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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended March 31, 2003

OR

For the transition period from            to            

Commission file number 1-7564

DOW JONES & COMPANY, INC.

(Exact name of registrant as specified in its charter)

(212) 416-2000

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes    x    No    ¨

The number of shares outstanding of each of the issuer’s classes of common stock on March 31, 2003: 60,603,844 shares of Common Stock and 20,770,483 shares of Class B Common Stock.

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DOW JONES & COMPANY, INC.

INDEX

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I. FINANCIAL INFORMATION

Item 1: Financial Statements

CONSOLIDATED STATEMENTS OF INCOME

Dow Jones and Company, Inc.

For the three months ended March 31, 2003 and 2002

(unaudited)

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

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CONSOLIDATED STATEMENTS OF CASH FLOWS

Dow Jones & Company, Inc.

For the three months ended March 31, 2003 and 2002

(unaudited)

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

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CONSOLIDATED BALANCE SHEETS

Dow Jones & Company, Inc.

(unaudited)

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

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NOTES TO FINANCIAL STATEMENTS

Dow Jones & Company, Inc.

(unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements reflect all adjustments considered necessary by management to present fairly the company’s consolidated financial position as of March 31, 2003, and the consolidated results of operations and consolidated cash flows for the three month periods ended March 31, 2003 and 2002. In management’s opinion, all adjustments necessary for a fair presentation in accordance with generally accepted accounting principles are reflected in the financial statements presented.

The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the company’s annual report on Form 10-K for the year ended December 31, 2002 filed with the Securities and Exchange Commission. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.

2. Gain on Resolution of Telerate Sale Loss Contingencies

In the first quarter of 2003, the company recorded a gain of $59.8 million ($.73 per diluted share) on the resolution of certain loss contingencies resulting from the sale of its former Telerate subsidiary to Bridge Information Systems, Inc. (Bridge). The reserve for loss contingencies was established as part of the loss on sale of Telerate in 1998 and related to various claims that arose out of the Stock Purchase Agreement, including a purchase price adjustment related to working capital, an indemnification undertaking and other actual and potential claims and counter-claims between the company and Bridge. In February 2001, Bridge declared bankruptcy. In March 2003, these matters were resolved by the bankruptcy court, and the company’s contingent liabilities were thereby extinguished.

3. Contract Guarantee

Under the terms of the company’s 1998 sale of Telerate to Bridge, Dow Jones retained its guarantee of payments under certain circumstances of certain minimum payments for data acquired by Telerate from Cantor Fitzgerald Securities (Cantor) and Market Data Corporation (MDC). The annual minimum payments average approximately $50 million per year through October 2006 under certain conditions. Bridge agreed to indemnify Dow Jones for any liability Dow Jones incurred under the contract guarantee with respect to periods subsequent to Bridge’s purchase of Telerate. In 2000, based in part on uncertainty with Bridge’s solvency as well as other factors, the company established a reserve of $255 million representing the net present value of the total estimated payments from 2001 through October 2006, using a discount rate of 6%. The first quarters of 2003 and 2002 included charges related to the accretion of the discount on the reserve balance of $2.6 million ($.03 per diluted share) and $3.2 million ($.04 per diluted share), respectively.

Bridge filed for bankruptcy in February 2001 but made payments for this data for the post-petition periods through October 2001, when Telerate ceased operations, went out of business, sold certain assets and rejected its contracts with Cantor and MDC. The company is now in litigation with Cantor and MDC with respect to their claims for amounts due under the contract guarantee. The company has various substantial defenses to these claims and the litigation is proceeding. The trial court rendered a decision in January 2003 denying the parties’ respective motions to grant their own claims and to dismiss the competing claims. The company, Cantor and MDC have all filed appeals from the trial court’s order. While these appeals are pending, the discovery phase is proceeding.

While it is not possible to predict with certainty the ultimate outcome of this litigation, the company believes the likelihood of a loss exceeding the amount reserved is remote; however, it is possible that such loss could be less than the amount reserved.

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4. Other Guarantees and Contingencies

In addition to the litigation that is separately disclosed in Note 3 of this Form 10-Q, there are various libel actions and other legal proceedings that have arisen in the ordinary course of business that are pending against the company and its subsidiaries. In the opinion of management, based on advice of legal counsel, the ultimate outcome to the company and its subsidiaries as a result of these other legal proceedings will not have a material effect on the company’s financial statements. In addition, the company has insurance coverage for many of these matters.

The company’s bylaws provide for indemnification of officers and directors prosecuted in a criminal action or sued in a civil action or proceeding to the full extent permitted by the Delaware General Corporation Law. The maximum potential amount of future payments the company could be required to make under these indemnification provisions is unlimited; however, the company maintains directors’ and officers’ liability and corporation reimbursement insurance for the benefit of the company and its directors and officers. The policy provides coverage for certain amounts paid as indemnification pursuant to the provisions of Delaware law and the company’s bylaws. As a result of its insurance coverage, the company believes that the estimated fair value of these indemnification provisions is minimal.

The company enters into indemnification agreements in its ordinary course of business, typically with companies from which it is acquiring or to which it is selling businesses, partners in joint ventures, licensees and licensors, and service providers and contractors. Under these agreements the company generally indemnifies, holds harmless, and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party, as a result of the company’s activities or its breach of the agreement in question or in connection with any intellectual property infringement claim by any third party with respect to its products. These indemnification obligations generally survive termination of the underlying agreement, either for some set number of years or perpetually. In some cases, the maximum potential amount of future payments the company could be required to make under these indemnification obligations is unlimited. The company believes that the estimated fair value of these indemnity obligations is minimal and the company has no liabilities recorded for these obligations as of March 31, 2003. The company has not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions.

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 under these guarantees totals $7.9 million through 2010.

5. Dispositions

In the first quarter of 2002, the company recognized a gain of $153.4 million ($126.1 million after taxes, or $1.49 per diluted share) resulting from the sale at the end of March 2002 of four of the company’s Ottaway newspapers to Community Newspapers Holdings, Inc.

6. Restructuring Reserves

The following table displays the activity and balances of the restructuring reserve account as of March 31, 2003:

As of March 31, 2003, roughly 95% of the approximate 445 employees involved in the 2002 restructurings were terminated with the remainder expected to be terminated by mid-year 2003.

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7. Dilution and Stock Compensation Plans

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

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

(2) Options to purchase 8,577,000 shares in 2003 at an average price of $53.97 have been excluded from the diluted earnings per share calculation because the options’ exercise prices were greater than the average market price during the quarter and to include such securities would be antidilutive.

(3) Options to purchase 5,600,000 shares in 2002 at an average price of $58.54 have been excluded from the diluted per share calculation because to include such securities would be antidilutive.

Fair Value Based Method

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

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The following table provides the estimated fair value under the Black-Scholes option-pricing model of each option granted in the first quarter of 2003 and 2002, and the significant weighted-average assumptions used in their determination.

8. Comprehensive Income

Comprehensive income was computed as follows:

9. Pending Transactions/Subsequent Events

In November 2002, the company and the von Holtzbrinck Group entered into a memorandum of understanding pursuant to which they agreed to exchange equity shareholdings so as to reduce the von Holtzbrinck Group’s ownership of The Wall Street Journal Europe to 10% from 49% and the company’s ownership of the von Holtzbrinck Group’s business daily, Handelsblatt, to 10% from 22%, with news and advertising relationships continuing. The agreement also provides each party the unilateral option to unwind the strategic alliance entirely. Assuming the transaction is consummated, the company expects to record an after-tax gain of $11 million, or $.14 per share, on the exchange of its 12% interest in Handelsblatt for 39% of The Wall Street Journal Europe. Although the transaction has not been finalized, the company is funding Wall Street Journal Europe losses at the ninety-percent level as of January 1, 2003.

On April 16, 2003, the company’s Ottaway Newspaper subsidiary entered into a definitive agreement to acquire The Record of Stockton, California from Omaha World-Herald Company for $144 million in cash, plus net working capital. The purchase was consummated on May 5, 2003. The Record has daily paid circulation of 59,271 and Sunday circulation of 72,698. The Record Group had combined 2002 revenues of $37 million and operating profits of $9.6 million. The purchase was primarily funded by the issuance of debt under the company’s commercial paper program. The company has temporarily suspended its share repurchase program to utilize excess cash flow to reduce this debt.

In April 2003, the company and its insurance providers reached agreement on its recovery for business interruption losses resulting from the terrorist attacks on the World Trade Center on September 11, 2001. The company expects to receive proceeds and record pretax income of approximately $18 million from its business interruption insurance claim in the second quarter of 2003.

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10. Business Segments

The company has determined the following three reportable segments based on the manner in which it manages its business: print publishing, electronic publishing and general-interest community newspapers. In addition, the company reports certain administrative activities under the corporate segment.

Print publishing includes the operations of The Wall Street Journal and its international editions, Barron’s and other business periodicals, as well as U.S. television operations. Electronic publishing includes the operations of Dow Jones Newswires, Consumer Electronic Publishing and Dow Jones Indexes/Ventures. Consumer Electronic Publishing includes the results of WSJ.com and its related vertical sites as well as the company’s licensing/business development and radio/audio businesses. Revenues in the electronic publishing segment are mainly subscription based. Ottaway Newspapers, the community newspapers segment, publishes 15 daily newspapers, 12 Sunday papers and more than 30 weeklies and shoppers in communities throughout the U.S.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Revenues in the first quarter of 2003 were affected by the difficult advertising and business environment, particularly in the latter half of the quarter as advertisers delayed placing ads on the expectation, and then the reality, of war with Iraq. Despite the war, operating profits rose 43%. The company’s aggressive cost containment efforts, improved color advertising at The Wall Street Journal, and strong revenue growth at Consumer Electronic Publishing and some other electronic businesses more than offset sharp declines in business-to-business advertising revenue and a reduction of profits as a result of the divestitures of Ottaway properties last year.

During the quarter, the company continued to focus on its “Business Now” strategic plan. Dow Jones Newswires launched Dow Jones NewsPlus, the first of the Newswire of the Future products. This service is aimed at the broker community and is a major enhancement for Dow Jones Newswires subscribers to the North American equity wire. This added functionality has allowed Dow Jones Newswires to introduce an overall price increase in 2003. Also, as a continuation of the company’s strategy to reinvest in additional, more strategic, community newspapers, in April 2003, the company entered into an agreement to purchase The Record in Stockton, California. The purchase was consummated on May 5, 2003. The Record is the leading daily newspaper serving the city of Stockton and surrounding San Joaquin County in Northern California’s Central Valley, one of the fastest growing markets in California. The Record Group had combined 2002 revenues of $37 million and operating profits of $9.6 million. The transaction is expected to be accretive to earnings per share.

Results of Operations

Net income for the first quarter of 2003 was $66.9 million, or $.82 per diluted share, compared with first quarter 2002 earnings of $129.8 million, or $1.53 per diluted share (all “per share” amounts included herein are based on reported net income and use diluted shares). Net income in each quarter included certain items affecting comparisons which netted to a gain of $.70 per share in the first quarter 2003 and a gain of $1.45 per share in the first quarter of 2002. The items affecting comparisons are detailed further on page 16.

Revenues for the first quarter of 2003 fell $34.7 million, or 8.8%, to $358.2 million, largely as a result of a decline in company-wide advertising revenue and a decline in revenues related to divested community newspaper properties. Excluding Ottaway divested and newly-acquired properties, or on a “same store” basis, total revenue was down $18.6 million, or 4.9%. Same store advertising revenue declined $18.1 million, or 8.7%, on lower advertising volume principally at the domestic Journal. Information services revenue was up modestly as strong growth in revenue at Consumer Electronic Publishing and other electronic businesses was partially offset by a decline in Dow Jones Newswires revenues. Circulation and other revenue, on a same-store basis, decreased $.7 million, or .7% on a slight decline in circulation and commercial printing revenue.

Operating expenses in 2003 were reduced $39.9 million, or 10%, to $340.7 million, reflecting cost saving initiatives (about $22 million), lower newsprint costs ($3 million), lower costs as a result of the Ottaway divestitures, net of newly acquired properties ($12 million), and a decrease in year-over-year Today’s Journal costs ($3 million). Newsprint expense, on a same-store basis, was down 10%, as a result of a 10.7% decrease in consumption offset by a slight increase in prices. Employee compensation expense was down about 10% (down about 6.9% on a same-store basis). At the end of March 2003, the number of full-time employees was about 6,800, down 9.4% from March 31, 2002.

Operating income for the first quarter of 2003 was $17.6 million (4.9% of revenues), up $5.3 million, or 43%, from $12.3 million (3.1% of revenues) in the like period a year ago, as operating income and margins improved across the print and electronic publishing segments.

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Segment Data

The company’s business and financial news and information operations are reported in two segments: print publishing and electronic publishing. The results of the company’s Ottaway Newspapers subsidiary, which publishes 15 daily newspapers, 12 Sunday papers and more than 30 weeklies and shoppers in 9 states in the U.S., are reported in the community newspaper segment. In addition, the company reports certain administrative activities under the corporate segment. Print publishing accounted for approximately 60% of first quarter 2003 revenues, with electronic publishing accounting for 22% and community newspapers accounting for 18%.

Print Publishing

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).

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Revenues

First quarter 2003 revenue fell $21.6 million, or 9.2%, driven by advertising softness at The Wall Street Journal, where ad linage dropped 11%. Advertising linage declines accelerated during the quarter as the effects of the Iraq war intensified. Journal linage declined 1.2% in January, 9.4% in February and 20% in March. Revenues were down 8.8% in the U.S. and were down 12.6% overseas despite advertising linage increases at The Asian Wall Street Journal and The Wall Street Journal Europe. The declines in international advertising revenue largely reflect discounts related to a global ad sales program launched in the summer of 2002. U.S. television advertising license revenue from CNBC was down 5.6%.

Overall Journal advertising linage was down 11%, as improvements in general, consumer and classified advertising were more than offset by a sharp decline in the company’s core financial and technology categories. General advertising, which represented 43% of total linage, improved 2.5%, with increases in professional services, autos and other consumer advertising somewhat offset by a decline in travel advertising and other general business advertising. Technology advertising, which represented 17% of the total Journal linage, fell 28.5% as declines in business-to-business e-commerce, hardware, personal computer and telecommunications advertising were offset slightly by an increase in software advertising. Financial advertising, which accounted for 16% of total Journal linage for the quarter, fell 37.5%, reflecting the continued weakness in the financial markets, as evidenced by significant declines in tombstones and investment advisory. Classified advertising linage, which represented 24% of total Journal linage, increased 15.3% reflecting improvements in real estate and other classified advertising. Color advertising, which is billed at a premium, increased 14%.

First quarter 2003 circulation and other revenue for the U.S. print publications decreased $.7 million, or 1%, in the first quarter of 2003, as a result of slight declines in circulation volume at both The Wall Street Journal and Barron’s. Average circulation for the first three months of 2003 for The Wall Street Journal was 1,812,000 compared with circulation of 1,836,000 in the first quarter of 2002. Barron’s average circulation was 287,000 in the quarter, down from 298,000 in the first quarter 2002. The Journal’s subscription price increase, which was announced in 2002’s fourth quarter, became effective in February 2003 for renewing subscribers.

International print circulation and other revenues fell $.9 million, or 9.9%, as a result of lower conference revenue coupled with a decrease in circulation at the Far Eastern Economic Review. Combined average circulation for the international Journals was 160,000 in the first quarter compared with 174,000 in the first quarter of 2002.

Expenses

Print publishing expenses were reduced $25.7 million, or 11%, from first quarter 2002 levels, as a result of lower employee salary and benefits expense, reduced marketing expenses for Today’s Journal, and a decrease in newsprint expenses. Newsprint expense was down 11.7% as a result of a 12.4% decrease in consumption somewhat offset by a .9% increase in newsprint prices. The number of employees in the print publishing segment was down 9.3% from March 31, 2002.

Operating losses

Print publishing operating losses were reduced 47% in the quarter, to a loss of $4.7 million, as the company’s strict cost containment initiatives more than offset advertising revenue declines.

Electronic Publishing

Electronic publishing includes the operations of Dow Jones Newswires, Consumer Electronic Publishing and Dow Jones Indexes/Ventures. Consumer Electronic Publishing includes the results of WSJ.com and its related vertical sites as well as the company’s licensing/business development and radio/audio businesses. Revenues in the electronic publishing segment are mainly subscription-based. Electronic publishing represented about 22% of total 2003 revenues.

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Revenues

Electronic publishing revenues increased $1.4 million, or 1.8%, as strong increases in Consumer Electronic Publishing and Dow Jones Indexes/Ventures more than offset a decrease in Newswires revenue. Dow Jones Newswires revenue fell $3.8 million, or 6.6%, from the first quarter of 2002, primarily reflecting a decrease in retail revenue due to contraction in the securities industry. English-language terminals carrying Dow Jones Newswires at March 31, 2003 were 303,000 compared with 348,000 at March 31, 2002. North American terminals decreased by 46,000, while International terminals increased by 1,000.

Consumer Electronic Publishing revenue increased $2.6 million, or 20%, compared to the same period last year. The strong growth in revenue was driven by an increase of WSJ.com subscriber revenue largely due to a price increase implemented in July 2002 coupled with a rise in the number of subscribers. At the end of March 2003, the number of WSJ.com subscribers increased 5.5% from a year earlier. Dow Jones Indexes/Ventures revenues, which include Dow Jones Indexes and reprints/permissions businesses, increased $2.6 million, or 36%.

Expenses

Electronic publishing expenses were down slightly, to $62.4 million. The decline in expenses reflected lower employee salary and benefits costs and other cost saving initiatives offset by an increase in facilities expense. The number of employees in the electronic publishing segment was down 8.1% from a year ago.

Operating income

Electronic publishing’s operating income of $16.8 million (21.3% of revenues) was $1.6 million, or 11%, better than first quarter 2002 operating income of $15.2 million (19.6% of revenues). The improvement in both margins and profitability were largely driven by increases in revenues at Consumer Electronic Publishing and Dow Jones Indexes/Ventures and cost containment efforts.

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Community Newspapers

Community newspapers includes the operations of Ottaway Newspapers, which publishes 15 daily newspapers and over 30 weekly newspaper and “shoppers” in 9 states in the U.S. Community newspapers comprised about 18% of first quarter 2003 revenues.