Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
Commission file number 1-7564
DOW JONES & COMPANY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-5034940
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 LIBERTY STREET, NEW YORK, NEW YORK 10281
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 416-2000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock $1.00 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Class B Common Stock $1.00 par value
(Title of class)
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 a check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ( )
Aggregate market value of common stock held by non-affiliates of the
registrant at January 31, 2001 was approximately $2,876,000,000.
The number of shares outstanding of each of the registrant's classes of common
stock on January 31, 2001: 65,841,907 shares of Common Stock and
21,042,223 shares of Class B Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates information from certain portions of the registrant's
definitive Proxy Statement for the 2001 annual meeting of stockholders to be
filed with the Securities and Exchange Commission within 120 days after the
close of the fiscal year.
PART I.
ITEM 1. Business.
Dow Jones & Company, Inc. (the company) is a global provider of business and
financial news and information. Its operations are divided into three
operating segments: print publishing, electronic publishing and general-
interest community newspapers. Financial information about operating segments
and geographic areas is incorporated by reference to Note 14 to the Financial
Statements of this report.
At December 31, 2000, the company employed 8,574 full-time employees. The
company's principal executive offices are located at 200 Liberty Street, New
York, New York, 10281.
Print publishing
- ----------------
The print publishing segment contains 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.
The Wall Street Journal, the company's flagship publication, is one of the
country's largest daily newspapers with average circulation for 2000 of
1,789,000. The Wall Street Journal is edited in New York City at the
company's executive offices. The Journal's three major regional editions are
printed at 17 plants located across the United States. The Wall Street
Journal offers advertisers the opportunity to focus their messages through 18
localized editions and the option of advertising in full color.
The Journal provides weekend-oriented coverage every Friday via a fourth
section "Weekend Journal". Weekend Journal includes expanded personal-finance
coverage as well as pages devoted to travel, wines, sports, residential real
estate and the arts. The Journal also publishes at various times of the year
special reports on topics such as technology, personal finance and executive
compensation, e-commerce, health, medicine as well as demographically targeted
editions devoted to subjects of retirement and small business.
The Wall Street Journal Sunday, launched in 1999, introduced a four-page
package, roughly half news and half advertising, with content focused on
personal finance and careers. The Sunday Journal is published once a week in
the business sections of partner newspapers with combined circulation of over
5.8 million. In 2000, additional metropolitan and community newspapers were
added bringing the total newspapers to 38. Participating newspapers include:
The Advocate (Stamford, CT) Portsmouth Herald
The Arizona Republic The Post & Courier (Charleston, SC)
Austin American-Statesman The Providence Journal
The Buffalo News Record-Eagle (Traverse City, MI)
Contra Costa Times The Sacramento Bee
Daily Herald (suburban Chicago) Santa Barbara News Press
The Daily Item (Sunbury, PA) Santa Cruz County Sentinel
The Denver Post Star-Telegram (Ft. Worth/Arlington, TX)
Everett (Washington) Herald Star Tribune (Minneapolis, St. Paul, MN)
Greenwich Time St. Petersburg Times
The Hartford Courant St. Louis Post-Dispatch
The Las Vegas Review-Journal Southwest Times Record (Fort
The Los Angeles Daily News Smith, AR)
Milwaukee Journal Sentinel Sun-Sentinel (South Florida)
Morning News of The Sunday Record (Northern New
Northwest Arkansas (Springdale) Jersey)
The News and Observer (Raleigh) Sunday Record (Middletown, NY)
The News-Times (Danbury, CT) The Times-Picayune (New Orleans, LA)
The News Tribune (Tacoma, WA) The Tulsa World
The Orange County Register Wilkes-Barre Times Leader
The Orlando Sentinel
-2-
The company receives a content fee and shares in the advertising revenues.
Total Sunday Journal circulation exceeded 8.6 million beginning in January
2001. The Technology Journal, initiated in February 1998, is published each
Thursday in the Marketplace section of The Wall Street Journal. The coverage
focuses on companies with new technology affecting people's lives, or some
trend or movement in technology.
In late 2000, The Wall Street Journal regional sections ceased publication,
largely due to competing demands on company's resources.
The production of the paper employs satellite transmission of page images to
the outlying plants and other technologies designed to speed the delivery of
editorial material to the presses and to reduce the steps taken in the
printing process.
In 1998, the company launched a $232 million three-year program to expand
color and page capacity for The Wall Street Journal. This project will expand
the Journal's page capacity from 80 pages to 96 pages and color page capacity
from eight pages to 24 pages and offers advertisers added flexibility with
regard to the positioning of color advertising throughout the paper. The
company expects to utilize this additional capacity in the beginning of 2002.
In 2000, the company completed the key phase of The Wall Street Journal
pagination project, ending more than three decades of remote composition. The
project was launched in early 1999 to streamline the production process and
compose electronically all news and advertising pages of the Journal using a
fully integrated system with new ad-layout and editorial components. The
project goals included getting fresher content into the Journal while ensuring
timely home delivery; simplifying the company's technology structure by
installing best-of-class industry-proven solutions; and giving front-end
control of the pages to the News and Advertising departments. Barron's
magazine will go live with the new system in first quarter of 2001.
The Wall Street Journal is delivered principally in two ways: through the
company's National Delivery Service, Inc. subsidiary and by second-class
postal service. In 2000, the National Delivery Service on average delivered
about 1.2 million, or 80%, of the Journal's subscription copies each
publishing day. This system provides delivery earlier and more reliably than
the U.S. Postal Service. Approximately 178,000 copies of the Journal are sold
each business day at newsstands.
The Wall Street Journal Europe is headquartered in Brussels, Belgium and
printed in Belgium, Germany, Switzerland, Italy and the United Kingdom. It is
available on the day of publication in continental Europe, the United Kingdom,
the Middle East and North Africa. The newspaper had an average circulation in
2000 of 92,000. Effective January 1, 2000, the company and the von
Holtzbrinck Group, a leading German media company (publisher of Handelsblatt,
a German business newspaper, and with interests in TV production, radio
broadcasting and multimedia) exchanged equity-shareholdings in their
respective subsidiaries so as to give the von Holtzbrinck Group 49% ownership
of The Wall Street Journal Europe and the company 22% ownership of the von
Holtzbrinck Group's business daily, Handelsblatt. The agreement included a
commitment to double circulation of the Journal Europe within five years and
to expand the page capacity from an average of 28 to 40 pages per day,
including an increase in color pages from 8 to 12.
Convergence, which is a quarterly magazine that reports on multimedia
industries in Europe, is delivered as an insert in The Wall Street Journal
Europe.
-3-
The Asian Wall Street Journal is headquartered and printed in Hong Kong and is
transmitted by satellite to additional printing sites in Singapore, Japan,
Thailand, Malaysia, Taiwan, Philippines, Korea and Indonesia. The Asian Wall
Street Journal had average circulation of 78,000 in 2000.
The company has substantial breadth and depth of journalistic resources with
its print and electronic businesses which are drawn on by all print editions.
The Asian Journal provides the foundation for the company's Asian Wall Street
Journal Weekly Edition, which is published in New York for North American
readers with interests in Asia.
The company began expanding readership of The Wall Street Journal news content
by introducing The Wall Street Journal Americas in 1994 to Central and South
America. Since then the company has broadened its delivery of Journal news
content to other parts of the world. These Special Editions are part of 37
newspapers in 32 countries. They are published in 11 different languages and
serve a combined circulation of nearly six million.
Barron's, the Dow Jones Business and Financial Weekly, is a magazine that
specializes in reporting and commentary on financial markets. The weekend
magazine, which had an average circulation of 305,000 in 2000, uses twelve of
the seventeen printing plants employed in the production of the domestic Wall
Street Journal. Barron's is edited in New York City and is delivered by
second-class postal service and through National Delivery Service. Barron's
sells 118,000 copies at newsstands weekly.
The Far Eastern Economic Review, published weekly in Hong Kong, is Asia's
leading English-language business magazine. Circulation is about 99,000,
concentrated in Hong Kong, Malaysia, Singapore and other parts of Southeast
Asia. More than 17,000 copies are sold in North America and Europe.
The Wall Street Journal Classroom Edition, which is published nine times
during the school year and is read by an estimated 600,000 students every
month during the academic year in more than 4,000 middle-school and high-
school classrooms throughout the United States. Individuals, organizations
and corporations sponsor nearly one-third of all subscriptions.
SmartMoney, The Wall Street Journal Magazine of Personal Business, featuring
personal investing, spending and saving money, is published jointly with
Hearst Corp. In 1999, SmartMoney launched a free portal site, SmartMoney.com,
which provides a resource for private investors on personal finance and daily
updates on current investment opportunities.
Vedomosti, or The Record, was introduced in 1999 in Russia. Vedomosti,
considered the only independent business newspaper in Russia, is published
daily, Monday through Friday. Readership of the publication reached over
59,000 in 2000. Initial circulation is centered in the business community in
Moscow and St. Petersburg, with a regional expansion program currently being
reviewed. The new publication uses original content created by 72 local
reporters and editors and content from The Financial Times and The Wall Street
Journal translated into the Russian language. On April 3, 2000, the St.
Petersburg edition of Vedomosti was launched. The newspaper is owned one-
third each by Dow Jones, Pearson and Independent Media.
Also included in this segment is the domestic portion of the company's
television group. As a result of the global business television alliance with
NBC, the company's domestic operations provide business news programming to
CNBC as part of a multiyear license agreement. The company's overseas
television ventures, which were merged with CNBC's overseas operations into
equally-owned operations in Europe and Asia Pacific, are included as part of
the Equity in Losses of Associated Companies.
-4-
In early 1998, NBC and Dow Jones re-launched their business information
channels in Europe and Asia Pacific as CNBC, a service of NBC and Dow Jones.
The overseas services reach in total over 52 million households on a full-time
basis and nearly 55 million households on a part-time basis.
Additionally as part of the television alliance with NBC, Dow Jones joined
Microsoft Corp. and NBC in certain interactive initiatives, including
supplying highlights of WSJ.com to the MSNBC internet site, and an ownership
interest in MSNBC Business Video in the United States, renamed CNBC/Dow Jones
Business Video. This service provides live and archived audio and video
business and financial news events via the World Wide Web.
Electronic publishing
- ---------------------
Electronic publishing includes the operations of Dow Jones Newswires, Dow
Jones Indexes, WSJ.com and other.
Dow Jones Newswires is a global publisher of real-time business and financial
news. Its various wires are displayed on approximately 346,000 English-
language terminals worldwide, providing users with real-time information on
equities, fixed income, foreign exchange, commodities and energy. Dow Jones
Newswires has a dedicated staff of over 800 business and financial journalists
in addition to drawing on the resources of the global Journal and Associated
Press. Since 1999, the company began to distribute Newswires material on a
real-time basis to customers of on-line brokers. In addition to providing
news to financial firm web sites, Dow Jones Newswires offers a set of online
products in the professional-to-professional (P2P) market and providing news
to niche commodities trading markets, such as energy, paper, metals and
agricultural products.
Dow Jones News Service, a 24-hour service that transmits an average of about
4,000 news items a day, is North America's pre-eminent supplier of business
and financial news to subscribers at brokerage firms, banks, investment
companies and other businesses. Capital Markets Report is the company's
newswire that covers Treasury, fixed income and financial futures markets
around the world.
The Dow Jones Economic Report and the Dow Jones Financial Report, which are
produced outside the United States in conjunction with the Associated Press
(AP) since 1967, provides international economic, business and financial news
to subscribers in 51 countries. In addition to these two broad international
newswires, the company and the AP offer specialized wires dedicated to the
coverage of European and Asian equities, banking and the markets in foreign
exchange. Other newswires provided in alliance with the AP include the World
Equities Report, which serves U.S. institutions investing in international
markets.
In 2000, the company introduced the Dow Jones Chinese Language Newswire,
marking the first time that Dow Jones provided comprehensive news and research
on the U.S. stock market in Chinese. In addition to the Chinese Newswires,
the company also launched local language product offerings in Japanese,
Spanish, French, Bahasa and German.
Washington-based Federal Filings publishes newswires, newsletters and
investment research based on its coverage of federal regulatory agencies,
Capitol Hill and bankruptcy courts nationwide. Federal Filings' products
include Federal Filings Business News, a real-time newswire covering the
Security Exchange Commission filings; Daily Bankruptcy Review, a compendium of
large bankruptcy filings throughout the U.S.; and several other newsletters
targeted at niche investing communities.
-5-
WSJ.com was introduced in 1996 on the Internet and offers continuously updated
coverage of business news both in the U.S. and around the world, supported by
the global resources of The Wall Street Journal and Dow Jones Newswires.
Subscribers have access to more than 22,000 in-depth background reports on
companies, an archive of news articles, and personal news and stock
portfolios. Subscribers can also search the Dow Jones Publications Library,
featuring current and past articles from 6,000 newspapers, magazines and
business-news sources. At December 31, 2000, WSJ.com had over 535,000
subscribers and was the largest paid subscription site on the Internet.
The company and At Home Corp., an Internet-access and content provider, formed
a new company, Work.com into which the company contributed dowjones.com, a
free portal site launched in 1999. In August 2000 Work.com launched its
business portal website at www.work.com targeted to small and midsize business
Internet users.
Consumer sites include CareerJournal.com; homes.wsj.com; travel.wsj.com;
startup.wsj.com; college.wsj.com; wine.wsj.com; and OpinionJournal.com.
The Dow Jones Indexes group develops, maintains and markets Dow Jones' various
index products. In 1997, the company began licensing the Dow Jones Industrial
Averages as well as other indexes as the basis for trading options, futures,
unit trusts, annuities, mutual funds, derivatives and specialized structured
products. In 1998, Dow Jones and the leading exchanges of France (SBF-Bourse
de Paris), Germany (Deutsche Borse) and Switzerland (Swiss Exchange) entered
into a joint venture, named STOXX Ltd.
The Dow Jones STOXX family of indices accounted for $377 billion of assets at
year-end 2000, constituting the majority of total assets under management
based on Dow Jones Indexes. STOXX tracks the performance of certain European
equities, including broad-based measures as well as gauging the market
performance of countries that have joined the European Economic and Monetary
Union.
Dow Jones Reuters Business Interactive LLC (Factiva) is a joint venture
launched in mid-1999 with Reuters Group Plc. Each partner had a significant
but different market share in the global market for providing business
information electronically to corporations and professionals. The Dow Jones
Interactive product had a larger customer base in North America, while
Reuters' former product, Reuters Business Briefing, had a larger customer
presence in Europe and Asia. In July 2000 Factiva launched Factiva Publisher,
which contains the combined content set of both Dow Jones Interactive and
Reuters Business Briefing. In addition, Factiva Consulting has been launched
to help clients customize their corporate Intranets.
Factiva, currently, is a leading global provider of third party business
information, as well as a suite of information integration solutions that help
clients combine internal and external news to build corporate knowledge
centers. In addition to exclusive access to Dow Jones and Reuters newsflows,
the joint venture's content, appearing on more than 1.5 million desktops in 34
countries, includes millions of articles from more than 7,000 business, trade
and local publications, including information sources in 22 languages with
user interfaces in 11 of these languages.
-6-
Community Newspapers
- --------------------
Community newspapers published by Ottaway Newspapers, Inc., a wholly-owned
subsidiary, include 19 general-interest dailies in 11 states: California,
Connecticut, Kentucky, Massachusetts, Michigan, Minnesota, Missouri, New
Hampshire, New York, Oregon and Pennsylvania. Average circulation of the
dailies during 2000 exceeded 546,0000; Sunday circulation for 14 newspapers
was 521,000. Community newspapers also publish 30 weekly and shoppers
publications. The daily newspapers and some of the weeklies have their own
Internet web sites, with combined revenues of $3.1 million in 2000. The
principal administrative office of Ottaway Newspapers is in Campbell Hall, New
York. The primary delivery method for the newspapers is private delivery.
Other
- -----
Dow Jones' investments include a minority interest in Nation Multimedia Group
Public Co., Ltd., a Bangkok, Thailand, publisher of English and Thai-language
magazines and newspapers; VWD-Vereinigte Wirtschaftsdienste GmbH, a German
news agency specializing in business and economic news and information; HB-Dow
Jones S.A., a part-owner of Economia, a publishing company in the Czech
Republic; Sohu.com Inc., a leading Internet portal in China; iBEAM
Broadcasting Corp., an Internet broadcasting network that delivers streaming
media; BreakingViews.Com Ltd., a source of analytical reports on breaking
financial news via the Internet; and F.F. Soucy Inc. & Partners, L.P., a
newsprint mill in Canada.
Raw Materials
- -------------
The primary raw material used by the company is newsprint. In 2000
approximately 329,000 metric tons were consumed. Newsprint was purchased
principally from 12 suppliers. The company is a limited partner in F.F.
Soucy, Inc. & Partners, L.P., Riviere du Loup, Quebec, Canada. F.F. Soucy
furnished 12% of total newsprint requirements in 2000. The company has signed
long-term contracts with certain newsprint suppliers, including F.F. Soucy,
for a substantial portion of its annual newsprint requirements. For many
years the available sources of newsprint have been adequate to supply the
company's needs.
Research and Development
- ------------------------
Research and development expenses were $30,584,000 in 2000, $30,544,000 in
1999, and $60,988,000 in 1998. Excluding Telerate operations, R&D expenses
totaled $32,029,000 in 1998.
-7-
Competition
- -----------
The print publications of the company are highly competitive. In its various
news-publishing activities, Dow Jones competes with a wide spectrum of other
information media. All metropolitan general interest newspapers and many
small city or suburban papers carry business and financial pages or sections,
including securities quotations, as do many Internet-based publications and
services. In addition, specialized magazines in the business and financial
field, as well as general news magazines publish substantial amounts of
business-related material. Nearly all these publications seek to sell
advertising space and much of this effort is directly or indirectly
competitive with Dow Jones' publications. The Journal also competes for
advertising with non-business publications, such as technology magazines,
offering audiences of similar demographic quality. In addition, the Journal
and the company's other business publications also compete with television and
radio for advertisers.
The company's newswires compete with other global financial newswires
including Reuters Group Plc, Bloomberg L.P., Bridge Information Systems, Inc.,
as well as McGraw-Hill, Inc. The company's newswires maintain a stronger
market position in North America than internationally.
Dow Jones' index-licensing business competes with various organizations that
develop and license indexes, including the Standard & Poors unit of McGraw-
Hill, Inc., Financial Times, and Morgan Stanley/Capital International. Dow
Jones competes with these organizations in developing benchmarks of equity
market performance to which investable products may be linked.
Factiva competes with various business information services, including Dialog
Corp. (recently acquired by The Thomson Corporation) and Lexis-Nexis, a
division of Reed Elsevier Plc which may have an equal or greater market share.
It also competes with various online services offered via the Internet.
Information services that were formerly available to only a few research
professionals in business are now readily available to many due to the
expansion of the Internet. Competition to meet the growing demand for fast
access to business and personal finance information is intense and
technologies to disseminate this information are rapidly changing.
All of the community newspapers operating under Ottaway Newspapers, Inc.
compete with metropolitan general interest newspapers, and most compete with
other newspapers, local radio and television available in their respective
sales areas.
The company's overseas business television ventures compete with various
international satellite networks that specialize in general news but also
provide business programming. Also, individual television stations, networks
and cable channels in each country broadcast programming that competes for
advertising and the attention of viewers in their respective markets.
ITEM 2. Properties.
Dow Jones operates 17 plants with an aggregate of approximately one million
square feet for the printing of its domestic publications. Printing plants
are located in Palo Alto and Riverside, California; Denver, Colorado; Orlando,
Florida; LaGrange, Georgia; Naperville and Highland, Illinois; Des Moines,
Iowa; White Oak, Maryland; Chicopee Falls, Massachusetts; South Brunswick, New
Jersey; Charlotte, North Carolina; Bowling Green, Ohio; Sharon, Pennsylvania;
Dallas and Beaumont, Texas; and Federal Way, Washington. All plants include
office space. All are owned in fee except the Palo Alto, California, plant,
which is located on 8.5 acres under a lease to Dow Jones for 50 years,
expiring in 2015.
-8-
Other facilities owned in fee with a total of approximately 870,000 square
feet house news, sales, administrative, technology and operational staff.
These facilities are located in South Brunswick, New Jersey, and Chicopee
Falls, Massachusetts. The company has let 253,000 square feet of office space
in South Brunswick.
Dow Jones occupies two major leased facilities in New York City, including
320,000 square feet at the World Financial Center, which primarily houses
editorial and executive staff, and 98,000 square feet at a separate location
for advertising sales staff.
The company also leases other business and editorial offices in numerous
locations around the world, including 92,000 square feet in Harborside, N.J.,
75,000 square feet in four locations in London and 73,000 square feet in three
locations in Hong Kong.
Ottaway Newspapers operates in 26 locations, including a 24,000 square foot
administrative headquarters in Campbell Hall, New York. These facilities are
located in Santa Cruz, California; Danbury, Connecticut; Ashland, Kentucky;
Beverly, Hyannis, New Bedford, Gloucester, Nantucket, Peabody, Salem and
Newburyport, Massachusetts; Traverse City, Michigan; Mankato, Minnesota;
Joplin, Missouri; Exeter and Portsmouth, New Hampshire; Middletown, Oneonta,
Plattsburgh and Port Jervis, New York; Medford, Oregon; and Grove City,
Sharon, Stroudsburg and Sunbury, Pennsylvania. Local printing facilities,
which include office space, total approximately 1.2 million square feet. All
facilities are owned in fee except the office space in Salem, which is leased.
The company believes that its current facilities are suitable and adequate,
well maintained and in good condition. Older facilities have been modernized
and expanded to meet present and anticipated needs.
ITEM 3. Legal Proceedings
On February 20, 2001, Market Data Corp. (MDC) commenced a lawsuit against Dow
Jones in the Supreme Court of the State of New York, seeking to compel the
company to pay $11.7 million, plus interest, attorneys fees and costs, that
MDC claims is owed under the guarantee issued to MDC and Cantor Fitzgerald
Securities Corp., together with unspecified consequential damages that MDC
claims result from Dow Jones' failure to pay on the guarantee. The guarantee
relates to certain annual minimum payments owed by Telerate for data acquired
by Telerate from Cantor Fitzgerald and MDC under contracts entered into when
Telerate was a subsidiary of Dow Jones, and is described above in Management's
Discussion and Analysis. The complaint alleges that the payment was due on
February 15, 2001 and that Telerate has not made the payment because Bridge
Information Systems, Inc., which owns Telerate, has filed a petition in the
United States Bankruptcy Court for the Eastern District of Missouri seeking
protection from its creditors. The period within which Dow Jones must answer,
move against or otherwise respond to the Complaint has not yet expired.
ITEM 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
-9-
Executive Officers of the Registrant
- ------------------------------------
Each executive officer is elected annually to serve at the pleasure of the
Board of Directors.
Mr. Bailey, Mr. Zannino and Mr. Vieth have been employed by the company for
fewer than five years.
Peter R. Kann, age 58, Chairman of the Board since July 1991, Chief Executive
Officer since January 1991 and Publisher of The Wall Street Journal since
January 1989, served as President from July 1989 to July 1991 and Chief
Operating Officer from July 1989 to December 1990, Executive Vice President
from 1985 to 1989 and Associate Publisher of The Wall Street Journal from 1979
to 1988.
Richard F. Zannino, age 42, joined the company in February 2001 as Executive
Vice President and Chief Financial Officer. Before joining Dow Jones, Mr.
Zannino was Senior Vice President, Finance & Administration and Chief
Financial Officer of Liz Claiborne, Inc. since 1998. Previously, Mr. Zannino
had worked briefly as Chief Financial Officer of General Signal Corporation,
and before that for five years at Saks Fifth Avenue, ultimately as Executive
Vice President and Chief Financial Officer.
Jerome H. Bailey, age 48, retiring effective April 30, 2001, joined the
company in April 1998 as Senior Vice President and Chief Financial Officer and
in October 1998 was promoted to Executive Vice President and Chief Financial
Officer. Prior to joining Dow Jones, Mr. Bailey was Chief Financial Officer
for Salomon, Inc. and Salomon Brothers from 1993 until Salomon was acquired by
Travelers Group, Inc. in 1997.
Peter G. Skinner, age 56, Executive Vice President since October 1998 and
General Counsel and Secretary since 1985, Senior Vice President from November
1989 to October 1998, President, Television from January 1995 to December
1997, served as Vice President from 1985 to November 1989.
James H. Ottaway Jr., age 63, Senior Vice President since 1986, President of
Magazines since February 1988, Chairman of Ottaway Newspapers, Inc. since
1979, served as President of the International Group from February 1988 to
January 1995, as Vice President/Community Newspapers from 1980 to 1985 and as
President of Ottaway Newspapers, Inc. from 1970 to 1985 and its Chief
Executive from 1976 to January 1989, resuming that position in June 1998.
L. Gordon Crovitz, age 42, Senior Vice President/Electronic Publishing since
October 1998, Vice President/Planning and Development from November 1997 to
October 1998. Managing Director for Telerate's Asia/Pacific operation from
September 1996 to November 1997. Editor and Publisher of Review Publishing
Company from July 1993 to September 1996.
Christopher W. Vieth, age 36, Corporate Controller, joined the company in July
2000. Prior to joining Dow Jones, Mr. Vieth had been Vice President and
Corporate Controller of Barnes and Noble, Inc. since May 1999. He joined
Barnes and Noble in December 1995 as Director of Finance and was named
Director of Finance and Operations in 1998. From 1987 through 1995, Mr. Vieth
worked at Amerada Hess Corporation and held several positions of increased
responsibility within the company.
-10-
PART II.
ITEM 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
The company's common stock is listed on the New York Stock Exchange. The
class B common stock is not traded. The approximate number of stockholders of
record as of January 31, 2001 was 10,992 for common stock and 4,053 for class
B common stock. The company paid $1.00 per share in dividends in 2000 and
$.96 in 1999.
=============================================================================
Market Price 2000 Market Price 1999
----------------- Dividends ----------------- Dividends
Quarters High Low Paid 2000 High Low Paid 1999
- -----------------------------------------------------------------------------
First $72 7/8 $57 3/8 $.25 $49 1/2 $43 5/8 $.24
Second 77 5/16 62 3/8 .25 56 3/8 46 5/16 .24
Third 75 59 3/8 .25 55 49 5/16 .24
Fourth 61 13/16 51 3/8 .25 71 3/8 53 1/16 .24
=============================================================================
ITEM 6. Selected Financial Data.
See Management's Discussion and Analysis of Financial Condition and Results
of Operations for a discussion of factors that affect the comparability of
the information reflected in this table.
The following table shows selected financial data for the most recent five
years:
=============================================================================
(in thousands except
per share amounts) 2000 1999 1998 1997 1996
- -----------------------------------------------------------------------------
Revenues $2,202,618 $2,001,835 $2,158,106 $2,572,518 $2,481,592
Net (loss) income (118,962) 272,429 8,362 (802,132) 189,969
- -----------------------------------------------------------------------------
Per share amounts:
Net (loss) income
Basic $(1.35) $3.01 $.09 $(8.36) $1.96
Diluted (1.35) 2.99 .09 (8.36) 1.95
Dividends 1.00 .96 .96 .96 .96
- -----------------------------------------------------------------------------
Total assets $1,362,056 $1,512,713 $1,484,022 $1,919,734 $2,759,631
Long-term debt,
including
current portion 150,865 149,945 149,889 234,124 337,618
=============================================================================
Net (loss) income included unusual pretax items as follows:
=============================================================================
(in thousands) 2000 1999 1998 1997 1996
- -----------------------------------------------------------------------------
Restructuring
charges $(2,755) $( 76,115) $(1,001,263)
Gain (loss) on
disposition of
businesses and
investments $ 24,053 51,945 (126,085) 52,595 $14,315
Reserve for
contract
guarantee (255,308)
Write-down of
investments (178,499)
=============================================================================
-11-
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
In 2000, the company recorded a consolidated net loss of $119 million, or
$1.35 per diluted share, compared with profits of $272.4 million, or $2.99 per
diluted share, a year ago and $8.4 million, or $.09 per share, in 1998. (All
references to "per share" amounts in this discussion are on a per diluted
share basis.) Excluding the special items discussed below, net income in 2000
was $3.32 per share, up 36% over $2.44 per share in 1999 which was up 27% over
$1.92 per share in 1998.
The loss in 2000 included write-downs totaling $178.5 million, or $2.04 per
share, on the company's investments in Bridge Information Systems, Inc.
(Bridge) and OptiMark Technologies, Inc. and a reserve of $255 million, or
$2.93 per share, on a contract guarantee relating to Telerate. These losses
were partially offset by net gains on sales of businesses and investments
totaling $18.1 million, or $.19 per share. Also in 2000, a 1998 restructuring
charge ($2.1 million after tax, or $.02 per share) relating to an equity
investee was reversed, resulting from the favorable disposition of a satellite
lease in Europe.
Earnings in 1999 included net gains on sales of businesses and investments of
$51.6 million, or $.57 per share, and a net restructuring charge of $1.6
million, or $.02 per share, for employee severance associated with the
conversion to electronic pagination of The Wall Street Journal.
Earnings in 1998 reflected a loss of $150.3 million ($123 million after tax,
or $1.27 per share) on the sale of the company's Telerate subsidiary and net
losses from Telerate's operations of $23.3 million ($.24 per share). Results
also included $19.3 million ($.21 per share) from net gains on the sales of
businesses and investments and restructuring charges of $82.6 million ($49.6
million after tax, or $.53 per share), largely from employee severance, write-
down of assets, real estate lease terminations and charges related to
redundant international television satellite leases.
In 1998, the company completed the sale of Telerate to Bridge. The purchase
price consisted of $150 million aggregate par value of 5 year, redeemable,
convertible, 4% preferred stock of Bridge, which was included in other
investments, and cash of $360 million. Under the terms of the sale, Dow Jones
retained its guarantee of payments under certain circumstances of certain
annual minimum payments for data acquired by Telerate from Cantor Fitzgerald
Securities and Market Data Corporation (MDC) under contracts entered into
during the period when Telerate was a subsidiary of Dow Jones (contract
guarantee). The annual minimum payments average approximately $50 million per
year through October 2006. Bridge has agreed to indemnify Dow Jones for any
liability Dow Jones incurs under the contract guarantee with respect to
periods subsequent to Bridge's purchase of Telerate.
In 1999, Dow Jones acquired approximately 1.78 million shares of SAVVIS
Communications Corp. at 50 cents per share for an aggregate cost of $0.9
million and issued subordinated debt to Bridge which had a carrying value
(including interest) of $2.9 million. Bridge is SAVVIS' largest customer and
shareholder and a significant vendor for technical support services.
Dow Jones accounted for these investments under the cost method; therefore,
changes in the value of the investment are not recognized unless there is
impairment in value of the investment that is deemed to be "other than
temporary". It is the company's policy to continually monitor investments for
indications of impairment.
Throughout 2000, Bridge experienced continued operating shortfalls from plan
and experienced a need for substantial relief from its bank lenders and
additional financing. In the judgment of Dow Jones management, these
developments, when combined with the pricing of its third quarter issuance of
convertible notes, clearly demonstrated that there was a decline in value of
-12-
the company's preferred stock holdings. In addition, Bridge notified its
lenders that as of September 30, 2000 it was not in compliance with certain
financial covenants under its outstanding credit agreement. Bridge's
principal shareholder had taken over management of the company and launched
several initiatives focused on improving operations, increasing revenues and
raising additional capital. However, there was no assurance that these
efforts would be successful. These factors, combined with the lack of updated
long-term forward projections, left Dow Jones management with insufficient
objective evidence to determine that the decline in value of the company's
preferred stock holdings was temporary. Using the third quarter convertible
notes financing transaction as a benchmark, Dow Jones recorded a charge to
earnings in the third quarter of $82.3 million on this investment (there was
no tax benefit as this was a capital loss). Also the company discontinued
accruing dividends on its preferred stock holdings effective with the third
quarter of 2000. The revised carrying value for this investment at September
30, 2000 was $80.3 million.
Bridge's financial position continued to deteriorate during the fourth
quarter, and it continued to experience severe operational difficulties. In
December, Bridge informed Dow Jones that Telerate might be late in paying the
February 15, 2001 quarterly installment under the data supply contracts
described above. Subsequently MDC notified Dow Jones that if Telerate failed
to pay the installment (amounting to approximately $12 million), MDC would
seek to recover such amount from Dow Jones under the contract guarantee.
During the fourth quarter and continuing into January and early February 2001,
Bridge's primary investor, Welsh Carson Anderson & Stowe, engaged in
negotiations with Bridge and its lenders in an effort to reach an agreement to
restructure Bridge's debt, arrange additional financing and significantly
reorganize its operations. However, those negotiations did not reach a
successful conclusion and on February 15, 2001 Bridge filed a petition under
Chapter 11 of the Bankruptcy Code with a view to seeking a sale of its assets
in order to repay its creditors in whole or in part. (Bridge's Chapter 11
filing had been preceded by an involuntary bankruptcy petition filed on
February 1, 2001 by one of its creditors, but Bridge's Chapter 11 filing
rendered the earlier filing moot.)
Dow Jones understands that Telerate did not make the approximately $12 million
quarterly payment described above on February 15, 2001. MDC has commenced a
lawsuit against Dow Jones seeking such payment and certain consequential
damages that MDC claims have resulted and will result if Dow Jones does not
make such payment. Dow Jones has not made such payment and the litigation is
proceeding.
In light of the foregoing events, Dow Jones has concluded that its Bridge-
related investments have been further impaired, and are now worthless. As a
result, in the fourth quarter, the company wrote off $84.1 million
representing the entire remaining carrying value of the Bridge preferred
stock, the Bridge subordinated debt and the SAVVIS stock.
With respect to the remaining minimum annual payments due from Telerate to MDC
described above, Dow Jones believes that MDC and Cantor Fitzgerald have the
obligation to cover, mitigate or otherwise reduce and/or avoid any losses or
damages under these circumstances, including by securing the best possible
commercial terms for the supply of the subject data to a third party or
parties. Dow Jones believes that any and all amounts which are received by
MDC and/or Cantor Fitzgerald in respect of such data (which Dow Jones believes
is marketable and has considerable value) would reduce any liability that Dow
Jones might have under the contract guarantee. There is a high degree of
uncertainty, however, as to what value the data will have in the marketplace;
whether an agreement will be reached by MDC and/or Cantor Fitzgerald to supply
the data to a third party or parties; the financial position of such party or
parties; and the timing of any such agreement. Therefore, it is not possible
for Dow Jones to determine with any certainty that any such offsets would in
fact be realized, or at what time or in what amounts. Consequently, the
-13-
company has established a reserve in the amount of $255 million representing
the present value of the total estimated annual minimum payments over the
remainder of the contract term (through October 2006) using a discount rate of
approximately 6%. The amount of such reserve is reflected as a charge in the
fourth quarter of 2000. The company will accrue the discount on the contract
guarantee using the interest method. In 2001, the impact could amount to
approximately $14 million, which would be recorded as a non-operating charge.
To the extent any offsets against the liability described above become certain
or are realized in the future, or if the liability is otherwise reduced or
eliminated, Dow Jones will reduce or eliminate the reserve as appropriate and
recognize a special gain in the relevant period.
In addition, the company holds a minority interest in OptiMark Technologies,
Inc. consisting of preferred and common shares with an aggregate cost of $12.1
million. OptiMark has significantly restructured its operations and its most
recent public filing indicates that there is some question of OptiMark's
ability to continue as a going concern, principally because of negative cash
flow. Management believes that the carrying value of the company's investment
in OptiMark is impaired and that the impairment is other than temporary. As a
result the company recorded a charge in the fourth quarter of 2000 to write
off the full carrying value of its $12.1 million investment.
The following table reconciles the company's reported results to income
excluding special items. The term "special items," as used within the
remainder of management's discussion and analysis, refers to those items
within the table.
Special Items
-------------
(in millions, except
per share amounts) 2000 Income 1999 Income 1998 Income
Operating Net EPS Operating Net EPS Operating Net EPS
--------- --- --- --------- --- --- --------- --- ---
REPORTED (LOSS)
INCOME $498.2 $(119.0) $(1.35) $389.5 $272.4 $2.99 $218.6 $ 8.4 $ .09
ADJUSTED TO REMOVE:
Telerate loss (33.2) (146.3) (1.51)
Restructuring
charges included in
operating income:
Employee severance (2.8) (1.6) (.02) (38.8) (22.9) (.24)
Real estate
lease terminations (20.0) (12.2) (.13)
Technology related (17.3) (10.3) (.11)
Included in non-
operating income:
International TV
restructuring 2.1 .02 (4.2) (.05)
Reserve for contract
guarantee (255.3) (2.93)
Write-downs of
investments:
Bridge Information
Systems (166.4) (1.90)
OptiMark
Technologies (12.1) (.14)
Investment gains (loss):
DJ Financial
Publishing 9.5 .10
SportsTicker
Enterprises 4.8 .05
Swap of NextVenue
shares for iBEAM
shares 3.8 .04
USSB Inc. 57.3 .63
OptiMark Technologies 10.6 .12 8.2 .09
IDD Enterprises (16.3) (.18)
EDGAR Direct 1.0 .01
WBIS+ 7.4 .08
Mediatex 2.7 .03
INCOME EXCLUDING
SPECIAL ITEMS $498.2 $ 294.6 $ 3.32* $392.3 $222.4 $2.44 $327.9 $ 185.0 $ 1.92
* Per share amounts for each special item were calculated using the average shares outstanding
during the quarter that the transaction occurred. Therefore, the total of the individual items
does not add to the full-year earnings per share.
-14-
Excluding these special items, earnings per share in 2000 of $3.32 grew $.88,
or 36%, from 1999 as earnings improved in all segments coupled with a $.09 per
share benefit of lower average shares outstanding.
Operating income of $498.2 million (or 22.6% of revenues) in 2000 was up
$108.7 million, or 28%, from $389.5 million (or 19.5% of revenues) a year ago.
Excluding the restructuring charge in 1999, operating income advanced $105.9
million, or 27%, from $392.3 million (or 19.6% of revenues) in 1999. The
EBITDA margin in 2000 was 27.5% versus 24.8% in 1999. EBITDA is defined as
operating income excluding depreciation, amortization and restructuring
charges (see Note 14 to the financial statements). Revenues rose 10% to $2.2
billion from the $2 billion recorded in 1999, largely due to growth in
advertising revenue at print publishing. Revenue from U.S. operations, which
was 91% of total revenues in 2000, increased 9.1% and revenue from
international operations improved 20%. Operating expenses of $1.7 billion (or
77% of revenues) in 2000 grew $92.1 million, or 5.7%, from $1.6 billion (or
81% of revenues) in 1999, in part reflecting higher newsprint costs and
promotional spending. Newsprint expense was up 21% in 2000 with a 10.1%
increase in the average price per ton of newsprint and a 9.7% increase in the
tons consumed. Excluding the 1999 restructuring charge, operating expenses
increased $94.9 million, or 5.9%, from $1.6 billion (or 80% of revenues).
The company formed a 50-50 joint venture on July 1, 1999, Dow Jones Reuters
Business Interactive LLC (Factiva), into which the company contributed a
significant portion of its Dow Jones Interactive business. The company's
share of Factiva's results is reported in Equity in Losses of Associated
Companies. Prior to July 1, 1999, results of the interactive business
contributed to Factiva were included in the company's electronic publishing
revenues, expenses and operating income. If the company's one-half share of
Factiva results were consolidated on a proportional basis, revenues of $2.3
billion in 2000 would have increased 13% from last year, expenses of $1.8
billion would have risen 8.6% (8.8% excluding the 1999 restructuring charge)
and operating income of $503.1 million would have been 31% better (30%
excluding the 1999 restructuring charge).
On January 1, 2000, Dow Jones contributed its indirect holdings in the Czech
business publisher Economia and the German financial news agency VWD to The
Wall Street Journal Europe and the company exchanged a 49% interest in The
Wall Street Journal Europe for a 22% interest in Handelsblatt, Germany's
leading business newspaper and a subsidiary of von Holtzbrink Group. As a
result, Dow Jones' interest in Economia declined to 12% and in VWD to 17%.
Minority interests reflected in the 2000 financial statements largely
represent von Holtzbrinck Group's 49% share of the contributed businesses. In
conjunction with this new alliance, the company initiated expanded promotional
programs to position The Wall Street Journal Europe to be the leading regional
business publication in Europe.
Effective April 1, 2000, Dow Jones and At Home Corp., an Internet-access and
content provider, formed a new company, Work.com, into which Dow Jones
contributed dowjones.com. In August 2000, Work.com launched its business
portal website targeted at small and midsize business Internet users. The
results for Work.com, as of the effective date, are included in Equity in
Losses of Associated Companies.
In September 2000, the company completed the key phase of The Wall Street
Journal pagination project, ending more than three decades of remote
composition. The project was launched in early 1999 to streamline the
production process and compose electronically all news and advertising pages
of The Wall Street Journal, using a fully integrated system with new
advertising layout and editorial components. The project goals included
getting fresher content into the Journal, while ensuring timely home delivery;
-15-
simplifying the company's technology structure by installing best-of-class
industry-proven solutions; and giving front-end control of the pages to the
News and Advertising departments. Barron's will go live with the new system
in the first quarter of 2001.
In 1999, the company recorded a restructuring charge of $2.8 million ($1.6
million after tax, or $.02 per share) for employee severance associated with
the conversion to electronic pagination of The Wall Street Journal. In 1998,
restructuring charges of $76.1 million ($45.4 million after tax, or $.48 per
share) included staff reduction costs of $38.8 million (mainly resulting from
two voluntary early retirement plans), real estate lease termination of $20
million (largely on its principal leased space in New York City) and a charge
of $17.3 million for write-downs of a U.S. news-editing technology system and
other computer equipment. In addition in 1998, the company recorded a
restructuring charge relating to equity investees of $6.5 million ($4.2
million after tax, or $.05 per share) to equity losses for additional costs
related to redundant international television satellite leases as a result of
establishing joint ventures with CNBC in 1997.
Operating income of $389.5 million (or 19.5% of revenues) in 1999 improved
$170.9 million, or 78%, from $218.6 million (or 10.1% of revenues) in 1998.
Excluding special items in both years, operating income of $392.3 million (or
19.6% of revenues) in 1999 grew $64.4 million, or 20%, from 1998's $327.9
million (or 17.5% of revenues). The EBITDA margin in 1999 was 24.8%, up from
20.3% (22.2% excluding Telerate) in 1998. Revenues of $2 billion in 1999 rose
$129.6 million, or 6.9%, from 1998, excluding Telerate in 1998, primarily
reflecting higher advertising revenue at print publishing. Revenue from U.S.
operations, which was 92% of total revenue in 1999, rose 8%, while revenue
from international operations declined 3.7%. Operating expenses, excluding
special items and Telerate, increased $65.3 million, or 4.2%, in part
resulting from a rise in compensation, promotional spending on branding
campaigns across all businesses, costs associated with international expansion
and process redesign initiatives. Partially tempering increased operating
expenses was a 7.5% decline in newsprint expenses with a 14% drop in average
price per ton somewhat offset by an 8% increase in usage in 1999.
SEGMENT DATA
A summary of results of operations for each of the company's principal
business segments as well as additional financial data is displayed in Note 14
to the financial statements.
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 19
daily newspapers and 15 weekly newspapers in 11 states in the U.S., are
reported in the community newspaper segment. Print publishing accounted for
approximately 69% of 2000 revenues. The community newspapers segment
accounted for 16% of 2000 revenues, while electronic publishing comprised the
remaining 15%.
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, Dow
Jones Indexes, WSJ.com, dowjones.com (up to April 1, 2000 when it was
contributed to Work.com) and Dow Jones Interactive (up to July 1, 1999 when it
was contributed to Factiva) and other. The company's 50% share of Factiva's
results is reported in Equity in Losses of Associated Companies.
-16-
PRINT PUBLISHING
============================================================================
(in thousands) 2000 1999 1998
- ----------------------------------------------------------------------------
U.S. Publications:
Advertising $1,071,731 $ 892,317 $ 729,865
Circulation and other 299,000 311,565 319,293
International Publications:
Advertising 102,686 73,327 67,773
Circulation and other 45,529 43,588 45,008
- ----------------------------------------------------------------------------
Total revenues 1,518,946 1,320,797 1,161,939
Operating expenses 1,118,789 1,013,760 988,357
- ----------------------------------------------------------------------------
Operating income $ 400,157 $ 307,037 $ 173,582
- ----------------------------------------------------------------------------
EBITDA * $ 465,122 $ 372,354 $ 272,005
EBITDA margin 30.6% 28.2% 23.4%
============================================================================
* See Note 14 to financial statements.
Print publishing operating income in 2000 increased $93.1 million, or 30%,
from a year ago as revenue rose 15% and expenses grew 10%. Excluding a $2.8
million restructuring charge in 1999, print publishing operating income
advanced $90.4 million, or 29%. EBITDA was up $92.8 million, or 25%, from
1999. The improvement in 2000 primarily was attributable to strength in
advertising revenue at The Wall Street Journal, which was partially offset by
the volume related expenses and higher newsprint prices. Meanwhile, operating
profits in 1999 benefited from strong advertising volume and lower newsprint
prices compared to 1998.
Revenues in 2000 grew $198.1 million, or 15%, from 1999, largely on a 14.1%
advertising linage gain at The Wall Street Journal. Barron's revenue improved
12%, reflecting a 12.9% increase in national ad pages. International print
revenues rose 27%, also driven by strong advertising growth. About 10% of
print publishing revenues were earned by international publications. Within
the print publishing segment, "U.S." revenue figures refer to all revenues,
from whatever geographic source, for publications headquartered in the United
States, while "international" revenue figures refer to all revenues, from
whatever geographic source, for publications headquartered outside the United
States. Advertising linage at The Wall Street Journal Europe increased 14.9%
(15.8% on a per issue basis) and at The Asian Wall Street Journal grew 25.2%
(25.7% on a per issue basis) in 2000. The Far Eastern Economic Review also
had significant advertising page growth in 2000 with an increase of 35.2%, as
the Asian economy strengthened. This followed a 30.1% decline in 1999. U.S.
television advertising revenue more than doubled from 1999. Circulation and
other revenue of $344.5 million for print publishing was down 3% in 2000.
The Wall Street Journal posted linage gains in all three principal advertising
categories in 2000. General advertising includes advertising from all
significant industries such as technology, telecommunications, automotive and
professional services as well as consumer and corporate image advertising.
Linage for this category, which comprises 63% of total Journal linage, rose
19%, following a 21.9% gain in 1999 and a 2.1% improvement in 1998.
Technology, the largest component of general advertising, increased 77% in
2000, after a 32% increase in 1999 as business to business e-commerce
continued to thrive during the first half of 2000. General linage excluding
technology declined 2.4% in part due to lower telecommunications and consumer
advertising. Financial advertising consists of advertising by investment and
trading firms as well as advertising for tombstone/initial public offerings
(IPOs). This category, which comprises 25% of total advertising, was up 4.2%
in 2000, after climbing 17.7% in 1999 and declining 11.6% in 1998. The 2000
increase chiefly was from higher investing and trading spending during the
-17-
first half of 2000. Through the first half of 2000, financial linage surged
29.5% driven by a strong economy and heavy activity in tombstone/IPOs, which
continued the trend from the second half of 1999. However, the second half of
2000 did not experience the same demand in financial advertising as had been
achieved during the second half of 1999, resulting in a 16.1% decline for the
last half of 2000. Classified and other linage, which accounts for the
remaining 12% of total advertising, increased 12.3%, reflecting strong
commercial and residential real estate advertising, following gains of 2% in
1999 and 8.9% in 1998, respectively.
Circulation and other revenues for U.S. print publications declined $12.6
million, or 4%, in 2000. Average circulation for The Wall Street Journal was
1,789,000 in 2000, up from 1,772,000 in 1999 and 1,773,000 in 1998. Recent
circulation growth at The Wall Street Journal included higher levels of lower
rate hotel/airline copies. Minimal circulation revenue is generated from
hotel/airline copies but they are of value to advertisers. The company's
Statement of Total Circulation (STC) provides circulation data which is
periodically reviewed by independent accountants, and also information on the
quality and character of the publication's paid circulation, including
complimentary and third party amenity copies, subscription terms and price.
The STC, which was first issued in March 1998, is issued semi-annually
covering the six-month periods ending March and September. For the six-month
period ended September 30, Wall Street Journal average circulation under the
STC was 1,883,000, up from 1,855,000 in 1999 and 1,836,000 in 1998. Barron's
average annual circulation was 305,000 compared with 300,000 and 296,0000 in
1999 and 1998, respectively.
Circulation and other revenue for international print publications in 2000 was
up 4.5% from 1999, with gains from increased circulation largely offset by a
stronger U.S. dollar in Europe. Average combined circulation for the
international editions of The Wall Street Journal for 2000 was 170,000, up 16%
from 147,000 in 1999 and compared with 128,000 in 1998.
Print publishing expenses in 2000 rose $105 million, or 10%, from a year
earlier. Excluding a $2.8 million restructuring charge in 1999, expenses grew
$107.8 million, or 11%. Expense growth was largely volume related (higher
production and newsprint costs, sales incentives and delivery costs) coupled
with higher newsprint prices and increased promotional spending (a portion of
which was linked to the Journal's branding campaign). Newsprint expense was
up 21%, driven by a 10% increase in price and a 10% increase in usage in 2000
compared with a year ago. The average newsprint price per ton consumed in
2000 was $552 versus $500 a year ago. At December 31, 2000, the number of
full-time employees in the print publishing segment was up 5.3% from a year
earlier, primarily due to expanded news coverage worldwide.
Revenues in 1999 for print publishing grew $158.9 million, or 14%, from 1998,
reflecting a 15% improvement in U.S. revenue with advertising revenue growth
of 22%. U.S. circulation and other revenues declined 2.4% in 1999.
Advertising revenue from the international publications increased 8.2% as a
result of a 26.1% linage increase at The Wall Street Journal Europe and a 9.6%
increase at The Asian Wall Street Journal, which were partially offset by a
30.1% decline in advertising pages at the Far Eastern Economic Review.
Total print publishing expenses in 1999 rose $25.4 million, or 2.6%, from
1998. Excluding restructuring costs, expenses increased $72.6 million, or
7.7%, due to compensation (part of which was tied to advertising revenue
gains), promotional spending (a portion of which was linked to the Journal's
branding campaign) and costs related to international expansion, which were
partially offset by lower newsprint expense of $12.2 million, or 7.5%, with a
14% price drop.
-18-
ELECTRONIC PUBLISHING
============================================================================
(in thousands) 2000 1999 1998
- ----------------------------------------------------------------------------
Revenues $327,569 $349,998 $393,178
Expenses 287,272 314,888 337,118
- ----------------------------------------------------------------------------
Operating income $ 40,297 $ 35,110 $ 56,060
- ----------------------------------------------------------------------------
EBITDA * $ 65,558 $ 58,372 $ 88,409
EBITDA margin 20.0% 16.7% 22.5%
============================================================================
* See Note 14 to financial statements.
In 2000, electronic publishing operating income was up $5.2 million, or 15%,
from 1999, despite a revenue decrease of $22.4 million, or 6.4%. These
comparisons, however, are distorted by the impact of the company contributing
the bulk of its Dow Jones Interactive business to the Factiva joint venture,
effective July 1, 1999. The company's share of Factiva's results is recorded
in Equity in Losses of Associated Companies.
The supplemental information included in the table below and related
discussion which follows, include Dow Jones' 50% share of Factiva's results on
a pro forma basis as if the venture were formed on January 1, 1998 and
excludes special items.
============================================================================
(in thousands) 2000 1999 1998
- ----------------------------------------------------------------------------
Dow Jones Newswires:
North America $192,019 $172,193 $161,535
International 39,894 36,868 44,718
- ----------------------------------------------------------------------------
Total Newswires 231,913 209,061 206,253
Factiva 120,498 111,329 108,514
WSJ.com 50,083 30,939 17,177
Dow Jones Indexes 14,637 12,924 12,490
Other 25,852 39,426 48,744
- ----------------------------------------------------------------------------
Total revenues 442,983 403,679 393,178
Operating expenses 397,818 373,241 327,257
- ----------------------------------------------------------------------------
Operating income $ 45,165 $ 30,438 $ 65,921
- ----------------------------------------------------------------------------
EBITDA * $ 76,944 $ 54,692 $ 88,409
EBITDA margin 17.4% 13.5% 22.5%
============================================================================
* See Note 14 to financial statements.
Electronic publishing's 2000 operating income increased $14.7 million, or 48%,
from 1999. EBITDA increased $22.3 million, or 41%. Revenues advanced $39.3
million, or 9.7%, while expenses grew $24.6 million, or 6.6%. The growth in
expenses was largely due to promotion of the company's interactive products,
including Internet development costs and continued expansion of the Newswire
business. This increase was partially mitigated by the impact of the December
1999 sale of the company's IDD Enterprises subsidiary and the April 1, 2000
contribution of dowjones.com, to a joint venture, Work.com. Excluding IDD
Enterprises and dowjones.com from both periods, operating income of $47.5
million in 2000 increased 7%, revenues of $442.3 million were up 13% and
expenses increased 14%. On the same basis, EBITDA improved 16% as the margin
grew to 17.8% in 2000 from 17.3% in 1999.
-19-
Dow Jones Newswires revenue in 2000 increased $22.9 million, or 11%, from a
year ago, with gains of 12% and 8.2% in North America and international,
respectively. The mix of North American versus international revenue was
roughly 83% to 17% in 2000 compared with 82% to 18% in 1999. The gain in
North America was partly driven by new revenue from on-line trading sites of
institutional customers in addition to the growth in terminals for Dow Jones
News Service. International growth reflected increased retail terminals
through Reuters and Bloomberg as well as growth in third-party wholesale
agreements revenue in Asia. In 2000, foreign language wires were introduced
starting with the Chinese-language service in March 2000, followed by
Japanese, Spanish, French, Bahasa and German language services during the
year. At the end of 2000, there were 346,000 English-language newswire
terminals compared with 318,000 a year ago. Approximately 26,000 of the
additional terminals were in North America with a 2,000 increase throughout
the rest of the world.
Factiva revenue represents the company's 50% share as if Factiva had existed
from the beginning of 1998. The difference between the company's pro forma
half of Factiva revenue and the company's wholly-owned Dow Jones Interactive
revenues for the first half of 1999 is reflected in "other", and in part
accounts for the decline in the "other" category. The company's share of
Factiva revenue increased $9.2 million, or 8.2%, in 2000, largely due to
customer growth partially offset by the impact of a strong U.S. dollar on its
overseas revenues. Factiva Publisher, which contains the combined content set
of both Dow Jones Interactive and Reuters Business Briefing, was launched in
July 2000.
WSJ.com revenue in 2000 jumped $19.1 million, or 62%, from a year ago,
reflecting a 72% increase in advertising revenue and a 49% rise in
subscription revenue. The ratio between advertising and subscription revenue
for 2000 was 59% to 41%, respectively, versus 56% advertising to 44%
subscription in 1999. The number of subscribers at the end of 2000 reached
535,000, up 43% from the year-ago total of 375,000, and compared with 266,000
in 1998. At year-end 2000, the average number of different individuals who
accessed at least one page of WSJ.com subscriber-only content over the course
of a 24-hour day was 100,000 and the average monthly page views per user was
122.
Dow Jones Indexes revenue in 2000 increased $1.7 million, or 13%, with 21 new
exchange-traded funds in North America. Assets based on Dow Jones Indexes
rose to $393 billion from $196 billion in 1999, stemming from the STOXX
venture in Europe (the company's 25% share of results from STOXX is included
in Equity in Losses of Associated Companies).
Other electronic publishing revenue in 2000 declined $13.6 million, or 34%,
mainly due to the sale of IDD Enterprises at the end of 1999.
Electronic publishing operating income, including one-half of Factiva results,
decreased $35.5 million, or 54%, in 1999 from 1998. EBITDA fell $33.7
million, or 38%, in 1999. Revenue rose $10.5 million, or 2.7%. Operating
expenses grew $46 million, or 14%, mainly due to the promotion and development
of interactive products and expansion of Newswire businesses, principally
internationally. Since the sale of Telerate, which was the primary
distributor of Newswires overseas, the company has invested heavily in its
electronic products in an effort to expand internationally through various
distribution channels and to position itself to take advantage of
opportunities presented by the Internet.
-20-
COMMUNITY NEWSPAPERS
==========================================================================
(in thousands) 2000 1999 1998
- --------------------------------------------------------------------------
Advertising $256,015 $237,005 $225,017
Circulation and other 100,088 94,035 92,070
- --------------------------------------------------------------------------
Total revenues 356,103 331,040 317,087
Operating expenses 261,621 246,081 272,327
- --------------------------------------------------------------------------
Operating income $ 94,482 $ 84,959 $ 44,760
- --------------------------------------------------------------------------
EBITDA * $111,716 $102,804 $ 78,644
EBITDA margin 31.4% 31.1% 24.8%
==========================================================================
* See Note 14 to financial statements.
Community newspapers reported an operating income increase of $9.5 million, or
11%, in 2000. The gain reflected a $25.1 million, or 7.6%, increase in
revenues tempered by higher expenses of $15.5 million, or 6.3%. EBITDA was up
8.7% from a year ago.
The revenue growth largely resulted from a $19 million, or 8%, increase in
advertising revenue, which comprised 72% of total revenue. Community
newspapers overall advertising linage rose 3.6% in 2000, with linage at the
daily papers up 3.9% and at non-dailies up 1.6%. Contributing to the gain was
a 6.3% growth in classified linage. Circulation revenue showed a slight
improvement of $1.2 million, or 1.3%, mainly due to subscription rate
increases. Average circulation in 2000 for the dailies was 546,000 in 2000
versus 555,000 in 1999, down 1.6%. At year-end, circulation was 534,000
compared to 551,000 a year ago. Operating expenses rose $15.5 million, or
6.3%, resulting from higher newsprint, promotion and print delivery costs.
Employee compensation expense, which is the largest cost component of
community newspapers, grew 4.4%.
In 1999, community newspapers operating income was up $40.2 million, or 90%,
from 1998. Excluding a 1998 restructuring charge of $16.3 million, operating
income in 1999 increased $23.9 million, or 39%. Revenues advanced 4.4% with
an advertising revenue increase of 5.3%. Expenses were down $26.2 million, or
9.6%, from 1998. Operating expenses decreased 3.9% from 1998 (excluding the
restructuring charge) reflecting lower newsprint expense and a 2.7% decline in
staffing costs (benefiting from the staff reduction plan completed in 1998).
EBITDA in 1999 was $24.2 million, or 31%, better than 1998.
TELEVISION
Television includes income from U.S. television operations reported in the
print publishing segment and losses from international television reported in
Equity in Losses in Associated Companies results. Pretax earnings were $21.1
million (excluding the reversal of a $3.2 million restructuring charge) in
2000 compared with losses of $4.4 million in 1999 and $20.8 million (excluding
special items) in 1998. Improvements in each year were attributable to the
company's worldwide alliance with CNBC, particularly in the U.S.
-21-
STAFFING COSTS
At December 31, 2000, the company employed about 8,600 full-time employees, up
4.9% from a year ago, largely due to international expansion. At December 31,
1999 the number of employees was nearly 8,200, down 1% from 1998 reflecting
the staff transfer to Factiva that was partially offset by growth in print and
electronic publishing. Consolidated employee compensation (including
retirement plans and medical benefits) was approximately 42% of total
operating expenses in both 2000 and 1999, compared with 38% in 1998 (excluding
restructuring charges in both 1999 and 1998).
OTHER INCOME/DEDUCTIONS
Investment income, net of interest expense, in 2000 was $6.1 million, up from
$4.6 million in 1999. Higher capitalized interest related to the color print
expansion project in 2000 more than offset a $3 million shortfall from the
dividend from Bridge. (The company did not accrue the quarterly dividend on
the preferred stock of Bridge in the second half of 2000).
The company's share of losses from equity investments was $17.2 million in
2000 compared with losses of $27.9 million a year ago. A reversal of a 1998
pretax restructuring charge of $3.2 million relating to the favorable
disposition of an equity investee satellite lease in Europe was included in
2000. Excluding this item, equity losses were $20.4 million. The improvement
in equity losses largely reflected the company's 50% share of Factiva profits
(formed on July 1, 1999), reduced losses at the international television joint
ventures, higher earnings at the company's newsprint mill affiliate and
earnings from the Handelsblatt investment. Partly offsetting these gains were
increased losses at SmartMoney (in part from new product development costs)
and the inclusion of Work.com losses. Equity losses in 1998 were $22.3
million (or $15.2 million excluding international television restructuring
charges).
In 2000, the company recorded $255 million for the reserve of the contract
guarantee, $166.4 million for write-downs in the company's Bridge related
investments and $12.1 million for the write-down of its investment in OptiMark
Technologies, Inc. Also included in 2000 results were pretax gains on sales
of businesses and investments including: $13.8 million from the sale of the
company's subsidiary, Dow Jones Financial Publishing Corp., which published
Investment Advisor, Asset Management, Property and Realty Stock Review; $6.4
million from the sale of the company's minority interest in SportsTicker
Enterprises L.P., a leading supplier of real-time sports news and information;
and $3.8 million resulting from the exchange of the company's holdings in
NextVenue Inc. for shares of iBEAM Broadcasting Corp., an Internet broadcast
network that delivers streaming media.
Included in 1999 earnings were pretax gains of $10.6 million from the sale of
a portion of the company's minority interest in OptiMark Technologies, Inc.
and $57.3 million from the sale of the company's interest in United States
Satellite Broadcasting, Inc. In addition, the company recorded a pretax loss
of $16.3 million from the sale of IDD Enterprises, L.P., a wholly owned
subsidiary.
In 1998, the company recorded a pretax loss of $126.1 million on the sale of
businesses and investments. The pretax loss of $150.3 million from the sale
of Telerate was partially offset by a total pretax gain of $24.2 million from
the sale of the company's interest in WBIS+ TV, Mediatex Communications Corp.,
EDGAR Direct and a portion of its holding in OptiMark Technologies, Inc.
-22-
INCOME TAXES
The effective income tax rate is distorted by the non-deductibility of the
reserve for the contract guarantee and the investment write-downs in 2000 as
well as the loss on the sale of Telerate in 1998 and the utilization of the
capital loss carryforward (principally resulting from the Telerate sale) on
gains from the sales of businesses and investments. The following table shows
the impact of these items.
============================================================================
2000 1999 1998
- ----------------------------------------------------------------------------
Effective income tax rate (net of minority
interests) 252.5% 34.8% 88.0%
Effective income tax rate (net of minority
interests) excluding special items 39.2% 39.7% 41.4%
============================================================================
At December 31, 2000 the company had available approximately $480 million of
capital loss carryforward (a deferred tax asset of $182 million), which was
fully reserved through a valuation allowance. The company may utilize the
carryforward through 2003. In addition, the company has recorded an
unrecognized capital loss carryforward of $434 million (a deferred tax asset
of $165 million which was fully reserved) that will be available for use for
five years from the year it is recognized for tax purposes.
FINANCIAL POSITION
During 2000, the company repurchased 3.7 million shares of its common stock at
an aggregate price of $230.1 million. As of December 31, 2000, puts were
outstanding covering 2 million shares at strike prices (net of put premiums
received) ranging from $50.70 to $56.40 per share, with exercise dates through
April 2002. The company has the option of net share settlement on these
contracts. As of December 31, 2000, approximately $526.8 million remained
under board authorization for share repurchases, after reserving for the
possible exercise of outstanding puts.
Cash provided by operations in 2000 reached $446.4 million, up $149.4 million,
or 50%, from 1999's $297 million. The increase in 2000 from 1999 was
primarily due to enhanced earnings, excluding non-cash write-downs and the
reserve for the contract guarantee, and faster collections of accounts
receivable. In 2000, sales of investments and businesses generated $28.8
million and proceeds from sales under the company's various stock compensation
plans provided $28.6 million. Cash and cash equivalents were $49.3 million at
December 31, 2000 versus $86.4 million at the year-end of 1999.
In addition to the repurchase of the company's stock in 2000, the company
funded capital expenditures of $187 million (including $63 million for The
Wall Street Journal color and print expansion project), paid dividends of
$88.1 million and invested $50.4 million in various affiliated companies.
If the company is required to perform under the terms of the contract
guarantee related to Telerate, it could be obligated to pay an estimated
average of $50 million per year through 2006. (A $255 million reserve was
recorded in 2000's fourth quarter.)
In 2001, the company expects its beginning cash balance and cash provided by
operations to be sufficient to meet its normal recurring operating
commitments, fund capital expenditures and pay dividends. The company expects
funding for the expansion of color and page capacity for the U.S. print Wall
Street Journal, on schedule for completion by the first quarter of 2002, to
total $232 million, of which $165 million was spent through 2000. Total
capital expenditures in 2001 are projected to be between $150 million and $175
million, with $67 million for the balance of the print expansion project and
-23-
$25 million for WSJ.com redesign, compared with $187 million in 2000 ($63
million for print expansion) and $191 million in 1999 ($78 million for print
expansion).
If necessary, the company's liquidity requirements may be funded through the
issuance of commercial paper, which is supported by a $400 million revolving
credit agreement with several banks through June 2001. The company plans to
extend the credit agreement prior to its expiration. Borrowings may be in the
form of commercial paper, bank loans or long-term notes under a $300 million
shelf registration statement filed with the Securities and Exchange
Commission. Commercial paper, amounting to $150.9 million at December 31,
2000, is classified as long-term, as it is the company's intent to refinance
such obligations on a long-term basis.
OUTLOOK - 2001
The overall strength of the U.S. economy is a key factor in the rate of growth
of advertising volume and revenue of The Wall Street Journal and other company
businesses. The slowing of the U.S. economy which developed late in 2000 and
continues into 2001, prevailing general uncertainty about the prospects for
the balance of the current year, and the discretionary nature of the timing of
some client advertising spending, combine to create a greater than usual
challenge in forecasting the company's financial outlook for 2001.
Linage at The Wall Street Journal was down 10.4% in the fourth quarter of
2000, and is expected to decline about 30% in 2001's first quarter. This
compares to a 43% linage increase in the first quarter of 2000. Assuming a
recovery in the U.S. economy during the second quarter of 2001, the company
believes that linage comparisons will improve in the second half of the year.
Advertising revenue will benefit from an advertising rate increase of 5%
effective January 1, 2001. Circulation revenue for The Wall Street Journal
should benefit from a price increase for newsstand copies with a cover price
of $1 effective April 2, 2001 (previously 75 cents). Advertising linage at
the community newspapers group is expected to be down slightly, however, this
decline should be offset by an increase in rates. The company expects modest
growth in electronic publishing revenues.
In terms of expenses, the major newsprint mills have announced a price
increase of $50 per metric ton, effective in the first half of 2001. In order
to offset the expected difficult revenue comparisons, the company has begun a
cost reduction program.
The developing situation at Bridge may also impact the company's results for
2001. Most of the company's Newswires contracts are directly with the end-
user, although some end-users receive Newswires through Bridge terminals.
Should Bridge fail to perform under certain wholesale supply agreements with
the company, the company believes it will be able to supply this information
to affected customers (either directly or through another distributor).
However, there could be a transitional period during which company revenue
could be reduced by approximately $3 million per quarter. Unless the
liability under the Cantor guarantee is reduced or eliminated, the
amortization of the discount would result in a non-operating charge of
approximately $3.5 million per quarter.
-24-
INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS
Management's Discussion and Analysis and other sections of this Annual Report
include forward-looking statements that reflect the company's current
expectations or beliefs concerning future results and events. In addition,
the company may from time to time make additional forward-looking statements,
either orally or in writing. The company cautions readers that the company's
targets and objectives, and the results expected or anticipated by forward-
looking statements, including, without limitation, statements relating to the
company's future business prospects, revenues, income, working capital,
liquidity, capital needs and interest costs and similar items, are subject to
certain risks and uncertainties which could cause actual results and events to
differ materially from those anticipated in the forward-looking statements.
Factors that might cause such a difference include, but are not limited to:
- global business, economic and stock market conditions, and the negative
impact of economic downturns on sales of the company's products and
services;
- economic conditions that are influencing the rate and volume of
advertising linage, in particular IPO, dot-com and technology advertising,
and the resulting impact on the company's advertising revenues;
- business conditions (growth or consolidation) in the financial services
industry, and the tendency of consolidation to negatively impact the
market for the company's products and services and advertising;
- the extent to which the company is called upon to perform under the
guarantee to Cantor Fitzgerald Securities and Market Data Corporation,
the extent to which Bridge performs under its agreement to indemnify
the company in that event, and the other uncertainties relating to
liability under this guarantee described above in Management's Discussion
and Analysis;
- the difficult comparisons the company will face in 2001 in light of the
high level of advertising sales revenue achieved at The Wall Street
Journal in the past year;
- the intense competition the company's products and services face in the
markets for financial news and information and advertising revenues from
newspapers, specialized magazines, free and paid Internet publications and
services, financial television programming and other new media;
- the company's ability to manage expense growth;
- with respect to Newswires, the extent and impact of delays and
difficulties that would be encountered in a migration process if Bridge
was unable to serve its customers;
- with respect to Newswires, the rate of addition of new subscribers,
particularly, outside the U.S., and the cancellations of Telerate and
Bridge terminals;
- increased competition in the market for electronic business information
and research services and Factiva's ability to increase its market share
and revenues in the face of competition from local providers with more
local content and from other international providers;
- WSJ.com's ability to increase its revenues in light of its paid
subscription model;
-25-
- the company's ability to leverage its brands and develop new and enhanced
"vertical" Internet sites and to generate advertising and other revenues
from these sites;
- rapid technological changes and frequent new product introductions
prevalent in electronic publishing;
- the company's ability to expand production and service capacity for
electronic publishing products on a timely basis to support growth of
operations and user traffic;
- the amount of user traffic on the company's Internet sites and the pricing
of advertising on Internet sites generally;
- potential increased regulation of on-line businesses;
- the company's ability to increase its circulation and advertising revenues
from its international print publications, given competition from local
publications and from other international publications;
- the company's ability to achieve and maintain a diversified advertising
base for its print publications;
- any delays that could occur in expanding the company's newspaper page and
color printing capacity, which could result in insufficient capacity to
carry advertisements;
- adverse developments relating to the company's commitments, contingencies
and equity investments;
- risks associated with the development of television channels in
competitive foreign markets, including the ability to produce or obtain
desired programming, to sell advertising time at desired rates, to achieve
sufficient distribution and to attract audiences;
- risks associated with the ability to sell advertising time at desired
rates in the U.S. television market;
- cost of newsprint;
- the extent to which the company is able to maintain favorable arrangements
with respect to the licensing of its content;
- any damage to or technical failure of the company's computer
infrastructure systems or software that causes interruptions of
operations;
- the company's ability to attract and retain qualified personnel in the
tight labor market that exists;
- the company's ability to negotiate collective bargaining agreements with
its labor unions without work interruptions;
- adverse verdicts in legal proceedings, including libel actions;
- risks associated with foreign operations, including currency and political
risks;
- and such other risk factors as may have been or may be included from time
to time in the company's reports filed with the Securities and Exchange
Commission.
-26-
ITEM 8. Financial Statements and Supplementary Data
CONSOLIDATED STATEMENTS OF (LOSS) INCOME
Dow Jones & Company
For the years ended December 31, 2000, 1999 and 1998
=============================================================================
(in thousands except per share amounts) 2000 1999 1998
- -----------------------------------------------------------------------------
REVENUES:
Advertising $1,467,244 $1,230,412 $1,035,511
Information services 281,366 315,110 660,798
Circulation and other 454,008 456,313 461,797
- -----------------------------------------------------------------------------
Total revenues 2,202,618 2,001,835 2,158,106
- -----------------------------------------------------------------------------
EXPENSES:
News, operations and development 542,959 553,800 708,398
Selling, administrative and general 674,687 619,908 672,968
Newsprint 182,359 150,899 163,146
Print delivery costs 196,502 181,263 176,467
Depreciation and amortization 107,885 103,669 142,439
Restructuring 2,755 76,115
- -----------------------------------------------------------------------------
Operating expenses 1,704,392 1,612,294 1,939,533
- -----------------------------------------------------------------------------
Operating income 498,226 389,541 218,573
OTHER INCOME (DEDUCTIONS):
Investment income 8,116 9,861 12,266
Interest expense (2,037) (5,269) (7,193)
Equity in losses of associated
companies (17,182) (27,907) (22,253)
Gain (loss) on disposition of
businesses and investments 24,053 51,945 (126,085)
Reserve for contract guarantee (255,308)
Write-down of investments (178,499)
Other, net (991) (125) (3,650)
- -----------------------------------------------------------------------------
Income before income taxes
and minority interests 76,378 418,046 71,658
Income taxes 196,957 145,501 63,083
- -----------------------------------------------------------------------------
(Loss) income before minority interests (120,579) 272,545 8,575
Minority interests in losses (earnings)
of subsidiaries 1,617 (116) (213)
- -----------------------------------------------------------------------------
NET (LOSS) INCOME $ (118,962) $ 272,429 $ 8,362
=============================================================================
PER SHARE:
Net (loss) income:
Basic $(1.35) $3.01 $ .09
Diluted (1.35) 2.99 .09
Cash dividends 1.00 .96 .96
Weighted-average shares outstanding:
Basic 87,854 90,450 95,180
Diluted 87,854 91,151 96,404
=============================================================================
The accompanying notes are an integral part of the financial statements.
-27-
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dow Jones & Company
For the years ended December 31, 2000, 1999 and 1998
=============================================================================
(in thousands) 2000 1999 1998
- -----------------------------------------------------------------------------
OPERATING ACTIVITIES:
Consolidated net (loss) income $(118,962) $272,429 $ 8,362
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Write-down of investments 178,499
Reserve for contract guarantee 255,308
Write-down of plant and property 20,801
Depreciation 105,064 100,214 134,594
Amortization of goodwill 2,821 3,455 7,845
(Gain) loss on disposition of businesses
and investments (24,053) (51,945) 126,085
Gain on disposition of plant and property (1,235) (433) (1,410)
Equity in losses of associated
companies, net of distributions 29,343 34,118 36,109
Changes in assets and liabilities:
Accounts receivable 56,085 (67,254) (34,680)
Other current assets (23,206) (3,178) (13,141)
Unearned revenue (11,801) (12,156) 33,179
Accounts payable and accrued liabilities 2,446 (13,406) (8,602)
Income and deferred taxes (3,080) 23,764 (23,861)
Deferred compensation 11,733 19,523 20,056
Other, net (12,515) (8,104) 1,735
- -----------------------------------------------------------------------------
Net cash provided by operating
activities 446,447 297,027 307,072
- -----------------------------------------------------------------------------
INVESTING ACTIVITIES:
Additions to plant and property (187,035) (190,739) (225,834)
Disposition of plant and property 1,535 2,664 9,210
Businesses and investments acquired (50,384) (52,215) (56,967)
Disposition of businesses and investments 28,760 80,692 478,574
Other, net 4,331 2,205
- -----------------------------------------------------------------------------
Net cash (used in) provided by
investing activities (202,793) (157,393) 204,983
- -----------------------------------------------------------------------------
FINANCING ACTIVITIES:
Cash dividends (88,123) (87,151) (91,662)
Increase in long-term debt 149,988
Reduction of long-term debt (150,000) (63,015)
Proceeds from sales under stock
compensation plans 28,644 33,367 52,951
Purchase of treasury stock, net of
put premiums (221,204) (142,339) (291,215)
- -----------------------------------------------------------------------------
Net cash used in financing activities (280,695) (196,123) (392,941)
- -----------------------------------------------------------------------------
(Decrease) increase in cash
and cash equivalents (37,041) (56,489) 119,114
Cash and cash equivalents at
beginning of year 86,388 142,877 23,763
- -----------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 49,347 $ 86,388 $142,877
=============================================================================
The accompanying notes are an integral part of the financial statements.
-28-
CONSOLIDATED BALANCE SHEETS
Dow Jones & Company
December 31, 2000 and 1999
=============================================================================
(dollars in thousands) 2000 1999
- -----------------------------------------------------------------------------
ASSETS:
Current Assets:
Cash and cash equivalents $ 49,347 $ 86,388
Accounts receivable - trade, net of
allowance for doubtful accounts of
$6,377 in 2000 and $5,919 in 1999 236,284 291,567
Accounts receivable - other 43,649 24,855
Newsprint inventory 13,109 9,407
Prepaid expenses 18,105 16,041
Deferred income taxes 7,749 9,885
- -----------------------------------------------------------------------------
Total current assets 368,243 438,143
- -----------------------------------------------------------------------------
Investments in associated companies,
at equity 65,871 50,959
Other investments 11,219 174,727
Plant and property, at cost:
Land 21,880 22,066
Buildings and improvements 415,297 313,138
Equipment 969,365 902,230
Construction in progress 218,937 205,917
- -----------------------------------------------------------------------------
1,625,479 1,443,351
Less, accumulated depreciation 864,616 766,939
- -----------------------------------------------------------------------------
760,863 676,412
Goodwill, less accumulated amortization
of $39,162 in 2000 and $38,660 in 1999 73,840 83,099
Deferred income taxes 71,316 73,552
Other assets 10,704 15,821
- -----------------------------------------------------------------------------
Total assets $1,362,056 $1,512,713
=============================================================================
The accompanying notes are an integral part of the financial statements.
-29-
=============================================================================
(dollars in thousands) 2000 1999
- -----------------------------------------------------------------------------
LIABILITIES:
Current Liabilities:
Accounts payable - trade $ 66,699 $ 66,776
Accrued wages, salaries and commissions 73,119 62,659
Retirement plan contributions payable 21,333 41,686
Other payables 185,138 124,470
Income taxes 27,658 40,315
Unearned revenue 213,277 225,157
- -----------------------------------------------------------------------------
Total current liabilities 587,224 561,063
Long-term debt 150,865 149,945
Deferred compensation, principally
postretirement benefit obligation 227,948 217,612
Other noncurrent liabilities 228,658 29,226
- -----------------------------------------------------------------------------
Total liabilities 1,194,695 957,846
- -----------------------------------------------------------------------------
Minority Interests in Subsidiaries 8,593 1,377
STOCKHOLDERS' EQUITY:
Common stock, par value $1 per share; authorized
135,000,000 shares; issued 81,135,653 shares
in 2000 and 81,004,088 shares in 1999 81,136 81,004
Class B common stock, convertible, par value $1
per share; authorized 25,000,000 shares; issued
21,045,368 shares in 2000 and 21,176,933 shares
in 1999 21,045 21,177
- -----------------------------------------------------------------------------
102,181 102,181
Additional paid-in capital 137,481 137,487
Retained earnings 602,432 809,517
Accumulated other comprehensive income:
Unrealized loss on investments (4,960) (941)
Foreign currency translation adjustment 405 (1,257)
- -----------------------------------------------------------------------------
837,539 1,046,987
Less, treasury stock, at cost; 15,351,872 shares
in 2000 and 12,360,278 shares in 1999 678,771 493,497
- -----------------------------------------------------------------------------
Total stockholders' equity 158,768 553,490
- -----------------------------------------------------------------------------
Total liabilities and stockholders' equity $1,362,056 $1,512,713
=============================================================================
-30-
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Dow Jones & Company
For the years ended December 31, 2000, 1999 and 1998
==========================================================================================================================
Accumulated
Class B Additional Other Com- Treasury Stock
(in thousands except Common Common Paid-in Retained prehensive -----------------
per share amounts) Stock Stock Capital Earnings Income (loss) Shares Amount Total
==========================================================================================================================
Balance, December 31, 1997 $80,621 $21,560 $136,398 $707,539 $(6,144) (5,511,285) $(159,152) $780,822
Net income - 1998 8,362 8,362
Unrealized gain on investments 32,379 32,379
Translation adjustment 555 555
Adjustment for realized
loss included in net income 9,023 9,023
-------
Comprehensive income 50,319
Dividends, $.96 per share (91,662) (91,662)
Conversion of class B common
stock into common stock 278 (278)
Capital changes of investee 655 655
Premiums on puts 3,490 3,490
Sales under stock
compensation plans (3,064) 1,512,385 63,965 60,901
Purchase of treasury stock (6,212,833) (295,185) (295,185)
- --------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 80,899 21,282 137,479 624,239 35,813 (10,211,733) (390,372) 509,340
Net income - 1999 272,429 272,429
Unrealized gain on investments 2,124 2,124
Translation adjustment (1,295) (1,295)
Adjustment for realized
gain included in net income (38,840) (38,840)
-------
Comprehensive income 234,418
Dividends, $.96 per share (87,151) (87,151)
Conversion of class B common
stock into common stock 105 (105)
Capital changes of investee (322) (322)
Premiums on puts 4,869 4,869
Sales under stock
compensation plans (4,539) 895,989 43,604 39,065
Purchase of treasury stock (3,044,534) (146,729) (146,729)
- --------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 81,004 21,177 137,487 809,517 (2,198) (12,360,278) (493,497) 553,490
-31-
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONT.)
Dow Jones & Company
For the years ended December 31, 2000, 1999 and 1998
==========================================================================================================================
Accumulated
Class B Additional Other Com- Treasury Stock
(in thousands except Common Common Paid-in Retained prehensive -----------------
per share amounts) Stock Stock Capital Earnings Income (loss) Shares Amount Total
==========================================================================================================================
Balance, December 31, 1999 81,004 21,177 137,487 809,517 (2,198) (12,360,278) (493,497) 553,490
Net loss - 2000 (118,962) (118,962)
Unrealized loss on investments (4,019) (4,019)
Translation adjustment 1,662 1,662
-------
Comprehensive loss (121,319)
Dividends, $1.00 per share (88,123) (88,123)
Conversion of class B common
stock into common stock 132 (132)
Capital changes of investee (989) (989)
Premiums on puts 8,943 8,943
Sales under stock
compensation plans (7,960) 723,606 44,873 36,913
Purchase of treasury stock (3,715,200) (230,147) (230,147)
- --------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2000 $81,136 $21,045 $137,481 $602,432 $(4,555) (15,351,872) $(678,771) $158,768
==========================================================================================================================
The accompanying notes are an integral part of the financial statements.
-32-
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE CONSOLIDATED FINANCIAL STATEMENTS include the accounts of the company and
its majority-owned subsidiaries. All significant intercompany transactions
are eliminated in consolidation. The equity method of accounting is used for
companies and other investments in which the company has significant
influence, generally this represents common stock ownership or partnership
equity of at least 20% and not more than 50% (see Note 5). On May 29, 1998,
the company completed the sale of Telerate (formerly, Dow Jones Markets),
which was a significant subsidiary of the company. The disposition of this
business has had a major impact on the comparability of the company's
financial statements. To assist the reader of these financial statements and
related notes with comparability, the company has disclosed certain financial
information throughout the footnotes excluding the impact of Telerate.
RECLASSIFICATIONS of certain amounts for prior years have been recorded to
conform to the current year presentation.
CASH EQUIVALENTS are highly liquid investments with a maturity of three months
or less when purchased.
NEWSPRINT INVENTORY is stated at the lower of cost or market. The cost of
newsprint is computed by the last-in, first-out (LIFO) method. If newsprint
inventory had been valued by the average cost method, it would have been
approximately $9,709,000 and $6,725,000 higher in 2000 and 1999, respectively.
INVESTMENTS in marketable equity securities, all of which are classified as
available for sale, are carried at their market value in the consolidated
balance sheets. The unrealized gains or losses from these investments are
recorded directly to Stockholders' Equity. Any decline in market value below
the investment's original cost that is determined to be other than temporary
as well as any realized gains or losses would be recognized in income (see
Note 15).
DEPRECIATION is computed using straight-line or declining-balance methods over
the estimated useful lives of the respective assets or terms of the related
leases. Upon retirement or sale, the cost of disposed assets and the related
accumulated depreciation are deducted from the respective accounts and the
resulting gain or loss is included in income. The cost of construction of
certain long-term assets includes capitalized interest, which is amortized
over the life of the related assets. Interest capitalized in 2000, 1999 and
1998 totaled $8.4 million, $4.5 million and $4.8 million, respectively.
Maintenance and repairs are charged to expense as incurred. Major renewals,
betterments and additions are capitalized.
LONG-LIVED ASSETS are comprised of plant and property, intangible assets and
investments. Long-lived assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of the asset may
not be recoverable. An estimate of undiscounted future cash flows produced by
the asset is compared to the carrying value to determine whether an impairment
exists. If an asset is determined to be impaired, the loss is measured based
on quoted market prices in active markets, if available. If quoted market
prices are not available, the estimate of fair value is based on various
valuation techniques, including discounted value of estimated future cash
flows. Assets to be disposed are recorded at the lower of carrying value or
estimated net realizable value.
-33-
GOODWILL, which is the excess of purchase price over the net assets of
businesses acquired, is amortized using the straight-line method over various
periods, principally 40 years.
DEFERRED INCOME TAXES are provided for temporary differences in bases between
financial statement and income tax assets and liabilities. Deferred income
taxes are recalculated annually at tax rates then in effect (see Note 7).
FOREIGN CURRENCY TRANSLATION of assets and liabilities is determined at the
appropriate year-end exchange rates, while results of operations are
translated at the average rates of exchange in effect throughout the year.
The resultant translation adjustments for subsidiaries whose functional
currency is not the U.S. dollar are recorded directly to Stockholders' Equity.
Gains or losses arising from translation of financial statements for foreign
subsidiaries where the U.S. dollar is the functional currency as well as from
all foreign currency transactions are included in income. Foreign exchange
included in Other, net in the income statement totaled a loss of $833,000 in
2000, a gain of $285,000 in 1999 and a loss of $4,616,000 in 1998.
FOREIGN-EXCHANGE CONTRACTS are designated as cash flow hedges of anticipated
operating expenses that are denominated in foreign currencies. These
contracts are entered into to protect against the risk that such expenses will
be adversely affected by changes in exchange rates. Such losses could be
significant if a major devaluation were to occur. By using these derivative
instruments the company is exposed to the adverse effect that a change in
currency has on the value of a financial instrument. The company manages this
market risk by establishing and monitoring limits as to the degree of risk
that may be undertaken. The company's derivative activities are monitored by
its treasury and finance functions. Realized gains or losses on foreign
currency forward contracts are recognized currently through income and
generally offset the transaction losses or gains on the foreign currency cash
flows which they are intended to hedge. (See Note 15).
REVENUE from subscriptions to the company's print publications and information
services is recognized in income as earned, pro rata on a monthly basis, over
the subscription period. Costs in connection with the procurement of
subscriptions are charged to expense as incurred. Advertising revenue, net of
commissions, is recognized in the period in which the advertisement is
displayed. Advertising revenue based on a minimum number of "impressions" is
recognized as impressions occur. Revenue from licensing the Dow Jones
Averages includes both upfront one-time fees and ongoing revenue. Both
upfront fees and ongoing licensing revenue are recognized in income as earned
over the license period.
RESEARCH AND DEVELOPMENT expenditures are charged to expense as incurred.
Research and development (R&D) expenses were $30,584,000 in 2000, $30,544,000
in 1999 and $60,988,000 in 1998 ($32,029,000 in 1998 excluding Telerate).
USE OF ESTIMATES: The financial statements are prepared in accordance with
generally accepted accounting principles which require certain reported
amounts to be based on estimates. Actual results could differ from these
estimates.
-34-
NOTE 2. WRITE DOWN OF INVESTMENTS
BRIDGE
In 1998, the company completed the sale of Telerate to Bridge. The purchase
price consisted of $150 million aggregate par value of 5 year, redeemable,
convertible, 4% preferred stock of Bridge, which was included in other
investments, and cash of $360 million. Under the terms of the sale, Dow Jones
retained its guarantee of payments under certain circumstances of certain
annual minimum payments for data acquired by Telerate from Cantor Fitzgerald
Securities and Market Data Corporation (MDC) under contracts entered into
during the period when Telerate was a subsidiary of Dow Jones (contract
guarantee). The annual minimum payments average approximately $50 million per
year through October 2006. Bridge has agreed to indemnify Dow Jones for any
liability Dow Jones incurs under the contract guarantee with respect to
periods subsequent to Bridge's purchase of Telerate.
In 1999, Dow Jones acquired approximately 1.78 million shares of SAVVIS
Communications Corp. at 50 cents per share for an aggregate cost of $0.9
million and issued subordinated debt to Bridge which had a carrying value
(including interest) of $2.9 million. Bridge is SAVVIS' largest customer and
shareholder and a significant vendor for technical support services.
Dow Jones accounted for these investments under the cost method; therefore,
changes in the value of the investment are not recognized unless there is
impairment in value of the investment that is deemed to be "other than
temporary." It is the company's policy to continually monitor investments for
indications of impairment.
Throughout 2000, Bridge experienced continued operating shortfalls from plan
and experienced a need for substantial relief from its bank lenders and
additional financing. In the judgment of Dow Jones management, these
developments, when combined with the pricing of its third quarter issuance of
convertible notes, clearly demonstrated that there was a decline in value of
the company's preferred stock holdings. In addition, Bridge notified its
lenders that as of September 30, 2000 it was not in compliance with certain
financial covenants under its outstanding credit agreement. Bridge's
principal shareholder had taken over management of the company and launched
several initiatives focused on improving operations, increasing revenues and
raising additional capital. However, there was no assurance that these
efforts would be successful. These factors, combined with the lack of updated
long-term forward projections, left Dow Jones management with insufficient
objective evidence to determine that the decline in value of the company's
preferred stock holdings was temporary. Using the third quarter convertible
notes financing transaction as a benchmark, Dow Jones recorded a charge to
earnings in the third quarter of $82.3 million on this investment (there was
no tax benefit as this was a capital loss). Also, the company discontinued
accruing dividends on its preferred stock holdings effective with the third
quarter of 2000. The revised carrying value for this investment at September
30, 2000 was $80.3 million.
Bridge's financial position continued to deteriorate during the fourth
quarter, and it continued to experience severe operational difficulties. In
December, Bridge informed Dow Jones that Telerate might be late in paying the
February 15, 2001 quarterly installment under the data supply contracts
described above. Subsequently MDC notified Dow Jones that if Telerate failed
to pay the installment (amounting to approximately $12 million), MDC would
seek to recover such amount from Dow Jones under the contract guarantee.
-35-
During the fourth quarter and continuing into January and early February 2001,
Bridge's primary investor, Welsh Carson Anderson & Stowe, engaged in
negotiations with Bridge and its lenders in an effort to reach an agreement to
restructure Bridge's debt, arrange additional financing and significantly
reorganize its operations. However, those negotiations did not reach a
successful conclusion and on February 15, 2001 Bridge filed a petition under
Chapter 11 of the Bankruptcy Code with a view to seeking a sale of its assets
in order to repay its creditors in whole or in part. (Bridge's Chapter 11
filing had been preceded by an involuntary bankruptcy petition filed on
February 1, 2001 by one of its creditors, but Bridge's Chapter 11 filing
rendered the earlier filing moot.)
Dow Jones understands that Telerate did not make the approximately $12 million
quarterly payment described above on February 15, 2001. MDC has commenced a
lawsuit against Dow Jones seeking such payment and certain consequential
damages that MDC claims have resulted and will result if Dow Jones does not
make such payment. Dow Jones has not made such payment and the litigation is
proceeding.
In light of the foregoing events, Dow Jones has concluded that its Bridge-
related investments have been further impaired, and are now worthless. As a
result, in the fourth quarter, the company wrote off $84.1 million
representing the entire remaining carrying value of the Bridge preferred
stock, the Bridge subordinated debt and the SAVVIS stock.
With respect to the remaining minimum annual payments due from Telerate to MDC
described above, Dow Jones believes that MDC and Cantor Fitzgerald have the
obligation to cover, mitigate or otherwise reduce and/or avoid any losses or
damages under these circumstances, including by securing the best possible
commercial terms for the supply of the subject data to a third party or
parties. Dow Jones believes that any and all amounts which are received by
MDC and/or Cantor Fitzgerald in respect of such data (which Dow Jones believes
is marketable and has considerable value) would reduce any liability that Dow
Jones might have under the contract guarantee. There is a high degree of
uncertainty, however, as to what value the data will have in the marketplace;
whether an agreement will be reached by MDC and/or Cantor Fitzgerald to supply
the data to a third party or parties; the financial position of such party or
parties; and the timing of any such agreement. Therefore, it is not possible
for Dow Jones to determine with any certainty that any such offsets would in
fact be realized, or at what time or in what amounts. Consequently, the
company has established a reserve in the amount of $255 million representing
the present value of the total estimated annual minimum payments over the
remainder of the contract term (through October 2006) using a discount rate of
approximately 6%. The amount of such reserve is reflected as a charge in the
fourth quarter of 2000. The company will accrue the discount on the contract
guarantee using the interest method. To the extent any offsets against the
liability described above become certain or are realized in the future, or if
the liability is otherwise reduced or eliminated, Dow Jones will reduce or
eliminate the reserve as appropriate and recognize a special gain in the
relevant period.
OPTIMARK
The company holds a minority interest in OptiMark Technologies, Inc.
consisting of preferred and common shares with an aggregate cost of $12.1
million. OptiMark has significantly restructured its operations and its most
recent public filing indicates that there is some question of OptiMark's
ability to continue as a going concern, principally because of negative cash
flow. Management believes that the carrying value of the company's investment
in OptiMark is impaired and that the impairment is other than temporary. As a
result the company recorded a charge in the fourth quarter of 2000 to write
off the full carrying value of its $12.1 million investment.
-36-
NOTE 3. RESTRUCTURING CHARGES
Operations:
In 1999's second quarter, the company recorded severance associated with the
conversion to electronic pagination of The Wall Street Journal of $2.8
million, or $1.6 million after tax, which applied to approximately 70
employees. The layoffs were substantially completed in the second quarter of
2000.
Operating expenses in 1998 included charges associated with restructuring
certain business units, collectively totaling $76.1 million ($45.4 million
after tax). The charge to operating expenses mainly consisted of employee
severance-related costs of $38.8 million (mainly resulting from two voluntary
early retirement plans - one for its Ottaway Newspaper unit); a charge of $20
million pertaining to a reduction in leased office space (largely on its
principal leased space in New York City) and $17.3 million for write-downs of
a U.S. news-editing technology system and other computer equipment. The bulk
of the severance was paid in 1998 and the lease termination fee was paid in
1999.
Restructuring charges were as follows:
=============================================================================
(in thousands) 1999 1998
- -----------------------------------------------------------------------------
Severance $2,755 $23,572
Write-down of plant and property 20,801
Real estate lease terminations 18,264
Pension/postretirement benefit
costs 11,721
Other 1,757
- -----------------------------------------------------------------------------
Total restructuring $2,755 $76,115
=============================================================================
Equity in Losses of Associated Companies:
The second quarter of 2000 included a reversal of a 1998 restructuring charge
of $3.2 million ($2.1 million after tax) relating to an equity investee,
resulting from the favorable disposition of a satellite lease in Europe. The
1998 total charge of $6.5 million ($4.2 million after tax) represented the
company's share of additional losses associated with television satellite
leases in Asia and Europe that were redundant as a result of joint ventures
established in 1997 with CNBC. These charges were due to difficulties in
subleasing satellites. Both of these transactions were recorded in Equity in
Losses of Associated Companies.
-37-
NOTE 4. DISPOSITIONS OF BUSINESSES AND INVESTMENTS
The first quarter of 2000 included a gain of $13.8 million ($9.5 million after
tax) from the sale of the company's subsidiary, Dow Jones Financial Publishing
Corp., which published Investment Advisor, Asset Management, Property and
Realty Stock Review. In the second quarter of 2000, the company sold its
minority interest in SportsTicker Enterprises L.P., a leading supplier of
real-time sports news and information, for a gain of $6.4 million ($4.8
million after tax). The fourth quarter of 2000 included a net gain of $3.8
million resulting from the exchange of the company's holdings in NextVenue
Inc. for shares issued through a merger of iBEAM Broadcasting Corp., an
Internet broadcast network that delivers streaming media.
In the first quarter of 1999, the company realized a net gain of $10.6 million
from the sale of a portion of its minority interest in OptiMark Technologies,
Inc. In the third quarter, a net gain of $57.3 million was recorded from the
disposition of the company's holdings in United States Satellite Broadcasting,
Inc. The fourth quarter included a loss of $16.3 million from the sale of the
company's subsidiary, IDD Enterprises L.P.
In 1998, in addition to the sale of Telerate (see Note 2) the company recorded
a first quarter gain of $15.4 million ($10.1 million after tax) on the
disposition of the company's interests in WBIS+ TV and Mediatex Communications
Corp., publisher of Texas Monthly magazine, and a fourth quarter after-tax
gain of $9.2 million from the sale of a portion of its holding in OptiMark
Technologies, Inc. and the company's EDGAR Direct business.
No federal tax was provided on the 2000 NextVenue exchange and the 1999 gains
as the company utilized a portion of its capital loss carryforward (see
Note 7).
-38-
NOTE 5. INVESTMENTS IN ASSOCIATED COMPANIES, AT EQUITY
On January 1, 2000, Dow Jones contributed its indirect holdings in the Czech
business publisher Economia and the German financial news agency VWD to The
Wall Street Journal Europe and the company exchanged a 49% interest in The
Wall Street Journal Europe for a 22% interest in Handelsblatt, Germany's
leading business newspaper and a subsidiary of von Holtzbrinck Group. As a
result, Dow Jones' interest in Economia declined to 12% from 23.5% and in VWD
to 17% from 33.3%. Minority interests in 2000 largely represent von
Holtzbrinck Group's 49% share of the contributed businesses.
On July 1, 1999, the company formed a 50-50 joint venture, Dow Jones Reuters
Business Interactive LLC (Factiva), with Reuters Group Plc, into which Dow
Jones contributed a significant portion of its interactive business unit. The
company's 50% share of the joint venture results is reported in Equity in
Losses of Associated Companies in the consolidated financial statements.
Prior to July 1, 1999, results of the interactive business contributed to the
joint venture were included in electronic publishing operating results.
At December 31, 2000, the principal components of Investments in Associated
Companies, at Equity were the following:
==============================================================================
Investment Ownership Description of business
- ------------------------------------------------------------------------------
Business News (Asia) Private 50% Business and financial news television
company broadcasting as CNBC Asia
Pacific, in partnership with NBC
Business News (Europe) L.P. 50 Business and financial news television
company broadcasting as CNBC Europe,
in partnership with NBC
Dow Jones Reuters Business 50 Provides electronic-delivery of
Interactive LLC (Factiva) business news and on-line research,
in partnership with Reuters Group Plc.
F.F. Soucy, Inc. & Partners, L.P. 40 Newsprint mill in Quebec, Canada
Handelsblattgruppe-Zeitung GmbH 22 Publisher of Handelsblatt, Germany's
leading business newspaper
HB-Dow Jones S.A. 42 A part-owner of a publishing company
in the Czech Republic
SmartMoney 50 Publisher of SmartMoney magazine and
SmartMoney.com, serving the private-
investor market throughout the U.S.
and Canada, in partnership with
Hearst Corp.
==============================================================================
Dow Jones & Company has entered a long-term contract with F.F. Soucy, Inc. &
Partners, L.P. covering a substantial portion of its annual newsprint
requirements. Operating expenses of the company include the cost of newsprint
supplied by F.F. Soucy of $21,345,000 in 2000, $18,954,000 in 1999 and
$22,325,000 in 1998.
-39-
Dow Jones performs several services on behalf of Factiva, including the
billing and collections of receivables, payroll services and payments to
vendors, in addition to leasing Factiva office space. At December 31, Other
Receivables included net amounts due from Factiva and Factiva customers of
$23.1 million in 2000 and $10.6 million in 1999.
Summarized financial information for the company's equity-basis investments in
associated companies, combined, was as follows. The majority of these
investments are partnerships, which require the associated tax benefit or
expense to be recorded by the parent.
=============================================================================
(in thousands) 2000 1999 1998
- -----------------------------------------------------------------------------
Income statement information:
Revenues $669,887 $339,799 $182,694
Operating loss (13,624) (35,592) (41,261)
Net loss (15,487) (39,537) (39,615)
Financial position information:
Current assets $255,701 $149,107 $ 80,402
Noncurrent assets 182,236 160,346 139,201
Current liabilities 200,211 120,920 74,248
Noncurrent liabilities 62,481 80,247 50,639
Net worth 175,245 108,286 94,716
=============================================================================
NOTE 6. LONG-TERM DEBT
The company can borrow up to $400 million through June 25, 2001, under a
revolving credit agreement with a consortium of banks. Borrowings may be made
either in Eurodollars with interest that approximates the applicable
Eurodollar rate or in U.S. dollars with interest that approximates the bank's
prime rate, its certificate of deposit rate or the federal funds rate. An
annual fee of .06% is payable on the commitment which the company may
terminate or reduce at any time. Prepayment of borrowings may be made without
penalty. The company plans to extend the revolving credit agreement prior to
its expiration.
The company and the banks amended certain restrictive covenants contained in
the revolving credit agreement, including a restriction on net worth,
effective December 31, 2000. With respect to restrictive covenants as
amended, consolidated indebtedness was approximately $810 million less than
the maximum borrowing allowed and the company's cash flow, as defined in the
agreement, far exceeded that required.
In December 2000, the company repaid $150 million of 5.75% notes due December
1, 2000. The notes were refinanced through the issuance of commercial paper
supported by the company's revolving credit agreement; as such, these notes
have been classified as long term (the company can draw down funds under the
revolving credit agreement prior to June 25, 2001, which would not be payable
until one year from the date drawn).
Interest payments were $10,269,000 in 2000, $9,720,000 in 1999 and $10,970,000
in 1998.
-40-
NOTE 7. INCOME TAXES
The components of consolidated income before income taxes and minority
interests were as follows:
=============================================================================
Excluding
Telerate*
(in thousands) 2000 1999 1998 1998
- -----------------------------------------------------------------------------
Domestic $109,441 $469,085 $104,282 $278,897
Foreign (33,063) (51,039) (32,624) (21,384)
- -----------------------------------------------------------------------------
$ 76,378 $418,046 $ 71,658 $257,513
=============================================================================
The following is a reconciliation of income tax expense to the amount derived
by multiplying income before income taxes and minority interests by the
statutory federal income tax rate of 35%.
================================================================================================
Excluding
Telerate*
% of % of % of % of
Income Income Income Income
Before Before Before Before
(in thousands) 2000 Taxes 1999 Taxes 1998 Taxes 1998 Taxes
- ------------------------------------------------------------------------------------------------
Income before income
taxes and minority
interests multiplied
by statutory federal
income tax rate $ 26,732 35.0 $146,316 35.0 $25,080 35.0 $ 90,130 35.0
State and foreign taxes,
net of federal income
tax effect 24,788 32.5 20,074 4.8 12,276 17.1 17,132 6.7
Nondeductible capital loss 151,833 198.8 26,186 36.5
Utilization of capital
loss carryforward (3,592) (4.7) (18,181) (4.4) (4,290) (1.7)
Research and development
credits (1,491) (2.0) (1,824) (0.4) (5,067) (7.1) (1,980) (0.8)
Other, net (1,313) (1.7) (884) (0.2) 4,608 6.5 1,599 0.6
- ------------------------------------------------------------------------------------------------
$196,957 257.9 $145,501 34.8 $63,083 88.0 $102,591 39.8
================================================================================================
* Excludes Telerate operations and the loss on sale in 1998.
Excluding the effects of capital gains and losses, the effective tax rate, net
of minority interest, was 39.2% in 2000, 39.7% in 1999 and 88% in 1998 (41.4%
excluding Telerate in 1998).
-41-
Consolidated income tax expense was as follows:
============================================================================
(in thousands) Federal State Foreign Total
- ----------------------------------------------------------------------------
2000
Currently payable $156,915 $24,927 $10,742 $192,584
Deferred 1,975 2,727 (329) 4,373
- ----------------------------------------------------------------------------
Total $158,890 $27,654 $10,413 $196,957
============================================================================
1999
Currently payable $113,147 $26,393 $ 8,235 $147,775
Deferred 809 572 (3,655) (2,274)
- ----------------------------------------------------------------------------
Total $113,956 $26,965 $ 4,580 $145,501
============================================================================
1998
Currently payable $ 71,765 $17,710 $11,684 $101,159
Income tax refund due * (20,157) (20,157)
Deferred (13,651) (3,573) (695) (17,919)
- ----------------------------------------------------------------------------
Total $ 37,957 $14,137 $10,989 $ 63,083
============================================================================
* Relates to a tax capital loss carryback resulting from the Telerate sale,
which was received in 1999.
The company's combined current and noncurrent deferred taxes at December 31,
2000 and 1999 consisted of the following deferred tax assets and liabilities:
=============================================================================
Deferred Tax Deferred Tax
Assets Liabilities
(in thousands) 2000 1999 2000 1999
- -----------------------------------------------------------------------------
Depreciation $48,840 $47,663
Employee benefit plans, including
deferred compensation $ 98,963 $ 97,599
Foreign tax credits 7,375 6,688
Restructuring charges 4,913
Investments 15,369 13,727
Leases 6,283 7,755
Capital loss carryforward 182,045 185,824
Unrecognized capital loss carryforward 164,526
Valuation allowance (346,571) (185,824)
All other 5,539 5,742 5,624 5,324
- -----------------------------------------------------------------------------
Total deferred taxes $133,529 $136,424 $54,464 $52,987
=============================================================================
The company may utilize the capital loss carryforward for up to three more
years. The company will be able to utilize the unrecognized capital loss
carryforward for a period of five years from the year it is recognized for tax
purposes. At this time the company has fully reserved both balances. Income
tax payments were $200,037,000 in 2000, $141,894,000 in 1999 and $107,101,000
in 1998.
-42-
NOTE 8. CAPITAL STOCK
Common stock and class B common stock have the same dividend and liquidation
rights. Class B common stock has ten votes per share, free convertibility
into common stock on a one-for-one basis and can be transferred in class B
form only to members of the stockholder's family and certain others affiliated
with the stockholder.
In September 2000, the company's Board of Directors authorized the repurchase
of up to an additional $500 million of the company's common stock over the
balance remaining from prior authorizations. Since initial approval in 1998,
the company has repurchased 13 million shares at an aggregate cost of $672.9
million. Additionally, as part of the company's stock repurchase program, the
company has sold put options. As of December 31, 2000, 2 million shares under
puts were outstanding at strike prices (net of put premiums received) ranging
from $50.70 to $56.40 per share, with exercise dates through April 2002. The
company has the option of net share settlement on these contracts. As of
December 31, 2000, approximately $526.8 million remained under board
authorization, after reserving for the exercise of outstanding puts.
NOTE 9. EMPLOYEE STOCK COMPENSATION PLANS
STOCK PURCHASE PLAN:
Under the terms of the Dow Jones 1998 Employee Stock Purchase Plan, eligible
employees may purchase shares of the company's common stock based on
compensation through payroll deductions or lump sum payment. The purchase
price for payroll deductions is the lower of 85% of the fair market value of
the stock on the first or last day of the purchase period. Lump-sum purchases
are made during the offering period at the lower of 85% of the fair market
value of the stock on the first day of the purchase period or the payment
date.
The activity in the plan was as follows:
=============================================================================
Shares Subscribed
Stock Purchase --------------------------------
Prices 2000 1999 1998
- -----------------------------------------------------------------------------
Balance, January 1 86,773 98,778 141,457
Shares subscribed 127,071 149,681 185,474
Purchases $40.63 to $62.90 (133,998) (149,202) (213,915)
Terminated/canceled (10,609) (12,484) (14,238)
- -----------------------------------------------------------------------------
Balance, December 31 69,237 86,773 98,778
=============================================================================
At December 31, 2000, there were 1,563,901 shares available for future
offerings.
STOCK OPTION PLANS:
The Dow Jones 1997 Long Term Incentive Plan provides for the grant to key
executives of stock options and contingent stock rights (collectively, "plan
awards"). The plan is administered by the compensation committee of the Board
of Directors, the members of which may not participate in the plan. The Dow
Jones 1998 Stock Option Plan provides for grant of stock options to key
employees.
-43-
Options for shares of common stock may be granted under both plans at not less
than the fair market value of the common stock on the date of grant. Options
granted since 1998 become exercisable in equal annual installments over three
years from the date of grant. All other options outstanding at December 31,
2000 were exercisable. Options expire 10 years from the date of grant.
The activity with respect to options under both plans was as follows:
=============================================================================
(shares in thousands) 2000 1999 1998
---------------- ---------------- ----------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
- -----------------------------------------------------------------------------
Balance, January 1 3,966 $42.33 4,677 $40.97 5,031 $37.50
Granted * 1,317 64.27 94 52.07 1,288 49.18
Exercised (553) 38.65 (735) 34.18 (1,291) 33.50
Terminated/canceled (143) 56.85 (70) 49.71 (351) 48.95
- -----------------------------------------------------------------------------
Balance, December 31 4,587 $48.62 3,966 $42.33 4,677 $40.97
=============================================================================
Options exercisable
at December 31 2,927 $41.95 2,792 $39.20 2,825 $36.39
=============================================================================
* The company has granted the vast majority of stock options and contingent
stock rights in the fourth quarter of each year. In 1999 no such grants were
awarded. Commencing in 2000 most of these grants were awarded in the first
quarter of the year.
Options outstanding at the end of 2000 are summarized as follows:
=============================================================================
(shares in thousands) Options outstanding Options exercisable
-------------------------------- -------------------
Weighted-
Weighted- Average Weighted-
Average Remaining Average
Range of Exercise Contractual Exercise
Exercise Prices Shares Price Life Shares Price
- -----------------------------------------------------------------------------
$26.00 to $34.38 933 $31.66 3.8 years 933 $31.66
$35.12 to $44.00 535 37.59 3.5 515 37.34
$45.31 to $54.88 1,863 49.73 7.4 1,449 49.75
$56.56 to $67.13 1,194 63.87 9.1 28 63.66
$68.56 to $75.94 62 72.34 9.4 2 68.56
- -----------------------------------------------------------------------------
Balance,
December 31, 2000 4,587 $48.62 6.7 years 2,927 $41.95
=============================================================================
Contingent stock rights, granted under the Long Term Incentive Plan, entitle
the participant to receive future payments in the form of common stock, cash
or a combination of both. The compensation ultimately received will depend on
the extent to which specific performance criteria are achieved during the
four-year performance period, the participant's individual performance and
other factors, as determined by the compensation committee. Compensation
received could be less than or equal to that specified in the right, but
cannot exceed the right.
-44-
A summary of contingent stock right activity follows:
=============================================================================
2000 1999 1998
- -----------------------------------------------------------------------------
Balance, January 1 476,612 581,587 513,181
Granted* 159,700 9,250 180,225
Awarded (67,432) (41,900) (42,495)
Terminated/canceled (103,524) (72,325) (69,324)
- -----------------------------------------------------------------------------
Balance, December 31 465,356 476,612 581,587
=============================================================================
Year of Grant
-----------------------------------------
1996 1997 1998 1999 2000 Balance
- -----------------------------------------------------------------------------
Rights outstanding 100,256 80,800 122,200 9,250 152,850 465,356
=============================================================================
* The company has granted the vast majority of stock options and contingent
stock rights in the fourth quarter of each year. In 1999 no such grants were
awarded. Commencing in 2000 these grants were awarded in the first quarter of
the year.
At December 31, 2000, there were 661,212 shares available for future grants
under the long-term incentive plan and 1,860,017 shares available under the
stock option plan.
The company accounts for its stock-based compensation in accordance with
Accounting Principles Board Opinion No. 25 (APB 25) and its related
interpretations. Under APB 25, stock-based compensation charged to income was
$3,406,000 in 2000, $6,920,000 in 1999 and $1,564,000 in 1998. The changes in
expense largely reflect the movement in the market price of the company's
stock.
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 (loss) income and (loss) earnings per share would have been the
following adjusted amounts:
=============================================================================
(in thousands except per share amounts) 2000 1999 1998
- -----------------------------------------------------------------------------
Net (loss) income:
Consolidated as reported $(118,962) $272,429 $8,362
Consolidated adjusted for SFAS 123 (128,394) 266,896 5,765
Per share - diluted:
Consolidated as reported (1.35) 2.99 .09
Consolidated adjusted for SFAS 123 (1.46) 2.93 .06
=============================================================================
-45-
The following table provides the estimated fair value under the Black-Scholes
option-pricing model of each option and stock-purchase right granted in years
1998 through 2000, and the significant weighted-average assumptions used in
their determination.
=============================================================================
Risk-Free
Interest Dividend Expected
Fair Value Rate Yield Life Volatility
- -----------------------------------------------------------------------------
Stock Purchase
Plan Right
2000 $15.79 5.7% 2.1% 0.6 years 26.8%
1999 11.09 5.1 2.3 0.6 22.7
1998 12.39 5.2 2.4 0.6 24.2
Options under Stock
Option Plans
2000 $18.37 6.7% 2.1% 5.0 years 25.5%
1999 12.63 5.6 2.3 5.0 23.0
1998 10.72 4.7 2.4 5.0 22.3
=============================================================================
NOTE 10. RETIREMENT AND PENSION PLANS
The company provides retirement plans for a majority of its employees who meet
specific length of service requirements. Effective January 1, 2000, the
company's Profit Sharing Retirement Plan was renamed the Dow Jones 401(k)
Savings Plan. Also, the plan, which was based on a combination of
compensation and consolidated net income, was modified to be based on a fixed
percentage of compensation and to allow an employer matching opportunity. The
contribution for each employee is limited to the amount deductible for income
tax purposes. The annual cost of the plan is funded currently.
Substantially all employees who are not covered by the above plans are covered
by noncontributory defined benefit pension plans. These plans are not
material in respect to charges to operations.
Total retirement and pension plan expenses amounted to $38,945,000,
$47,484,000 and $55,607,000 in 2000, 1999 and 1998, respectively ($48,645,000
excluding Telerate in 1998).
-46-
NOTE 11. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
For a majority of its full-time employees, the company sponsors a defined
benefit postretirement medical plan which provides lifetime health care
benefits to retirees who meet specified length of service and age
requirements, and their eligible dependents. The plan is unfunded. The
company sponsors no additional postretirement benefit plans other than its
retirement plans (see Note 10).
The following sets forth the plan's status reconciled with amounts reported in
the company's consolidated balance sheets at December 31.
=============================================================================
(in thousands) 2000 1999
- -----------------------------------------------------------------------------
Benefit obligation at January 1 $148,479 $151,525
Service cost 6,618 6,452
Interest cost 11,073 9,631
Plan participant contributions 603 609
Plan amendments (2,900)
Actuarial loss (gain) 5,637 (13,724)
Benefits paid (6,307) (6,014)
- -----------------------------------------------------------------------------
Benefit obligation at December 31 163,203 148,479
Unrecognized prior service cost (2,228) (5,446)
Unrecognized net actuarial gain 5,454 11,043
- -----------------------------------------------------------------------------
Accrued postretirement benefit
liability at December 31 $166,429 $154,076
=============================================================================
Pretax postretirement benefit expense included the following components:
=============================================================================
(in thousands) 2000 1999 1998
- -----------------------------------------------------------------------------
Service cost $ 6,618 $ 6,452 $ 8,267
Interest cost 11,073 9,631 9,293
Amortization of prior service cost 366 603
Special termination benefit 5,183
Curtailment gain (5,600)
- -----------------------------------------------------------------------------
Net periodic postretirement benefit cost $18,057 $16,686 $17,143
=============================================================================
A 7.75% annual rate of increase in the per capita costs of covered health care
benefits was assumed for 2001, gradually decreasing to 5.25% by the year 2006
and remaining at that rate thereafter. Increasing the assumed health care
cost trend rates by one percentage point in each year would increase the
accumulated postretirement benefit obligation as of December 31, 2000 by $25.1
million and increase the aggregate of the service cost and interest cost
components of net periodic postretirement benefit cost for 2000 by $3.5
million. Conversely, a one percentage point decline in the assumed health
care cost trend rates would lower the benefit obligation at the end of 2000 by
$21.2 million and reduce the aggregate of the service and interest cost by
$2.8 million. A discount rate of 7.5% was used to determine the accumulated
postretirement benefit obligation as of December 31, 2000.
At December 31, 1999, the company's accumulated postretirement benefit
obligation was calculated using a discount rate of 7.75% and a health care
cost trend rate of 8.25% for 2000 decreasing to 5.25% by the year 2006.
-47-
NOTE 12. COMMITMENTS AND CONTINGENCIES
Commitments for capital expenditures amounted to $55,546,000 at December 31,
2000.
Noncancelable leases require minimum rental payments through 2014 totaling
$258,216,000. Payments required for the years 2001 through 2005 are as
follows:
=============================================================================
(in thousands) 2001 2002 2003 2004 2005
- -----------------------------------------------------------------------------
$53,907 $45,873 $40,412 $36,375 $21,994
=============================================================================
These leases are principally for office space and equipment and contain
renewal and escalation clauses. Total rental expense amounted to $70,243,000
in 2000, $70,114,000 in 1999 and $89,391,000 in 1998 ($76,320,000 excluding
Telerate in 1998).
The company has guaranteed payment for office space occupied by certain of its
joint ventures. The company's partners in these joint ventures have either
directly guaranteed their share of any payments required under these
guarantees or agreed to indemnify the company for 50% of any payments the
company may be required to make under these guarantees. Dow Jones' share of
this obligation totals $22 million through 2011.
Various libel actions, environmental and other legal proceedings that have
arisen in the ordinary course of business are pending against the company and
its subsidiaries. In the opinion of management, the ultimate outcome to the
company and its subsidiaries as a result of legal proceedings is adequately
covered by insurance, or, if not covered, would not have a material effect on
the company's financial statements taken as a whole.
NOTE 13. PER SHARE AMOUNTS
Basic (loss) earnings per share were $(1.35) in 2000, $3.01 in 1999 and $0.09
in 1998. The per share amounts have been computed on the basis of the
weighted-average number of shares outstanding (87,854,000 shares in 2000,
90,450,000 shares in 1999 and 95,180,000 shares in 1998).
Diluted (loss) earnings per share have been computed as follows:
=============================================================================
(in thousands except
per share amounts) 2000 (2) 1999 1998 (3)
- -----------------------------------------------------------------------------
Net (loss) income $(118,962) $272,429 $8,362
Weighted-average shares
outstanding - basic 87,854 90,450 95,180
Stock options 559 961
Other, principally contingent
stock rights 142 263
------ ------ ------
Weighted-average shares
outstanding - diluted (1) 87,854 91,151 96,404
Diluted (loss) earnings per share $(1.35) $2.99 $.09
=============================================================================
(1) The diluted average shares outstanding have been determined by assuming
the proceeds from the exercise of outstanding options were used to acquire
treasury stock at the average market value of the stock during the year.
-48-
(2) Options and contingent stock rights outstanding at December 31, 2000, as
shown in Note 9 to the financial statements, have been excluded from the
diluted loss per share in 2000 because to include such securities would be
antidilutive. Including the dilution from outstanding options and contingent
stock rights would have resulted in weighted-average diluted shares
outstanding of 88,755,000 for the year 2000.
(3) Options to purchase 888,000 shares in 1998 at $50.75 were excluded from
the diluted earnings per share calculation because the options' exercise
prices were greater than the average market price for 1998 and to include such
securities would be antidilutive.
NOTE 14. BUSINESS SEGMENTS
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. Electronic publishing includes the operations of Dow
Jones Newswires, Dow Jones Indexes, WSJ.com, dowjones.com (up to April 1, 2000
when it was contributed to Work.com) and other. Prior year results included
Dow Jones Interactive, a significant portion of which was contributed to
Factiva on July 1, 1999. Ottaway Newspapers, the community newspapers
segment, publishes 19 daily newspapers and 15 weekly newspapers in communities
throughout the U.S.
The company's operations by business segment and geographic area were as
follows:
Financial Data by Business Segment
=============================================================================
(in thousands) 2000 1999 1998
- -----------------------------------------------------------------------------
REVENUES (1)
Print publishing $1,518,946 $1,320,797 $1,161,939
Electronic publishing (2) 327,569 349,998 393,178
Community newspapers 356,103 331,040 317,087
---------- ---------- ----------
Segment revenues 2,202,618 2,001,835 1,872,204
Divested operations - Telerate 285,902
---------- ---------- ----------
Consolidated revenues $2,202,618 $2,001,835 $2,158,106
- -----------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES
AND MINORITY INTERESTS
Print publishing $ 400,157 $ 307,037 $ 173,582
Electronic publishing (2) 40,297 35,110 56,060
Community newspapers 94,482 84,959 44,760
Corporate (36,710) (37,565) (22,602)
---------- ---------- ----------
Segment operating income (3) 498,226 389,541 251,800
Divested operations - Telerate (33,227)
---------- ---------- ----------
Consolidated operating income 498,226 389,541 218,573
Equity in losses of associated companies (17,182) (27,907) (21,653)
Gain (loss) on disposition of
businesses and investments 24,053 51,945 (126,085)
Reserve for contract guarantee (255,308)
Write-down of investments (178,499)
Other income, net 5,088 4,467 823
---------- ---------- ----------
Income before income taxes and
minority interests $ 76,378 $ 418,046 $ 71,658
- -----------------------------------------------------------------------------
-49-
=============================================================================
(in thousands) 2000 1999 1998
- -----------------------------------------------------------------------------
EBITDA (4)
Print publishing $ 465,122 $ 372,354 $ 272,005
Electronic publishing (2) 65,558 58,372 88,409
Community newspapers 111,716 102,804 78,644
Corporate (36,285) (37,565) (22,602)
---------- ---------- ----------
Segment EBITDA 606,111 495,965 416,456
Divested operations - Telerate 20,671
---------- ---------- ----------
Consolidated EBITDA $ 606,111 $ 495,965 $ 437,127
- -----------------------------------------------------------------------------
DEPRECIATION AND AMORTIZATION EXPENSE
Print publishing $ 64,965 $ 62,562 $ 48,509
Electronic publishing 25,261 23,262 22,488
Community newspapers 17,234 17,845 17,544
Corporate 425
---------- ---------- ----------
Segment depreciation and
amortization expense 107,885 103,669 88,541
Divested operations - Telerate 53,898
---------- ---------- ----------
Consolidated depreciation and
amortization expense $ 107,885 $ 103,669 $ 142,439
- -----------------------------------------------------------------------------
ASSETS AT DECEMBER 31
Print publishing $ 869,618 $ 813,623 $ 667,422
Electronic publishing 171,224 183,379 195,575
Community newspapers 194,777 203,637 213,884
---------- ---------- ----------
Segment assets 1,235,619 1,200,639 1,076,881
Cash and investments 126,437 312,074 407,141
---------- ---------- ----------
Consolidated assets $1,362,056 $1,512,713 $1,484,022
- -----------------------------------------------------------------------------
CAPITAL EXPENDITURES
Print publishing $ 157,553 $ 161,414 $ 120,699
Electronic publishing 22,068 21,243 38,719
Community newspapers 7,414 8,082 11,075
---------- ---------- ----------
Segment capital expenditures 187,035 190,739 170,493
Divested operations - Telerate 55,341
---------- ---------- ----------
Consolidated capital expenditures $ 187,035 $ 190,739 $ 225,834
=============================================================================
Financial Data by Geographic Area
=============================================================================
(in thousands) 2000 1999 1998
- -----------------------------------------------------------------------------
REVENUES (5)
United States $2,008,987 $1,840,716 $1,795,755
International 193,631 161,119 362,351
---------- ---------- ----------
Consolidated revenues $2,202,618 $2,001,835 $2,158,106
- -----------------------------------------------------------------------------
PLANT AND PROPERTY, NET OF
ACCUMULATED DEPRECIATION
United States $ 743,660 $ 661,113 $ 587,700
International 17,203 15,299 14,417
---------- ---------- ----------
Consolidated plant and property, net $ 760,863 $ 676,412 $ 602,117
=============================================================================
-50-
Notes:
(1) Revenues shown represent revenues from external customers. Transactions
between segments are not significant.
(2) The company's share of Factiva's results is included in Equity in Losses
in Associated Companies in the consolidated financial statements. Prior to
July 1, 1999, results of the interactive business were included in the
company's electronic publishing revenue, expenses and operating income. Had
50% of Factiva's results been included, electronic publishing 2000 revenue
would have been $443 million, up 9.7% from $403.7 million in 1999, following a
2.7% increase from 1998; operating income would have been $45.2 million, up
48%, following a 54% decline from 1998; EBITDA would have been $76.9 million
in 2000, $54.7 million in 1999 and $88.4 million in 1998.
Excluding restructuring charges, but including the company's 50% share of
Factiva, segment operating income was as follows:
(in thousands) 2000 1999 1998
---- ---- ----
Print publishing $400,157 $309,792 $223,496
Electronic publishing 45,165 30,438 65,921
Community newspapers 94,482 84,959 61,100
Corporate (36,710) (37,565) (22,602)
-------- -------- --------
$503,094 $387,624 $327,915
Equity in earnings (losses) of Factiva $ 4,868 $ (4,672)
(3) Included within segment operating income in 1999 and 1998 were
restructuring charges as follows:
(in thousands) 1999 1998
---- ----
Print publishing $2,755 $49,914
Electronic publishing 9,861
Community newspapers 16,340
------ ------
Total restructuring $2,755 $76,115
Approximately $20 million of the 1998 restructuring charge for the print
publishing segment reflected a noncash write-down of plant and property.
(4) EBITDA is computed by the company as operating income excluding
depreciation, amortization and restructuring charges. EBITDA is a measure
used by the company's management in determining a business unit's performance.
EBITDA is not a measure of performance under generally accepted accounting
principles and should not be construed as a substitute for consolidated net
income as a measure of performance, nor as a substitute for cash flow as a
measure of liquidity. EBITDA is a component of a covenant of the company's
credit agreement that limits the company's ability to incur additional future
indebtedness. EBITDA is not a measure of funds available for management's
use. Management believes that EBITDA is a standard measure of operating
performance that is commonly used by investors and analysts to analyze and
compare other communication companies. EBITDA may be calculated differently
by other companies and investors should not view the company's calculation of
EBITDA as an alternative to GAAP measurements such as operating income, net
income and cash flows provided by or used in operating, investing and
financing activities.
(5) In 1998, excluding Telerate, revenues were $1.872 billion:
United States - $1.705 billion and International - $167 million.
-51-
NOTE 15. FINANCIAL INSTRUMENTS
Fair Value of Financial Instruments
The carrying values of the company's cash and cash equivalents, accounts
receivable and accounts payable approximate fair value. The fair value of the
following financial instruments, as of December 31, 2000 and 1999, was
determined primarily by reference to dealer markets and market prices.
=============================================================================
(in thousands) Fair Value Carrying Value
- -----------------------------------------------------------------------------
2000
Other investments $ 11,219 $ 11,219
Long-term debt 150,865 150,865
- -----------------------------------------------------------------------------
1999
Other investments $217,172 $174,727
Long-term debt 148,875 149,945
=============================================================================
Other investments included marketable equity securities, namely shares in
Nation Multimedia Group Public Co., Ltd (NMG), a media company in Thailand
(2000 and 1999); Sohu.com Inc. a leading Internet portal in China (2000); and
iBEAM Broadcasting Corp., an Internet broadcast network that delivers
streaming media (2000). As of December 31, 2000, the market value of these
shares was $6.7 million reflecting a gross unrealized gain of $1.7 million and
a gross unrealized loss of $6.7 million. The balance of the other investments
is carried at original cost. At December 31, 1999, the fair value of NMG was
$6.4 million, reflecting a gross unrealized loss of $.9 million.
Included in other investments at December 31, 1999 were $150 million of 5
year, convertible, 4% Bridge preferred stock, accrued dividends on the stock
and a note receivable from Bridge with a total carrying value of $162.3
million. Also included were shares of SAVVIS Communications Corp. (SAVVIS), a
provider of Internet backbone and high-speed access with a carrying value of
$.9 million. SAVVIS completed an initial public offering in February 2000,
with Bridge its majority owner and its largest customer. In addition, other
investments included the company's investment in OptiMark Technologies, Inc.
See Note 2 "Write Down of Investments".
Foreign Currency Forward Exchange Contracts
The forward contracts establish the exchange rates at which the company will
purchase the contracted amount of local currencies for specified foreign
currencies at a future date. Forward exchange contracts mature at the
anticipated cash requirement date of the hedged transaction, within one year.
At December 31, 2000, the company had outstanding foreign currency forward
contracts for the euro of $29 million and British pound of $29.5 million. At
December 31, 2000, the unrealized gain on these contracts of $2.4 million was
included in Foreign Currency Translation Adjustment on the balance sheets.
There were no contracts outstanding at December 31, 1999.
Concentrations of Credit Risk
Financial instruments that potentially could subject the company to
concentrations of credit risk consist largely of trade accounts receivable.
The company sells print and electronic information products worldwide to a
wide variety of customers in the financial, business and private investor
marketplaces. The concentration of credit risk with respect to trade
receivables is slight due to the large number and geographic dispersion of
customers that comprise the company's customer base.
-52-
NOTE 16. SUMMARY OF QUARTERLY FINANCIAL DATA (UNAUDITED)
The summary of unaudited 2000 and 1999 quarterly financial data was as
follows:
=============================================================================
(in thousands except Quarters
per share amounts) --------------------------------------
First Second Third Fourth Year
- -----------------------------------------------------------------------------
2000
Revenues $550,752 $593,157 $500,290 $558,419 $2,202,618
Operating income 135,509 157,905 83,267 121,545 498,226
Net income (loss) (1) 88,670 100,563 (33,896) (274,299) (118,962)
Per share*:
Basic .99 1.15 (.39) (3.15) (1.35)
Diluted .98 1.13 (.39) (3.15) (1.35)
- -----------------------------------------------------------------------------
1999
Revenues $462,082 $510,571 $469,795 $559,387 $2,001,835
Operating income 72,814 104,812 84,143 127,772 389,541
Net income (2) 51,522 57,212 102,801 60,894 272,429
Per share*:
Basic .56 .63 1.14 .68 3.01
Diluted .56 .62 1.13 .67 2.99
=============================================================================
(1) In 2000, the company recorded a net gain of $18.1 million on the sales of
businesses and investments: $9.5 million on the sale of its subsidiary, Dow
Jones Financial Publishing Corp. (first quarter); $4.8 million on the sale of
its minority interest in SportsTicker Enterprises L.P. (second quarter); and
$3.8 million on the exchange of the company's holdings in NextVenue Inc. for
shares issued through a merger of iBEAM Broadcasting Corp. (fourth quarter).
The company recorded write-downs totaling $178.5 million on its investments in
2000: $82.3 million on its Bridge Information Systems, Inc. preferred stock in
the third quarter; and $84.1 million on the remaining value of its Bridge-
related investments and $12.1 million on its OptiMark Technologies, Inc.
investment in the fourth quarter. In addition, the company recorded a fourth
quarter reserve of $255 million for a contract guarantee related to the
Telerate sale. Also, the company recorded a reversal of a 1998 restructuring
charge of $3.2 million ($2.1 million after tax) relating to an equity
investee, in the second quarter.
(2) In 1999, the company recorded a net gain of $51.6 million on the sales of
businesses and investments: $10.6 million on the sale of a portion of the
company's minority interest in OptiMark Technologies, Inc. (first quarter);
$57.3 million on the sale of United States Satellite Broadcasting, Inc. (third
quarter); and a net loss of $16.3 million on the sale of IDD Enterprises L.P.
(fourth quarter). Operating income in 1999 included a second quarter
restructuring charge of $2.8 million ($1.6 million after tax).
* Per share amounts for the quarters and full years have each been calculated
separately. Accordingly, quarterly amounts may not add to the annual amounts
because of differences in the average common shares outstanding during each
period and, with regard to diluted per share amounts only, because of the
inclusion of the effect of potentially dilutive securities only in the periods
in which such effect would have been dilutive.
-53-
STATEMENT OF MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
To the Stockholders of Dow Jones & Company, Inc.:
Management has prepared and is responsible for the consolidated financial
statements and related information in the Annual Report. The financial
statements, which include amounts based on judgment, have been prepared in
conformity with generally accepted accounting principles consistently applied.
Management has developed and continues to maintain a system of internal
accounting and other controls for the company and its subsidiaries.
Management believes these controls provide reasonable assurance that assets
are safeguarded from loss or unauthorized use and that the company's financial
records are a reliable basis for preparing the financial statements. The
company's system of internal controls is supported by written policies,
including a code of conduct, a program of internal audits, and by a program of
selecting and training qualified staff. Underlying the concept of reasonable
assurance is the premise that the cost of control should not exceed the
benefit derived.
PricewaterhouseCoopers LLP, independent accountants, have audited the
consolidated financial statements as described in their report. The report
expresses an independent opinion on the fairness of presentation of the
financial statements and, in so doing, provides an independent objective
assessment of the manner in which management meets its responsibility for
fairness and accuracy in financial reporting.
The Board of Directors, through its audit committee consisting solely of
outside directors, is responsible for reviewing and monitoring the company's
financial reporting and accounting practices. The audit committee meets
regularly with management, internal auditors and independent accountants - -
both separately and together. The internal auditors and the independent
accountants have free access to the audit committee to review the results of
their audits, the adequacy of internal accounting controls and the quality of
financial reporting.
-54-
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Dow Jones & Company, Inc.:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of (loss) income, stockholders' equity and cash flows
present fairly, in all material respects, the financial position of Dow Jones
& Company, Inc. and subsidiaries at December 31, 2000 and 1999, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
New York, New York
January 25, 2001, except as to Note 2, which is as of February 15, 2001
-55-
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
PART III.
ITEM 10. Directors and Executive Officers of the Registrant.
The information required by this item with respect to directors of the company
is incorporated by reference to the tables, including the footnotes thereto,
titled "Nominees for Election at the Annual Meeting," "Incumbent Directors
(Class of 2002)" and "Incumbent Directors (Class of 2003)" in the 2001 Proxy
Statement and to the material in footnote 5 to the table under the caption
"Security Ownership of Directors and Management" in the 2001 Proxy Statement.
The information required by this item with respect to compliance with Section
16(a) of the Securities Exchange Act of 1934 is incorporated by reference to
the material under the caption "Section 16(a) Beneficial Ownership Reporting
Compliance" in the 2001 Proxy Statement. For the information required by this
item relating to executive officers, see Part I, page 10 of this 2000
Form 10-K.
ITEM 11. Executive Compensation.
The information required by this item is incorporated by reference to the
tables, including the footnotes thereto, appearing under the captions
"Executive Compensation," "Separation Plan for Senior Management" and "Jerome
H. Bailey Retirement Agreement" in the 2001 Proxy Statement, and to the
material in the fifth through eighth paragraphs preceding the "Executive
Compensation" section in the 2001 Proxy Statement.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by this item is incorporated by reference to the
tables, including the footnotes thereto, appearing under the captions
"Security Ownership of Certain Beneficial Owners" and "Security Ownership of
Directors and Management" in the 2001 Proxy Statement.
ITEM 13. Certain Relationships and Related Transactions.
The information required by this item is incorporated by reference to
footnotes 3, 5 and 6 to the tables titled "Nominees for Election at the Annual
meeting," "Incumbent Directors (Class of 2002)" and "Incumbent Directors
(Class of 2003)" in the 2001 Proxy Statement.
-56-
PART IV.
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
14(a)(1)Financial Statements: Page Reference
--------------
Included in Part II, Item 8 of this report:
Consolidated statements of (loss) income for the
years ended December 31, 2000, 1999 and 1998 27
Consolidated statements of cash flows for the
years ended December 31, 2000, 1999 and 1998 28
Consolidated balance sheets, December 31, 2000
and 1999 29 - 30
Consolidated statements of stockholders' equity
for the years ended December 31, 2000, 1999 and 1998 31 - 32
Notes to financial statements 33 - 53
Statement of management's responsibility for
financial statements 54
Report of independent accountants 55
(a)(2) Financial Statement Schedule:
Included in Part IV of this report:
Report and consent of independent accountants 62
Schedule II - Valuation and qualifying accounts and reserve 63
Other schedules have been omitted since they are either not required or not
applicable.
-57-
(a) (3) Exhibits
Exhibit
Number Document
------- --------
3.1 The Restated Certificate of Incorporation of the company, as
amended April 25,1989, is hereby incorporated by reference to
Exhibit 10.15 to its Form 10-Q for the quarter ended June 30, 1999.
3.2 The By-laws of the company restated as of May 17, 1989 is hereby
incorporated by reference to Exhibit 10.16 to its Form 10-Q for the
quarter ended June 30, 1999.
4.1 Form of promissory note for commercial paper is hereby
incorporated by reference to Exhibit 4.1 to its Form 10-Q for the
quarter ended September 30, 1985.
10.1 Deferred Compensation Contracts between the Company and various
officers and directors are hereby incorporated by reference to
Exhibit 20 to its Form 10-K for the year ended December 31, 1980.
10.2 Dow Jones 1981 Stock Option Plan, as amended, is hereby
incorporated by reference to Exhibit 20.2 to its Form 10-Q for
the quarter ended June 30, 1981.
10.3 Lease, as amended, between the Company and Olympia and York
Battery Park Company, of space in The World Financial Center, New
York City, is hereby incorporated by reference to Exhibit 10.9 to
its Form 10-K for the year ended December 31, 1983.
10.4 Dow Jones 1988 Executive Incentive Plan, as amended, is hereby
incorporated by reference to Exhibit 19 to its Form 10-Q for the
quarter ended June 30, 1988.
10.5 Lease, as amended, between the Company and Waterfront Associates,
of space at Harborside Plaza Two, Jersey City, N.J. is hereby
incorporated by reference to Exhibit 10.15 to its Form 10-K for
the year ended December 31, 1989.
10.6 Dow Jones 1991 Stock Option Plan, as amended, is hereby
incorporated by reference to Exhibit 19.2 to its Form 10-Q for
the quarter ended September 30, 1991.
10.7 Dow Jones 1992 Long term Incentive Plan is hereby incorporated by
reference to Exhibit 10 to its Form 10-Q for the quarter ended
March 31, 1992.
10.8 Dow Jones 1997 Long Term Incentive Plan is hereby incorporated
by reference to Exhibit 10 to its Form 10-Q for the quarter ended
March 31, 1997.
10.9 Retirement Agreement dated December 30, 1997 between the company
and Mr. Valenti is hereby incorporated by reference to Exhibit
10.11 to its Form 10-K for the year ended December 31, 1997.
-58-
Exhibit
Number Document
------- --------
10.10 Dow Jones 1998 Stock Option Plan is hereby incorporated by
reference to Exhibit 10.12 to its Form 10-Q for the quarter
ended March 31, 1998.
10.11 Separation Plan for Senior Management is hereby incorporated by
reference to Exhibit 10.13 to its Form 10-K for the year ended
December 31, 1998.
10.12 Separation Agreement and Release of Claims dated December 2,1998
between the company and Mr. Kenneth L. Burenga is hereby
incorporated by reference to Exhibit 10.14 to its Form 10-K for
the year ended December 31, 1998.
10.13 Amended and Restated Credit Agreement, dated as of June 27, 2000
is hereby incorporated by reference to Exhibit 10 to its
Form 10-Q for the quarter ended June 30, 2000.
* 10.14 Retirement Agreement dated October 30, 2000 between the company
and Mr. Bailey.
* 10.15 First Amendment, dated December 31, 2000, to the Amended and
Restated Credit Agreement dated as of June 27, 2000.
21 List of Subsidiaries
23 Consent of PricewaterhouseCoopers LLP, independent accountants,
is contained on page 62 of this report.
* Securities and Exchange Commission and New York Stock Exchange copies
only.
(b) Reports on Form 8-K
Form 8-K, dated December 06, 2000
Form 8-K, dated December 22, 2000
-59-
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
DOW JONES & COMPANY, INC.
Dated: March 7, 2001 By: /s/ Christopher W. Vieth
-------------------------
Christopher W. Vieth
Corporate Controller
(Chief Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
Peter R. Kann
- -------------------------- Chairman of the Board March 7, 2001
Chief Executive Officer
Richard F. Zaninno
- -------------------------- Executive Vice President March 7, 2001
Chief Financial Officer
Rand V. Araskog
- -------------------------- Director March 7, 2001
Christopher Bancroft
- -------------------------- Director March 7, 2001
William C. Cox
- -------------------------- Director March 7, 2001
Harvey Golub
- -------------------------- Director March 7, 2001
-60-
Signature Title Date
--------- ----- ----
Leslie Hill
- -------------------------- Director March 7, 2001
Irvine O. Hockaday, Jr.
- -------------------------- Director March 7, 2001
Vernon E. Jordan
- -------------------------- Director March 7, 2001
M. Peter McPherson
- -------------------------- Director March 7, 2001
Frank N. Newman
- -------------------------- Director March 7, 2001
James H. Ottaway, Jr.
- -------------------------- Director March 7, 2001
William C. Steere, Jr.
- -------------------------- Director March 7, 2001
-61-
INDEPENDENT ACCOUNTANTS' REPORT ON FINANCIAL STATEMENT SCHEDULE
---------------------------------------------------------------
To the Board of Directors and Stockholders of Dow Jones & Company, Inc.:
Our audits of the consolidated financial statements referred to in our report
dated January 25, 2001, except as to Note 2, which is as of February 15, 2001,
appearing in the 2000 Annual Report to Shareholders of Dow Jones & Company,
Inc. (which report and consolidated financial statements are incorporated in
this Annual Report on Form 10-K) also included an audit of the Financial
Statement Schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion,
this Financial Statement Schedule presents fairly, in all material respects,
the information set forth therein when read in conjunction with the related
consolidated financial statements.
PRICEWATERHOUSECOOPERS LLP
New York, New York
January 25, 2001
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We consent to the incorporation in the Registration Statements on Form S-3
(File No. 333-02071) and Form S-8 (File Nos. 2-72684, 33-45962, 33-45963, 33-
49311, 33-55079, 333-57175, 333-70921, and 333-67523) of Dow Jones & Company,
Inc. of our report dated January 25, 2001, except as to Note 2, which is as of
February 15, 2001, which appears in the Annual Report to Stockholders, which
is incorporated in this Annual Report on Form 10-K. We also consent to the
incorporation of our report dated January 25, 2001 relating to the financial
statement schedule, which appears above.
PRICEWATERHOUSECOOPERS LLP
New York, New York
March 7, 2001
-62-
Schedule II
DOW JONES & COMPANY
and its Subsidiaries
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
for the years ended December 31, 2000, 1999 and 1998
(in thousands)
Additions
-------------------------
Balance at Charged to Charged Balance
Beginning Cost and to Other at End
Description of Period Expenses Accounts(A) Deductions of Period
- ----------- ---------- ---------- ---------- ---------- ---------
Year ended December 31, 2000:
Reserves deducted from assets -
Allowance for doubtful accounts $ 5,919 $ 6,917 $1,213 $ 7,672 (B) $ 6,377
======== ======== ====== ======= ========
Tax valuation allowance $185,824 $164,526 - - $346,571
======== ======== ====== ======= ========
Year ended December 31, 1999:
Reserves deducted from assets -
Allowance for doubtful accounts $ 6,641 $ 3,228 $ 767 $ 4,717 (B) $ 5,919
======== ======== ====== ======= ========
Tax valuation allowance $222,504 - - $36,680 $185,824
======== ======== ====== ======= ========
Year ended December 31, 1998:
Reserves deducted from assets -
Allowance for doubtful accounts $ 16,445 $ 4,623 $3,234 $17,661 (B) $ 6,641
======== ======== ====== ======= ========
Tax valuation allowance - $222,504 - - $222,504
======== ======== ====== ======= ========
Notes:
(A) Recoveries of accounts previously written off and reductions of revenue.
(B) Accounts written off as uncollectible and credits issued to customers. In 1998 also includes a
deduction of $9,955,000 resulting from the divestiture of Telerate.
-63-