Dow Jones & Company Announces First Quarter 2003 Results; Provides 2nd Quarter Outlook.Business Editors NEW YORK--(BUSINESS WIRE)--April 10, 2003 Dow Jones Dow Jones the best known of several U.S. indexes of movements in price on Wall Street. [Am. Hist.: Payton, 202] See : Finance & Company (NYSE NYSE See: New York Stock Exchange : DJ) announced today that it earned 82 cents per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share during the first quarter ended March 31, 2003, compared to $1.53 per diluted share in the first quarter of 2002. Excluding the special items detailed below, the Company earned 12 cents per diluted share, an increase of 50.0% compared to the 8 cents per diluted share earned in the first quarter 2002. First quarter 2003 special items netted to a gain of 70 cents. This included a non-cash gain of 73 cents per diluted share from the reversal reversal n. the decision of a court of appeal ruling that the judgment of a lower court was incorrect and is reversed. The result is that the lower court which tried the case is instructed to dismiss the original action, retry the case, or is ordered to change its of a 1998 reserve for loss contingencies Contingencies (ISSN 1048-9851) is the bimonthly magazine of the American Academy of Actuaries, providing a large and diverse readership with general interest and technical articles on a wide range of issues related to the actuarial profession. related to the sale of Telerate to Bridge Information Systems that were settled in Bridge's bankruptcy proceedings bankruptcy proceedings n. the bankruptcy procedure is: a) filing a petition (voluntary or involuntary) to declare a debtor person or business bankrupt, or, under Chapter 11 or 13, to allow reorganization or refinancing under a plan to meet the debts of the party , and a charge of 3 cents per diluted share for accretion The act of adding portions of soil to the soil already in possession of the owner by gradual deposition through the operation of natural causes. The growth of the value of a particular item given to a person as a specific bequest under the provisions of a will between the of discount for contract guarantee obligations. Special items in the first quarter of 2002 netted to a gain of $1.45 per diluted share. This included a gain of $1.49 per diluted share from the sale of four Ottaway Newspaper properties and a charge of 4 cents per diluted share to accrete discount for contract guarantee obligations. Please refer to the attached financial exhibits and notes for more details on the Company's results and special items. Revenue of $358.2 million declined 8.8% in the first quarter of 2003, with U.S. Wall Street Journal linage lin·age also line·age n. 1. The number of lines of printed or written material. 2. Payment for written work at a specified amount per line. linage Noun 1. declining 11.0% in the quarter compared to the first quarter 2002. Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. were $340.7 million, down 10.5% from the first quarter of 2002 and operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. was $17.6 million, up 42.8% from last year. Operating income as a percent of revenues was 4.9%, compared to 3.1% last year. Dow Jones also said that, assuming war effects persist through much of the second quarter, it expects earnings per share before special items in the quarter to be in the mid-teens cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. range, compared to 25 cents per share in the second quarter 2002. This assumes that second quarter 2003 linage at the U.S. Wall Street Journal declines in the mid-teens percentage range compared to the second quarter 2002. Based on currently anticipated special items that may occur in the second quarter 2003, the Company expects reported earnings per share to be in the mid- mid- pref. Middle: midbrain. 20 cents per share range, compared with 64 cents per share in the second quarter 2002. Please refer to the attached table for a reconciliation of the Company's second quarter 2003 earnings estimates. Peter R. Kann, chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Dow Jones & Company, said: "We continue to be hampered by the persistently per·sis·tent adj. 1. Refusing to give up or let go; persevering obstinately. 2. Insistently repetitive or continuous: a persistent ringing of the telephone. 3. difficult business and advertising environment, especially in our core financial and technology advertising segments, further exacerbated by the war in Iraq Iraq or Irak (both: ēräk`, ĭrăk`), officially Republic of Iraq, republic (2005 est. pop. 26,075,000), 167,924 sq mi (434,924 sq km), SW Asia. . At the same time, however, we continue to invest in our products, improve our operating performance and control our spending, laying the groundwork for much better results - and stronger shareholder returns - as business recovers." Rich Zannino, executive vice president and chief operating officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. of Dow Jones added: "While we can't control the business environment, business confidence or geopolitical ge·o·pol·i·tics n. (used with a sing. verb) 1. The study of the relationship among politics and geography, demography, and economics, especially with respect to the foreign policy of a nation. 2. a. events and their impact on advertising, we are aggressively controlling all we can. One result is improved bottom lines at each of our business segments in the first quarter. Other results include increased color and consumer advertising at the Journal, increased ad volume at our international Journal editions, the launch of Dow Jones NewsPlus, price increases for a number of our products, improved financial performance at the Online Journal and our equity investments, tight control of spending, and improved organizational effectiveness Organizational effectiveness is the concept of how effective an organization is in achieving the outcomes the organization intends to produce. The idea of organizational effectiveness is especially important for non-profit organizations as most people who donate money to non-profit . We continue to successfully execute To run a program, which causes the computer to carry out its instructions. See executable code, instruction and EXE file. execute - execution these and the other initiatives outlined in Business Now, our strategic plan, enabling us to take full advantage of an improving environment, when it arrives." Segment Results Print publishing results were depressed Depressed A description of a market, security, or product that is experiencing weak demand and lowering prices. Notes: A depressed market, security, or product implies that prices and volume are low. There are many reasons for a depressed market, security, or product. by the continued difficult global advertising environment, especially in our core financial and technology segments. Revenues declined 9.2% in the first quarter to $214.4 million. Advertising linage at The Wall Street Journal (U.S.) fell 11.0% (down 20.0% per issue in March) while per issue linage at the international editions of the Journal were up 11.9% (up 6.0% in March). Barron's ad pages were down 23.7% per issue in the quarter (down 30.6% in March). The print publishing segment had an operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $4.7 million in the first quarter, an improvement of 46.6% from the prior year period. Electronic publishing An umbrella term for non-paper publishing, which includes publishing online or on media such as CDs and DVDs. continued to post strong results. Revenues in the first quarter were $79.2 million, up 1.8% from the prior year period. Operating income was $16.8 million, up 10.5% from last year, and operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: improved to 21.3% this year from 19.6% last year, driven by improved performance at Indexes/Ventures and Consumer Electronic Publishing. Paid subscribers to The Wall Street Journal Online, the largest paid subscription news site on the web, reached 675,000 as of March 31, 2003, up 5.5% over March 31, 2002. Ottaway community newspapers Ottaway Community Newspapers (formerly Ottaway Newspapers, Inc.) is a subsidiary of Dow Jones and owns newspapers in California, Maine, Massachusetts, New Hampshire, New York, Oregon and Pennsylvania. It is headquartered in Campbell Hall, New York. continued its steady performance (results discussed here exclude operations divested and acquired during the last 12 months). Revenue increased 2.7% in the first quarter to $63.6 million. Advertising linage increased 0.1% in the first quarter (linage was down 5.2% in March). Ottaway operating income was up 1.6% to $12.5 million in the first quarter with an operating margin of 19.6% compared to 19.8% last year. During the first quarter, the Company repurchased 556,000 shares of its common stock at an aggregate cost of $19.8 million. The Company ended the first quarter 2003 with $119.9 million in debt, compared to $92.9 million at the end of 2002. As previously announced, the Company will host an earnings conference call at 10:00 a.m. Eastern standard time today. The call can be accessed via a live webcast through the Investor Relations Investor relations The process by which the corporation communicates with its investors. section of the Company's Web site, www.dowjones.com, or listen-only dial-in conference lines, by dialing 706-643-1846. A replay of the conference call and the full text of the prepared remarks will be available on the Company's Web site in the Investor Relations section shortly after the call concludes. Dow Jones & Company (NYSE: DJ; dowjones.com) publishes The Wall Street Journal and its international and online editions, Barron's and the Far Eastern Economic Review, Dow Jones Newswires Dow Jones Newswires is the real-time financial news organization owned by Dow Jones. Founded in 1882, its primary competitors are Bloomberg L.P. and Reuters. The company reports more than 420,000 subscribers -- including brokers, traders, analysts and fund managers -- as of July , Dow Jones Indexes and the Ottaway group of community newspapers. Dow Jones is co-owner with Reuters Reuters British cooperative news agency. Founded in 1851 by Paul Julius Reuter, it was initially concerned with commercial news but began to serve a growing newspaper clientele after the London Morning Advertiser subscribed in 1858. Group of Factiva Factiva is a division of Dow Jones & Company. The unit provides business and research information and services for the business and education communities. Factiva products provide access to more than 10,000 sources (such as newspapers, journals, magazines, news and radio , with Hearst of SmartMoney SmartMoney The Wall Street Journal Magazine of Personal Business was launched in 1992 by Hearst Corporation and Dow Jones & Company. Its first editor was Norman Pearlstine. It is published monthly and its current circulation is 824,327. and with NBC NBC in full National Broadcasting Co. Major U.S. commercial broadcasting company. It was formed in 1926 by RCA Corp., General Electric Co. (GE), and Westinghouse and was the first U.S. company to operate a broadcast network. of CNBC CNBC Center for the Neural Basis of Cognition (artificial intelligence) CNBC Consumer News and Business Channel CNBC Congress of National Black Churches, Inc. television operations in Asia and Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). . Dow Jones
also provides news content to CNBC and radio stations in the U.S.
Information Relating To relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. : This press release contains forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those anticipated, including the cyclical cyclical Of or relating to a variable, such as housing starts, car sales, or the price of a certain stock, that is subject to regular or irregular up-and-down movements. nature of the company's business and the strong negative impact of economic downturns, including the continuing effect of the war in Iraq, on advertising revenues; the severe weaknesses in the current technology and financial advertising markets; the extent of any recovery in the economy; the risk that the company will not benefit from any recovery in the economy; and such other risk factors as may be included from time to time in the company's reports filed with the Securities and Exchange Commission.
Dow Jones & Company
Earnings Summary
(Unaudited)
(in thousands, except
per share amounts) Quarters Ended March 31
2003 2002
-------- --------
Reported results:
Revenues $358,230 $392,891
Operating income 17,579 12,306
Net income 66,932 129,825
Effective tax rate(*) 8.8% 19.7%
Diluted EPS $ .82 $ 1.53
Excluding items described in Note 2:
Net income $ 9,721 $ 6,884
Effective tax rate(*) 40.0% 40.0%
Diluted EPS $ .12 $ .08
EPS percentage change 50.0% (52.9)%
(*) The effective income tax rate is net of minority interests.
See notes to financial information on page 10.
Reconciliation of Second Quarter Earnings Outlook
Quarters Ended June 30,
2003 Guidance 2002 Actual
-------- --------
Reported earnings per share mid-20 cents $ .64
per share
range(**)
Adjusted to remove:
Gain on sale of ONI property .45
Potential gain on exchange of WSJ Europe
and Handelsblatt interests .14
Restructuring charge related to a workforce
reduction (.07)
Special gains at equity method investments .05
Contract guarantee (.03) (.04)
-------- --------
EPS before special items mid-teens $ .25
cents
per share
range
(**) Based on special items currently anticipated.
Condensed Consolidated Statements of Income
(Unaudited)
(in thousands, except
per share amounts) Quarters Ended March 31
2003 2002
-------- --------
Revenues:
Advertising $190,508 $219,868
Information services 71,856 71,631
Circulation and other 95,866 101,392
-------- --------
Total revenues 358,230 392,891
Expenses:
News, operations and development 115,295 127,032
Selling, administrative and general 129,022 152,126
Newsprint 23,071 26,778
Print delivery costs 45,906 47,252
Depreciation and amortization 27,357 27,397
-------- --------
Operating expenses 340,651 380,585
-------- --------
Operating income 17,579 12,306
Other income (deductions):
Investment income 74 90
Interest expense (453) (1,589)
Equity in losses of
associated companies (1,849) (2,450)
Gain on reversal of Telerate sale
loss contingency 59,821
Gain on sale of businesses 153,407
Contract guarantee (2,610) (3,178)
Other, net 439 755
-------- --------
Income before income taxes and
minority interests 73,001 159,341
Income taxes 6,481 31,878
-------- --------
Income before minority interests 66,520 127,463
Minority interests 412 2,362
-------- --------
Net income $ 66,932 $129,825
======== ========
Net income per share:
- Basic $.82 $1.54
- Diluted $.82 $1.53
Weighted-average shares outstanding:
- Basic 81,791 84,319
- Diluted 82,028 84,849
See notes to financial information on page 10.
Dow Jones & Company
Segment Information
(Unaudited)
(dollars in thousands) Quarters Ended March 31
2003 2002
-------- --------
Revenues:
Print publishing $214,424 $236,048
Electronic publishing 79,187 77,800
Community newspapers:
Comparable operations 63,635 61,977
Divested/acquired operations 984 17,066
-------- --------
Consolidated revenues 358,230 392,891
Percentage change in revenues
excluding divested/acquired operations (4.9)% (14.9)%
Operating income:
Print publishing (4,685) (8,777)
Electronic publishing 16,831 15,227
Community newspapers:
Comparable operations 12,483 12,285
Divested/acquired operations 98 3,778
Corporate (7,148) (10,207)
-------- --------
Consolidated operating income $ 17,579 $ 12,306
======== ========
Operating margin:
Print publishing (2.2)% (3.7)%
Electronic publishing 21.3 19.6
Community newspapers:
Comparable operations 19.6 19.8
Divested/acquired operations 10.0 22.1
Consolidated operating margin 4.9 3.1
Depreciation and amortization (D&A):
Print publishing $ 17,680 $ 17,016
Electronic publishing 6,790 6,735
Community newspapers:
Comparable operations 2,704 2,813
Divested/acquired operations 54 593
Corporate 129 240
-------- --------
Consolidated D&A $ 27,357 $ 27,397
======== ========
See notes to financial information on page 10.
Dow Jones & Company
Supplemental Segment Revenue Information
(Unaudited)
(in thousands) Quarters Ended March 31
2003 2002
-------- --------
Print Publishing:
U.S. Publications:
Advertising $129,857 $148,166
Circulation and other 66,390 67,092
International Publications:
Advertising 9,993 11,711
Circulation and other 8,184 9,079
-------- --------
Total 214,424 236,048
Electronic Publishing:
Dow Jones Newswires:
Domestic 43,365 45,809
International 10,611 11,975
-------- --------
Total Newswires 53,976 57,784
Consumer Electronic Publishing(*) 15,371 12,792
Dow Jones Indexes/Ventures 9,840 7,224
-------- --------
Total 79,187 77,800
Community Newspapers:
Advertising
Comparable operations 44,931 43,343
Divested/acquired operations 760 12,016
-------- --------
Total advertising 45,691 55,359
Circulation and other
Comparable operations 18,704 18,634
Divested/acquired operations 224 5,050
-------- --------
Total circulation and other 18,928 23,684
Total 64,619 79,043
-------- --------
Total segment revenues $358,230 $392,891
======== ========
(*) Includes WSJ.com, related vertical sites, licensing/business
development and radio/audio.
See notes to financial information on page 10
Dow Jones & Company
Statistical Information
(Unaudited)
Quarters Ended March 31
2003 2002
-------- --------
Advertising Volume
Year-Over-Year Percentage Change:
The Wall Street Journal
General 2.5% (14.0)%
Technology (28.5) (39.8)
Financial (37.5) (33.3)
Classified 15.3 (17.1)
Total (11.0) (26.2)
The Asian Wall Street Journal 5.6 (44.5)
The Wall Street Journal Europe 22.1 (42.8)
Barron's (17.3) (23.8)
Ottaway Newspapers (*)
Daily (0.5) (2.6)
Non-daily 3.1 1.3
Total 0.1 (2.0)
Wall Street Journal advertising as a
percentage of total Journal linage:
General 43.2% 37.5%
Technology 16.9 21.0
Financial 16.3 23.3
Classified 23.6 18.2
Other statistics: March 31 March 31
2003 2002
-------- --------
Dow Jones Newswires terminals 303,000 348,000
WSJ.com subscribers 675,000 640,000
WSJ.com unique visitors/business day 129,000 112,000
Average monthly unique visitors to the
Journal Network (**) 5,975,000 N/A
Average monthly page views to the Journal
Network (**) 67,339,000 N/A
(*) Percentage excludes divested/acquired operations
(**) In conjunction with the relaunch of WSJ.com, page views and
unique visitors statistics are calculated under a new
methodology, prior year figures are not available on a
comparable basis. Journal Network consists of WSJ.com and
related vertical sites.
Dow Jones & Company
Notes to Financial Information 10
1. The company's calculation of net income and earnings per share
excluding special items may not be comparable to similarly titled
measures reported by other companies, since companies and investors
may differ as to what type of events warrant adjustment. Net income
and earnings per share excluding special items are not measures of
performance under generally accepted accounting principles and should
not be construed as substitutes for consolidated net income and
earnings per share as a measure of performance. However, management
uses these measures in comparing the company's historical performance
and believes that they provide meaningful and comparable information
to investors to assist in their analysis of the company's performance
relative to prior periods and its competitors.
2. The following table reconciles reported results to income
adjusted for special items for the quarters ended March 31, 2003 and
2002.
Quarters Ended March 31
(in millions, except 2003 2002
per share amounts) Pre-Tax Net EPS Pre-Tax Net EPS
-------------------- --------------------
Reported $73.0 $66.9 $ .82 $159.3 $129.8 $1.53
Adjusted to remove:
Included in non-operating
income:
Contract guarantee (a) (2.6) (2.6) (.03) (3.2) (3.2) (.04)
Gain on reversal of
Telerate sale loss
contingency (b) 59.8 59.8 .73
Sale of ONI
properties (c) 153.4 126.1 1.49
----- ----- ----- ------ ------ -----
Adjusted $15.8 $ 9.7 $ .12 $ 9.1 $ 6.9 $ .08
===== ===== ===== ====== ====== =====
(a) Contract Guarantee:
Under the terms of the company's 1998 sale of Telerate to Bridge
Information Systems (Bridge), Dow Jones retained its guarantee of
payments under certain circumstances of certain minimum payments for
data acquired by Telerate from Cantor Fitzgerald Securities (Cantor)
and Market Data Corporation (MDC). The annual minimum payments average
approximately $50 million per year through October 2006 under certain
conditions. Bridge agreed to indemnify Dow Jones for any liability Dow
Jones incurred under the contract guarantee with respect to periods
subsequent to Bridge's purchase of Telerate. In 2000, based in part on
uncertainty with Bridge's solvency as well as other factors, the
company established a reserve of $255 million representing the net
present value of the total minimum payments of about $300 million from
2001 through October 2006, using a discount rate of 6%. Bridge filed
for bankruptcy in February 2001 but made payments for this data for
the post-petition periods through October 2001, when Telerate ceased
operations, went out of business, sold certain assets and rejected its
contracts with Cantor and MDC. The company is now in litigation with
Cantor and MDC with respect to their claims for amounts due under the
contract guarantee. The company has various substantial defenses to
these claims and the litigation is proceeding.
The first quarter of 2003 and 2002 included charges related to the
accretion of the discount on the reserve balance of $2.6 million ($.03
per diluted share) and $3.2 million ($.04 per diluted share),
respectively.
Dow Jones & Company
Notes to Financial Information
(b) Gain on reversal of Telerate sale loss contingency:
In May 1998, the company established a reserve for loss
contingencies related to the sale of its Telerate subsidiary to
Bridge. In March 2003, based on a settlement in Bridge bankruptcy
proceedings, the company recorded a reversal of its reserve of $59.8
million ($.73 per diluted share).
(c) Gains on sale of ONI properties:
The first quarter of 2002 included a gain of $153.4 million
($126.1 million after taxes, or $1.49 per diluted share) resulting
from the sale of four of the company's Ottaway newspapers to Community
Newspapers Holdings, Inc.
3. The company's business and financial news and information
operations are reported in two segments: print publishing and
electronic publishing. The results of the company's Ottaway Newspapers
subsidiary, which publishes 14 daily newspapers and over 30 weeklies
and shoppers in 9 states in the U.S., are reported in the community
newspaper 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). Electronic publishing includes the
operations of Dow Jones Newswires, Consumer Electronic Publishing and
Dow Jones Indexes/Ventures.
4. Summarized financial information for 50% held equity-basis
investments in associated companies were as follows (amounts are at
100% levels):
(in thousands) Quarters Ended March 31
2003 2002
---- ----
Factiva
Revenues $62,153 $63,426
Operating income 2,284 4,651
Depreciation and amortization 3,202 3,848
SmartMoney
Revenues $12,093 $10,973
Operating income (loss) 88 (2,448)
Depreciation and amortization 440 508
CNBC International (*)
Revenues $ 8,301 $ 7,207
Operating loss (7,631) (8,727)
Depreciation and amortization 998 1,054
(*) Includes the results of CNBC Europe and CNBC Asia.
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