------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,428 (7,056)
Cash and cash equivalents at beginning of year 5,652 16,416
- --------------------------------------------------------------------------
Cash and cash equivalents at June 30 $ 7,080 $ 9,360
==========================================================================
See notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
CONDENSED CONSOLIDATED
BALANCE SHEETS
Dow Jones & Company, Inc.
<CAPTION>
June 30 December 31
============================================================================
(in thousands) 1994 1993
- ----------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 7,080 $ 5,652
Accounts receivable-trade, net 212,320 192,855
Newsprint inventory 7,097 7,576
Other current assets 60,558 62,378
- ----------------------------------------------------------------------------
Total current assets 287,055 268,461
- ----------------------------------------------------------------------------
Investments in associated companies,
at equity 83,220 70,653
Other investments 76,774 55,009
Plant and property, at cost 1,745,122 1,675,753
Less, Allowance for depreciation 1,149,244 1,081,286
- ----------------------------------------------------------------------------
595,878 594,467
Excess of cost over net assets of
businesses acquired, less amortization 1,327,305 1,347,757
Other assets 16,292 13,192
- ----------------------------------------------------------------------------
Total assets $2,386,524 $2,349,539
============================================================================
LIABILITIES:
Accounts payable and accrued liabilities $195,960 $ 204,561
Dividend payable 20,946
Federal and state income taxes 47,102 56,739
Unearned revenue 223,480 204,220
Current maturities of long-term debt 5,318 5,318
- ----------------------------------------------------------------------------
Total current liabilities 492,806 470,838
Long-term debt 250,953 261,073
Other noncurrent liabilities 131,392 124,798
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Total liabilities 875,151 856,709
- ----------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Common stocks 102,181 102,181
Additional paid-in capital 134,442 135,109
Retained earnings 1,332,761 1,309,533
- ----------------------------------------------------------------------------
1,569,384 1,546,823
Less, Treasury stock, at cost 58,011 53,993
- ----------------------------------------------------------------------------
Total stockholders' equity 1,511,373 1,492,830
- ----------------------------------------------------------------------------
Total liabilities and stockholders' equity $2,386,524 $2,349,539
============================================================================
See notes to condensed consolidated financial statements.
</TABLE>
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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 June 30, 1994, and
December 31, 1993, and the consolidated results of operations for the three-
month and six-month periods ended June 30, 1994 and 1993, and the
consolidated cash flows for the six-month periods 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. 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>
Six Months Ended June 30
============================================================================
(in thousands) 1994 1993
- ----------------------------------------------------------------------------
<S> <C> <C>
Interest payments $11,328 $11,604
Income tax payments 97,758 85,638
============================================================================
</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 SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 1994 AND 1993
Second-quarter 1994 net income of $46 million, or $.46 per share,
increased $6.2 million, or 15.6%, from second-quarter 1993 net income of
$39.8 million, or $.40 per share. The improvement was the result of
operating income gains across all business segments.
Net income in 1994's first half of $86.2 million, or $.86 per share,
increased $15.4 million, or 21.8%, from $70.8 million, or $.71 per share,
in the first six months of 1993. Earnings in the first half of 1994
included the cumulative effect of the adoption of Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits," which reduced net income $3 million, or $.03 per share.
Excluding the cumulative effect of this change in accounting, net income of
$89.2 million was $18.4 million, or 26.1%, better than earnings in the
first half of 1993.
SEGMENT DATA
The following table compares revenues and operating income by business
segment for the second quarter and six months ended June 30, 1994 and 1993:
<TABLE>
<CAPTION>
Quarter Ended June 30
===========================================================================
(in thousands) 1994 1993 % Increase
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Information services $239,726 $214,294 11.9
Business publications 219,331 209,622 4.6
Community newspapers 65,096 63,127 3.1
- ---------------------------------------------------------------------------
Operating Income:
Information services $ 49,819 $ 39,147 27.3
Business publications 40,212 37,904 6.1
Community newspapers 11,197 9,109 22.9
===========================================================================
Six Months Ended June 30
===========================================================================
Revenues:
Information services $469,632 $423,540 10.9
Business publications 432,854 408,738 5.9
Community newspapers 120,879 118,200 2.3
- ---------------------------------------------------------------------------
Operating Income:
Information services $ 97,963 $ 73,607 33.1
Business publications 81,717 69,698 17.2
Community newspapers 15,623 12,867 21.4
===========================================================================
</TABLE>
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OPERATING INCOME
Second-quarter 1994 operating income of $96.3 million grew $14.6
million, or 17.9%, primarily as a result of a 27.3% increase in information
services operating income from the like 1993 period. The company's
operating margin rose to 18.4% from 16.8% in the second quarter of 1993, as
revenues were up 7.6% while operating expenses increased 5.5%.
The information services segment, which includes the company's Dow
Jones/Telerate and Business Information Services groups, reported an
operating income increase of $10.7 million, or 27.3%. The operating margin
for the segment was 20.8%, up from 18.3% in the second quarter of 1993.
Second-quarter 1994 operating income benefitted from fluctuations in foreign
currency exchange rates, primarily in the Asia/Pacific region. Excluding
this benefit, second-quarter 1994 information services segment operating
income would have been up $9.5 million, or 24.2%.
Dow Jones/Telerate group operating income advanced 32.7% in 1994's
second quarter. Revenue growth of 11.6% exceeded the 6.9% increase in
expenses. Business Information Services operating income fell 19.6%,
chiefly due to increased development costs and fees to information
providers.
Business publications segment operating income increased $2.3 million,
or 6.1%, in 1994's second quarter, with its operating margin of 18.3% up
slightly from 18.1% in the comparable period last year. Revenues were up
$9.7 million, or 4.6%, despite a 2.7% drop in Wall Street Journal
advertising linage, while operating expenses were up $7.4 million, or 4.3%.
The business publications segment contains the company's world-wide
initiatives into television and multimedia, including the Dow Jones Investor
Network. Excluding television operations, business publications operating
income would have been up 9% in 1994's second quarter.
Community newspapers operating income for the quarter grew $2.1
million, or 22.9%. Revenues increased $2 million, or 3.1%. Operating
expenses decreased 0.2%, primarily due to lower newsprint costs. The
community newspapers operating margin for 1994's second quarter rose to
17.2% from 14.4% in the second quarter of 1993.
First-half consolidated operating income grew $38 million, or 25.9%.
Information services segment operating income advanced $24.4 million, or
33.1%, in the first six months of 1994. Operating income for the business
publications segment increased $12 million, or 17.2%, in 1994's first half.
Six-month community newspapers operating income was up $2.8 million, or
21.4%.
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REVENUES
Revenues increased $37.1 million, or 7.6%, in the second quarter,
following a $35.8 million, or 7.7%, rise in the first quarter. Through six
months, revenues were up $72.9 million, or 7.7%.
Information services revenues rose $25.4 million, or 11.9%, in the
second quarter and $46.1 million, or 10.9%, in the first half of 1994.
Revenues at Dow Jones/Telerate increased 11.6% in 1994's second quarter.
World-wide volume gains, resulting from both increases in the number of
terminals and enhanced and expanded services, accounted for more than four-
fifths of this increase. Strong growth continued in both foreign and
domestic operations with their respective revenues rising 11.6% and 11.7% in
1994's second quarter. In the first six months of 1994, Dow Jones/
Telerate's revenue gained $40.7 million, or 10.7%. Revenue from foreign
operations increased 10.9% and domestic revenue was up 10.3% from the first
six months of 1993. Business Information Services group revenue increased
14.4% in the second quarter and 12.9% in the first half of 1994.
In the quarter ended June 30, 1994, business publications revenues were
up 4.6%. Revenues for the segment increased 5.9% in the first six months.
Advertising revenue at business publications increased 3.6% in the second
quarter and 5.2% in the first half of 1994. Wall Street Journal advertising
linage declined 2.7% in the second quarter, following a 1.7% gain in the
first quarter. For the first six months Journal advertising linage was off
0.6% from the like 1993 period.
The downturn in second quarter linage was largely due to a fall-off in
financial advertising. Financial linage, which was up 8.7% in 1994's first
quarter, declined 6.3% in the second quarter. The slide in total linage is
likely to continue in the second half of 1994, as the Journal is faced with
tougher prior-year comparisons and an uncertain outlook for the financial
markets. (Financial linage was up almost 30% in 1993's second half versus
the like 1992 period.) General advertising linage was off 2.4% in the
second quarter, after falling 5.3% in 1994's first quarter. General linage
was down 3.7% in 1994's first half. Circulation revenue for this segment
was up 5.8% in the second quarter and 6.7% in the first half, reflecting the
$10 increase to $149 in the Journal's annual subscription price which was
effective July 1, 1993. Journal average circulation for the first half of
1994 of 1,823,000 was down 1.4% from the like 1993 period.
Barron's national advertising pages increased 3.6% in the second
quarter and 7.8% in the first six months. Barron's six-month average
circulation of approximately 287,000 was up 7.3% compared with the first
half of 1993. The cover price of Barron's was increased to $3 from $2.50
effective June 27, 1994; subscription prices remained unchanged.
Advertising revenue from overseas publications increased 20.8% in the second
quarter and 26.6% in the first six months of 1994. Combined average
circulation for the Asian and European Journals of 105,000 increased about
4.5% from the first half of 1993.
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Revenue at the community newspapers segment increased 3.1% in the
second quarter and 2.3% in the first half of 1994. Advertising revenue was
up 3.6% in 1994's second quarter and 2.5% in the first six months.
Advertising linage increased 0.6% in the second quarter but was down 0.2%
through six months. Circulation revenue rose 2.7% in both the second
quarter and the first half of 1994. Average circulation at Ottaway's 21
daily newspapers for the six months ended June 30, 1994, was up slightly
compared with the like year-earlier period.
OPERATING EXPENSES
Operating expenses increased $22.5 million, or 5.5%, in the three
months ended June 30, 1994, and $34.8 million, or 4.3%, in the first six
months of 1994.
Second-quarter and first-half expenses at the information services
segment were up $14.8 million, or 8.4%, and $21.7 million, or 6.2%,
respectively, mainly due to increased fees to information providers and
depreciation. Second-quarter expenses at Dow Jones/Telerate rose 6.9% while
Business Information Services group operating expenses grew 22.7%. For the
first half of 1994 expenses at Dow Jones/Telerate were up 4.9% and Business
Information Services group expenses rose 19%. Information services segment
expenses in 1994's second half are likely to increase at a greater rate than
in the first half as a result of additional spending on product development,
enhancement of information and network upgrades. At June 30, 1994, the
number of full-time employees for the information services segment was down
0.6% from year-end 1993 and 1.5% from June 30, 1993.
Business publications expenses were up $7.4 million, or 4.3%, in the
second quarter and $12.1 million, or 3.6%, in the first six months of 1994.
The expense increases were attributable to higher selling and operations
costs, partially offset by a decrease in newsprint expense. The reduction
in newsprint expense, which was caused by higher supplier discounts, is
expected to dissipate in 1994's second half as suppliers cut discounts. The
business publications segment holds the company's television broadcasting
activities. Initiatives in this area increased segment expenses $2.9
million in the first half of 1994 compared with the like period a year ago.
These expenses are expected to grow throughout 1994 and beyond as the
company pursues an increased presence in world-wide business TV
broadcasting.
Expenses at Ottaway Newspapers, the company's community newspapers
segment were flat for the second quarter and the first half of 1994 due to
lower newsprint expense. The reduction in newsprint expense from 1993's
second quarter and first six months was the result of higher supplier
discounts in the 1994 periods.
At June 30, 1994, the company employed 9,998 full-time employees
compared with 10,014 a year ago and 10,006 at year-end 1993.
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OTHER INCOME/DEDUCTIONS
Interest expense fell $1.9 million, or 33.1%, in the second quarter and
$3.4 million, or 29.4%, in 1994's first half. The reduction in interest
expense was attributable to a lower average debt level and more favorable
interest rates this year, as higher-rate long-term notes, which matured in
February, were replaced with lower-rate commercial paper. Long-term debt
outstanding, excluding current maturities, at June 30, 1994, was $251
million compared with $367.6 million at June 30, 1993.
Second-quarter equity in losses of associated companies was $3.3
million compared with losses of $0.4 million in the year-ago quarter. In
1994's first six months, equity in losses of associated companies totaled
$6.2 million compared with losses of $0.1 million in the like period a year
ago. The first half of 1994 included losses, which are expected to
continue, for several new equity ventures. These holdings include the
company's interest in Asia Business News, a business and financial news
television channel broadcasting in Asia, and BIZ, a monthly magazine aimed
at chief executives and owners of the country's fastest-growing small
businesses. Also, the company's newsprint mill affiliates had equity losses
of $1.5 million in 1994's first half compared with income of $1 million in
the like 1993 period.
INCOME TAXES
The effective income tax rate for 1994's second quarter was 47.5%
compared with 46.8% in the like year-ago quarter. The higher rate in 1994
was primarily due to the increase, from 34% to 35%, in the corporate federal
income tax rate enacted in August of 1993.
FINANCIAL POSITION
The working capital ratio, excluding unearned revenue, was 1.1 to 1 at
June 30, 1994, versus 1 to 1 at December 31, 1993. During 1994's first
half, cash provided by operations was $177.3 million, up from $124.5 million
for the comparable 1993 period.
In the first half of 1994 the company, primarily using cash from
operations, paid cash dividends of $42 million, incurred capital
expenditures of $85.1 million, made investments totaling $38.4 million,
reduced long-term debt by $10.1 million and purchased 559,400 shares of its
common stock for $20.1 million. Cash and cash equivalents totaled $7.1
million at June 30, 1994, an increase of $1.4 million from December 31,
1993. The debt-to-equity ratio at June 30, 1994, was 16.6% compared with
25.8% a year earlier and 17.5% at December 31, 1993.
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PART II. OTHER INFORMATION
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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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: August 9, 1994 By Thomas G. Hetzel
----------------------
Comptroller
(Chief Accounting Officer)
