EX-99 3 exhibit991earnings.txt DOW JONES THIRD QUARTER EARNINGS RELEASE Exhibit 99.1 Investor Contacts: Dow Jones & Company Mark Donohue 200 Liberty Street Director, Investor Relations New York, NY 10281 (609) 520-5660 Richard Zannino Executive Vice President, COO (212) 416-4205 Media Contact: Brigitte Trafford Vice President, Communications (212) 416-3213 DOW JONES REPORTS IMPROVED REVENUE AND PROFIT FOR THIRD QUARTER 2003 Provides 4th Quarter Outlook NEW YORK, N.Y. (October 14, 2003)-- Dow Jones & Company (NYSE: DJ) reported today that it earned 11 cents per diluted share during the third quarter ended September 30, 2003, compared with 3 cents per diluted share in the third quarter of 2002. Excluding the special items explained herein, the Company earned 14 cents per diluted share during the third quarter 2003, an increase of 133% from the 6 cents per diluted share earned in the third quarter 2002. A special charge of 3 cents per share was recorded in the third quarter of both 2002 and 2003 for accretion of the discount for contract guarantee obligations. Please refer to the attached financial exhibits and notes for more details on the Company's results. Revenue increased 6.7% in the third quarter of 2003 to $375.9 million, led by a 7.1% increase in U.S. Wall Street Journal linage, compared with the third quarter of 2002. Third quarter linage at the Journal was driven by a 29.4% increase in September. Operating expenses were $359.1 million, up 4.3% from the third quarter of 2002, and operating income was $16.8 million (4.5% of revenue), up 111% over last year's $8.0 million (2.3% of revenue). Commenting on the quarter's results, Peter R. Kann, chairman and CEO of Dow Jones & Company, said: "We are very pleased with the acceleration in Wall Street Journal ad linage in September. Together with continued tight cost control and many operational improvements successfully executed as part of our strategic plan, Business Now, drove our much-improved financial performance in the third quarter. While we're not ready to call an end to this severe B2B ad recession, we are cautiously optimistic that the worst is now behind us. In any event, we will continue to do all we can to further improve the quality of our products and to maximize our revenue growth, operating leverage and profitability in any environment." Dow Jones also said that it expects earnings per share before special items in the fourth quarter 2003 to be around the 40 cents per share range, compared to 34 cents per share in the fourth quarter 2002. This assumes that fourth quarter 2003 linage at the U.S. Wall Street Journal will be up in the low to mid single digit percentage range versus the fourth quarter 2002. Based on currently anticipated special items that may occur in the fourth quarter 2003, the Company expects reported earnings per share to be around the 50 cents per share range, compared with 18 cents per share in the fourth quarter 2002. Please refer to the attached table for a reconciliation of the Company's fourth quarter earnings. Segment Results Print publishing revenues increased 4.0% in the third quarter to $213.6 million. Advertising linage at The Wall Street Journal (U.S.) increased 7.1% (up 29.4% in September, with one extra issue) while linage at the international editions of the Journal increased 26.3% (up 44.1% in September, with one extra issue in both the European and Asian editions). Barron's ad pages were down 8.9% in the quarter with one less issue (up 4.1% in September). The print publishing segment had an operating loss of $11.5 million in the third quarter, seasonally its weakest quarter, an improvement of 36.2% compared to a loss of $18.0 million last year. Electronic publishing revenues in the third quarter were $79.4 million, up 5.6% from the prior year period. Operating income was $17.1 million, up 25.9% from last year, while operating margins improved to 21.5% this year from 18.1% last year, driven by improved performance at Consumer Electronic Publishing and Indexes/Ventures. Paid subscribers to The Wall Street Journal Online, the largest paid subscription news site on the web, grew to 686,000 as of September 30, 2003, up 3.3% over September 30, 2002. Ottaway community newspapers' revenue in the third quarter was $83.0 million, up 15.5% over the prior year period (revenues would have been flat excluding the May 2003 acquisition of The Record of Stockton). Same property advertising linage decreased 1.7% in the third quarter (linage was down 6.1% in September with one less Sunday). Ottaway total operating income was up 5.9% to $21.8 million in the third quarter with an operating margin of 26.2% compared to 28.6% last year, primarily because of increased newsprint and pension costs. The Company ended the third quarter with $193.6 million in debt, compared with $210.3 million at the end of the second quarter 2003. 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 section of the Company's Web site, www.dowjones.com, or through a listen-only dial-in conference line, by dialing 201-689-8320. 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 Indexes and the Ottaway group of community newspapers. Dow Jones is co-owner with Reuters Group of Factiva, with Hearst of SmartMoney and with NBC 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 Forward-Looking Statements: 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 nature of the company's business and the strong negative impact of economic downturns on the company's core advertising market--business-to-business advertising--and on advertising revenues in general; 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; the company's ability to continue to limit and manage expense growth without harming its growth prospects; the uncertainties relating to the company's guarantee to Cantor Fitzgerald Securities and Market Data Corporation; the intense competition the company's existing products and services face; the risk that the company's initiatives to attract more consumer advertising, and other diversified advertising, to The Wall Street Journal will not succeed; with respect to Newswires, the negative impact of consolidations and layoffs in the financial services industry on sales; 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. This presentation 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 measures. This reconciliation is also available on the Investor Relations page of our web site at www.dowjones.com. Dow Jones & Company Earnings Summary 5 (Unaudited)
(in thousands, except per share amounts) Quarters Ended September 30 Nine Months Ended September 30 2003 2002 2003 2002 ---- ---- ---- ---- Reported results: Revenues $375,946 $352,409 $1,127,762 $1,162,324 Operating income 16,816 7,964 87,619 44,227 Net income 9,076 2,446 106,846 186,271 Effective tax rate* 43.6% 59.3% 25.0% 21.7% Diluted EPS $.11 $.03 $1.31 $2.21 Excluding items described in Note 2: Operating income $ 16,816 $ 7,964 $ 69,211 $ 55,325 Net income 11,382 5,347 43,320 33,633 Effective tax rate* 38.2% 40.0% 39.5% 40.0% Diluted EPS $.14 $.06 $.53 $.40 EPS percentage change 133.3% (70.0)% 32.5% (55.6)% *The effective income tax rate is net of minority interests. See notes to financial information on page 10.
Reconciliation of Fourth Quarter Earnings Outlook
Quarters Ended December 31 2003 Guidance 2002 Actual ------------- ----------- Reported earnings per share around $.50 $.18 per share range** Adjusted to remove: Potential gain on exchange of WSJ Europe and Handelsblatt interests .14 Restructuring charges (.11) Insurance gain on WFC damaged assets .02 Restructuring charges included in equity investment results (.04) Contract guarantee (.03) (.03) ------------ ----------- EPS before special items around $.40 $.34 per share range **Based on special items currently anticipated.
Dow Jones & Company Condensed Consolidated Statements of Income 6 (Unaudited)
(in thousands, except per share amounts) Quarters Ended September 30 Nine Months Ended September 30 2003 2002 2003 2002 ---- ---- ---- ---- Revenues: Advertising $208,897 $185,308 $ 622,733 $ 650,177 Information services 71,278 69,132 214,194 211,488 Circulation and other 95,771 97,969 290,835 300,659 -------- -------- ---------- ---------- Total revenues 375,946 352,409 1,127,762 1,162,324 -------- -------- ---------- ---------- Expenses: News, operations and development 122,487 121,695 357,862 373,385 Selling, administrative and general 137,143 122,752 400,938 428,630 Newsprint 26,438 24,283 76,971 77,699 Print delivery costs 46,904 47,572 141,529 142,715 Depreciation and amortization 26,158 28,143 81,251 84,570 Restructuring charges and September 11 related items, net (18,408) 11,098 -------- -------- ---------- ---------- Operating expenses 359,130 344,445 1,040,143 1,118,097 -------- -------- ---------- ---------- Operating income 16,816 7,964 87,619 44,227 Other income (deductions): Investment income 558 106 811 302 Interest expense (664) (493) (1,862) (2,574) Equity in (losses) earnings of associated companies (16) (674) 306 (17) Gain on resolution of Telerate sale loss contingencies 59,821 Gain on sale of businesses 197,925 Contract guarantee (2,306) (2,901) (7,375) (9,120) Other, net 1,258 (303) 1,909 147 -------- -------- ---------- ---------- Income before income taxes and minority interests 15,646 3,699 141,229 230,890 Income taxes 7,022 3,565 35,642 51,758 -------- -------- ---------- ---------- Income before minority interests 8,624 134 105,587 179,132 Minority interests 452 2,312 1,259 7,139 -------- -------- ---------- ---------- Net income $ 9,076 $ 2,446 $ 106,846 $ 186,271 ======== ======== ========== ========== Net income per share: - Basic $.11 $.03 $1.31 $2.22 - Diluted .11 .03 1.31 2.21 Weighted-average shares outstanding: - Basic 81,507 83,450 81,568 83,933 - Diluted 81,865 83,768 81,864 84,379 See notes to financial information on page 10.
Dow Jones & Company Segment Information 7 (Unaudited)
(dollars in thousands) Quarters Ended September 30 Nine Months Ended September 30 2003 2002 2003 2002 ---- ---- ---- ---- Revenues: Print publishing $213,586 $205,342 $ 662,295 $ 702,647 Electronic publishing 79,352 75,173 238,551 231,586 Community newspapers: Comparable operations 72,526 71,894 208,302 205,917 Divested/newly-acquired operations 10,482 18,614 22,174 -------- -------- ---------- ---------- Consolidated revenues $375,946 $352,409 $1,127,762 $1,162,324 ======== ======== ========== ========== Percentage change in revenues excluding divested/newly-acquired operations 3.7% (7.0)% (2.7)% (11.3)% Operating income: Print publishing $(11,491) $(18,005) $ (10,598) $ (21,615) Electronic publishing 17,098 13,580 50,012 43,971 Community newspapers: Comparable operations 19,364 20,554 51,747 54,590 Divested/newly-acquired operations 2,402 4,100 5,255 Corporate (10,557) (8,165) (26,050) (26,876) -------- -------- ---------- ---------- Segment operating income 16,816 7,964 69,211 55,325 Restructuring charges and September 11 related items, net 18,408 (11,098) -------- -------- ---------- ---------- Consolidated operating income $ 16,816 $ 7,964 $ 87,619 $ 44,227 ======== ======== ========== ========== Operating margin: Print publishing (5.4)% (8.8)% (1.6)% (3.1)% Electronic publishing 21.5 18.1 21.0 19.0 Community newspapers: Comparable operations 26.7 28.6 24.8 26.5 Divested/newly-acquired operations 22.9 22.0 23.7 Segment operating margin 4.5 2.3 6.1 4.8 Depreciation and amortization (D&A): Print publishing $ 16,312 $ 18,818 $ 51,700 $ 55,058 Electronic publishing 6,543 6,363 20,121 19,794 Community newspapers: Comparable operations 2,502 2,722 7,843 8,318 Divested/newly-acquired operations 630 1,156 681 Corporate 171 240 431 719 -------- -------- ---------- ---------- Consolidated D&A $ 26,158 $ 28,143 $ 81,251 $ 84,570 ======== ======== ========== ========== See notes to financial information on page 10.
Dow Jones & Company Supplemental Segment Revenue Information 8 (Unaudited) (in thousands) Quarters Ended September 30 Nine Months Ended September 30 2003 2002 2003 2002 ---- ---- ---- ---- Print Publishing: U.S. Publications: Advertising $129,790 $119,322 $ 406,745 $ 435,040 Circulation and other 63,562 67,505 197,274 203,194 International Publications: Advertising 12,138 10,020 33,272 37,467 Circulation and other 8,096 8,495 25,004 26,946 -------- -------- ---------- ---------- Total 213,586 205,342 662,295 702,647 Electronic Publishing: Dow Jones Newswires: Domestic 42,739 43,676 127,971 134,323 International 10,920 10,635 32,171 33,670 -------- -------- ---------- ---------- Total Newswires 53,659 54,311 160,142 167,993 Consumer Electronic Publishing(*) 16,254 13,179 49,207 40,375 Dow Jones Indexes/Ventures 9,439 7,683 29,202 23,218 -------- -------- ---------- ---------- Total 79,352 75,173 238,551 231,586 Community Newspapers: Advertising Comparable operations 51,869 51,352 149,247 146,844 Divested/newly-acquired operations 8,879 15,692 15,707 -------- -------- ---------- ---------- Total advertising 60,748 51,352 164,939 162,551 Circulation and other Comparable operations 20,657 20,542 59,055 59,073 Divested/newly-acquired operations 1,603 2,922 6,467 -------- -------- ---------- ---------- Total circulation and other 22,260 20,542 61,977 65,540 Total 83,008 71,894 226,916 228,091 -------- -------- ---------- ---------- Total segment revenues $375,946 $352,409 $1,127,762 $1,162,324 ======== ======== ========== ========== (*) 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 9 (Unaudited)
Quarters Ended September 30 Nine Months Ended September 30 2003 2002 2003 2002 ---- ---- ---- ---- Advertising Volume Year-Over-Year Percentage Change: The Wall Street Journal General 12.5% (13.6)% (1.8)% (11.7)% Technology 12.0 (10.5) (7.8) (30.6) Financial (12.8) (17.8) (23.0) (31.5) Classified 10.5 (4.1) 12.3 (9.7) Total 7.1 (12.0) (4.7) (20.5) The Asian Wall Street Journal 29.0 (2.9) 8.7 (32.6) The Wall Street Journal Europe 23.6 (10.0) 16.2 (31.4) Barron's (8.9) 3.3 (16.7) (13.0) Ottaway Newspapers (*) Daily (2.5) (2.6) (2.0) (3.0) Non-daily 2.4 (6.6) 1.8 (3.6) Total (1.7) (3.3) (1.4) (3.1) Wall Street Journal advertising as a percentage of total Journal linage: General 40.7% 38.7% 41.0% 39.8% Technology 21.1 20.2 19.8 20.5 Financial 15.7 19.3 16.5 20.4 Classified 22.5 21.8 22.7 19.3 Other statistics: September 30 September 30 2003 2002 ------------ ------------ Dow Jones Newswires terminals 289,000 324,000 WSJ.com subscribers 686,000 664,000 WSJ.com unique visitors/business day 123,371 121,036 Average monthly unique visitors to the Journal Network 5,401,000 5,035,000 Average monthly page views to the Journal Network 64,586,000 60,320,000 (*) Percentage excludes divested/newly-acquired operations.
Dow Jones & Company Notes to Financial Information 10 1. The company's calculation of net income, operating income and earnings per share before 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 before 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. 2. The following table reconciles reported results to income adjusted for special items for the third quarter and the nine months ended September 30, 2003 and 2002.
Quarters Ended September 30 (in millions, except 2003 2002 per share amounts) Operating Net EPS Operating Net EPS ------------------------ ------------------------ Reported income $16.8 $ 9.1 $.11 $ 8.0 $ 2.4 $ .03 Adjusted to remove: Included in non-operating income: Contract guarantee (a) (2.3) (.03) (2.9) (.03) ----- ----- ---- ----- ------ ----- Adjusted $16.8 $11.4 $.14 $ 8.0 $ 5.3 $ .06 ===== ===== ==== ===== ====== ===== Nine Months Ended September 30 (in millions, except 2003 2002 per share amounts) Operating Net EPS Operating Net EPS ------------------------ ------------------------ Reported $87.6 $106.8 $1.31 $44.2 $186.3 $2.21 Adjusted to remove: Included in operating income: Restructuring charges (b) (11.1) (6.3) (.07) Gain from business interruption insurance claim (b) 18.4 11.1 .14 Included in non-operating income: Contract guarantee (a) (7.4) (.09) (9.1) (.11) Gain on resolution of Telerate sale loss contingencies (c) 59.8 .73 Sale of ONI properties (d) 164.1 1.94 CNBC International gain (e) 3.9 .05 ----- ------ ----- ----- ------ ----- Adjusted $69.2 $ 43.3 $ .53 $55.3 $ 33.6* $ .40 ===== ====== ===== ===== ====== ===== * The sum of the individual amounts does not equal the total due to rounding.
Dow Jones & Company Notes to Financial Information 11 (a) Contract guarantee: Under the terms of the company's 1998 sale of Telerate to 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 estimated payments from 2001 through October 2006, using a discount rate of 6%. Earnings in 2003 and 2002 have included charges related to the accretion of the discount on the reserve balance. These charges totaled $2.3 million and $2.9 million in the third quarters of 2003 and 2002, respectively. For the first nine months of 2003 and 2002, charges related to the accretion of discount totaled $7.4 million and $9.1 million, respectively. 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 trial court rendered a decision in January 2003 denying the parties' respective motions to grant their own claims and to dismiss the competing claims. The company, Cantor and MDC have all filed appeals from the trial court's order. While these appeals are pending, the discovery phase is proceeding. While it is not possible to predict with certainty the ultimate outcome of this litigation, the company believes the likelihood of a loss exceeding the amount reserved is remote; however, it is possible that such loss could be less than the amount reserved. (b) Restructuring charges and September 11 related items, net: In the second quarter of 2003, the company recorded a gain of $18.4 million ($11.1 million after taxes, or $.14 per diluted share) reflecting the settlement of its business interruption insurance claim for loss of operating income suffered as a result of the terrorist attacks on the World Trade Center on September 11, 2001. The second quarter of 2002 included restructuring charges of $11.1 million ($6.3 million after taxes, or $.07 per diluted share) largely reflecting employee severance related to a workforce reduction. (c) Gain on resolution of Telerate sale loss contingencies: In the first quarter of 2003, the company recorded a gain of $59.8 million ($.73 per diluted share) on the resolution of certain loss contingencies resulting from the sale of its former Telerate subsidiary to Bridge Information Systems, Inc. (Bridge). The reserve for loss contingencies was established as part of the loss on sale of Telerate in 1998 and related to various claims that arose out of the Stock Purchase Agreement, including a purchase price adjustment related to working capital, an indemnification undertaking and other actual and potential claims and counter-claims between the company and Bridge. In February 2001, Bridge declared bankruptcy. In March 2003, these matters were resolved by the bankruptcy court, and the company's contingent liabilities were thereby extinguished. Dow Jones & Company Notes to Financial Information 12 (d) Gains on sale of ONI properties: The second quarter of 2002 included a gain of $44.5 million ($38 million after taxes, or $.45 per diluted share) from the sale of Ottaway's Essex County newspaper properties to Eagle-Tribune Publishing Company. 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. (e) Gains in equity in losses of associated companies: The second quarter of 2002 included gains at CNBC Asia of $3.9 million ($.05 per diluted share) which consisted of a $2.5 million gain from the favorable settlement of a contractual obligation and a $1.4 million gain from the sale of an investment by CNBC Asia. 3. On May 5, 2003, the company's Ottaway Newspaper subsidiary acquired The Record of Stockton, California from Omaha World-Herald Company for $144 million in cash, plus net working capital. The Record has daily paid circulation of 59,271 and Sunday circulation of 72,698. The Record Group reported 2002 revenues of $37 million and operating profits of $9.6 million. 4. Restructuring charges and September 11 related items, net are not included in segment expenses, as management evaluates segment results exclusive of these items. For information purposes, restructuring charges and September 11 related items, net allocable to each segment for the nine months ended September 30, 2003 and 2002 were as follows:
(in thousands) Nine Months Ended September 30 2003 2002 ------------------------------- Print Publishing $(17,422) $ 8,310 Electronic Publishing (951) 2,443 Corporate (35) 345 -------- ------- Total (gain)/charges from restructuring and September 11 related items, net $(18,408) $11,098 ======== =======
5. 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 15 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 global operations of The Wall Street Journal and its international editions, as well as Barron's and U.S. television operations (results of the company's international television ventures are included in equity in earnings of associated companies). Electronic publishing includes the operations of Dow Jones Newswires, Consumer Electronic Publishing and Dow Jones Indexes/Ventures. Dow Jones & Company Notes to Financial Information 13 6. Summarized financial information for 50% held equity-basis investments in associated companies were as follows (amounts are at 100% levels):
(in thousands) Quarters Ended September 30 Nine Months Ended September 30 2003 2002 2003 2002 --- ---- ---- ---- Factiva Revenues $59,162 $62,327 $183,119 $187,473 Operating income 3,045 6,590 7,937 14,027 Depreciation and amortization 2,942 2,314 9,357 9,530 SmartMoney Revenues $12,056 $11,016 $ 36,400 $ 34,088 Operating loss (1,227) (2,070) (2,255) (6,859) Depreciation and amortization 208 408 1,103 1,362 CNBC International (*) Revenues $ 9,432 $ 9,760 $ 27,584 $ 27,503 Operating loss (4,698) (6,772) (17,624) (20,360) Depreciation and amortization 931 1,085 2,897 3,210 (*) Includes the results of CNBC Europe and CNBC Asia.