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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q



[x]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934


For the quarterly period ended March 31, 2005


OR


[ ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934



 

For the transition period from                     to                      

 


Commission file number 1-7564


DOW JONES & COMPANY, INC.


(Exact name of registrant as specified in its charter)



DELAWARE

 

13-5034940

 

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 



200 LIBERTY STREET, NEW YORK, NEW YORK

 

10281

 

(Address of principal executive offices)

 

(Zip Code)

 


(212) 416-2000

(Registrant’s telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x    No ___


Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes x    No ___


The number of shares outstanding of each of the issuer’s classes of common stock on March 31, 2005: 61,949,546 shares of Common Stock and 20,522,334 shares of Class B Common Stock.



1



DOW JONES & COMPANY, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2005


 INDEX



 

  

 

Page No.

PART I - Financial Information (unaudited)

 
    

Item 1.

  

Financial Statements

 
    
 

  

Condensed Consolidated Statements of Income – For the three months ended March 31, 2005 and 2004   

3

    
 

  

Condensed Consolidated Statements of Cash Flows – For the three months ended March 31, 2005 and 2004

4

    
 

  

Condensed Consolidated Balance Sheets – As of March 31, 2005 and December 31, 2004   

5

    
 

  

Notes to Condensed Consolidated Financial Statements   

6

    

Item 2.

  

Management’s Discussion and Analysis of Financial Condition and Results of Operations   

16

    

Item 3.

  

Quantitative and Qualitative Disclosures about Market Risk   

26

    

Item 4.

  

Controls & Procedures   

27

  
  

PART II - Other Information

 
    

Item 1.

  

Legal Proceedings   

27

    

Item 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds

28

    

Item 4.

  

Submission of Matters to a Vote of Security Holders   

28

    

Item 6.

  

Exhibits   

30

    
  

Signature

31




2


PART I - FINANCIAL INFORMATION


Item 1.

Financial Statements

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Dow Jones & Company, Inc.

(unaudited)

(in thousands, except per share amounts)

  

 

For the Three Months Ended March 31

  
 

  

 

2005

   

2004

  

Revenues:

  

        

Advertising

  

$

217,744

  

$

226,699

  

Information services

  

 

98,469

   

75,827

  

Circulation and other

  

 

95,859

   

99,095

  
 

  

        

Total revenues

  

 

412,072

   

401,621

  
 

  

        

Expenses:

  

        

News, production and technology

  

 

135,261

   

122,557

  

Selling, administrative and general

  

 

160,185

   

145,235

  

Newsprint

  

 

28,201

   

27,631

  

Print delivery costs

  

 

44,366

   

47,845

  

Depreciation and amortization

  

 

27,090

   

27,355

  

Restructuring charges and September 11-related items

  

 

-

   

(2,761

)

 
 

  

        

Total operating expenses

  

 

395,103

   

367,862

  
 

  

        

Operating income

  

 

16,969

   

33,759

  
          

Other income (expense):

  

        

Investment income

  

 

295

   

91

  

Interest expense

  

 

(4,009

)

  

(648

)

 

Equity in earnings (losses) of associated companies

  

 

734

   

(740

)

 

Contract guarantee

  

 

(1,299

)

  

(1,985

)

 

Other, net

  

 

1,339

   

(766

)

 
 

  

        

Income before income taxes and minority interests

  

 

14,029

   

29,711

  

Income taxes

  

 

5,849

   

12,481

  
 

  

        

Income before minority interests

  

 

8,180

   

17,230

  

Minority interests in losses of subsidiaries

  

 

-

   

586

  
 

  

        

Net income

  

$

8,180

  

$

17,816

  
 

  

        

Net income per share:

  

        

Basic

  

$

.10

  

$

.22

  

Diluted

  

 

.10

   

.22

  
          

Cash dividends per share

  

 

.25

   

.25

  
          

Weighted-average shares outstanding:

  

        

Basic

  

 

82,251

   

81,758

  

Diluted

  

 

82,756

   

82,212

  
          

Comprehensive income (Note 11)

  

$

6,322

  

$

18,353

  
          

The accompanying notes are an integral part of the condensed consolidated financial statements.



3


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Dow Jones & Company, Inc.

(unaudited)

(in thousands)

  

 

For the Three Months Ended March 31

  
 

  

 

2005

   

2004

  

Cash Flows from Operating Activities:

  

        

Net income

  

$

8,180

  

$

17,816

  

Adjustments to reconcile net income to net cash provided by operating activities:

  

        

Depreciation

  

 

24,508

   

26,702

  

Amortization of intangibles

  

 

2,582

   

653

  

Equity in (earnings) losses of associated companies, net of distributions

  

 

(409

)

  

1,538

  

Minority interests in losses of subsidiaries

  

 

-

   

(586

)

 

Contract guarantee

  

 

1,299

   

1,985

  

Changes in assets and liabilities, net of acquisitions:

  

        

Accounts receivable

  

 

14,863

   

(13,622

)

 

Other assets

  

 

1,027

   

(3,950

)

 

Accounts payable and accrued liabilities

  

 

(68,027

)

  

(26,233

)

 

Income taxes

  

 

4,295

   

16,549

  

Deferred taxes

  

 

(2,615

)

  

(3,860

)

 

Unearned revenue

  

 

15,219

   

6,565

  

Other noncurrent liabilities

  

 

3,358

   

3,745

  

Other, net

  

 

1,481

   

207

  
 

  

        

Net cash provided by operating activities

  

 

5,761

   

27,509

  
          

Cash Flows from Investing Activities:

  

        

Additions to plant, property and equipment

  

 

(10,593

)

  

(16,116

)

 

Funding of equity investees

  

 

(5,550

)

  

(4,069

)

 

Advances from equity investees

  

 

-

   

6,945

  

Businesses acquired, net of cash received

  

 

(438,773

)

  

(85,331

)

 

Other, net

  

 

2,450

   

209

  
 

  

        

Net cash used in investing activities

  

 

(452,466

)

  

(98,362

)

 
          

Cash Flows from Financing Activities:

  

        

Cash dividends

  

 

(20,514

)

  

(20,429

)

 

Proceeds from issuance of bonds

  

224,899

   

-

  

Increase in commercial paper borrowings

  

245,527

   

105,313

  

Bond issuance costs

  

(1,468

)

  

-

  

Book overdraft

  

 

-

   

(4,547

)

 

Proceeds from sales under stock compensation plans

  

 

7,085

   

2,661

  
 

  

        

Net cash provided by financing activities

  

 

455,529

   

82,998

  
          

Effect of currency exchange rate changes on cash

  

413

   

501

  
          

Increase in cash and cash equivalents

  

 

9,237

   

12,646

  
          

Cash and cash equivalents at beginning of year

  

 

17,237

   

23,514

  
          

Cash and cash equivalents at March 31

  

$

26,474

  

$

36,160

  
 

  

        

The accompanying notes are an integral part of the condensed consolidated financial statements.

 



4


CONDENSED CONSOLIDATED BALANCE SHEETS

Dow Jones & Company, Inc.

(unaudited)

(in thousands)

  

 

March 31 2005

  

December 31 2004

 

Assets:

  

  

  

   

Current Assets:

  

  

  

   

Cash and cash equivalents

  

$

26,474

  

$

17,237

 

Accounts receivable – trade, net

  

 

166,173

  

 

168,497

 

Accounts receivable – other

  

 

22,943

  

 

23,282

 

Newsprint inventory

  

 

10,365

  

 

9,402

 

Prepaid expenses

  

 

25,165

  

 

22,471

 

Deferred income taxes

  

 

12,929

  

 

13,025

 

Total current assets

  

 

264,049

  

 

253,914

 
        

Investments in associated companies, at equity

  

 

92,455

  

 

88,911

 

Other investments

  

 

12,150

  

 

14,302

 
        

Plant, property and equipment, at cost

  

 

1,723,803

  

 

1,722,847

 

Less, accumulated depreciation

  

 

1,074,333

  

 

1,062,823

 

Plant, property and equipment, net

  

 

649,470

  

 

660,024

 
        

Goodwill

  

 

657,111

  

 

245,558

 

Other intangible assets

  

 

143,515

  

 

88,887

 

Deferred income taxes

  

 

32,129

  

 

13,755

 

Other assets

  

 

15,573

  

 

14,852

 

Total assets

  

$

1,866,452

  

$

1,380,203

 
 

  

  

  

   

Liabilities:

  

  

  

   

Current Liabilities:

  

  

  

   

Accounts payable – trade

  

$

68,063

 

$

68,191

 

Accrued wages, salaries and commissions

  

 

51,332

  

 

75,926

 

Retirement plan contributions payable

  

 

6,553

  

 

24,350

 

Other payables

  

 

69,053

  

 

59,947

 

Contract guarantee obligation

  

 

233,245

  

 

219,257

 

Income taxes

  

 

44,708

  

 

43,211

 

Unearned revenue

  

 

237,409

  

 

215,638

 

Short-term debt

  

391,370

  

9,998

 

Total current liabilities

  

 

1,101,733

  

 

716,518

 
        

Long-term debt

  

 

224,903

  

 

135,845

 

Deferred compensation, principally postretirement benefit obligation

  

 

314,485

  

 

312,925

 

Contract guarantee obligation

  

 

28,713

  

 

41,402

 

Other noncurrent liabilities

  

 

19,003

  

 

19,140

 

Total liabilities

  

 

1,688,837

  

 

1,225,830

 
        

Minority interests in subsidiaries

  

 

3,830

  

 

3,830

 
        

Stockholders’ Equity:

  

  

  

   

Common stock

  

 

102,181

  

 

102,181

 

Additional paid-in capital

  

 

145,251

  

 

124,082

 

Retained earnings

  

 

827,112

  

 

839,446

 

Accumulated other comprehensive income, net of taxes

  

 

(3,798

) 

 

(1,940

)

 

  

  

  

   

Less, treasury stock, at cost

  

 

896,961

  

 

913,226

 

Total stockholders’ equity

  

 

173,785

  

 

150,543

 

Total liabilities and stockholders’ equity

  

$

1,866,452

  

$

1,380,203

 
       

The accompanying notes are an integral part of the condensed consolidated financial statements.



5


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Dow Jones & Company, Inc.

(unaudited)


1.

Basis of Presentation


In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments considered necessary for a fair statement of the Company’s consolidated financial position as of March 31, 2005, and the consolidated results of operations for the three month periods ended March 31, 2005 and 2004 and consolidated cash flows for the three month periods then ended.  All adjustments reflected in the accompanying financial statements are of a normal recurring nature.  Reclassifications of certain amounts for prior years have been recorded to conform to the current year presentation.


The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2004 filed with the Securities and Exchange Commission.  The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.



2.

Earnings Per Share


Basic and diluted earnings per share have been computed as follows:


(in thousands, except per share amounts)

  

Three Months Ended 
March 31

 
  

2005 (2)

  

2004 (2)

 
       

Net income

$

8,180

  

$

17,816

 
   

  

   

Weighted-average shares outstanding – basic

 

82,251

  

 

81,758

 
       

Effect of dilutive securities:

  

  

   

Stock options

 

230

  

 

210

 

Other, principally contingent stock rights

 

275

  

 

244

 
   

  

   

Weighted-average shares outstanding – diluted (1)

 

82,756

  

 

82,212

 
   

  

   

Basic earnings per share

$

.10

  

$

.22

 

Diluted earnings per share

 

.10

  

 

.22

 


(1)

The diluted average shares outstanding have been determined using the treasury stock method, which assumes the proceeds from the exercise of outstanding options were used to repurchase shares at the average market value of the stock during the quarter.

 

(2)

Options to purchase 8,891,000 shares in 2005 at an average price of $53.82 and options to purchase 7,450,000 shares in 2004 at an average price of $56.09 have been excluded from the diluted earnings per share calculation because the options’ exercise prices were greater than the average market price during the quarter and to include such securities would be antidilutive.

 




6



3.

Stock-based Compensation Plans


The Company accounts for its stock-based compensation in accordance with Accounting Principles Board Opinion No. 25 (APB 25), “Accounting for Stock Issued to Employees,” and its related interpretations.  Had the Company’s stock-based compensation been determined by the fair-value based method of SFAS 123, “Accounting for Stock-Based Compensation,” the Company’s net income and earnings per share would have been as follows:


(in thousands, except per share amounts)

  

Three Months Ended 
March 31

 
 

  

2005

   

2004

 
        

Net income, as reported

$

8,180

  

$

17,816