Dow Jones Reports Second Quarter Results; Provides 3rd Quarter Outlook.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- 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) today reported that it earned one cent 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 second quarter of 2005, compared with 41 cents per diluted share in the second quarter of 2004. Excluding the special items explained herein, the Company earned 34 cents per diluted share during the second quarter of 2005 compared with 41 cents per diluted share in the second quarter of 2004. Revenue of $454.2 million in the second quarter of 2005 increased 3.7% over the second quarter of 2004, 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. of $38.9 million declined 30.9%. Excluding special items, operating income declined 10.7% compared to the second quarter 2004, mainly due to profit declines in the Company's Print Publishing segment. Special Items: In the second quarter of 2005, the Company recorded special items netting to a loss of 33 cents per diluted share, including: a charge of 44 cents related to the transfer of its equity interest in CNBC CNBC Center for the Neural Basis of Cognition (artificial intelligence) CNBC Consumer News and Business Channel CNBC Congress of National Black Churches, Inc. International and CNBC World CNBC World is a business news channel operated in the United States by NBC Universal. The channel broadcasts programs from CNBC's international channels. Specifically, the entire business day schedule of CNBC Europe is broadcast live, along with the morning session programs to CNBC (separately announced last evening), which will strengthen the Company's profitability by eliminating about $15 million in annual equity losses; a loss of 8 cents for restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. for workforce reductions primarily related to the repositioning repositioning Laparoscopic surgery The changing of a Pt's position during a procedure to improve access or visualization of the operative field, which may be linked to complications, as it changes anatomic planes of operation. Cf Laparoscopic surgery. of the Company's international print and online operations, which are expected to save about $17 million annually, beginning in 2006; and a loss of 1 cent 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 on a contract-guarantee obligation; a gain of 11 cents from the sale of the Company's non-strategic minority interest in F.F. Soucy for $40 million, which contributed less than one million in after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. equity income in 2004, and a gain of 10 cents on the unwind Unwind 1. The closure of an investment position. 2. The reconciliation of an error previously unseen by a brokerage house. Notes: 1. Sometimes referred to as closing out a position. of the remaining shareholdings between Handelsblatt The Handelsblatt is the leading German commercial economy newspaper published by the Verlagsgruppe Handelsblatt in Düsseldorf, a subsidiary of Georg von Holtzbrinck Publishing Group. It has a circulation of 148,319 daily copies. Its editor-in-chief is Bernd Ziesemer. and The Wall Street Journal 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). . In the second quarter of 2004, special items
netted to zero cents per share Cents per shareThe amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. as a special gain of two cents per share related to the disposition Act of disposing; transferring to the care or possession of another. The parting with, alienation of, or giving up of property. The final settlement of a matter and, with reference to decisions announced by a court, a judge's ruling is commonly referred to as disposition, regardless of of an investment was offset by a loss of two cents per share for accretion of discount on a contract-guarantee obligation. Commenting on second quarter results, Peter R. Kann, chairman and chief executive officer of Dow Jones, said, "Our results continue to be adversely affected by declines in B2B (Business to Business) Refers to one business communicating with or selling to another. See B2B e-commerce, B2C and B2G. B2B - business to business advertising in our Print Publishing segment, a situation we see improving in the third quarter 2005. Meantime, we remain focused on executing exciting initiatives such as our acquisition and integration of MarketWatch MarketWatch operates a financial information website that provides business news, analysis and stock market data to some 6 million people. MarketWatch offers personal finance news and advice, tools for investors and access to industry research. and the September September: see month. 17th launch of the Weekend Edition of The Wall Street Journal--both of which are tracking ahead of expectations. In addition, we continued to control costs and announced the repositioning of our international print and online editions and exit from our CNBC international television partnership." Dow Jones said it estimates third quarter 2005 earnings per share before special items and dilution Dilution A reduction in earnings per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities. Notes: Adding to the number of shares outstanding reduces the value of holdings of existing shareholders. from Weekend Edition and MarketWatch to be up slightly over the 15 cents per share earned in the third quarter of 2004. After an estimated six to seven cents per share dilution from Weekend Edition and MarketWatch, the Company expects third quarter 2005 earnings per share in the low double digit Noun 1. double digit - a two-digit integer; from 10 to 99 integer, whole number - any of the natural numbers (positive or negative) or zero; "an integer is a number that is not a fraction" cents per share range. This assumes Monday Monday: see week. thru Friday Friday: see Sabbath; week. Friday young Indian rescued by Crusoe and kept as servant and companion. [Br. Lit.: Robinson Crusoe] See : Servant 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. at the U.S. Wall Street Journal will be up slightly with total linage including two Saturday Saturday: see week; Sabbath. Weekend Edition issues up in the low to mid single digit A single character in a numbering system. In decimal, digits are 0 through 9. In binary, digits are 0 and 1. digit - An employee of Digital Equipment Corporation. See also VAX, VMS, PDP-10, TOPS-10, DEChead, double DECkers, field circus. range in the third quarter 2005 compared to the third quarter 2004. Based on currently anticipated special items in the third quarter of 2005, the Company expects reported earnings per share to be in the low double digit cents per share range, compared with 15 cents per share in the third quarter of 2004. Segment Results Print Publishing revenue of $235.5 million in the second quarter of 2005 declined 7.2%, and operating income of $7.2 million was down 58.2% versus the same period a year ago due to a decline in advertising revenue. Advertising linage at the U.S. Wall Street Journal decreased 6.3% (down 11.7% in June June: see month. ) while linage at the international editions of the Journal decreased 2.0% (down 10.3% in June). Barron's advertising pages decreased 8.3% in the quarter (up 0.5% in June). Electronic Publishing An umbrella term for non-paper publishing, which includes publishing online or on media such as CDs and DVDs. revenue of $128.4 million in the second quarter of 2005 increased 33.5% from the same period a year ago, driven by the acquisition of MarketWatch, together with increased revenue in all electronic publishing business units. Operating income of $29.4 million in the second quarter of 2005 increased 28.1% over last year primarily due to the acquisition of MarketWatch and organic growth at Consumer Electronic Publishing and Indexes. Operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: of 22.9% in the second quarter of 2005 was down slightly from the previous year's 23.8%. Terminal counts at Newswires were down 1.7% compared to last year. Paid subscribers to The Wall Street Journal Online grew to 744,000 as of June 30, 2005, up 8.8% from the prior year period. Ottaway Newspapers' revenue of $90.3 million in the second quarter of 2005 increased 2.8% from the same period a year ago. Operating income of $22.6 million was down 10.2% and operating margin was 25.0% versus 28.7% last year mainly due to higher newsprint newsprint low grade paper used for newspapers. Old newspapers are fed to cattle as an alternative roughage and may occasionally be ingested by dogs. Significant amounts of lead are accumulated in tissues; no cases of poisoning have been recorded in cattle, though it has been prices and planned expenses related to a new Internet See Web 2.0 and Internet2. initiative and content management system. Advertising linage decreased 0.1% in the second quarter (up 0.5% in June). The Company ended the second quarter of 2005 with $517 million in debt compared to $616 million at the end of the first quarter 2005 and $215 million at the end of the second quarter of 2004. The increase over prior year is due to the incurrence In`cur´rence n. 1. The act of incurring, bringing on, or subjecting one's self to (something troublesome or burdensome); as, the incurrence of guilt, debt, responsibility, etc. s> Noun 1. in January January: see month. 2005 of an additional $439 million in debt to finance the Company's acquisition of MarketWatch. As previously announced, the Company will host an earnings conference call at 10 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy today. The call can be accessed via a live Web cast 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 through a listen-only, dial-in conference line, by dialing 877-407-3140. 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, MarketWatch 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 Universal NBC Universal is a media and entertainment company formed in May 2004 by the combination of General Electric's NBC with Vivendi Universal Entertainment (part of the French Media Group, Vivendi SA). GE owns 80% of NBC Universal with the remaining 20% owned by Vivendi SA. of CNBC television operations in Asia and Europe. 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 on advertising revenues, particularly in the Company's core advertising market-B2B advertising; the risk that inconsistent Reciprocally contradictory or repugnant. Things are said to be inconsistent when they are contrary to each other to the extent that one implies the negation of the other. trends across major advertising categories, such as technology and finance, will continue and that B2B advertising levels, particularly in technology and finance, may or may not return to historical levels; the Company's ability to expand and diversify diversify To acquire a variety of assets that do not tend to change in value at the same time. To diversify a securities portfolio is to purchase different types of securities in different companies in unrelated industries. the Journal's market segment focus beyond financial and technology; the Company's ability to limit and manage expense growth, especially in light of its prior cost cutting and its planned growth initiatives; intense competition for ad revenues and readers the Company's products and services face; the impact on the future circulation of the Journal and community newspapers that may be caused by the declining frequency of regular newspaper buying by young people; the Company's ability to successfully integrate the MarketWatch business into its existing business units, and to achieve production and operational efficiencies and synergies in doing so; with respect to Newswires and other subscription-based products and services, the negative impact of business consolidations and layoffs in the financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. industry on sales; the uncertainties relating to the Company's guarantee to Cantor Fitzgerald Cantor Fitzgerald L.P. is a global financial services firm specializing in bond trading, as well as investment banking, asset management, market data and brokerage services. Securities and Market Data Corporation; 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 and posted in the Investor Relations section of the Company's web site (www.dowjones.com). This press release includes certain non-GAAP financial measures as defined under SEC rules. As required by SEC rules, we have attached to this press release a reconciliation of those measures to the most directly comparable GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). measures. This reconciliation is also available on the Investor Relations page of our web site (www.dowjones.com).
Dow Jones & Company, Inc.
Earnings Summary
(Unaudited)
(in thousands, except per share amounts)
Quarters Ended Six Months Ended
June 30 June 30
------------------- -------------------
2005 2004 2005 2004
-------- -------- -------- --------
Reported results:
Revenues $454,198 $437,790 $866,270 $839,411
Operating income $ 38,896 $ 56,290 $ 55,865 $ 90,049
Net income $ 861 $ 34,041 $ 9,041 $ 51,857
Effective tax rate* 96.0% 42.3% 74.5% 42.0%
Diluted EPS $ .01 $ .41 $ .11 $ .63
Excluding items described in
Note 2:
Operating income $ 50,263 $ 56,290 $ 67,232 $ 87,288
Net income $ 28,020 $ 34,019 $ 37,499 $ 52,158
Effective tax rate* 40.3% 40.9% 39.7% 40.1%
Diluted EPS $ .34 $ .41 $ .45 $ .63
EPS percentage change (17.1)% 51.9 % (28.6)% 61.5%
* The effective income tax rate is net of minority interests.
See notes to financial information on page 10.
Reconciliation of Third Quarter Earnings Outlook
Quarters Ended September 30
---------------------------
2004
2005 Guidance Actual
----------------- -------
Low
double
Reported earnings per share digits cents $.15
per share range**
Adjusted to remove:
Contract guarantee (.01) (.02)
Certain income tax matters - .02
----------------- -------
Low double
EPS before special items digits cents $.15
per share range** =======
** Based on special items currently anticipated.
Dow Jones & Company, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
(in thousands, except per Quarters Ended Six Months Ended
share amounts) June 30 June 30
------------------ ------------------
2005 2004 2005 2004
-------- -------- -------- --------
Revenues:
Advertising $249,876 $255,836 $467,620 $482,535
Information services 103,590 81,518 202,059 157,345
Circulation and other 100,732 100,436 196,591 199,531
-------- -------- -------- --------
Total revenues 454,198 437,790 866,270 839,411
Expenses:
News, production and
technology 141,166 130,052 276,427 252,609
Selling, administrative and
general 159,129 148,779 319,314 294,014
Newsprint 31,086 28,947 59,287 56,578
Print delivery costs 46,184 47,024 90,550 94,869
Depreciation and amortization 26,370 26,698 53,460 54,053
Restructuring charges
(reversals) 11,367 - 11,367 (2,761)
-------- -------- -------- --------
Total operating expenses 415,302 381,500 810,405 749,362
-------- -------- -------- --------
Operating income 38,896 56,290 55,865 90,049
Other income (expense):
Investment income 190 165 485 256
Interest expense (4,903) (800) (8,912) (1,448)
Equity in earnings of
associated companies 1,832 2,139 2,566 1,399
Gain on disposition of
investments 22,862 3,260 22,862 3,260
Write-down of investments (35,865) - (35,865) -
Contract guarantee (1,117) (1,819) (2,416) (3,804)
Other, net (486) (499) 853 (1,265)
-------- -------- -------- --------
Income before income taxes and
minority interests 21,409 58,736 35,438 88,447
Income taxes 20,548 25,004 26,397 37,485
-------- -------- -------- --------
Income before minority
interests 861 33,732 9,041 50,962
Minority interests - 309 - 895
-------- -------- -------- --------
Net income $ 861 $ 34,041 $ 9,041 $ 51,857
======== ======== ======== ========
Net income per share:
- Basic $ .01 $ .42 $ .11 $ .63
- Diluted .01 .41 .11 .63
Weighted-average shares
outstanding:
- Basic 82,714 81,799 82,474 81,779
- Diluted 83,200 82,211 82,970 82,211
See notes to financial information on page 10.
Dow Jones & Company, Inc.
Segment Information
(Unaudited)
Quarters Ended Six Months Ended
(dollars in thousands) June 30 June 30
------------------- -------------------
2005 2004 2005 2004
-------- -------- -------- --------
Revenues:
Print publishing $235,485 $253,761 $452,216 $491,336
Electronic publishing 128,423 96,214 245,602 182,583
Community newspapers 90,290 87,815 168,452 165,492
-------- -------- -------- --------
Consolidated revenues $454,198 $437,790 $866,270 $839,411
======== ======== ======== ========
Percentage change in
revenues excluding
newly-acquired operations (1.1)% 7.6% (2.2)% 8.3%
Operating income (loss):
Print publishing $ 7,224 $ 17,289 $ 170 $ 21,913
Electronic publishing 29,385 22,947 50,848 41,460
Community newspapers 22,603 25,161 35,933 42,133
Corporate (8,949) (9,107) (19,719) (18,218)
-------- -------- -------- --------
Segment operating income 50,263 56,290 67,232 87,288
Restructuring (charges)
reversals (11,367) - (11,367) 2,761
-------- -------- -------- --------
Consolidated operating
income $ 38,896 $ 56,290 $ 55,865 $ 90,049
======== ======== ======== ========
Operating margin:
Print publishing 3.1% 6.8% -% 4.5%
Electronic publishing 22.9% 23.8% 20.7% 22.7%
Community newspapers 25.0% 28.7% 21.3% 25.5%
Segment operating margin 11.1% 12.9% 7.8% 10.4%
Depreciation and
amortization (D&A):
Print publishing $ 13,714 $ 16,866 $ 28,590 $ 34,542
Electronic publishing 9,538 6,950 18,775 13,610
Community newspapers 3,080 2,839 6,020 5,818
Corporate 38 43 75 83
-------- -------- -------- --------
Consolidated D&A $ 26,370 $ 26,698 $ 53,460 $ 54,053
======== ======== ======== ========
See notes to financial information on page 10.
Dow Jones & Company, Inc.
Supplemental Segment Revenue Information
(Unaudited)
Quarters Ended Six Months Ended
(in thousands) June 30 June 30
----------------- -----------------
2005 2004 2005 2004
-------- -------- -------- --------
Print publishing:
U.S. publications:
Advertising $149,885 $165,535 $285,501 $316,717
Circulation and other 65,479 66,104 129,782 132,057
-------- -------- -------- --------
Total for U.S. publications 215,364 231,639 415,283 448,774
International publications:
Advertising 12,339 13,996 22,137 25,916
Circulation and other 7,782 8,126 14,796 16,646
-------- -------- -------- --------
Total for international
publications 20,121 22,122 36,933 42,562
-------- -------- -------- --------
Total for print publishing 235,485 253,761 452,216 491,336
Electronic publishing:
Dow Jones Newswires:
North America 50,282 48,945 99,146 93,348
International 16,730 14,616 32,863 25,413
-------- -------- -------- --------
Total newswires 67,012 63,561 132,009 118,761
Consumer Electronic Publishing* 44,131 19,893 80,471 38,062
Dow Jones Indexes/Ventures 17,280 12,760 33,122 25,760
-------- -------- -------- --------
Total electronic publishing 128,423 96,214 245,602 182,583
Community newspapers:
Advertising 68,742 66,317 126,690 123,185
Circulation and other 21,548 21,498 41,762 42,307
-------- -------- -------- --------
Total community newspapers 90,290 87,815 168,452 165,492
-------- -------- -------- --------
Total segment revenues $454,198 $437,790 $866,270 $839,411
======== ======== ======== ========
* Includes WSJ.com, related vertical sites, licensing/business
development, radio/audio, and the January 2005 acquisition of
MarketWatch, Inc.
See notes to financial information on page 10.
Dow Jones & Company, Inc.
Statistical Information
(Unaudited)
Quarters Ended Six Months
June 30 Ended June 30
-------------- ------------------------
2005 2004 2005 2004
------ ------ ------------ ----------
Advertising volume
increase/(decrease)*:
The Wall Street Journal:
General (5.1)% 17.7% (2.1)% 5.5%
Technology (18.1) (30.2) (19.1) (19.8)
Financial (14.5) 5.3 (19.9) 24.5
Classified 5.6 10.5 3.7 9.2
Total (6.3) 3.3 (7.1) 4.7
The Asian Wall Street Journal (0.6) 5.0 (4.0) 6.3
The Wall Street Journal Europe (3.4) 8.6 (12.0) 10.9
Barron's (8.3) 21.1 (10.6) 21.5
Ottaway Newspapers:
Daily 0.8 3.8 (0.3) 3.2
Non-daily (3.9) 13.2 (5.2) 13.2
Total (0.1) 5.5 (1.2) 4.9
The Wall Street Journal
advertising as a
percentage of total Journal
linage*:
General 43.1% 42.5% 41.6% 39.4%
Technology 14.2 16.3 14.6 16.8
Financial 16.0 17.6 17.3 20.0
Classified 26.7 23.6 26.5 23.8
Other statistics: June 30
------------------------
2005 2004
------------ ----------
Dow Jones Newswires terminals 286,000 291,000
WSJ.com subscribers 744,000 684,000
WSJ.com unique
visitors/business day 170,000 143,000
Average monthly unique visitors to Dow
Jones Online** 8,654,000 8,265,000
Average monthly page views to Dow
Jones Online 276,132,000 n/a
* General and technology advertising for 2004 was reclassified to
conform to the current year presentation.
** Average monthly unique visitors to Dow Jones Online is from
NielsenNetRatings. The 2005 amount includes WSJ.com,
MarketWatch.com, BigCharts.com, Barron's Online, and the Journal's
other vertical websites. The 2004 amount represents comparable
unduplicated audience (i.e., unique visitors).
A[micro] Dow Jones & Company, Inc.
A[micro] Notes to Financial Information
A[micro] 1. The Company's calculation of net income, operating 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, operating 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, operating 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.
A[micro] 2. The following table reconciles reported results to income
adjusted for special items for the second quarter and the six months
ended June 30, 2005 and 2004:
Quarters Ended June 30
------------------------------------------------
(in millions, except 2005 2004
per share amounts) ------------------------ ----------------------
Operating Net EPS Operating Net EPS
--------- ------ ----- --------- ----- -----
Reported income $ 38.9 $ 0.9 $ .01 $ 56.3 $34.0 $ .41
Adjusted to remove:
Included in
operating income:
Restructuring
charges (a) (11.4) (6.9) (.08)
Included in non-
operating income:
Contract guarantee (b) (1.1) (.01) (1.8) (.02)
Gain on disposition
of
investments (c) 17.7 .21 1.8 .02
Write-down of
investments (d) (36.7) (.44)
--------- ------ ----- --------- ----- -----
Adjusted income $ 50.3 $ 28.0* $ .34* $ 56.3 $34.0 $ .41
========= ====== ===== ========= ===== =====
Six Months Ended June 30
-------------------------------------------------
(in millions, except 2005 2004
per share amounts) ------------------------ -----------------------
Operating Net EPS Operating Net EPS
--------- ------ ----- --------- ----- -----
Reported income $ 55.9 $ 9.0 $ .11 $ 90.0 $51.9 $ .63
Adjusted to remove:
Included in
operating income:
Restructuring
charges (a) (11.4) (6.9) (.08) 2.8 1.7 .02
Included in non-
operating income:
Contract guarantee (b) (2.4) (.03) (3.8) (.04)
Gain on
disposition of
investments (c) 17.7 .21 1.8 .02
Write-down of
investments (d) (36.7) (.44)
--------- ------ ----- --------- ----- -----
Adjusted income $ 67.2* $ 37.5* $ .45 $ 87.3* $52.2 $ .63
========= ====== ===== ========= ===== =====
* The sum of the individual amounts does not equal total due to
rounding.
A[micro] (a) Restructuring charges:
A[micro] 2005
A[micro] In the second quarter of 2005, the Company recorded a
restructuring charge of $11.4 million ($6.9 million, net of taxes)
primarily reflecting employee severance related to a workforce
reduction of about 120 full-time employees. Most of the charge relates
to the Company's efforts to reposition its international print and
online operations but also includes headcount reductions at other
parts of the business.
A[micro] 2004
A[micro] In the fourth quarter 2001, the Company recorded a charge of $32.2
million as a result of its decision to permanently re-deploy certain
personnel and abandon four of seven floors that were leased at its
World Financial Center headquarters. This charge primarily reflected
the Company's rent obligation through May 2005 on this vacated space.
A[micro] In the first quarter 2004, the Company renewed its lease at the
World Financial Center, including extending the term of one of the
floors that was previously abandoned. The Company reoccupied this
floor with personnel from another of its New York locations, whose
lease term was expiring. As a result, the Company reversed $2.8
million ($1.7 million, net of taxes) of the remaining lease obligation
reserve for the previously abandoned floor at WFC.
A[micro] Restructuring charges are not included in segment expenses, as
management evaluates segment results exclusive of these items. For
information purposes, the restructuring charge in 2005 and the
reversal of the lease obligation reserve in 2004 allocable by segment
for the quarters and six months ended June 30, 2005 and 2004 were as
follows:
Quarters Ended Six Months
(in thousands) June 30 Ended June 30
------------- ---------------
2005 2004 2005 2004
------- ----- ------- -------
Print Publishing $ 8,585 $ - $ 8,585 $(2,631)
Electronic Publishing 1,969 - 1,969 (125)
Corporate 813 - 813 (5)
------- ----- ------- -------
Total $11,367 $ - $11,367 $(2,761)
======= ===== ======= =======
(b) Contract guarantee: Under the terms of the Company's 1998 sale of Telerate to Bridge Information Systems (Bridge), the Company retained its guarantee of payments under certain circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or of certain minimum payments for data acquired by Telerate from Cantor Fitzgerald Securities (Cantor) and Market Data Corporation (MDC (1) (Mobile Daughter Card) See riser card. (2) See Meta Data Coalition. ). The annual minimum payments average approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $50 million per year through October October: see month. 2006 under certain conditions. Bridge agreed to indemnify To compensate for loss or damage; to provide security for financial reimbursement to an individual in case of a specified loss incurred by the person. Insurance companies indemnify their policyholders against damage caused by such things as fire, theft, and flooding, which the Company for any liability the Company 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 The ability of an individual to pay his or her debts as they mature in the normal and ordinary course of business, or the financial condition of owning property of sufficient value to discharge all of one's debts. solvency n. as well as other factors, the Company established a reserve of $255 million representing the present value of the total estimated minimum annual payments of about $300 million from 2001 through October 2006, using a discount rate of 6%. Bridge filed for bankruptcy bankruptcy, in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most in February February: see month. 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 An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called 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 trial court in January 2003 denied motions by each of the parties that their own claims for relief be granted and that competing claims be dismissed dis·miss tr.v. dis·missed, dis·miss·ing, dis·miss·es 1. To end the employment or service of; discharge. 2. . Appeals from those decisions were not pursued, and discovery has concluded. Dispositive motions In law, a dispositive motion is a motion seeking a trial court order entirely disposing of one or more claims in favor of the moving party without need for further trial court proceedings. "To dispose" of a claim means to decide the claim in favor of one or another party. have been fully briefed for the court. The trial previously scheduled to begin in June 2005 has been adjourned and no new trial date has been set. The second quarter of 2005 and 2004 included charges related to the accretion of the discount on the reserve balance of $1.1 million ($.01 per diluted share) and $1.8 million ($.02 per diluted share), respectively. These charges totaled $2.4 million ($.03 per diluted share) and $3.8 million ($.04 per diluted share) in the first half of 2005 and 2004, respectively. (c) Gain on disposition of investments: 2005 In April 2005, the Company concluded the sale of its 39.9% minority interest in F.F. Soucy Inc., a Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. newsprint mill, to its majority owner, Brant-Allen Industries, Inc. The sale price of $40 million in cash generated approximately $38 million in after-tax proceeds, which were used to reduce the Company's commercial paper borrowings. The Company recorded an after-tax gain of $9.4 million ($.11 per diluted share) in the second quarter. During the second quarter of 2005, the Company and the von Holtzbrinck Group completed its exchange of cross shareholdings. In exchange for the Company's 10% interest in Handelsblatt, the Company received the remaining minority shareholdings in The Wall Street Journal Europe, an 11.5% increase in its interest in a Czech Republic Czech Republic, Czech Česká Republika (2005 est. pop. 10,241,000), republic, 29,677 sq mi (78,864 sq km), central Europe. It is bordered by Slovakia on the east, Austria on the south, Germany on the west, and Poland on the north. business periodical periodical, a publication that is issued regularly. It is distinguished from the newspaper in format in that its pages are smaller and are usually bound, and it is published at weekly, monthly, quarterly, or other intervals, rather than daily. and $6 million in cash. The Company recorded an after-tax gain of $8.3 million ($.10 per diluted share) in connection with the disposal of its interest in Handelsblatt. 2004 On April 2, 2004, simultaneous with the Company's acquisition of the remaining interest in the news operations of Vereinigte Wirtschaftsdienste GmbH GmbH Gesellschaft mit Beschränkter Haftung (German: limited liability company; business entity) (VWD VWD von Willebrand's disease. ), VWD sold its non-news assets to a third party, resulting in cash proceeds to the Company of $6.7 million. The Company was a minority shareholder in VWD. As a result of this sale, the Company recorded an after-tax gain of $1.8 million, or $.02 per diluted share, in the second quarter of 2004. (d) Write-down Write-Down Reducing the book value of an asset because it is overvalued compared to the market value. Notes: This is usually reflected in the company's income statement as an expense, thereby reducing net income. of investments: In July July: see month. 2005, the Company and NBC Universal agreed to transfer the Company's 50% interests in both CNBC Europe CNBC Europe is a business and financial news channel broadcast in Europe. It is the European version of CNBC. It is operated by NBC Universal, and headquartered in London. and CNBC Asia CNBC Asia is a business news channel in Asia. A subsidiary of NBC Universal, it is the Asian service of Consumer News and Business Channel (CNBC). It is broadcast from Singapore and Hong Kong. History CNBC Asia launched in 1995. (collectively CNBC International), as well as its 25% interest in CNBC World, to NBC Universal as of December December: see month. 31, 2005 for nominal Trifling, token, or slight; not real or substantial; in name only. Nominal capital, for example, refers to extremely small or negligible funds, the use of which in a particular business is incidental. NOMINAL. Relating to a name. consideration. The transfer of the Company's interest in CNBC Asia requires the mutually satisfactory resolution of certain structural matters prior to December 31, 2005. Under the agreement, the Company will fund its CNBC International capital requirements Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. for the remainder of 2005, up to approximately $6 million, and through 2006 the Company will continue to provide access to news resources and other services to CNBC International, nonexclusively. There are no plans to alter the licensing relationship in the U.S. between the Company and CNBC. As a result of this agreement, the Company recorded a charge of $36.7 million ($.44 per diluted share) in its second quarter of 2005, largely reflecting the write-down of its carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. (approximately $.39 of the charge), with the remainder primarily reflecting the additional committed cash funding. 3. The Company made the following acquisitions during the first half of 2005 and 2004: Acquisition of MarketWatch in 2005 On January 21, 2005, the Company completed its acquisition of MarketWatch, Inc. (MarketWatch) for a purchase price of approximately $538 million. The purchase price consisted of cash tendered totaling $507.7 million to acquire the 28.2 million outstanding common shares of MarketWatch; the exchange of 1.2 million stock options valued at $25 million using the Black-Scholes option pricing model option pricing model A mathematical formula for determining the price at which an option should trade. The model expresses the value of an option as a function of the value of the underlying asset, length of time until maturity, exercise price, yields on ; and, direct third party transaction costs Transaction Costs Costs incurred when buying or selling securities. These include brokers' commissions and spreads (the difference between the price the dealer paid for a security and the price they can sell it). of approximately $5 million. This acquisition was financed by $439 million of short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. commercial paper borrowings and cash, including cash received from MarketWatch of $74 million. In February 2005, the Company refinanced $225 million of its commercial paper borrowings with three-year bonds bearing a fixed interest rate of 3.875%. Acquisition of remaining interest in VWD news operations in 2004 On April 2, 2004, the Company acquired the remaining interest in the news operations of Vereinigte Wirtschaftsdienste GmbH (VWD), a German newswires business, for $12.1 million. The acquired business consists of financial newswires and business newsletters, which have been combined into the Company's Dow Jones Newswires business, under the brand name Dow (Direct OverWrite) See magneto-optic disk. Jones-VWD News. The Company was a minority shareholder in VWD. Acquisition of Alternative Investor in 2004 On March 19, 2004, the Company completed its acquisition of Alternative Investor from Wicks Business Information for $85 million plus net working capital. The $85 million purchase price could be increased by $5 million, payable in 2008, based on the performance of the acquired business. The acquisition was funded by the issuance of debt under the Company's commercial paper program. Alternative Investor is a provider of newsletters, databases and industry conferences for the venture-capital and private-equity markets, and has been combined into the Company's Dow Jones Newswires business. 4. The Company reports the results of its operations in three segments: print publishing, electronic publishing and community newspapers. In addition, the Company reports certain administrative activities under the corporate segment. Print publishing, which is largely comprised of the global editions of The Wall Street Journal, publishes business and financial content world-wide. This content is published primarily in the U.S., Europe, Asia and Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. editions of The Wall Street Journal as well as in Barron's and on U.S. television through a licensing arrangement with CNBC. Electronic publishing, which electronically distributes business and financial news and information, includes the operations of Dow Jones Newswires, Consumer Electronic Publishing and Dow Jones Indexes/Ventures. Consumer Electronic Publishing includes the results of WSJ WSJ Wall Street Journal WSJ Wisconsin State Journal (Madison, WI) WSJ Web Services Journal WSJ Winston-Salem Journal (North Carolina) WSJ Wagle Street Journal (Kathmandu, Nepal blog) .com and its related vertical sites, MarketWatch and the Company's licensing/business development and radio/audio businesses. The community newspapers segment publishes 15 daily newspapers, 12 Sunday papers Sunday paper n → (periódico) dominical m Sunday paper n → journal m du dimanche and more than 30 weekly newspapers and "shoppers" in nine states in the U.S. 5. Summarized financial information for 50% held equity-basis investments in associated companies associated company associate n → Partnerfirma f associated company n → società collegata were as follows (amounts are at 100% levels):
Quarters Ended Six Months Ended
(in thousands) June 30 June 30
---------------- ------------------
2005 2004 2005 2004
------- ------- -------- --------
Factiva
Revenues $71,327 $66,637 $139,507 $130,171
Operating income 3,668 6,009 7,346 10,269
Depreciation and amortization 2,919 3,340 5,699 6,442
SmartMoney
Revenues $13,798 $12,904 $ 26,556 $ 25,074
Operating income (loss) 124 (88) 25 (586)
Depreciation and amortization 125 211 249 422
CNBC International *
Revenues $14,401 $11,629 $ 25,571 $ 20,486
Operating loss (4,550) (6,429) (12,063) (14,995)
Depreciation and amortization 642 785 1,315 1,741
* Includes the results of CNBC Europe and CNBC Asia. See also Note 2
regarding the write-down of the Company's investment in CNBC
International.
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