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0000029924-98-000002.txt : 19980318
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ACCESSION NUMBER: 0000029924-98-000002
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 5
CONFORMED PERIOD OF REPORT: 19971231
FILED AS OF DATE: 19980317
SROS: NYSE
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: DOW JONES & CO INC
CENTRAL INDEX KEY: 0000029924
STANDARD INDUSTRIAL CLASSIFICATION: NEWSPAPERS: PUBLISHING OR PUBLISHING & PRINTING [2711]
IRS NUMBER: 135034940
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K
SEC ACT:
SEC FILE NUMBER: 001-07564
FILM NUMBER: 98566760
BUSINESS ADDRESS:
STREET 1: 200 LIBERTY ST
CITY: NEW YORK
STATE: NY
ZIP: 10281
BUSINESS PHONE: 2124162000
10-K
1
FORM 10-K 1997
PAGE 1 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, 1997 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 30, 1998 was approximately $2,480,000,000. The number of shares outstanding of each of the registrant's classes of common stock on January 30, 1998: 75,203,827 shares of Common Stock and 21,550,889 shares of Class B Common Stock.
PAGE 2 PART I. ITEM 1. Business. Dow Jones & Company, Inc. (the company) is a global provider of business news and information. Its operations are divided into three industry segments: business publishing, financial information services and general-interest community newspapers. Financial information about industry segments and geographic areas is incorporated by reference to Note 16 to the Financial Statements on pages 45 and 46 of this report. The company currently has approximately 12,300 full-time employees. About one-quarter of these employees are based outside the United States. The company's principal executive offices are located at 200 Liberty Street, New York, New York, 10281. As discussed further in Management's Discussion and Analysis and shown in the financial statements and related footnotes, the company recorded a charge of $1.03 billion ($955.8 million after taxes) for the restructurings of Dow Jones Markets, IDD Enterprises, L.P. and television operations. The bulk of the charge represented a noncash write-down of goodwill and plant and property of Dow Jones Markets. During the fourth quarter of 1997, the company determined that the previously announced $650 million investment program of Dow Jones Markets would be substantially scaled back, while the company continued to review other alternatives for Dow Jones Markets. The company initiated a cost reduction program, which included the severance of 200-300 employees. Additionally, the company determined its carrying value of Dow Jones Markets was impaired and a write-down was necessary. At the time of this filing the company expects to sell its Dow Jones Markets subsidiary shortly. Separately in December 1997, the company and National Broadcasting Company (NBC) agreed to a worldwide business television alliance. As part of the agreement, the company's and CNBC's overseas operations merged, resulting in equally-owned ventures in Europe and Asia. In the U.S., Dow Jones entered into a multiyear license agreement to supply business news programming to CNBC. The company sold in 1997 its 35% interests in Bear Island Paper Company, L.P., a newsprint mill, and Bear Island Timberlands Company, L.P.; and the company's American Demographics subsidiary, a publisher of information products serving the marketing industry. In the latter half of 1997, the company and its partner in DJA Partners discontinued its commercial real estate online service. Also, in the first quarter of 1998, the company completed the sales of its half-owned New York City television station, WBIS+, and its minority interest in Mediatex Communications Corp., publisher of Texas Monthly magazine. In 1997, Dow Jones began licensing the Dow Jones Industrial Average as well as other indexes as the basis for the trading of options, futures, unit trusts, annuities, mutual funds and specialized structured products. In 1998, Dow Jones and the leading exchanges of France, Germany and Switzerland launched a series of indexes that will track the performance of certain European equities, including broad-based measures as well as gauging the market performance of countries that are expected to join the European Monetary Union.
PAGE 3 Business Publishing - ------------------- The business publishing segment contains the operations of the company's Print Publications, which include The Wall Street Journal as well as its international editions in Europe and Asia; Dow Jones Interactive Publishing and some of the company's television operations. Dow Jones' flagship publication, the domestic Wall Street Journal, is the country's largest daily newspaper with average circulation for 1997 of 1,802,000. 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 on readers served by 17 localized editions and the option of advertising in full color. Since 1993, the Journal has been expanding its business and economic trend regional coverage to select parts of the United States, including Texas, Florida, California and the Southeast. In 1997, the Journal launched specialized regional coverage for its readers in the New England market. These Journal editions appear as a four-page weekly section included in copies of The Wall Street Journal distributed in their respective markets each Wednesday. The Journal also provides weekend-oriented coverage every Friday, including Your Money Matters Weekend Report (an expanded personal- finance column), a sports page, a travel page and a residential real estate page. In 1998, this weekend-oriented coverage will be launched as a new fourth section of the Journal on Fridays. "Weekend Journal" will provide new editorial features and advertising. The Journal also publishes special reports coverage of specific business and consumer topics such as executive compensation, technology and personal finance. 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. The Wall Street Journal is delivered principally in two ways: by second-class postal service and through the company's National Delivery Service, Inc. subsidiary. In 1997 National Delivery Service on average delivered over one million of the Journal's subscription copies each publishing day. This system provides delivery earlier and more reliably than the Postal Service. Approximately 224,000 copies of the Journal are sold each business day at newsstands. The Wall Street Journal Europe is headquartered in Brussels and printed in Belgium, Switzerland, England and Germany. It is available on the day of publication in continental Europe, the United Kingdom, the Middle East and North Africa. The newspaper had average circulation in 1997 of 65,000. In February 1998, the Journal Europe introduced an edition tailored especially for the United Kingdom market.
PAGE 4 The Central European Economic Review is distributed as an insert in The Wall Street Journal Europe and also sold separately by subscription. This magazine, which covers political and business developments in the former Soviet bloc, is published monthly. Convergence, which is a quarterly magazine that reports on multimedia industries in Europe, also is delivered as an insert in The Wall Street Journal Europe. 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 and beginning in 1997 to printing sites in Korea and Taiwan. The Asian Wall Street Journal had average circulation of 56,000 in 1997. All three print editions of the Journal draw on the resources of The Wall Street Journal's worldwide news staff. 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 its readership of 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 Wall Street Journal news content to other parts of the world. These Special Editions are part of 34 newspapers in 29 countries. They are published in 11 different languages and serve a combined circulation in excess of seven million. Barron's, the Dow Jones Business and Financial Weekly, is a magazine that specializes in reporting and commentary on financial markets. The magazine, which had average circulation of 296,000 in 1997, uses some of the facilities 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. About 130,000 copies are sold at newsstands weekly. Other business publications include the Far Eastern Economic Review, Asia's leading English-language newsweekly; the National Business Employment Weekly (NBEW), which contains career-related news features, job-related ads from the Journal's regional editions and NBEW-specific advertising; and The Wall Street Journal Classroom Edition, which is published nine times during the school year and is used in more than 3,600 schools nationwide. In early 1995 the company purchased Charter Financial Publishing Corp. of Shrewsbury, New Jersey. Renamed Dow Jones Financial Publishing, the unit is publisher of Dow Jones Investment Advisor and Dow Jones Asset Management magazines and the Realty Stock Review. SmartMoney, The Wall Street Journal Magazine of Personal Business, is published jointly with Hearst Corp. SmartMoney increased its advertising rate base to 700,000 copies effective with its January 1998 issue.
PAGE 5 Dow Jones Interactive Publishing is recognized as one of the nation's leading publishers of electronic business and financial news and information to financial professionals, private investors, corporate executives and managers, as well as to information specialists in corporate libraries. This business unit serves its customers' needs by delivering its information products and services in a wide range of electronic media, including personal computers, facsimile machines and radio. This group's products include Dow Jones Interactive (the successor to Dow Jones News/Retrieval and DowVision), The Wall Street Journal Interactive Edition and two radio services. Also included in this unit are the operations of IDD Enterprises, L.P. (IDD). Dow Jones Interactive is available over the World Wide Web or through Windows or Macintosh software interfaces. Dow Jones Interactive provides its subscribers with a vast news library of over 5,000 publications, including the full-text archive of The Wall Street Journal and Dow Jones Newswires and roughly 1,200 non-U.S. sources. Additionally, Dow Jones Interactive provides access to all of the 50 largest U.S. newspapers, as well as the leading business magazines. World Reporter, a new online news database launched in 1997 in conjunction with the Financial Times and Dialog Corp., is available through Dow Jones Interactive and provides local and regional coverage from multiple sources around the world. Dow Jones Interactive Publishing has an alliance with Thomson Corp., in which Thomson's WESTLAW is the exclusive computer-assisted legal research service to offer integrated access to Dow Jones Interactive. The Wall Street Journal Interactive Edition was introduced in April 1996 on the Internet's World Wide Web. The Interactive Journal offers continuously updated news and market information from The Wall Street Journal's global editions and Dow Jones Newswires, supplemental information and access to Dow Jones Interactive's Publications Library. In 1997, the Interactive Journal also added the contents of Barron's Online and SmartMoney Interactive. The Interactive Journal began charging subscribers in the latter part of 1996. At the end of 1997, this edition had over 150,000 subscribers, compared with roughly 50,000 at the end of 1996. Dow Jones' radio products include two radio programs -- "The Wall Street Journal Report" on AM stations and "The Dow Jones Report" on FM stations. Together these programs are carried on about 145 stations and reach roughly 80% of the United States. At the end of 1997, IDD Enterprises' principal product was Tradeline, a historical equity database. As part of the company's restructuring of operations in 1997, IDD's print publishing business was sold and the company initiated a plan to dispose of other nonstrategic assets of IDD.
PAGE 6 Also included in this business 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 will supply 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, will be included as part of Equity in Associated Companies. In early 1998, NBC and Dow Jones launched their business information channels in Europe and Asia as CNBC, a service of NBC and Dow Jones. The new overseas services are expected to reach in total nearly 25 million households on a full-time basis and over 80 million households on a part-time basis. Additionally as part of the television alliance with NBC, Dow Jones will join Microsoft Corp. and NBC in certain interactive initiatives, including supplying highlights of The Wall Street Journal Interactive Edition 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 Internet's World Wide Web. In January 1997, the company discontinued its business video service, the Dow Jones Investor Network. Financial Information Services - ------------------------------ The financial information services segment of Dow Jones comprises the operations of Dow Jones Markets, Dow Jones Newswires and the Dow Jones Indexes group. This segment primarily serves the global financial services industry. In 1997, Dow Jones Markets revenue fell 8.7%, after a 1% percent rise in 1996 and a 10% gain in 1995. This business has lost market share over recent years largely due to strong competitive pressures. A review of strategic alternatives for Dow Jones Markets has been under consideration. Dow Jones expects to sell its Dow Jones Markets subsidiary shortly. In 1997, as part of the investment program in Dow Jones Markets, the company acquired Indepth Data, Inc., a provider of comprehensive historical and real-time information on fixed-income instruments; entered into an exclusive license of "The Beast" analytics software from CastleNet LLC; and developed in cooperation with Microsoft Corp. the Active1 Workstation, which provides traders with a more flexible workstation environment, allowing customers to integrate their own programs and run multiple applications simultaneously. Also, Dow Jones Markets significantly enhanced its digital feed, delivering more individual data items. In the second quarter of 1997, the company forged an alliance with Nihon Keizai Shimbun, Inc. and Quick Corp. to develop Japan's largest and most comprehensive equities service. This joint venture expands on Dow Jones' global equities strategy, which includes a similar alliance with Primark Corp. in Europe in 1996.
PAGE 7 Dow Jones Markets is one of the largest suppliers of real-time market information and related services to financial professionals in over 90 countries around the world. Over two-thirds of Dow Jones Markets' revenues are generated by its foreign operations. The current foundation of the service rests on providing prices of U.S. Treasury securities as well as information on foreign exchange, international government bonds, global equities, energy, mortgage-backed securities and a variety of money market instruments. In addition, Dow Jones Markets provides global news coverage of the world's financial markets and an array of services from outside information providers, ranging from informed commentary on U.S. Federal Reserve actions to analysis of the commodities markets. Dow Jones Markets offers the widest coverage available of U.S. Treasury securities and provides value-added analytics in addition to the price information distributed through its long-standing, exclusive agreement with Cantor Fitzgerald Securities Corp. Dow Jones Markets is also the exclusive distributor of real-time foreign exchange and money market prices from M. W. Marshall & Company and Exco International, two of the world's foremost foreign exchange brokers. Dow Jones Markets provides products and software to help users analyze its live-market data. The Dow Jones Platform, formerly Trading Room Systems, provides advanced decision-support tools. Designed to serve the needs of large trading rooms, the Dow Jones Platform has networking capabilities which enable customers to link trading rooms worldwide. Running on powerful desktop workstations using software compatible with Microsoft Windows, the Dow Jones Platform consolidates several information, transaction and analytic services into a single platform at a trader's desk. The Dow Jones Workstation, introduced in early 1995, provides the entire breadth of Dow Jones Markets' real-time market data and decision- support products on a single, Windows-based platform. The Dow Jones Workstation can be delivered as a stand-alone product or incorporated into a customized trading room system. The Dow Jones Tradestation, which is technical analysis software designed to run on the Workstation, was introduced in January 1996. It offers advanced charting and analytical power combined with access to all Dow Jones Markets news, commentary and price information. The Dow Jones Digital Page Feed fills the needs of customers who prefer to receive any or all of Dow Jones Markets' data in the form of an electronic feed that can be incorporated into their own information systems. The digital feed offers these customers a highly reliable, timely and selective information feed which can be integrated with their internal distribution systems. Matrix is a DOS-based product which helps customers to build customized, full-color, market-specific pages using Dow Jones Markets data. Matrix has modules to analyze the fixed income and foreign exchange markets. This product is largely being phased out in favor of the Dow Jones Workstation or a direct digital feed.
PAGE 8 The Dow Jones Indexes group develops, maintains and markets Dow Jones' various index products. In 1997, the company began licensing the Dow Jones Industrial Average as well as other indexes as the basis for the trading of options, futures, unit trusts, annuities, mutual funds and specialized structured products. In 1998, Dow Jones and the leading exchanges of France, Germany and Switzerland launched a series of indexes that will track the performance of certain European equities, including broad-based measures as well as gauging the market performance of countries that are expected to join the European Monetary Union. In late 1996, the company and Primark Corp. formed a joint venture to establish a comprehensive equity service. The Primark/Dow Jones Equities service, which will be marketed to traders and investors in the United Kingdom and Ireland, will combine Primark's equities information on British companies with Dow Jones' global news and data. Dow Jones News Service, which was expanded to a 24-hour service in January 1997, 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, which is incorporated into Dow Jones Markets' basic information package, is the company's newswire that covers fixed income and financial futures markets around the world. The Dow Jones Newswires, produced outside the United States in partnership with the Associated Press (AP), provide international economic, business and financial news to subscribers in 65 countries. In addition to two broad international newswires, the company and AP offer specialized wires dedicated to the coverage of European equities, banking and the markets in foreign exchange. Also other newswires provided in partnership with the AP include the World Equities Report newswire, which serves domestic institutions investing in international markets and State/Local Alert, which provides exclusive news about municipal bond markets. Dow Jones Markets' Emerging Markets Report provides information on the emerging capital markets of developing countries, with particular emphasis on Latin America, by combining Dow Jones Markets' live market prices with news from Dow Jones and the Associated Press, plus market commentary from Thomson Financial Services. The Dow Jones Asian Equities Report, launched in 1994, covers 15 Asian- Pacific stock markets and news of the companies traded on them. Headquartered in Singapore, the service draws on the staffs of the Dow Jones Newswires, The Asian Wall Street Journal and Far Eastern Economic Review, as well as its own editors and reporters. 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 SEC filings; Daily Bankruptcy Review, a compendium of large bankruptcy filings throughout the U.S.; and 13F Advance, which analyzes the equity portfolio changes of prominent money managers. Federal Filings also offers Edgar Direct, which provides real-time access to the full text of SEC filings.
PAGE 9 Community Newspapers - -------------------- Community newspapers published at year-end 1997 by Ottaway Newspapers, Inc., a wholly-owned subsidiary, include 19 general-interest dailies in California, Connecticut, Kentucky, Massachusetts, Michigan, Minnesota, Missouri, New Hampshire, New York, Oregon and Pennsylvania. Average circulation of the dailies during 1997 was approximately 572,000; Sunday circulation for 13 newspapers was approximately 524,000. 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 United States Satellite Broadcasting Company, Inc., a provider of direct satellite programming; Nation Multimedia Group Public Co., Ltd., a Bangkok, Thailand, publisher of English and Thai-language magazines and newspapers; AmericaEconomia, a Spanish-language business magazine in South America; VWD- Vereinigte Wirtschaftsdienste GmbH, a German news agency specializing in business and economic news and information; Minex Corporation, a minority- owner of Electronic Broking Service, a provider of a foreign exchange trading service; HB-Dow Jones S.A., a part-owner of a publishing company in the Czech Republic; Optimark Technologies, Inc, a developer of trading systems for equities; Delta Clearing Corp., an option clearing service; and a newsprint mill in Canada. Raw Materials - ------------- The primary raw material used by the company is newsprint. In 1997 approximately 270,000 metric tons were consumed. Newsprint was purchased principally from 14 suppliers. F.F. Soucy, Inc. & Partners, L.P., Riviere du Loup, Quebec, Canada, and Bear Island Paper Company, Richmond, Virginia, furnished 14.5% and 17.1%, respectively, of total newsprint requirements. The company has signed long-term contracts with certain newsprint suppliers, including F.F. Soucy and Bear Island Paper Company, for a substantial portion of its annual newsprint requirements. The company is a limited partner in F.F. Soucy and was formerly a limited partner in Bear Island Paper Company. In December 1997, the company sold its 35% interest in Bear Island Paper Company. 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 $116,420,000 in 1997, $73,974,000 in 1996 and $66,710,000 in 1995.
PAGE 10 Year 2000 - --------- The "Year 2000" presents significant issues for Dow Jones, because of the technology-intensive nature of its operations. In 1996, the company established a project team responsible for identifying and resolving Year 2000 issues. These efforts include, but are not limited to, identification and review of internal operating systems and applications, and customer products and services, as well as discussions with information providers and other key suppliers to the business. Remediation costs for problems identified thus far are not material to the financial statements taken as a whole. In some cases, modifying existing computer software is not cost beneficial, and the systems themselves are being replaced. The company has established a timetable for resolving Year 2000 issues so as not to interrupt ongoing operations. Competition - ----------- The business publications of the company remain 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. In addition, specialized magazines in the economics field, as well as general news magazines, publish substantial amounts of business 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 company's business publications also compete with television and radio for advertisers. The Dow Jones Interactive Publishing group competes with various business information services, including Dialog Corp. and divisions of Reed Elsevier PLC which have greater market share. The Interactive Publishing group 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. The company believes that Reuters Holdings PLC ("Reuters"), a company headquartered in London, whose shares are publicly traded in the United States and the UK, is its most significant competitor currently providing, on a worldwide basis, financial information display services closely comparable to those furnished by Dow Jones Markets although other companies, primarily Bloomberg L.P., Bridge Information Systems, Inc., Automated Data Processing Corporation, ILX Systems, Inc., McGraw-Hill, Inc. and Quick Corporation of Japan are also in the business of providing financial information displayed on video screens to customers. The company believes that Reuters has more subscribers and video screens displaying its information than the company on a worldwide basis. The company believes that Bloomberg L.P. is its primary competitor in the fixed income segment of the financial services market, particularly in the United States.
PAGE 11 Dow Jones' nascent index-licensing business competes with various organizations that develop and license indexes, including McGraw-Hill, Inc., Financial Times, Morgan Stanley and Capital International. Dow Jones competes with these organizations in developing benchmarks of equity market performance to which investable products may be linked. 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. All of the community newspapers operating under Ottaway Newspapers, Inc. compete with metropolitan general interest newspapers, and most compete with other newspapers available in their respective sales areas. 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. Other facilities owned in fee with a total of approximately 870,000 square feet house news, sales, administrative, research, computer and operations staff. These facilities are located in South Brunswick, New Jersey, and Chicopee Falls, Massachusetts. Dow Jones occupies two major leased facilities in New York City, including 400,000 square feet at the World Financial Center, which primarily houses editorial and executive staff, and 89,000 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 50,000 square feet in two locations in Hong Kong. Dow Jones Markets leases approximately 160,000 square feet at five locations in New York City, 375,000 in Jersey City, New Jersey, 140,000 at five locations in London, England, 94,000 at three locations in Toronto, Ontario, 53,000 at three locations in Singapore and 40,000 at five locations in Hong Kong. In addition, Dow Jones Markets leases space around the world for its operations.
PAGE 12 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. It is estimated that between 74% and 87% of the capacity of the company's existing production facilities is being utilized. Item 3. Legal Proceedings Not applicable. ITEM 4. Submission of Matters to a Vote of Security Holders. Not applicable. 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 30, 1998, was 12,100 for common stock and 4,600 for class B common stock. The company paid $.96 per share in dividends in 1997 and in 1996.
============================================================================ Market Price 1997 Market Price 1996 ----------------- ----------------- Quarters Dividends Dividends Ended High Low Paid 1997 High Low Paid 1996 - ----------------------------------------------------------------------------
March 31 $46 1/8 $33 3/8 $.24 $41 $38 $.24 June 30 42 1/4 37 5/8 .24 41 7/8 34 3/4 .24 September 30 50 3/8 40 1/16 .24 41 7/8 37 .24 December 31 55 7/8 42 13/16 .24 37 3/4 31 7/8 .24 ============================================================================
PAGE 13 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) 1997 1996 1995 1994 1993 - ----------------------------------------------------------------------------
Revenues $2,572,518 $2,481,592 $2,283,761 $2,090,977 $1,931,816 (Loss) income before cumulative effect of accounting changes $(802,132) $189,969 $189,572 $181,180 $147,547 Net (loss) income $(802,132) $189,969 $189,572 $178,173 $147,547 - ---------------------------------------------------------------------------- Per Share Amounts: Basic: (Loss) income before cumulative effect of accounting changes $(8.36) $1.96 $1.96 $1.83 $1.48 Net (loss) income $(8.36) $1.96 $1.96 $1.80 $1.48 Diluted: (Loss) income before cumulative effect of accounting changes $(8.36) $1.95 $1.94 $1.82 $1.47 Net (loss) income $(8.36) $1.95 $1.94 $1.79 $1.47 Dividends $ .96 $ .96 $ .92 $ .84 $ .80 - ---------------------------------------------------------------------------- Total assets $1,919,734 $2,759,631 $2,598,700 $2,445,766 $2,349,539 Long-term debt, including current portion $234,124 $337,618 $259,253 $300,870 $266,391 ============================================================================
PAGE 14 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations In 1997, the company incurred a net loss of $802.1 million, or $8.36 per common share, compared with earnings in 1996 of $190 million, or $1.96 per common share. The loss in 1997 included charges totaling $1.03 billion ($955.8 million after taxes) for the impairment of value of Dow Jones Markets and other ("restructuring") charges. Gains of $52.6 million ($31.3 million after taxes) from the disposal of certain businesses and investments were also recorded in 1997. Net income in 1996 included a gain of nine cents per share from the sale of the company's interest in Press-Enterprise Company. Excluding the above nonrecurring items, earnings in 1997 fell 32%, to $122.4 million, or $1.27 per common share. A sharp decline in Dow Jones Markets operating results outweighed strong operating gains by the business publishing and community newspaper segments and initial licensing fees for the Dow Jones Averages. The restructuring charges of $1.03 billion included a $1 billion charge to operating expenses to reflect the impairment of value and restructuring at Dow Jones Markets and for the restructurings of IDD Enterprises, L.P. and domestic television operations. Additionally, the company recorded a $29.7 million charge to Equity in Losses of Associated Companies for the company's share of restructuring costs of its overseas television ventures. The charge to operating expenses, of which roughly 98% related to Dow Jones Markets, was composed of noncash write-downs of goodwill of $868.3 million and plant and property of $104 million, severance costs of $22.2 million and other costs totaling $6.7 million. In the first quarter of 1997, the company began a $650 million multiyear investment program to revitalize and expand its Dow Jones Markets business unit. The intent was to build a more flexible distribution infrastructure and add historical databases as well as broaden the number of products and services. In January 1997, the company's Board of Directors approved spending for 1997. As the project progressed, spending for subsequent years would be reviewed on an ongoing basis. During the year, management provided the Board of Directors with progress reports for its review. Spending on the investment program in 1997 totaled roughly $170 million, which included the acquisition of Indepth Data, Inc. and the licensing of "The Beast" analytics software from CastleNet LLC as well as the development of the Active1 Workstation and other non-product initiatives. During the fourth quarter of 1997, the company determined that while it had made progress in areas of product development, content enhancement and customer service, Dow Jones Markets' existing product revenues were declining at a faster pace than had been anticipated. Additionally, expected revenues in 1998 from Dow Jones Markets' new and emerging products were more modest than had been expected at the outset of the revitalization plan. Based on revised estimates, the long-term return on the revitalization plan was less compelling than at its outset, and the company decided to substantially scale back the plan, while continuing to review other alternatives for Dow Jones Markets. In the fourth quarter, the company initiated a cost reduction program, which included the reduction of 200-300 employees by early 1998.
PAGE 15 Additionally, in accordance with the company's accounting policies and practices, the company determined its carrying value in Dow Jones Markets was impaired and a write-down was necessary. The write-down, which reduced Dow Jones Markets carrying value to approximately $550 million, reflected the company's estimate of Dow Jones Markets' fair market value as of the date of the determination. Whether or not any additional write-down will be taken with respect to Dow Jones Markets will depend largely on the price and terms obtained in any sale of Dow Jones Markets. At the time of this filing, Dow Jones expects to sell its Dow Jones Markets subsidiary shortly. Separately in December 1997, the company and National Broadcasting Company (NBC) agreed to a worldwide business television alliance. As part of the agreement, the company's and CNBC's overseas television operations merged, resulting in equally-owned ventures in Europe and Asia. In the U.S., Dow Jones entered into a multiyear license agreement to supply business news programming to CNBC. The company's share of overseas television restructuring charges of $29.7 million comprised the bulk of its total television restructuring cost. This charge primarily related to certain operating lease redundancies. At the end of 1997, IDD Enterprises' principal product was Tradeline, a historical equity database. As part of the company's restructuring of operations in 1997, IDD's print publishing business was sold and the company initiated a plan to dispose of other nonstrategic assets of IDD. The restructuring charge for IDD principally reflected the write-down of goodwill. The consolidated operating loss in 1997 was $742 million, compared with operating income of $337 million a year ago. Excluding restructuring charges, operating income fell 23.1% from 1996. Revenues in 1997 grew $90.9 million, or 3.7%, to $2.57 billion, as higher advertising revenue from The Wall Street Journal and upfront licensing revenue from the Dow Jones Averages were tempered by an 8.7% decline in Dow Jones Markets revenue. Wall Street Journal advertising linage was up 13.4% in 1997, which followed a 13.9% increase a year earlier. On a consolidated basis, domestic revenues, which composed 73% of total revenues, climbed 8.1%, while revenues from foreign operations fell 6.9%. Expenses, excluding restructuring costs, increased $168.6 million, or 7.9%, largely as a result of spending on the revitalization plan at Dow Jones Markets, and increased content acquisition and advertising-volume related costs. Net income in 1996 of $190 million was flat compared with 1995 earnings. In 1995, net income included a net enhancement of one cent per share consisting of a six-cents-per-share gain on the sale of 80% of SportsTicker and a five-cents-per-share loss on an operating lease. Excluding nonrecurring items, net income in 1996 dropped 4% from 1995 as a downturn at Dow Jones Markets, continued investments in television, and a fall-off in equity results from newsprint mill partnerships more than offset earnings gains from Print Publications. Operating income of $337 million in 1996 advanced $32.9 million, or 10.8%. Revenues in 1996 of $2.48 billion rose $197.8 million, or 8.7%, with roughly two-thirds of the increase attributable to higher advertising revenue. Expenses of $2.14 billion increased $164.9 million, or 8.3%, in part due to enhanced news content, additional selling efforts and continued investment in product initiatives at the company's Dow Jones Markets, Dow Jones Interactive Publishing and Television units.
PAGE 16 In 1995, net income of $189.6 million increased $11.4 million, or 6.4%, from 1994. Operating income in 1995 declined $54.3 million, or 15.1%, reflecting a drop-off in business publishing segment profits, which were negatively affected by a sharp rise in newsprint prices and the start-up of the company's television operation in Europe. SEGMENT DATA A summary of the results of operations for each of the company's principal business segments as well as financial data by geographic area is displayed in Note 16 to the financial statements. Dow Jones' business operations are aligned into the following three segments: business publishing, financial information services and community newspapers. Business publishing contains the company's Print Publications, Dow Jones Interactive Publishing and some television operations. Business publishing, which serves the business consumer marketplace, accounted for over half of the company's revenue in 1997. Financial information services includes Dow Jones Markets, Dow Jones Newswires and the Dow Jones Indexes group. This segment primarily serves the worldwide financial services industry -- including traders and brokers - -- with real-time business and financial news, quotes, trading systems and analytical tools. Financial information services comprised about 37% of the company's revenue in 1997. The community newspapers segment consists of the company's Ottaway Newspapers, Inc. subsidiary, which publishes 19 daily newspapers as well as various weekly publications in communities throughout the United States. The community newspapers segment contributed about 12% of companywide revenues. BUSINESS PUBLISHING Operating income of $218.6 million in 1997 increased $59.2 million, or 37.1%. This segment's operating margin increased to 16.6% in 1997, from 13.1% in 1996 and 9.1% in 1995. Excluding restructuring charges of $21.8 million for IDD Enterprises, L.P. and domestic television operations, 1997 operating income advanced $81 million, or 51%. The strong rise in operating profits followed a $63.9 million, or 67%, gain in 1996 and a $61.9 million, or 39%, decline in 1995. This segment's growth in 1997 and 1996 was largely driven by double-digit advertising volume gains at The Wall Street Journal coupled with lower newsprint prices. In 1995, the segment was negatively affected by a substantial rise in the price of newsprint, the start-up of the company's television operation in Europe and an $8.4 million loss on an operating lease. In 1997, business publishing segment revenues grew $105.9 million, or 8.7%, to $1.32 billion, while expenses increased $46.7 million, or 4.4%, to $1.1 billion.
PAGE 17 Print Publications, which is the largest component of this segment and includes the results of The Wall Street Journal and its international editions in Europe and Asia, Barron's and other periodicals, had a revenue increase of 9.4% in 1997. The revenue increase was principally from increased advertising volume. Wall Street Journal advertising linage increased 13.4% in 1997, which followed gains of 13.9% in 1996 and 2.2% in 1995. All three principal Journal advertising categories achieved linage gains in 1997. General advertising, which composed 57% of total Journal linage, grew 17%, benefitting from increased advertising from technology companies and the automotive industry. General linage advanced 6.1% in 1996 and 5.1% in 1995. Financial advertising, which represented 30% of Journal linage and includes advertising from investment and trading firms and security offerings, grew 6.4% in 1997, after a 34% increase in 1996 and a decline of 3.1% in 1995. Classified and other linage rose 13% in 1997, after gains of 2.2% in 1996 and 2.7% in 1995. Advertising linage for the European and Asian Wall Street Journals grew 10.7% and 5.6% in 1997, respectively. Barron's national advertising pages, which are largely dependent on financial advertising, rose 6.8% in 1997, after a sharp rise of 31.6% in 1996 and a drop-off of 17.5% in 1995. The Far Eastern Economic Review's advertising volume fell 7.8% in 1997, following a decrease of 4.7% in 1996 and an increase of 15.3% in 1995. Average circulation for the domestic Wall Street Journal declined slightly to 1,802,000 in 1997 from 1,807,000 in 1996, but was up from circulation of 1,796,000 in 1995. Circulation for the international editions of The Wall Street Journal continued to grow with Europe and Asia, combined, posting average 1997 circulation of 121,000, up about 4% from a year earlier and up roughly 8% from 1995. Barron's average circulation in 1997 was 296,000, up from 294,000 in 1996 and 281,000 in 1995. Expenses for the Print Publications group rose just 2.5% in 1997, as higher costs related to advertising volume and increased selling efforts were somewhat mitigated by lower newsprint prices. Newsprint expense was down about 6.5% in 1997, reflecting a 13% decrease, on average, in prices and a 7% rise in tons consumed. In 1996, Print Publications expenses climbed 8%, in part the result of higher advertising-volume related expenses. Newsprint expense in 1996 was up 7%, due to a 10% increase in tons consumed with a 3% dip in prices. Dow Jones Interactive Publishing, which includes the results of Dow Jones Interactive (formerly, Dow Jones News/Retrieval), The Wall Street Journal Interactive Edition and IDD Enterprises, L.P. (IDD), had a revenue increase of 3.9% in 1997, largely due to increased advertising and subscription revenue from the Interactive Journal. At December 31, 1997, subscribers to the Interactive Journal totaled over 150,000, compared with roughly 50,000 a year earlier. Dow Jones Interactive Publishing operating expenses climbed 22%, largely reflecting the write-down of IDD's assets, principally goodwill, higher content acquisition costs and increased expenses from Interactive Journal operations. Excluding the IDD restructuring charge, expenses for Dow Jones Interactive Publishing rose 10.9%.
PAGE 18 Operating losses of the Television group contained within the business publishing segment were roughly 25% lower in 1997 compared with 1996. Excluding restructuring costs, the operating loss was 36% better than a year before. The improvement was largely the result of the discontinuation in January 1997 of the Dow Jones Investor Network and improved operating results of European Business News. Pretax losses from the company's worldwide television ventures, excluding restructuring costs, totaled $48 million in 1997, which approximated the loss incurred in 1996, but exceeded the $38 million loss in 1995. The number of full-time employees for the business publishing segment at the end of 1997 was down 2% from a year earlier, as expansion in Wall Street Journal staff was more than offset by reductions in television operations. FINANCIAL INFORMATION SERVICES The restructuring charge for Dow Jones Markets was $979.5 million, of which 97% constituted a noncash write-down of goodwill and plant and property. After comparing the expected cash inflows attributable to Dow Jones Markets in relation to its carrying value, the company determined its carrying value in Dow Jones Markets was impaired and a write-down was necessary. The write-down reduced Dow Jones Markets carrying value to approximately $550 million. The remaining portion of the charge was principally composed of accrued severance costs. Including the restructuring charge, the financial information services segment recorded an operating loss of $993 million in 1997, compared with operating profits of $155.8 million in 1996. Excluding the restructuring charge, the segment posted a $13.5 million loss in 1997, largely resulting from an 8.7% decline in Dow Jones Markets revenue and increased costs from the revitalization program. Segment revenues in 1997 fell $28 million, or 2.9%, to $951.7 million. Dow Jones Markets revenue declined 8.7%, or 4.4% excluding foreign exchange, in part the result of price reductions of its products due to intensifying competitive pressures over recent years. The number of Dow Jones Markets terminals in the marketplace remained relatively unchanged from recent years, at about 94,000 terminals. Somewhat offsetting the Dow Jones Markets revenue decline in 1997 was a revenue increase of 7.6% for the company's newswires and $31 million in upfront one-time fees for licensing the Dow Jones Averages. Segment revenues from foreign operations were down 9.8%, or 3.8% excluding foreign exchange, with revenue declines in both Europe and Asia. Domestic revenues, including the upfront licensing revenue, were up 8.4%. Excluding the restructuring charge, financial information services expenses increased $141.3 million, or 17.1% with roughly half of the increase attributable to expenses for the Dow Jones Markets revitalization program. In 1996, operating income for the financial information services segment fell $41.2 million, or 20.9%, to $155.8 million. Revenues of $979.7 million increased $18.3 million, or 1.9%, while expenses of $823.9 million climbed $59.5 million, or 7.8%. Excluding the effect of foreign exchange rate fluctuations, revenues and expenses were up 1.4% and 8.2%, respectively; and operating income declined $48.8 million, or 24.8%.
PAGE 19 Dow Jones Markets posted a 1% revenue increase in 1996, while Dow Jones Newswires generated 7% revenue growth. Segment revenues from foreign operations rose 2.6%, while domestic revenues were up just 0.8%. Modest revenue gains for European operations, achieved from sales of trading room systems, were partially offset by a slight revenue decline in the Asia/ Pacific region. Financial information services expenses increased as a result of additional spending on acquiring third-party content, heightened sales efforts and higher costs for trading room systems. The number of full-time employees in the financial information services segment at December 31, 1997 was up 13.6% from a year earlier, largely due to expanded staffs for the company's newswires, staffing for the Dow Jones Markets revitalization program and the acquisition of Indepth Data Inc., a provider of comprehensive historical and real-time information on fixed- income instruments. COMMUNITY NEWSPAPERS In 1997, community newspapers operating income of $50.6 million rose $6.8 million, or 15.6%, from $43.8 million earned a year earlier. Revenues of $300.6 million advanced $13.1 million, or 4.6%, largely as a result of rate increases. Advertising revenue grew 5%, with an advertising linage increase of 0.7%. Circulation revenue advanced 2.6%. Average daily circulation declined to 572,000, from 574,000 in 1996 and 576,000 in 1995. Segment expenses rose $6.3 million, or 2.6%, as increased employee compensation was softened by a 10.5% decline in newsprint expense. Community newspapers 1996 operating income increased $10.8 million, or 32.7%, to $43.8 million. Revenues of $287.5 million advanced $14.6 million, or 5.4%. Advertising revenue grew 5%, despite a 1.2% drop in advertising linage, and circulation revenue climbed 6.4%. Expenses increased just $3.8 million, or 1.6%, as the segment benefitted from a decline in newsprint prices, strict cost controls and efficiencies achieved from consolidating three operations in Essex County, Massachusetts in the second half of 1995. Newsprint expense for this segment was down roughly 2% in 1996. STAFFING COSTS At December 31, 1997, the company employed 12,309 full-time employees, up 3.9% from 11,844 at year-end 1996 and up 9.6% from the 11,232 employees at year-end 1995. As previously stated, as part of the restructuring of operations in 1997, the company incurred severance costs of $22.2 million, principally associated with the work force reduction at Dow Jones Markets. Salaries and wages, including severance costs, increased 12.9% in 1997 (9.7% without severance), following increases of 9.5% and 12.3% in 1996 and 1995, respectively.
PAGE 20 OTHER INCOME/DEDUCTIONS Equity in Losses of Associated Companies was $49.3 million in 1997, compared with a loss of $5.4 million in 1996 and earnings of $14.2 million in 1995. The loss in 1997 included a $29.7 million charge from restructuring overseas television ventures as a result of the global television alliance with NBC. Additionally, equity results since the end of 1995 have been adversely affected by an annual decline in earnings at the company's newsprint mill affiliates as well as incremental losses from television partnerships, including ITT-Dow Jones Television and Asia Business News; and from DJA Partners, a commercial online real estate service venture. On May 12, 1997, Dow Jones and ITT Corp. entered into an agreement to sell their television station, WBIS+, to Paxson Communications Corp. The sale of the station was completed on March 6, 1998. The company recorded a modest gain upon the sale. Additionally in the latter half of 1997, the company and its partner in DJA Partners discontinued the commercial real estate online service. Gains on the disposition of businesses and investments were $52.6 million in 1997, $14.3 million in 1996 and $13.6 million in 1995. Results in 1997 included a $6.2 million gain in the first quarter on the sale of the company's American Demographics subsidiary, a publisher of information products serving the marketing industry; and a $46.4 million gain in the fourth quarter from the sale of its interest in Bear Island Paper Company, L.P., a newsprint mill, and Bear Island Timberlands Company, L.P. In 1996, the $14.3 million gain resulted from the sale of the company's minority interest in Press-Enterprise Company, a general-interest newspaper in Riverside, California; while in 1995 the $13.6 million gain was largely the result of the sale of 80% of the company's interest in SportsTicker, a real- time sports news and information company. Included in Other, net in 1997 was a $6.4 million loss on foreign exchange, compared with foreign exchange losses of $78,000 in 1996 and $358,000 in 1995. INCOME TAXES In 1997, the company recorded tax expense of $37.8 million on pretax losses of $763.9 million. The bulk of the restructuring charge in 1997 comprised a write-down of goodwill, which was largely nondeductible for tax purposes. In 1996, the effective income tax rate edged up to 44.6% from 43.3% in 1995. Excluding the effect of nondeductible goodwill in each year, the effective tax rate was 37.6% in 1997, 39.7% in 1996 and 38.4% in 1995. The lower 37.6% effective rate was in part due to the favorable settlement of certain tax issues.
PAGE 21 INVESTMENTS The company invested a total of $79.6 million in businesses and investments in 1997, which included the purchase of Indepth Data, Inc., additional investments in television ventures in the U.S. and Asia, as well as investments in OptiMark Technologies, Inc., a developer of trading systems for equities. During 1996, businesses and investments acquired totaled $145.1 million. Investments mainly consisted of the acquisition with partner ITT Corp. of WNYC-TV, renamed WBIS+, from the city of New York. Also, the company made additional investments in Asia Business News, DJA Partners and Minex, a minority-partner in Electronic Broking Service, a provider of a foreign exchange trading service. FINANCIAL POSITION Cash provided by operations was $459.8 million in 1997, up $54.6 million from 1996's $405.2 million, and $87.9 million more than the $371.9 million generated in 1995. The increase in cash from operations in 1997 versus 1996 was in part due to improved collections of accounts receivable. During 1997, principally using cash provided by operations, the company paid dividends of $92 million and funded capital expenditures of $348 million. Also in 1997, the company received $128.6 million from the disposal of certain investments and paid down debt by $103.5 million. At December 31, 1997 debt outstanding, including the current portion, was $234.1 million. At the end of 1997, the debt-to-equity ratio was 30%, versus 20.5% at the end of 1996. Stockholders' equity dropped to $781 million at December 31, 1997 from $1.64 billion at the end of 1996. In 1998, the company expects cash provided by operations to be sufficient to meet its normal recurring operating commitments, fund capital expenditures of approximately $175 million and pay dividends of roughly $92 million. Capital spending in 1998 will include upgrading printing facilities and electronic publishing infrastructure and continued construction of office space. Additionally in the first quarter of 1998, the company received about $127 million from investment sales, namely WBIS+ and Mediatex Communications Corp., publisher of Texas Monthly magazine. The company can repurchase 2.1 million shares under the current authorization from the company's Board of Directors. These additional shares may be acquired as market and other conditions warrant. The company's liquidity requirements that exceed cash provided by operations are regularly funded through the issuance of commercial paper, which is supported by a $400 million revolving credit agreement with several banks through November 1999. Currently, the company has authorization from its Board of Directors to borrow up to $700 million. Borrowings may be in the form of commercial paper, bank borrowings, or notes under a $300 million shelf registration statement filed with the Securities and Exchange Commission. At December 31, 1997, commercial paper of $63 million and long- term notes of $150 million due December 1, 2000 were outstanding.
PAGE 22 OUTLOOK The company has been exploring strategic alternatives for its Dow Jones Markets business unit and expects to sell that unit shortly. At this time, the company cannot determine with any certainty the effect of such a sale on consolidated results. Any additional write-down with respect to Dow Jones Markets will depend on the price and terms obtained in any sale, but it is likely that a significant additional write-down will be taken. However, earnings after such a sale will improve as losses from this business unit will be eliminated. Earnings exclusive of nonrecurring items are expected to improve moderately in 1998. The company anticipates an earnings enhancement from the business publishing segment and lower interest expense, due to a lower average debt level in 1998 relative to 1997. Additionally, 1998 results will benefit from the realignment of television operations and IDD Enterprises as well as discontinuing DJA Partners. Dow Jones Indexes licensing revenue, which included significant upfront fees in 1997, is expected to decline in 1998, as the fees earned become more dependent on the volume of transactions of products based on the Dow Jones Indexes. Business publishing revenues are expected to be up modestly in 1998. Revenue growth is anticipated to come mainly from advertising rate increases and volume gains at Dow Jones Interactive Publishing. On January 1, 1998, advertising rates at The Wall Street Journal and Barron's were raised about 4%. The overseas Journal editions raised ad rates by an average of 6%. Changes in the domestic Journal's advertising volume are unpredictable and are in large part dependent on the U.S. economy and specifically, on the activity in financial markets. Expenses in 1998 for this segment are expected to increase modestly over its 1997 level, as higher Print Publications expenses due to newsprint rate hikes are expected to be cushioned by lower television operating expenses. As part of the business television alliance with NBC, the company's European television venture, in which the company held a majority interest, became a 50/50 partnership and will be included as part of Equity in Associated Companies in 1998. Newsprint prices at the end of 1997 were roughly 18% higher than at 1996's year-end. Global television pretax losses are expected to fall significantly from 1997's television loss of $48 million, excluding restructuring costs. The company expects to benefit from the television alliance with NBC as well as a favorable comparison with 1997. The first half of 1997 included start-up losses from Dow Jones' and ITT Corp.'s New York television station, WBIS+, which has been sold. Operating earnings from the community newspapers segment are expected to be constrained in 1998, as the segment is adversely affected by higher newsprint prices. Revenues are anticipated to rise in line with increases seen in recent years due to advertising and circulation rate increases.
PAGE 23 The "Year 2000" presents significant issues for Dow Jones, because of the technology-intensive nature of its operations. In 1996, the company established a project team responsible for identifying and resolving Year 2000 issues. These efforts include, but are not limited to, identification and review of internal operating systems and applications, and customer products and services, as well as discussions with information providers and other key suppliers to the business. Remediation costs for problems identified thus far are not material to the financial statements taken as a whole. In some cases, modifying existing computer software is not cost beneficial, and the systems themselves are being replaced. The company has established a timetable for resolving Year 2000 issues so as not to interrupt ongoing operations. INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS Management's Discussion and Analysis and other sections of this Form 10-K include forward-looking statements that reflect the company's current expectations or beliefs concerning future results and events. The words "expects," "intends," "believes," "anticipates," "likely," "will," and similar expressions identify forward-looking statements. These forward- looking statements 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, the timing, price and terms of any sale of Dow Jones Markets; rapid technological changes and frequent new product introductions prevalent in the financial information services and electronic publishing industries; product obsolescence due to advances in technology and shifts in market demand; competition from increased availability of financial information, including through the Internet, and resulting price pressures; business conditions (growth or consolidation) in the financial services and banking industries; economic and stock market conditions, particularly in the U.S., Asia and Europe, and their impact on advertising sales and sales of the company's products and services; cost of newsprint; adverse verdicts in legal proceedings, including libel actions; adverse decisions by federal regulators; 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 foreign operations, including currency and political risks; the cost of resolving the company's Year 2000 software issues or untimely resolution of its Year 2000 issues; 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. ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk. The company believes that its financial instruments as shown in Footnote 17 on page 47 of this Form 10-K are not subject to material market risk.
PAGE 24 ITEM 8. Financial Statements and Supplementary Data
CONSOLIDATED STATEMENTS OF (LOSS) INCOME Dow Jones & Company, Inc. For the years ended December 31, 1997, 1996 and 1995 ============================================================================== (in thousands except per share amounts) 1997 1996 1995 - ------------------------------------------------------------------------------
REVENUES: Information services $1,101,696 $1,125,625 $1,092,002 Advertising 1,011,864 896,981 771,779 Circulation and other 458,958 458,986 419,980 - ------------------------------------------------------------------------------ Total revenues 2,572,518 2,481,592 2,283,761 - ------------------------------------------------------------------------------ EXPENSES: News, operations and development 899,868 820,564 748,945 Selling, administrative and general 895,707 831,270 764,161 Newsprint 152,478 164,766 157,047 Second class postage and carrier delivery 114,442 110,256 103,497 Depreciation and amortization 250,734 217,756 206,070 Restructuring (Note 2) 1,001,263 - ------------------------------------------------------------------------------ Operating expenses 3,314,492 2,144,612 1,979,720 - ------------------------------------------------------------------------------ Operating (loss) income (741,974) 336,980 304,041 OTHER INCOME (DEDUCTIONS): Investment income 3,473 4,249 5,379 Interest expense (19,367) (18,755) (18,345) Equity in (losses) earnings of associated companies (Notes 2 & 4) (49,311) (5,408) 14,193 Gain on disposition of businesses and investments (Note 3) 52,595 14,315 13,557 Other, net (9,300) (121) 4,075 - ------------------------------------------------------------------------------ (Loss) income before income taxes and minority interests (Note 8) (763,884) 331,260 322,900 Income taxes (Note 8) 37,796 147,728 139,878 - ------------------------------------------------------------------------------ (Loss) income before minority interests (801,680) 183,532 183,022 Minority interests in (earnings) losses of subsidiaries (452) 6,437 6,550 - ------------------------------------------------------------------------------ NET (LOSS) INCOME $ (802,132) $ 189,969 $ 189,572 ============================================================================== PER SHARE (Note 13): Basic: Net (loss) income $(8.36) $1.96 $1.96 Weighted-average shares outstanding 95,993 96,703 96,907 - ------------------------------------------------------------------------------ Diluted: Net (loss) income $(8.36) $1.95 $1.94 Weighted-average shares outstanding 95,993 97,371 97,675 - ------------------------------------------------------------------------------ Cash Dividends $ .96 $ .96 $ .92 ============================================================================== The accompanying notes are an integral part of the financial statements.
PAGE 25
CONSOLIDATED BALANCE SHEETS Dow Jones & Company, Inc. December 31, 1997 and 1996 =============================================================================== (dollars in thousands) 1997 1996 -------------------------------------------------------------------------------
ASSETS: Current Assets: Cash and cash equivalents $ 23,763 $ 6,769 Accounts receivable -- trade, net of allowance for doubtful accounts of $16,445 in 1997 and $16,234 in 1996 295,250 313,205 Inventories (Note 5) 13,104 10,840 Deferred income taxes (Note 8) 16,565 18,369 Prepaid expenses 25,991 26,442 Other current assets 29,091 28,060 Investment in associated company, held for disposal (Note 4) 102,789 ------------------------------------------------------------------------------- Total current assets 506,553 403,685 ------------------------------------------------------------------------------- Investments in associated companies, at equity (Note 4) 46,064 215,478 Other investments (Notes 6 & 17) 85,290 99,587 Plant and property, at cost (Note 2): Land 26,234 26,319 Buildings and improvements 394,646 370,616 Equipment 1,970,903 1,780,990 Construction in progress 59,806 41,565 ------------------------------------------------------------------------------- 2,451,589 2,219,490 Less, accumulated depreciation 1,667,552 1,480,090 ------------------------------------------------------------------------------- 784,037 739,400 Excess of cost over net assets of businesses acquired, less write-down of $868,333 in 1997 and accumulated amortization of $407,405 in 1997 and $368,873 in 1996 (Note 2) 387,787 1,272,489 Deferred income taxes (Note 8) 93,045 7,914 Other assets 16,958 21,078 ------------------------------------------------------------------------------- Total assets $1,919,734 $2,759,631 =============================================================================== The accompanying notes are an integral part of the financial statements.
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=============================================================================== (dollars in thousands) 1997 1996 -------------------------------------------------------------------------------
LIABILITIES: Current liabilities: Accounts payable -- trade $ 147,378 $ 104,491 Accrued wages, salaries and commissions 70,011 70,453 Profit sharing and other retirement plan contributions payable (Note 10) 45,913 40,815 Other payables 97,048 76,021 Income taxes (Note 8) 53,895 63,868 Unearned revenue 252,832 240,239 Current maturities of long-term debt (Note 6) 5,318 5,318 ------------------------------------------------------------------------------- Total current liabilities 672,395 601,205 Long-term debt (Notes 6 & 17) 228,806 332,300 Deferred compensation, principally postretirement benefit obligation (Note 11) 179,798 164,006 Other noncurrent liabilities 57,913 18,127 ------------------------------------------------------------------------------- Total liabilities 1,138,912 1,115,638 ------------------------------------------------------------------------------- STOCKHOLDERS' EQUITY: Common stock, par value $1 per share; authorized 135,000,000 shares; issued 80,621,254 shares in 1997 and 80,514,161 shares in 1996 80,621 80,514 Class B common stock, convertible, par value $1 per share; authorized 25,000,000 shares; issued 21,559,767 shares in 1997 and 21,666,860 shares in 1996 21,560 21,667 ------------------------------------------------------------------------------- 102,181 102,181 Additional paid-in capital 136,398 134,434 Retained earnings 707,539 1,601,787 Unrealized gain on investments (Note 17) 3,396 12,353 Cumulative translation adjustment (9,540) (5,896) ------------------------------------------------------------------------------- 939,974 1,844,859 Less, treasury stock, at cost; 5,511,285 shares in 1997 and 6,735,782 shares in 1996 159,152 200,866 ------------------------------------------------------------------------------- Total stockholders' equity 780,822 1,643,993 ------------------------------------------------------------------------------- Total liabilities and stockholders' equity $1,919,734 $2,759,631 ===============================================================================
PAGE 27
CONSOLIDATED STATEMENTS OF CASH FLOWS Dow Jones & Company, Inc. For the years ended December 31, 1997, 1996 and 1995 ====================================================================================== (in thousands) 1997 1996 1995 --------------------------------------------------------------------------------------
OPERATING ACTIVITIES: Net (loss) income $(802,132) $189,969 $189,572 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Write-down of goodwill 868,333 Write-down of plant and property 104,040 Depreciation 205,525 174,189 163,051 Amortization of excess of cost over net assets of businesses acquired 45,209 43,567 43,019 Gain on disposition of businesses and investments (52,595) (14,315) (13,557) Gain on disposition of plant and property (840) (1,696) (1,827) Loss on operating lease 8,412 Minority interests in earnings (losses) of subsidiaries 452 (6,437) (6,550) Equity in losses (earnings) of associated companies, net of distributions 55,525 21,289 (1,714) Changes in assets and liabilities: Accounts receivable - trade 15,132 (40,099) (36,423) Unearned revenue 20,329 6,808 7,863 Inventories (2,409) 1,912 (2,180) Other current assets 2,216 (2,998) (8,563) Accounts payable and accrued liabilities 63,519 17,214 16,168 Income taxes (5,470) (2,283) 952 Deferred taxes (76,111) (3,994) (1,377) Deferred compensation 15,792 14,484 15,271 Other noncurrent liabilities 2,279 7,900 115 Other, net 969 (353) (345) -------------------------------------------------------------------------------------- Net cash provided by operating activities 459,763 405,157 371,887 -------------------------------------------------------------------------------------- INVESTING ACTIVITIES: Additions to plant and property (347,797) (232,178) (218,765) Disposition of plant and property 9,580 13,549 13,451 Businesses and investments acquired, net of cash received (79,616) (145,145) (74,186) Disposition of businesses and investments 128,621 23,877 22,066 Return of capital by investees 1,448 20 Proceeds from guaranteed investment contract 5,318 5,318 5,318 Loans to investees (1,047) (649) (10,402) -------------------------------------------------------------------------------------- Net cash used in investing activities (284,941) (333,780) (262,498) --------------------------------------------------------------------------------------
PAGE 28
FINANCING ACTIVITIES: Cash dividends (92,116) (92,969) (89,131) Increase in long-term debt 32,310 144,129 172,285 Reduction of long-term debt (135,854) (65,811) (214,544) Proceeds from sales under stock purchase plans 38,100 21,259 17,430 Purchase of treasury stock (88,704) Contributions from minority partner 5,416 9,142 -------------------------------------------------------------------------------------- Net cash used in financing activities (157,560) (76,680) (104,818) -------------------------------------------------------------------------------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (268) (1,595) (1,792) -------------------------------------------------------------------------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 16,994 (6,898) 2,779 Cash and cash equivalents at beginning of year 6,769 13,667 10,888 -------------------------------------------------------------------------------------- Cash and cash equivalents at end of year $ 23,763 $ 6,769 $ 13,667 ====================================================================================== The accompanying notes are an integral part of the financial statements.
PAGE 29 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Dow Jones & Company, Inc. For the years ended December 31, 1997, 1996 and 1995 ====================================================================================================================== Class B Additional Treasury Stock (in thousands Common Common Paid-in Retained Other ------------------- except shares) Stock Stock Capital Earnings Adjustments Shares Amount Total - ----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 $80,162 $22,019 $134,017 $1,404,346 $(6,219) (5,556,839) $(152,714) $1,481,611 Net income - 1995 189,572 189,572 Dividends, $.92 per share (89,131) (89,131) Translation adjustment 633 633 Conversion of class B common stock into common stock 104 (104) Capital changes of investee (242) (242) Sales under stock purchase plans 1,123 624,698 18,185 19,308 - ---------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1995 80,266 21,915 134,898 1,504,787 (5,586) (4,932,141) (134,529) 1,601,751 Net income - 1996 189,969 189,969 Dividends, $.96 per share (92,969) (92,969) Unrealized gain on investments 12,353 12,353 Translation adjustment (310) (310) Conversion of class B common stock into common stock 248 (248) Capital changes of investee (37) (37) Sales under stock purchase plans (427) 666,459 22,367 21,940 Purchase of treasury stock (2,470,100) (88,704) (88,704) - ---------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1996 80,514 21,667 134,434 1,601,787 6,457 (6,735,782) (200,866) 1,643,993 Net loss - 1997 (802,132) (802,132) Dividends, $.96 per share (92,116) (92,116) Unrealized loss on investments (Note 17) (8,957) (8,957) Translation adjustment (3,644) (3,644) Conversion of class B common stock into common stock 107 (107) Capital changes of investee (223) (223) Sales under stock purchase plans (Note 9) 2,187 1,224,497 41,714 43,901 - ---------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1997 $80,621 $21,560 $136,398 $ 707,539 $(6,144) (5,511,285) $(159,152) $ 780,822 ====================================================================================================================== The accompanying notes are an integral part of the financial statements.
PAGE 30 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. The equity method of accounting is used for companies and other investments in which the company's common stock ownership or partnership equity is at least 20% and not more than 50% (see Note 4). All significant intercompany transactions are eliminated in consolidation and all earnings or losses of subsidiaries that are attributable to minority owners are removed from consolidated earnings. CASH EQUIVALENTS are highly liquid investments with a maturity of three months or less when purchased. INVENTORIES are stated at the lower of cost or market. The cost of newsprint, which is the principal component of inventories, is computed by the last-in, first-out (LIFO) method. Remaining inventories include equipment purchased for resale to customers, which is based on specific identification, and other inventories, primarily spare parts to service maintenance contracts which are stated at average cost (see Note 5). 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 of these investments are recorded directly to Stockholders' Equity, net of deferred taxes. 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 17). 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. MAINTENANCE AND REPAIRS are charged to expense as incurred. Major renewals, betterments and additions are capitalized. THE EXCESS OF COST OVER NET ASSETS OF BUSINESSES ACQUIRED (GOODWILL) is amortized using the straight-line method over various periods, principally forty years. The company evaluates annually whether there has been a permanent impairment in the value of goodwill. Any impairment would be recognized when the sum of expected undiscounted cash flows derived from the acquired business is less than its carrying value. If such an impairment occurred, the amount of the impairment would be based on the fair value of the acquired business as determined by the market value of comparable companies or the present value of expected cash flows. In the fourth quarter of 1997, the company determined the carrying value of goodwill attributable to its Dow Jones Markets subsidiary was impaired and recorded a significant charge to consolidated results of operations. (see Note 2)
PAGE 31 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 8). 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 losses included in Other, net in the income statement totaled $6,391,000 in 1997, $78,000 in 1996 and $358,000 in 1995. FORWARD EXCHANGE CONTRACTS are entered into to hedge contractual revenue streams from foreign currency exchange rate fluctuations. As such, these nonspeculative forward exchange contracts are not recorded on the company's balance sheets. Also, unrealized gains and losses on these forward exchange contracts are deferred and recognized upon settlement of the related transactions. Accordingly, cash flows resulting from forward exchange contract settlements are classified as cash provided by operations as are the corresponding cash flows from the revenue streams being hedged (see Note 17). 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. Revenue from licensing the Dow Jones Averages includes both certain upfront one-time fees and ongoing revenues. The one-time fees, which totaled $31 million in 1997, are recorded to income when received. Ongoing licensing revenue is recognized in income as earned over the license period. RESEARCH AND DEVELOPMENT expenditures are charged to expense as incurred. Research and development expenses were $116,420,000 in 1997, $73,974,000 in 1996 and $66,710,000 in 1995. 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.
PAGE 32 NOTE 2. RESTRUCTURING CHARGES The company recorded a charge to operating expenses of $1 billion ($936.5 million after taxes) in 1997's fourth quarter, reflecting the write- down of goodwill and plant and property, severance and other costs. Substantially all of the charge related to restructuring Dow Jones Markets; however, a small portion of the charge, roughly 2%, was attributable to restructurings of IDD Enterprises, L.P. and certain television operations in the U.S. During the fourth quarter of 1997, the company reviewed its previously announced $650 million multiyear revitalization plan of Dow Jones Markets. It was concluded that the plan would be substantially scaled back, while the company continued to review other alternatives for Dow Jones Markets. The company further concluded that the carrying value of its investment in Dow Jones Markets was impaired and a write-down should be recorded. Additionally, the company commenced a plan to reduce its Dow Jones Markets work force by 200-300 employees by early 1998. The reduction of staff will be largely in worldwide Dow Jones Markets technical, administrative and sales positions. As the table below indicates, the main component of the restructuring charge was a noncash write-down of goodwill and plant and property. After measuring the carrying value of Dow Jones Markets against its projected cash inflows, it was determined the aggregate of future cash inflows was insufficient to recover the company's carrying value of Dow Jones Markets. The write-down reflects the company's assessment of Dow Jones Markets' fair market value.
The restructuring charge was composed of the following: ============================================================================ (in thousands) - ----------------------------------------------------------------------------
Write-down of goodwill $ 868,333 Write-down of plant and property 104,040 Severance 22,154 Other 6,736 - ---------------------------------------------------------------------------- Total restructuring $1,001,263 ============================================================================
Separately in December 1997, the company and National Broadcasting Corp. (NBC) agreed to a worldwide business television alliance. As part of the agreement, the company's and CNBC's overseas television operations merged, resulting in equally-owned ventures in Europe and Asia. In the U.S., Dow Jones entered into a multiyear license agreement to supply business news programming to CNBC. In the fourth quarter of 1997, Dow Jones recorded a charge of $29.7 million ($19.3 million after taxes) for its share of restructuring costs for its overseas television ventures. This charge, which principally related to operating lease redundancies, was included in Equity in Losses of Associated Companies.
PAGE 33 NOTE 3. ACQUISITIONS AND DISPOSITIONS In the second quarter of 1997, the company purchased Indepth Data Inc., a provider of comprehensive historical and real-time information on fixed- income instruments for $23.5 million in cash. The acquisition was accounted for by the purchase method. The first quarter of 1997 included a gain of $6.2 million ($3.6 million after taxes) from the sale of the company's American Demographics subsidiary, a publisher of information products serving the marketing industry. In the fourth quarter of 1997, the company recognized a gain of $46.4 million ($27.7 million after taxes) from the sale of its 35% interests in Bear Island Paper Company, L.P., a newsprint mill, and Bear Island Timberlands Company, L.P. The third quarter of 1996 included a gain of $14.3 million ($8.8 million after taxes) from the sale of the company's minority interest in Press-Enterprise Company, a newspaper publisher in Riverside, California. In the first quarter of 1995, the company recognized a gain of $13.4 million ($5.8 million after taxes) from the sale of 80% of its interest in SportsTicker, a real-time sports news and information company. NOTE 4. INVESTMENTS IN ASSOCIATED COMPANIES, AT EQUITY At December 31, 1997, the principal components of investments in associated companies, at equity were the following: a 40% interest in F.F. Soucy, Inc. & Partners, L.P., an operator of a newsprint mill located in Quebec, Canada; a 31% interest in Mediatex Communications Corp., publisher of Texas Monthly magazine; a 42% ownership in HB-Dow Jones S.A., a part- owner of a publishing company in the Czech Republic; a 50% interest in Business News (Asia) Private, a business and financial news television company broadcasting in Asia; and a 50% interest in SmartMoney, a joint venture with The Hearst Corporation to publish SmartMoney magazine, a monthly publication serving the personal-investor market throughout the U.S. and Canada. In addition to the above investments held at December 31, 1997, investments in associated companies at December 31, 1996 included 35% interests in Bear Island Paper Company, L.P. and Bear Island Timberlands, L.P., which were sold in 1997's fourth quarter (see Note 3); a 50% interest in DJA Partners, a developer of an online real estate service which was discontinued in the latter half of 1997; and a half-interest in ITT-Dow Jones Television, which owns a television station in New York City. On May 12, 1997, Dow Jones and ITT Corp. entered into an agreement to sell the station to Paxson Communications Corp. At year-end 1997, the sale of the station was pending regulatory approval, which is expected in 1998. Accordingly, the company's investment in this venture has been classified as current on the consolidated balance sheet. The company expects to record a modest gain upon consummation of the sale.
PAGE 34 Dow Jones & Company has entered long-term contracts with Bear Island Paper Company, L.P. and 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 Bear Island Paper of $25,095,000 in 1997, $29,509,000 in 1996 and $30,022,000 in 1995 and F.F. Soucy of $21,598,000 in 1997, $26,417,000 in 1996 and $25,353,000 in 1995. NOTE 5. INVENTORIES
Inventories as of December 31 were composed of the following: ============================================================================ (in thousands) 1997 1996 - ----------------------------------------------------------------------------
Newsprint inventory $11,590 $ 9,329 Other, principally equipment for resale 1,514 1,511 - ---------------------------------------------------------------------------- Total inventories $13,104 $10,840 ============================================================================
Newsprint inventory was determined by the last-in, first-out (LIFO) method. If newsprint inventory had been valued by the average cost method, it would have been approximately $9,240,000 and $7,355,000 higher in 1997 and 1996, respectively. NOTE 6. LONG-TERM DEBT
Long-term debt at December 31 was as follows: ============================================================================ (in thousands) 1997 1996 - ----------------------------------------------------------------------------
Commercial paper, 5.95% to 6.15% at December 31, 1997 $ 63,015 $161,242 Notes payable, 5.75%, due December 1, 2000 149,836 149,785 Note payable, Associated Press, 7.75% 21,273 26,591 - ---------------------------------------------------------------------------- 234,124 337,618 Less: current portion 5,318 5,318 - ---------------------------------------------------------------------------- Total long-term debt $228,806 $332,300 ============================================================================
Payments on long-term debt are due as follows: $5,318,000 in 1998, $68,334,000 in 1999, $155,154,000 in 2000 and $5,318,000 in 2001. Interest payments were $18,386,000 in 1997, $18,916,000 in 1996 and $16,679,000 in 1995.
PAGE 35 The company can borrow up to $400 million through November 16, 1999, under a revolving credit agreement with several 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 C/D rate or the federal funds rate. An annual fee of 0.08% is payable on the commitment which the company may terminate or reduce at any time. Prepayment of borrowings may be made without penalty. Although there were no borrowings under the agreement as of December 31, 1997, the company intends to maintain the commitment at least through December 31, 1998. Accordingly, commercial paper was classified as long- term. The company and the banks amended certain restrictive covenants contained in the revolving credit agreement, including restrictions on net worth. At December 31, 1997, with respect to restrictive covenants then in effect, consolidated indebtedness was approximately $900 million less than the maximum borrowing allowed and the company's cash flow, as defined in the agreement, far exceeded that required. In December 1995, the company sold $150 million of 5.75% notes due December 1, 2000. The notes are general unsecured obligations of the company and may not be redeemed prior to maturity. The note payable to the Associated Press is owed by the company in equal annual principal payments of $5,318,000 which commenced in 1991. The company purchased a Guaranteed Investment Contract from an insurance company which is included in Other Investments. The contract provides for payments to the company of interest and principal that match the payments owed the Associated Press. NOTE 7. 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. NOTE 8. INCOME TAXES
The components of (loss) income before income taxes and minority interests were as follows: ============================================================================ (in thousands) 1997 1996 1995 - ----------------------------------------------------------------------------
Domestic $(118,627) $258,616 $208,173 Foreign (645,257) 72,644 114,727 - ---------------------------------------------------------------------------- $(763,884) $331,260 $322,900 ============================================================================
PAGE 36
The following is a reconciliation of income tax expense (benefit) to the amount derived by multiplying (loss) income before income taxes and minority interests by the statutory federal income tax rate of 35%. ============================================================================ % of % of % of Loss Income Income Before Before Before (in thousands) 1997 Taxes 1996 Taxes 1995 Taxes - ----------------------------------------------------------------------------
(Loss) income before taxes multiplied by statutory federal income tax rate $(267,359) (35.0) $115,941 35.0 $113,015 35.0 Write-down of nondeductible goodwill 326,807 42.8 State and foreign taxes, net of federal income tax effect (31,377) (4.1) 14,454 4.4 12,864 4.0 Amortization of nondeductible goodwill 15,969 2.0 16,124 4.9 16,422 5.1 Research and development credits (4,456) (0.6) (2,550) (0.8) (6,113) (1.9) Other, net (1,788) (0.2) 3,759 1.1 3,690 1.1 - ---------------------------------------------------------------------------- $ 37,796 4.9 $147,728 44.6 $139,878 43.3 ============================================================================
Income tax expense was as follows: ============================================================================ (in thousands) Federal State Foreign Total - ----------------------------------------------------------------------------
1997 Currently payable $ 79,086 $ 21,405 $15,685 $116,176 Deferred (62,961) (12,120) (3,299) (78,380) - ---------------------------------------------------------------------------- Total $ 16,125 $ 9,285 $12,386 $ 37,796 ============================================================================ 1996 Currently payable $ 98,366 $ 25,319 $30,186 $153,871 Deferred 750 (6,195) (698) (6,143) - ---------------------------------------------------------------------------- Total $ 99,116 $ 19,124 $29,488 $147,728 ============================================================================ 1995 Currently payable $ 95,681 $ 19,126 $32,977 $147,784 Deferred (3,040) (3,845) (1,021) (7,906) - ---------------------------------------------------------------------------- Total $ 92,641 $ 15,281 $31,956 $139,878 ============================================================================
PAGE 37
The company's combined current and noncurrent deferred taxes at December 31, 1997 and 1996 consisted of the following deferred tax assets and liabilities: ============================================================================ Deferred Tax Deferred Tax Assets Liabilities ------------------- ------------------ (in thousands) 1997 1996 1997 1996 - ----------------------------------------------------------------------------
Depreciation $59,418 $63,470 Employee benefit plans, including deferred compensation $ 80,174 $ 81,121 4,312 4,987 Foreign tax credits 15,393 13,945 Restructuring charges 56,987 Sales and product allowances 3,799 3,524 Unrealized gain on investments 2,314 8,436 All other 22,582 10,170 3,281 5,584 - ---------------------------------------------------------------------------- Total deferred taxes $178,935 $108,760 $69,325 $82,477 ============================================================================
The company has not established a deferred tax asset with respect to certain foreign operating loss carryforwards which are not expected to be realized. Income tax payments were $119,377,000 in 1997, $154,005,000 in 1996 and $140,303,000 in 1995. NOTE 9. STOCK PURCHASE, STOCK OPTION AND EXECUTIVE INCENTIVE PLANS STOCK PURCHASE PLAN: Under the terms of the Dow Jones 1990 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 1997 1996 1995 - ----------------------------------------------------------------------------
Balance, January 1 137,107 141,855 145,410 Shares subscribed 258,635 220,306 231,341 Purchases $34.16 to $34.54 (241,243) (216,329) (224,663) Terminated/canceled (13,042) (8,725) (10,233) - ---------------------------------------------------------------------------- Balance, December 31 141,457 137,107 141,855 ============================================================================
At December 31, 1997, there were 113,867 shares available for future offerings.
PAGE 38 STOCK OPTION PLAN: Under the Dow Jones 1991 Stock Option Plan, options for shares of common stock may be granted to key employees at not less than the fair market value of the common stock on the date of grant. Options granted in 1997 become exercisable in equal annual installments over three years from the date of grant. All other options outstanding at December 31, 1997 were exercisable. Options expire ten years from the date of grant.
The activity in the stock option plan was as follows: ============================================================================ 1997 1996 1995 ---------------- ----------------- ---------------- Weighted- Weighted- Weighted- Average Average Average Shares Exercise Shares Exercise Shares Exercise ('000) Price ('000) Price ('000) Price - ----------------------------------------------------------------------------
Balance, January 1 3,791 $32.98 3,360 $32.32 3,279 $31.33 Granted 1,019 50.19 888 34.54 548 36.25 Exercised (909) 32.08 (430) 30.85 (401) 29.72 Terminated/canceled (156) 44.58 (27) 35.38 (66) 31.80 - ---------------------------------------------------------------------------- Balance, December 31 3,745 $37.22 3,791 $32.98 3,360 $32.32 ============================================================================ Options exercisable at December 31 2,726 $32.41 2,903 $32.51 2,812 $31.55 ============================================================================
At December 31, 1997, there were 256,393 shares available for future grants. EXECUTIVE INCENTIVE PLAN: In 1997 stockholders approved the Dow Jones 1997 Long Term Incentive Plan which 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. Under the 1997 incentive plan, up to two million shares of common stock may be granted for plan awards through December 31, 2001. Options for shares of common stock may be granted at not less than the fair market value of the common stock on the date of grant. Options granted in 1992 through 1995 were granted at 125% of the fair market value of the company's common stock on the date of grant, while options granted after 1995 were granted at the fair market value of the common stock on the date of grant. In April 1997, the company rescinded all of the outstanding stock appreciation rights of its plan participants. Options granted in 1997 become exercisable in equal annual installments over three years from the date of grant. Fifty percent of options granted in 1996 become exercisable in 1998. All other options granted prior to 1997 and outstanding at December 31, 1997 were exercisable. Options expire ten years from the date of grant.
PAGE 39
The activity with respect to options under the executive incentive plan was as follows: ============================================================================ 1997 1996 1995 ---------------- ----------------- ---------------- Weighted- Weighted- Weighted- Average Average Average Shares Exercise Shares Exercise Shares Exercise ('000) Price ('000) Price ('000) Price - ----------------------------------------------------------------------------
Balance, January 1 1,224 $35.42 966 $35.60 886 $34.28 Granted 222 50.75 293 34.38 103 45.31 Exercised (135) 30.29 (27) 31.44 (12) 28.17 Terminated/canceled (24) 54.25 (2) 32.42 (1) 28.83 Surrendered upon exercise of stock appreciation rights (1) 32.50 (6) 32.04 (10) 28.83 - ---------------------------------------------------------------------------- Balance, December 31 1,286 $38.30 1,224 $35.42 966 $35.60 ============================================================================ Options exercisable at December 31 919 $35.78 879 $35.19 814 $34.25 ============================================================================
Options outstanding at the end of 1997 for both the stock option and executive incentive plans are summarized as follows: ============================================================================ Options outstanding Options exercisable ---------------------------------- ------------------- Weighted- Weighted-Avg. Weighted- Average Remaining Average Range of Shares Exercise Contractual Shares Exercise Exercise Prices ('000) Price life ('000) Price - ----------------------------------------------------------------------------
$26.00 to $30.00 1,072 $28.09 4.4 years 1,072 $28.09 $32.00 to $35.47 1,909 34.10 6.6 1,762 34.07 $36.25 to $41.09 627 37.27 7.3 607 37.14 $43.91 to $50.75 1,423 49.61 9.5 203 44.62 - ---------------------------------------------------------------------------- Balance, December 31, 1997 5,031 $37.60 7.0 years 3,644 $33.41 ============================================================================
Contingent stock rights 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. With respect to 1993 grants, compensation received could be less than or equal to that specified in the right, but not greater than 125% of that amount. With respect to the grants issued after 1993, compensation received could be less than or equal to that specified in the right, but cannot exceed the right.
PAGE 40
A summary of contingent stock right activity follows: ============================================================================ 1997 1996 1995 - ----------------------------------------------------------------------------
Balance, January 1 558,600 522,900 417,100 Granted 88,600 117,000 124,100 Awarded (58,482) (80,300) (8,789) Terminated/canceled (75,537) (1,000) (9,511) - ---------------------------------------------------------------------------- Balance, December 31 513,181 558,600 522,900 ============================================================================
Year of Grant --------------------------------------------- 1993 1994 1995 1996 1997 Balance - ----------------------------------------------------------------------------
Rights outstanding 78,200 118,775 116,906 110,700 88,600 513,181 ============================================================================
At December 31, 1997, there were 1,765,237 shares available for future grants under the executive incentive 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 $3,400,000 in 1997, $1,504,000 in 1996 and $6,218,000 in 1995.
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 pro forma amounts: ============================================================================ 1997 1996 1995 - ----------------------------------------------------------------------------
Net (loss) income (in thousands): As reported $(802,132) $189,969 $189,572 Pro forma (807,509) 186,170 188,635 - ---------------------------------------------------------------------------- Per share - basic: As reported $(8.36) $1.96 $1.96 Pro forma (8.41) 1.93 1.95 ============================================================================
PAGE 41
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 1995 through 1997, 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 1997 $ 8.27 5.6% 2.4% 0.5 years 24.7% 1996 8.15 5.5 2.4 0.7 15.5 1995 7.15 5.7 2.4 0.6 15.5 Option under the Stock Option Plan 1997 $11.87 5.6% 2.4% 5.0 years 22.5% 1996 8.44 6.0 2.4 6.0 20.0 1995 8.78 5.8 2.4 6.0 20.0 Option under the Executive Incentive Plan 1997 $11.98 5.6% 2.4% 5.0 years 22.5% 1996 8.44 6.0 2.4 6.0 20.0 1995 7.29 6.0 2.4 8.0 20.0 ============================================================================
NOTE 10. PROFIT SHARING/RETIREMENT AND PENSION PLANS The company has profit sharing retirement plans for a majority of employees who meet specified length of service requirements. The annual cost of the plans, which are funded currently, is based upon a percentage of compensation or consolidated net income, as defined, but is limited to the amount deductible for income tax purposes. 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 profit sharing and pension plan expenses amounted to $60,082,000, $54,543,000 and $50,358,000 in 1997, 1996 and 1995, respectively. 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 profit sharing/retirement and pension plans (see Note 10).
PAGE 42
The following sets forth the plan's status reconciled with amounts reported in the company's consolidated balance sheets at December 31. ============================================================================ (in thousands) 1997 1996 - ----------------------------------------------------------------------------
Accumulated postretirement benefit obligation (APBO): Retirees $ 32,148 $ 28,362 Fully eligible active plan participants 17,759 14,271 Other active plan participants 83,580 72,209 - ---------------------------------------------------------------------------- Total APBO as of December 31 133,487 114,842 Unrecognized net (loss) gain (4,519) 828 - ---------------------------------------------------------------------------- Accrued postretirement benefit liability at December 31 $128,968 $115,670 ============================================================================
Pretax postretirement benefit expense included the following components: ============================================================================ (in thousands) 1997 1996 1995 - ----------------------------------------------------------------------------
Service cost $ 7,889 $ 7,316 $ 5,417 Interest cost 8,728 7,547 7,318 - ---------------------------------------------------------------------------- Net periodic postretirement benefit cost $16,617 $14,863 $12,735 ============================================================================
A 9.5% annual rate of increase in the per capita costs of covered health care benefits was assumed for 1998, gradually decreasing to 5% 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, 1997, by $25 million and increase the aggregate of the service cost and interest cost components of net periodic postretirement benefit cost for 1997 by $4 million. A discount rate of 7% was used to determine the accumulated postretirement benefit obligation as of December 31, 1997. At December 31, 1996, the company's accumulated postretirement benefit obligation was calculated using a discount rate of 7.5% and a health care cost trend rate of 11.5% for 1997, decreasing to 5% by the year 2008.
PAGE 43 NOTE 12. COMMITMENTS AND CONTINGENCIES Commitments for capital expenditures amounted to $80,868,000 at December 31, 1997.
Noncancelable leases require minimum rental payments through 2018 totaling $438,288,000. Payments required for the years 1998 through 2002 are as follows: ============================================================================ (in thousands) 1998 1999 2000 2001 2002 - ----------------------------------------------------------------------------
$79,975 $67,699 $56,974 $46,057 $40,945 ============================================================================
These leases are principally for office space and equipment and contain renewal and escalation clauses. Total rental expense amounted to $120,011,000 in 1997, $112,075,000 in 1996 and $107,753,000 in 1995. Rental expense in 1995 included a charge of $8.4 million, discounted at 6%, for the recognition of a loss on an operating lease, net of expected sublease rental income. The loss stemmed from vacating office space in which the company is obligated to rent until July 2001. At December 31, 1997, the company had loan guarantees outstanding of $4.3 million with remaining terms of up to four years for certain of its investees. The company views it as unlikely that its investees will fail to meet the terms of their obligations. 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 In February 1997, Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share" was issued. The statement, which is effective for financial statements issued after December 15, 1997, modifies the standards for computing and presenting earnings per share (EPS). SFAS 128 requires the dual presentation of a basic EPS and a diluted EPS on the face of the income statement. Basic (loss) earnings per share was $(8.36) in 1997 and $1.96 in both 1996 and 1995. The per share amounts have been computed on the basis of the weighted-average number of shares outstanding (95,993,000 shares in 1997, 96,703,000 shares in 1996 and 96,907,000 shares in 1995).
PAGE 44
Diluted (loss) earnings per share have been computed as follows: =========================================================================== (in thousands except per share amounts) 1997 (1) 1996 (2) 1995 (2) - ---------------------------------------------------------------------------
Net (loss) income $(802,132) $189,969 $189,572 Weighted-average shares outstanding - basic 95,993 96,703 96,907 Stock options 0 551 539 Other, principally contingent stock rights 0 117 229 ------ ------ ------ Weighted-average shares outstanding - diluted 95,993 97,371 97,675 Diluted (loss) earnings per share $(8.36) $1.95 $1.94 ============================================================================ (1) Options and contingent stock rights outstanding at December 31, 1997, as shown in Note 9 to the financial statements beginning on page 37 of this Annual Report, have been excluded from the diluted loss per share in 1997 because to include such securities would be antidilutive. (2) Options to purchase 290,000 shares in 1996 and 302,000 shares in 1995 at ranges of $41.09 to $54.25 were excluded from the diluted earnings per share calculation because the options' exercise prices were greater than the average market prices for 1996 and for 1995. The diluted average shares outstanding were 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.
NOTE 14. RECLASSIFICATIONS Certain amounts for prior years have been reclassified for comparative purposes. NOTE 15. SUMMARY OF QUARTERLY FINANCIAL DATA (UNAUDITED) The summary of unaudited 1997 and 1996 quarterly financial data shown on pages 50 and 51 of this report is incorporated herein by reference.
PAGE 45 NOTE 16. BUSINESS SEGMENTS
The company's operations by business segment and geographic area were as follows: Financial Data by Business Segment ================================================================================================ Financial Business Information Community (in thousands) Publishing Services Newspapers Corporate Consolidated - -----------------------------------------------------------------------------------------------
Revenues 1997 $1,320,187 $ 951,720 $300,611 $2,572,518 1996 1,214,336 979,745 287,511 2,481,592 1995 1,049,462 961,398 272,901 2,283,761 Operating (loss) income (1) 1997 218,596 (992,965) 50,584 $(18,189) (741,974) 1996 159,418 155,848 43,766 (22,052) 336,980 1995 95,509 197,015 32,987 (21,470) 304,041 Identifiable assets (2) 1997 676,646 776,292 222,609 244,187 1,919,734 1996 635,615 1,607,971 223,860 292,185 2,759,631 1995 587,032 1,598,041 229,515 184,112 2,598,700 Depreciation and amortization expense 1997 68,359 165,821 16,554 250,734 1996 57,695 144,181 15,880 217,756 1995 50,434 141,226 14,410 206,070 Capital expenditures 1997 108,043 227,129 12,625 347,797 1996 91,194 131,658 9,326 232,178 1995 89,054 113,296 16,415 218,765 Investments in associated companies (3) 1997 124,838 1996 194,500 1995 91,442 Equity in (losses) earnings of associated companies (3) 1997 (41,347) 1996 3,351 1995 19,494 ================================================================================================ NOTES: (1) Includes restructuring costs in 1997 as follows (in thousands): Business publishing $ 21,761 Financial information services 979,502 --------- $1,001,263 (2) Corporate assets include cash and cash equivalents, investments in associated companies, other investments and related deferred income taxes. (3) Business publishing -- Business News (Asia) Private; F.F. Soucy, Inc. & Partners, L.P.; ITT- Dow Jones Television and SmartMoney. On December 1, 1997, the company sold its interest in Bear Island Paper Company, L.P. and Bear Island Timberlands Co., L.P. Equity losses in 1997 include television restructuring charges.
PAGE 46
Financial Data by Geographic Area ============================================================================================== Europe United Middle East Asia/ Other (in thousands) States Africa Pacific Foreign Corporate Consolidated - ----------------------------------------------------------------------------------------------
Revenues 1997 $1,890,457 $372,813 $254,002 $ 55,246 $2,572,518 1996 1,748,800 408,434 271,765 52,593 2,481,592 1995 1,589,181 383,266 261,823 49,491 2,283,761 Operating (loss) income 1997 (117,047) (349,914) (169,960) (86,864) $(18,189) (741,974) 1996 288,686 16,289 50,741 3,316 (22,052) 336,980 1995 227,259 26,562 68,405 3,285 (21,470) 304,041 Identifiable assets 1997 1,318,905 195,327 121,939 39,376 244,187 1,919,734 1996 1,622,808 473,653 256,635 114,350 292,185 2,759,631 1995 1,570,852 468,882 256,547 118,307 184,112 2,598,700 ============================================================================================== Note: Operating loss in 1997 includes restructuring charges as follows (in thousands): United States $ 463,084 Europe/Middle East/Africa 294,593 Asia/Pacific 163,492 Other Foreign 80,094 --------- $1,001,263
PAGE 47 NOTE 17. 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, 1997 and 1996, was determined primarily by reference to dealer markets and quoted market prices. ============================================================================ (in thousands) Fair Value Carrying Value - ----------------------------------------------------------------------------
1997 Other investments $ 85,985 $ 85,290 Long-term debt 228,136 228,806 - ---------------------------------------------------------------------------- 1996 Other investments $100,502 $ 99,587 Long-term debt 331,000 332,300 ============================================================================
Other investments include marketable equity securities, namely shares in United States Satellite Broadcasting Company, Inc. (USSB), a provider of direct satellite television programming, and Nation Multimedia Group Public Co., Ltd, a media company in Thailand, which are carried at their fair value. At December 31, 1997, the fair value of these investments was $35.5 million, representing a gross unrealized gain of $10 million on the USSB investment and a gross unrealized loss of $4.3 million on the investment in Nation Multimedia Group. At December 31, 1996, the fair value of marketable equity securities was $50.7 million, yielding a gross unrealized gain of $20.8 million. The company enters into nonspeculative forward exchange contracts to insulate contractual revenue streams from foreign currency exchange rate fluctuations (see Note 1). Risk arises from movements in foreign currency exchange rates and from the possible inability of counterparties to meet the terms of their commitments, which the company views as unlikely. At December 31, 1997, the company had a forward exchange contract outstanding which settled in January 1998 to sell 350 million Japanese yen in exchange for $3.4 million. At December 31, 1997, the fair value of this contract was insignificant. At December 31, 1996, the fair value of forward exchange contracts then outstanding, which had contractual values totaling $46 million, was an unrealized gain of $4.7 million. Concentrations of Credit Risk Financial instruments that potentially could subject the company to concentrations of credit risk consist largely of trade accounts receivables. 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 which comprise the company's customer base.
PAGE 48 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Dow Jones & Company, Inc.: We have audited the accompanying consolidated balance sheets of Dow Jones & Company, Inc. and Subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1997. 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 in accordance with generally accepted auditing standards. Those standards 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. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Dow Jones & Company, Inc. and Subsidiaries as of December 31, 1997 and 1996, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. New York, New York January 29, 1998
PAGE 49 STATEMENT OF MANAGEMENT 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 in 1997 continued to strengthen, 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. Underlying the concept of reasonable assurance is the premise that the cost of control should not exceed the benefit derived. The company's system of internal controls is supported by written policies, a program of internal audits, including a periodic independent review of the Internal Audit Department, and by a program of selecting and training qualified staff. Coopers & Lybrand L.L.P., independent accountants, have audited the company's consolidated financial statements, as described in their report. The report expresses an independent opinion of 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.
PAGE 50
QUARTERLY CONSOLIDATED STATEMENTS OF (LOSS) INCOME (UNAUDITED) Dow Jones & Company, Inc. For the fourth quarters ended December 31, 1997 and 1996 ============================================================================ (in thousands except per share amounts) 1997 1996 - ----------------------------------------------------------------------------
REVENUES: Information services $ 279,646 $292,245 Advertising 291,586 262,287 Circulation and other 118,253 116,718 - ---------------------------------------------------------------------------- Total revenues 689,485 671,250 - ---------------------------------------------------------------------------- EXPENSES: News, operations and development 249,422 217,251 Selling, administrative and general 237,942 217,972 Newsprint 44,333 37,408 Second class postage and carrier delivery 30,683 29,541 Depreciation and amortization 68,999 55,414 Restructuring 1,001,263 - ---------------------------------------------------------------------------- Operating expenses 1,632,642 557,586 - ---------------------------------------------------------------------------- Operating (loss) income (943,157) 113,664 OTHER INCOME (DEDUCTIONS): Investment income 910 1,174 Interest expense (4,445) (6,072) Equity in losses of associated companies (27,280) (6,858) Gain on disposition of businesses and investments 46,416 Other, net (6,741) 388 - ---------------------------------------------------------------------------- (Loss) income before income taxes and minority interests (934,297) 102,296 Income tax (benefit) (45,026) 43,999 - ---------------------------------------------------------------------------- (Loss) income before minority interests (889,271) 58,297 Minority interests in (earnings) losses of subsidiaries (44) 1,346 - ---------------------------------------------------------------------------- NET (LOSS) INCOME $ (889,315) $ 59,643 ============================================================================ PER SHARE: Basic: Net (loss) income $(9.22) $.62 Weighted-average shares outstanding 96,465 95,808 - ---------------------------------------------------------------------------- Diluted: Net (loss) income $(9.22) $.62 Weighted-average shares outstanding 96,465 96,234 - ---------------------------------------------------------------------------- Cash Dividends $ .24 $.24 ============================================================================
PAGE 51
SUMMARY OF QUARTERLY FINANCIAL DATA (UNAUDITED) Dow Jones & Company, Inc. ============================================================================ Quarters Ended (in thousands except --------------------------------------- per share amounts) March 31 June 30 Sept. 30 Dec. 31 Year - ----------------------------------------------------------------------------
1997 (1) Revenues $605,963 $640,744 $636,326 $ 689,485 $2,572,518 Operating (loss) income 62,162 78,027 60,994 (943,157) (741,974) Net (loss) income 25,399 34,906 26,878 (889,315) (802,132) Per Share: Basic .27 .36 .28 (9.22) (8.36) Diluted .26 .36 .28 (9.22) (8.36) - ---------------------------------------------------------------------------- 1996 (2) Revenues $584,834 $630,637 $594,871 $ 671,250 $2,481,592 Operating income 68,952 92,092 62,272 113,664 336,980 Net income 37,625 52,025 40,676 59,643 189,969 Per Share: Basic .39 .54 .42 .62 1.96 Diluted .38 .53 .42 .62 1.95 ============================================================================ (1) Gains on the disposal of businesses and investments in 1997 included a first-quarter gain of four cents per share from the sale of the company's American Demographics subsidiary and a fourth-quarter gain of 29 cents per share from the disposal of the company's interests in Bear Island Paper Company, L.P. and Bear Island Timberlands Company, L.P. Additionally, the third quarter of 1997 included a net enhancement of 11 cents per share from certain one-time fees received from licensing the Dow Jones Averages. The fourth quarter and year-to-date 1997 operating losses include restructuring costs of $1 billion. (2) The third quarter of 1996 included a gain of nine cents per share from the sale of the company's minority interest in Press-Enterprise Company.
PAGE 52 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. Executive Officers of the Registrant - ------------------------------------ Each executive officer is elected annually to serve at the pleasure of the Board of Directors. All executive officers named below have been employed by the company for more than five years. Peter R. Kann, age 55, 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. Karen Elliott House, President/International Group of the company is the spouse of Mr. Kann. Kenneth L. Burenga, age 53, President of the company and President of The Wall Street Journal since July 1991, Chief Operating Officer since January 1991 and Chief Executive Officer of Dow Jones Markets since July 1996, served as Executive Vice President from January 1991 to July 1991 and Senior Vice President from 1986 thru 1990, and General Manager from January 1989 thru December 1990, as Chief Financial and Administrative Officer from 1986 to 1988 and Vice President/Circulation of The Wall Street Journal from 1980 to 1986. James H. Ottaway Jr., age 60, Senior Vice President since 1986, 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. Peter G. Skinner, age 53, Senior Vice President since November 1989, General Counsel and Secretary since 1985 and President, Television from January 1995 to December 1997, served as Vice President from 1985 to November 1989. Carl M. Valenti, age 59, will retire in early 1998, after serving as President and Publisher of Dow Jones Newswires from July 1996 and Senior Vice President of the company since July 1989. Mr. Valenti also served as President and Publisher of Dow Jones Markets from May 1990 to July 1996, Vice President of the company and President/Information Services Group from 1987 to 1990 and as Vice President/Information Services Group from 1980 to 1987.
PAGE 53 Kevin J. Roche, age 63, Vice President/Finance since 1986 and Chief Financial Officer since January 1989, served as Comptroller from 1977 to 1987. Mr. Roche will be retiring in 1998. Thomas G. Hetzel, age 42, Comptroller since October 1993, served as Associate Comptroller from 1992 to 1993 and Assistant Comptroller from 1988 to 1992. Directors of the Registrant - --------------------------- The information required by this item relating to directors, including positions with the company and business experience during the past five years, is as follows. Rand V. Araskog, age 66, member of the Corporate Governance and Executive Committees, has been a director of the company since 1981. Mr. Araskog is a director of various corporations and prior to March 1998, Chairman and Chief Executive Officer of ITT Corporation (hotel and gaming company). Mr. Araskog is a director of Alcatel Alsthom, Rayonier Inc., Shell Oil Company, The Hartford Financial Services Group, Inc., ITT Industries, Inc. and ITT Educational Services, Inc. Christopher Bancroft, age 46, member of the Compensation Committee, has been a director of the company since 1996. Mr. Bancroft is first cousin of Mr. Cox and Mrs. MacElree. William C. Cox, Jr., age 67, member of the Corporate Governance and Executive Committees, has been a director of the company since 1976. Prior to July, 1997, Mr. Cox was Executive Director/Client Relations of the company. Mr. Cox is the brother of Mrs. MacElree and first cousin of Mr. Bancroft. Harvey Golub, age 59, member of the Audit and Corporate Governance Committees, has been a director of the company since 1997. Mr. Golub has been Chairman and Chief Executive Officer, American Express Company since August 1993 and served as President from 1991 to 1993 of American Express Company (travel and financial services company). Mr. Golub is a director of Campbell Soup Company. Leslie Hill, age 44, member of the Corporate Governance Committee, has been a director of the company since 1997. Ms. Hill is a pilot for American Airlines and is the daughter of Mrs. MacElree. Irvine O. Hockaday, Jr., age 61, member of the Compensation and Executive Committees, has been a director of the company since 1990. Mr. Hockaday is President and Chief Executive Officer, Hallmark Cards, Inc. (greeting card manufacturer) and a director of Ford Motor Company, Sprint Corporation and UtiliCorp United, Inc.
PAGE 54 Vernon E. Jordan, Jr., age 62, member of the Executive Committee, has been a director of the company since 1982. Senior Partner at Akin, Gump, Strauss, Hauer & Feld, attorneys, and prior to 1982 was President and Chief Executive Officer, National Urban League, Inc. Mr. Jordan is a director of American Express Company, Bankers Trust Company, Bankers Trust New York Corporation, Callaway Golf Company, Chancellor Media Corporation, J.C. Penney Company, Inc., Revlon, Inc., Ryder Systems, Inc., Sara Lee Corporation, Union Carbide Corporation and Xerox Corporation. David K.P. Li, age 59, member of the Audit and Corporate Governance Committees, has been a director of the company since 1993. Mr. Li is Chief Executive Officer, The Bank of East Asia, Limited. Mr. Li is also a director of CBS, Campbell Soup Company, Hong Kong Telecommunications Limited, The Bank of East Asia, Limited, The Hong Kong & China Gas Company Limited, Sime Darby Hong Kong Limited and South China Morning Post (Holdings) Limited. Jane C. MacElree, age 68, member of the Compensation and Corporate Governance Committees, has been a director of the company since 1996. Mrs. MacElree is the mother of Ms. Hill and first cousin of Mr. Bancroft. Frank N. Newman, age 55, member of the Audit and Corporate Governance Committees, has been a director of the company since 1997. Mr. Newman is Chairman, President and Chief Executive Officer of Bankers Trust New York Corporation and Bankers Trust Company. Prior to September 1995, Mr. Newman was Deputy Secretary of the United States Treasury and prior to February 1993, Vice Chairman and Chief Financial Officer of BankAmerica Corporation. James Q. Riordan, age 70, member of the Audit, Executive and Compensation Committees, has been a director of the company since 1970 and is retiring from the Board in 1998. Mr. Riordan is director of various corporations. Prior to May 1992, he was President and Chief Executive Officer of Bekaert Corp. (steel wire manufacturer) and prior to October 1989, Vice Chairman and Chief Financial Officer, Mobil Corporation (petroleum). Mr. Riordan is a director of The Brooklyn Union Gas Company and The Houston Exploration Company, and a director/trustee of the mutual funds in the Seligman Group of investment companies. William C. Steere, Jr., age 61, member of the Compensation and Corporate Governance Committees, has been a director of the company since 1997. Mr. Steere is Chairman and Chief Executive Officer, Pfizer Inc. (pharmaceuticals). Mr. Steere is also a director of Minerals Technologies Inc. and Texaco Inc. M. Peter McPherson, age 57, is being nominated for director of the company. Mr. McPherson is President of Michigan State University and prior to October 1993, was Group Executive Vice President of Bank of America. The following executive officers of the company are also directors: Peter R. Kann, member of the Executive Committee and director since 1987; Kenneth L. Burenga, member of the Executive Committee and director since 1990; and James H. Ottaway Jr., director since 1987.
PAGE 55 Section 16(a) Beneficial Ownership Reporting Compliance - ------------------------------------------------------- Section 16(a) of the Securities Exchange Act of 1934 requires the company's executive officers and directors, and persons who own more than ten percent of the outstanding Common Stock or Class B Common Stock, to file reports of ownership and changes in ownership with the Securities and Exchange Commission and the New York Stock Exchange. Such persons are also required by SEC regulation to furnish the company with copies of all Section 16(a) reports they file. In 1991, the SEC completed an extensive revision of its rules in this area. In addition to increasing the number and kind of reports to be filed, the SEC has obliged companies to report in their proxy statements failures to file reports on a timely basis. The company believes that the failures to file listed below were inadvertent. Based solely on its review of the copies of such forms received by the company, or written representations from certain reporting persons that no Form 5 annual reports were required for those persons, the company believes that during 1997, all filing requirements under Section 16(a) of the Exchange Act applicable to its executive officers, directors, and greater than ten-percent beneficial owners were complied with except that Mr. William C. Cox, Jr., Ms. Leslie Hill and Mrs. Jane C. MacElree each filed a late Form 5 annual report reporting the deferred stock equivalents which they were credited during 1997.
PAGE 56 ITEM 11. Executive Compensation. The following tables and report provide information as to the cash and noncash compensation paid to, earned by or granted to each of the five most highly compensated senior policy making executives of the company.
Summary Compensation Table =========================================================================== Annual Compensation Long-Term Compensation ------------------------ --------------------------- Awards Payouts ------- --------- Long-term All other Name and Incentive Compen- Principal Options Payouts sation Position Year Salary Bonus (1) (2) (3) - ---------------------------------------------------------------------------
Peter R. Kann, 1997 $735,000 $190,000 31,800 $282,562 $180,017 Chairman of the Board, Chief 1996 $715,000 $380,000 40,000 $234,525 $210,850 Executive Officer and Director 1995 $680,000 $445,000 14,800 $507,938 $220,207 - --------------------------------------------------------------------------- Kenneth L. Burenga, 1997 $590,000 $140,000 16,900 $190,088 $113,472 President, Chief Operating Officer 1996 $550,000 $270,000 22,500 $198,750 $156,999 and Director 1995 $520,000 $310,000 10,200 $358,313 $161,548 - --------------------------------------------------------------------------- Carl M. Valenti, 1997 $453,000 $130,000 9,000 $128,438 $112,081 Senior Vice President 1996 $440,000 $155,000 12,900 $135,150 $112,940 1995 $422,000 $220,000 7,300 $255,938 $124,166 - --------------------------------------------------------------------------- Peter G. Skinner, 1997 $435,000 $153,000 10,700 $148,988 $113,074 Senior Vice President 1996 $410,000 $165,000 14,200 $147,075 $109,023 1995 $381,000 $205,000 7,300 $220,500 $113,032 - --------------------------------------------------------------------------- James H. Ottaway 1997 $391,000 $178,000 10,300 $128,438 $109,300 Jr., Senior Vice President 1996 $376,000 $160,000 12,900 $135,150 $101,386 and Director 1995 $361,000 $160,000 5,500 $196,875 $100,107 ===========================================================================
(1) In addition to stock option grants, the indicated executives were granted contingent stock rights under the Dow Jones 1997 Long Term Incentive Plan. The contingent stock rights granted during the most recently completed fiscal year are reported in the long-term incentive plan table on page 59 of this Form 10-K.
PAGE 57 (2) The payouts shown in the table for 1997 reflect the fair market value as of January 21, 1998 of the Final Awards made to the indicated executives under the Dow Jones 1992 Long Term Incentive Plan in respect of the four- year performance period 1994-1997. The payouts shown in the table for 1996 reflect the fair market value as of January 15, 1997 of the Final Awards made to the indicated executives under the Dow Jones 1992 Long Term Incentive Plan in respect of the four-year performance period 1993-1996. The payouts shown in the table for 1995 reflect the fair market value as of January 17, 1996 of the Final Awards made to the individual executives under the Dow Jones 1992 Long Term Inventive Plan in respect of the four- year performance period 1992-1995. The 1992 Long Term Incentive Plan was replaced in 1997 by the Dow Jones 1997 Long Term Incentive Plan. (3) The amounts referred to in the table above under "All Other Compensation" consist of the aggregate amounts contributed to the accounts of the indicated executives under the Dow Jones Profit Sharing Retirement Plan and the related Supplementary Benefit Plan in respect of the years indicated. With respect to amounts contributed in 1997, the Internal Revenue Code limits the allocation of the annual company contribution for the benefit of any individual account under a qualified profit sharing plan to the amount which would be contributed to such individual account based on maximum annual compensation of $160,000, but permits under a supplemental plan an additional allocation by the company to such individual equal to the additional amount which would otherwise have been allocated to him or her under the qualified plan had there been no limits. Executive officers may elect to have the amounts allocated to their accounts under the Supplementary Benefit Plan deemed to be invested in shares of Common Stock. With respect to 1997, such amounts were deemed to be invested at the closing price of the Common Stock on the first business day of 1998. With respect to 1997, the company has allocated the following amounts to the accounts of the indicated executives under the Profit Sharing Retirement Plan: Mr. Kann - $28,303; Mr. Burenga - $28,303; Mr. Valenti - $28,303; Mr. Skinner - $28,303; Mr. Ottaway - $28,303. The company has also allocated the following amounts to the accounts of the indicated executives under the Supplementary Benefit Plan with respect to 1997: Mr. Kann - $151,714; Mr. Burenga - $85,169; Mr. Valenti - $83,778; Mr. Skinner - $84,771; Mr. Ottaway - $80,997.
PAGE 58
Option Grants in 1997 ================================================================================================ Individual Grants ------------------------------------------------ Number of % of Total Potential Realizable Value Securities Options Exercise at Assumed Annual Rates Underlying Granted to or of Stock Price Options Employees Base Price Appreciation over Stock Granted In Fiscal ($/Share) Expiration Option Term (3) Name (1) Year (2) Date 5% 10% - ------------------------------------------------------------------------------------------------
Peter R. Kann 31,800 2.6% $50.75 11/26/07 $1,015,056 $2,571,984 Kenneth L. Burenga 16,900 1.4% $50.75 11/26/07 $ 539,448 $1,366,872 Carl M. Valenti 9,000 0.7% $50.75 11/26/07 $ 287,280 $ 727,920 Peter G. Skinner 10,700 0.9% $50.75 11/26/07 $ 341,544 $ 865,416 James H. Ottaway Jr. 10,300 0.8% $50.75 11/26/07 $ 328,776 $ 833,064 ================================================================================================ (1) One-third of the stock options will become exercisable on November 26, 1998, another one- third will become exercisable on November 26, 1999, and the remainder will become exercisable on November 26, 2000. (2) The exercise price of the stock options is $50.75 per share, the fair market value of the Common Stock on November 26, 1997, the date on which the stock options were granted. (3) These amounts represent gains based on assumed rates of appreciation over the entire ten-year period. Actual gains, if any, on stock option exercises are dependent on the future performance of the company's Common Stock and the continued employment of the optionee through the vesting period.
Aggregated Option Exercises in 1997 And Year-End Option Values ================================================================================================ Total Number of Value of Unexercised Unexercised Options at In-the-Money Options at December 31, 1997 December 31, 1997 (*) Shares -------------------------- -------------------------- Acquired on Value Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable - ------------------------------------------------------------------------------------------------
Peter R. Kann 1,969 $21,413 153,385 51,800 $2,878,276 $479,663 Kenneth L. Burenga - - 103,368 28,150 $1,929,197 $266,910 Carl M. Valenti - - 71,641 15,450 $1,315,507 $151,004 Peter G. Skinner 1,422 $13,510 62,230 17,800 $1,164,069 $168,550 James H. Ottaway Jr. 3,266 $54,706 63,699 16,750 $1,219,470 $154,822 ================================================================================================ (*) This represents the difference between the closing price of the company's Common Stock on December 31, 1997 ($53.6875) and the exercise price of the options.
PAGE 59
Long-Term Incentive Plan--Awards in 1997 =========================================================================== Performance or Other Number of Shares, Units Period Until Maturation Name or Other Rights (*) or Payout - ---------------------------------------------------------------------------
Peter R. Kann 12,500 1998-2001 Kenneth L. Burenga 6,625 1998-2001 Carl M. Valenti 3,550 1998-2001 Peter G. Skinner 4,225 1998-2001 James H. Ottaway Jr. 4,050 1998-2001 ===========================================================================
(*) The long-term incentive plan awards are contingent stock rights granted under the Dow Jones 1997 Long Term Incentive Plan. Each contingent stock right gives the holder the contingent right to receive up to the number of shares of Common Stock specified in the right (the "Initial Award") following completion of a 4-year performance period. The number of shares ultimately received (the "Final Award") will depend on the extent to which the performance criteria are achieved during the 4-year performance period, the participant's individual performance and other factors. Participants may elect, subject to the approval of the Compensation Committee, to receive all or a portion of their Final Awards in cash, or Common Stock, or a combination of both. If a participant elects to receive all or a portion of the Final Award in cash, the amount of cash will equal the closing price of the Common Stock on the date of the Final Award multiplied by the number of shares of Common Stock as to which the election is being made. During the performance period relating to each right, the Compensation Committee may adjust the performance criteria and otherwise modify the terms and provisions of the right. Also during the performance period, the holder is entitled to receive as "dividend equivalents" an amount equal to the cash dividends that the holder would have received if the holder had owned the number of shares of Common Stock covered by the Initial Award during the entire performance period. At December 31, 1997, Mr. Kann held contingent stock rights covering a total of 66,800 shares; Mr. Burenga - 41,725 shares; Mr. Valenti - 27,950 shares; Mr. Skinner - 26,625 shares; and Mr. Ottaway - 23,650 shares. At December 31, 1997, the fair market value of the Common Stock subject to such rights was as follows: Mr. Kann - $3,586,325; Mr. Burenga - $2,240,111; Mr. Valenti - $1,500,566; Mr. Skinner - $1,429,430; and Mr. Ottaway - $1,269,709. The Final Award ultimately received may be less than or equal to the numbers set forth above. It is expected that fully satisfactory competitive performance (as judged by the Compensation Committee in its discretion at the time of the payouts) would be competitively rewarded if the Final Award approximated 80% of the amounts set forth above. Exceptional performance would support a Final Award in excess of 80% of the amounts set forth above but in no event more than 100% of such amounts.
PAGE 60 Carl M. Valenti Retirement Agreement - ------------------------------------ Mr. Valenti will retire from the company, effective March 31, 1998, and has agreed to provide consulting services to the company during the period from April 1, 1998 through December 31, 1999. He has also agreed to refrain from engaging in any business activity that is competitive with the business of the company and its subsidiaries. In consideration for performance of his consulting and non-competition obligations, the company will pay Mr. Valenti an aggregate of $792,750 in 21 equal monthly installments of $37,750 commencing on April 1, 1998 and ending on December 1, 1999. In addition, the company will credit Mr. Valenti's deferred compensation account with an amount equal to the amounts he would have received under the Dow Jones Profit Sharing Retirement Plan and the related Supplementary Benefit Plan had he been an employee of the company and continued to receive a salary at his 1997 rate between April 1, 1998 and December 31, 1999. Compensation of Directors - ------------------------- During 1997 the Board of Directors met eight times, the Executive Committee met three times, the Audit Committee met four times, the Compensation Committee met five times and the Corporate Governance Committee met two times. In 1997 the fee for each Board meeting attended was $1,200; the fee for each committee meeting attended was $1,000; and the annual fee for each committee chairman was $3,000. At its November 1996 meeting the Board of Directors terminated the retirement plan for non-employee directors, effective immediately after the 1997 Annual Meeting. In order to begin to increase the proportion of directors' stock-based compensation, the Board of Directors at the same meeting lowered the cash component of the annual director's fee from $26,000 to $20,000 and adopted a deferred stock equivalent compensation plan for non-employee directors so as to provide a means to grant compensation based on shares of Common Stock ("stock equivalents") (and also to keep total directors' compensation competitive in light of the elimination of retirement benefits). All of these changes became effective immediately after the 1997 Annual Meeting. In 1998, the cash component of the annual director's fee and the fees for attending Board and committee meetings and for serving as a committee chairman will remain the same as in 1997. Under the directors' deferred stock equivalent compensation plan, each non-employee director is credited with $20,000 worth of stock equivalents per year. Such stock equivalents are credited quarterly (since the 1997 Annual Meeting), and the number thereof are determined at the market price of the company's Common Stock on the last business day of the quarter in question. From time to time Board members are invited to attend meetings of Board committees of which they are not members; in such cases, such Board members receive a committee meeting fee. Employees of the company or its subsidiaries who are directors do not receive director's, committee or committee chairman's fees.
PAGE 61 Directors may elect to defer receipt, in whole or in part, of any of their fees payable in cash. Deferred amounts will, at the electing director's option, either be credited to an interest bearing account or be deemed to be invested in shares of Common Stock (i.e., stock equivalents) at the market price on the last business day of the month in which the deferred amount in question would have otherwise been received. Deferred cash amounts will be paid in cash, in a lump sum or in the form of annuity, as the director may elect. Deferred stock equivalent amounts will be paid in cash (in a lump sum or in the form of an annuity) or shares of Common Stock (in up to fifteen annual installments), or a combination of cash and Common Stock, as the director may elect. Non-employee directors who retired at or prior to the 1997 Annual Meeting will continue to receive benefits under the company's retirement program for directors. Any such director who served for five years or more is entitled to receive an annual amount equal to the annual fee payable at the time of retirement. The fee will be payable for the lesser of 15 years or the number of years the director served. Upon the death of an eligible director, 75% of the annual amount is payable to his or her estate or designated beneficiary for the remaining payment term. Amounts previously accrued under the retirement plan by directors who continued to serve on the Board after the 1997 Annual Meeting were added to such directors' deferred compensation accounts and credited to cash or stock equivalent accounts as specified by the individual directors. ITEM 12. Security Ownership of Certain Beneficial Owners and Management. Security Ownership of Certain Beneficial Owners
The following table sets forth information, as of January 22, 1998, with respect to the number of shares of Common Stock and Class B Common Stock owned by the only persons who were known by the company to own beneficially more than 5% of the outstanding Common Stock or Class B Common Stock. =========================================================================== Shares Percent Beneficially of Name and Address of Beneficial Owner Owned(a) Class - ---------------------------------------------------------------------------
Christopher Bancroft Common 4,797,405(b) 6.4% c/o Holme Roberts & Owen LLC Class B 3,820,360(b) 17.7% 1700 Lincoln Street Denver, Colorado 80203 - --------------------------------------------------------------------------- Barclays Bank PLC Common 4,491,629(c) 6.0% 54 Lombard Street London, England EC3P 3AH - --------------------------------------------------------------------------- Capital Research & Management Co. Common 4,771,300(d) 6.3% 333 South Hope Street Los Angeles, California 90071 - --------------------------------------------------------------------------- Judson W. Detrick Common 3,402,772(e) 4.5% Holme Roberts & Owen LLC Class B 2,266,261(e) 10.5% 1700 Lincoln Street Denver, Colorado 80203 - ---------------------------------------------------------------------------
PAGE 62
=========================================================================== Shares Percent Beneficially of Name and Address of Beneficial Owner Owned(a) Class - ---------------------------------------------------------------------------
Michael B. Elefante Common 3,012,309(e) 4.0% Hemenway & Barnes Class B 1,689,981(e) 7.8% 60 State Street Boston, Massachusetts 02109 - --------------------------------------------------------------------------- Timothy F. Fidgeon Common 1,999,015(e) 2.7% Hemenway & Barnes Class B 2,163,083(e) 10.0% 60 State Street Boston, Massachusetts 02109 - --------------------------------------------------------------------------- Franklin Mutual Advisers, Inc. Common 3,818,100(f) 5.1% 51 John F. Kennedy Parkway Short Hills, New Jersey 07078 - --------------------------------------------------------------------------- Roy A. Hammer Common 11,780,020(e) 15.6% Hemenway & Barnes Class B 8,454,534(e) 39.2% 60 State Street Boston, Massachusetts 02109 - --------------------------------------------------------------------------- Paul D. Holleman Common 3,403,372(e) 4.5% Holme Roberts & Owen LLC Class B 2,266,211(e) 10.5% 1700 Lincoln Street Denver, Colorado 80203 - --------------------------------------------------------------------------- Jane C. MacElree Common 6,507,784(g) 8.6% c/o Hemenway & Barnes Class B 3,892,016(g) 18.1% 60 State Street Boston, Massachusetts 02109 - --------------------------------------------------------------------------- Rod B. MacLeod Common 2,689,448(e) 3.6% MacLeod & McGinness Class B 1,380,196(e) 6.4% 1800 Second Street, Suite 971 Sarasota, Florida 34236 - --------------------------------------------------------------------------- James H. Ottaway, Sr. Common 2,817,451(h) 3.7% Ruth B. Ottaway Class B 1,679,014(h) 7.8% James H. Ottaway, Jr. David B. Ottaway Ruth Ottaway Sherer c/o Ottaway Newspapers, Inc. Post Office Box 401 Campbell Hall, New York 10916 - --------------------------------------------------------------------------- Lawrence T. Perera Common 4,510,550(e) 6.0% Hemenway & Barnes Class B 3,477,000(e) 16.1% 60 State Street Boston, Massachusetts 02109 - ---------------------------------------------------------------------------
PAGE 63
=========================================================================== Shares Percent Beneficially of Name and Address of Beneficial Owner Owned(a) Class - ---------------------------------------------------------------------------
Michael J. Puzo Common 1,292,674(e) 1.7% Hemenway & Barnes Class B 1,899,488(e) 8.8% 60 State Street Boston, Massachusetts 02109 - --------------------------------------------------------------------------- Thomas A. Richardson Common 3,126,672(e) 4.1% Holme Roberts & Owen LLC Class B 1,928,331(e) 8.9% 1700 Lincoln Street Denver, Colorado 80203 - --------------------------------------------------------------------------- George T. Shaw Common 914,232(e) 1.2% Hemenway & Barnes Class B 1,083,025(e) 5.0% 60 State Street Boston, Massachusetts 02109 - --------------------------------------------------------------------------- State Street Bank & Trust Company Common 6,017,075(i) 8.0% 225 Franklin Street Class B 3,230,763(i) 15.0% Boston, Massachusetts 02110 - --------------------------------------------------------------------------- Elizabeth Steele Common 3,912,624(e) 5.2% c/o Hemenway & Barnes Class B 2,146,210(e) 10.0% 60 State Street Boston, Massachusetts 02109 - --------------------------------------------------------------------------- Bayne Stevenson Common 3,320,565(e) 4.4% c/o Hemenway & Barnes Class B 1,739,191(e) 8.1% 60 State Street Boston, Massachusetts 02109 ===========================================================================
(a) Except as otherwise indicated, the beneficial owner has sole voting and investment power. (b) Includes 4,510,000 shares of Common Stock and 3,477,000 shares of Class B Common Stock held by Mr. Bancroft as trustee, as to which he shares voting and investment power with other trustees, including Messrs. Hammer and Perera. Also includes 287,405 shares of Common Stock and 343,360 shares of Class B Common Stock held by Mr. Bancroft as trustee of a revocable trust, as to which he shares voting and investment power with other trustees, including Messrs. Holleman, Richardson and Detrick. Mr. Bancroft could acquire sole voting and investment power over such shares if he were to revoke the trust. (c) As of December 31, 1997, which is the most recent date as of which the company has such information, Barclays Bank PLC held all of these shares as an investment advisor or broker-dealer and had sole voting power as to 4,278,017 of these shares and shared investment power over all of these shares with non-affiliated persons.
PAGE 64 (d) As of December 31, 1997, which is the most recent date as of which the company has such information, Capital Research & Management Co. held all of these shares as an investment adviser and had sole investment power over all of these shares and no voting power over any of these shares. (e) Includes shares held as trustee, as to which voting and investment power is shared with other trustees (including other persons named above), by the following persons, each of whom disclaims beneficial ownership of such shares: Mr. Detrick - 3,402,772 shares of Common Stock and 2,266,211 shares of Class B Common Stock; Mr. Elefante - 3,012,309 shares of Common Stock and 1,689,981 shares of Class B Common Stock; Mr. Fidgeon - 1,999,015 shares of Common Stock and 2,163,083 shares of Class B Common Stock; Mr. Hammer - 11,780,020 shares of Common Stock and 8,454,534 shares of Class B Common Stock; Mr. Holleman - 3,402,772 shares of Common Stock and 2,266,211 shares of Class B Common Stock; Mr. MacLeod - 2,689,448 shares of Common Stock and 1,380,196 shares of Class B Common Stock; Mr. Perera - 4,510,550 shares of Common Stock and 3,477,000 shares of Class B Common Stock; Mr. Puzo - 1,292,674 shares of Common Stock and 1,899,488 shares of Class B Common Stock; Mr. Richardson - 3,126,672 shares of Common Stock and 1,928,331 shares of Class B Common Stock; Mr. Shaw - 914,232 shares of Common Stock and 1,083,025 shares of Class B Common Stock; Ms. Steele - 3,912,624 shares of Common Stock and 2,146,210 shares of Class B Common Stock; Mr. Stevenson - 3,301,134 shares of Common Stock and 1,730,393 shares of Class B Common Stock. Also includes 600 shares of Common Stock held by Mr. Holleman as trustee, as to which Mr. Holleman has sole voting and investment power. (f) As of December 31, 1997, which is the most recent date as of which the company has such information, Franklin Mutual Advisers, Inc. held all of these shares as an investment adviser and had sole voting and investment power over all of these shares. (g) Includes 5,531,471 shares of Common Stock and 3,348,848 shares of Class B Common Stock held by Mrs. MacElree as trustee, as to which she shares voting and investment power with other trustees, including Mr. Elefante with respect to 2,745,000 shares of Common Stock and 1,440,250 shares of Class B Common Stock; Mr. Hammer with respect to 2,739,400 shares of Common Stock and 1,746,733 shares of Class B Common Stock; Mr. Puzo with respect to 46,900 shares of Common Stock and 161,800 shares of Class B Common Stock; Mr. Shaw with respect to 14,400 shares of Common Stock and 394,683 shares of Class B Common Stock. Also includes 819,015 shares of Common Stock and 541,583 shares of Class B Common Stock held by Mrs. MacElree as trustee of a revocable trust, as to which she shares voting and investment power with other trustees, including Messrs. Fidgeon and Shaw. Mrs. MacElree could acquire sole voting and investment power over such shares if she were to revoke the trust.
PAGE 65 (h) All of these shares have been deposited in a voting trust by various Ottaway family trusts, individual members of the Ottaway family and a private investment company owned by members of the Ottaway family. The voting trustees under the voting trust are James H. Ottaway, Sr., his wife, Ruth B. Ottaway, and their adult children, James H. Ottaway, Jr., David B. Ottaway and Ruth Ottaway Sherer. The voting trust will remain in effect until January 27, 2003, but shares may be withdrawn from the voting trust prior thereto. As of January 22, 1998, each of James H. Ottaway, Sr., Ruth B. Ottaway and David B. Ottaway beneficially owned 2,817,451 shares of Common Stock and 1,679,014 shares of Class B Common Stock. As of January 22, 1998, Ruth Ottaway Sherer beneficially owned 2,989,621 shares of Common Stock (4.0%) and 1,716,203 shares of Class B Common Stock (8.0%). As of January 22, 1998, James H. Ottaway, Jr. beneficially owned 2,886,226 shares of Common Stock (includes 63,699 shares subject to options) and 1,679,014 shares of Class B Common Stock. Each of the foregoing persons is deemed the beneficial owner of the shares held in the voting trust described above and, accordingly, each of the foregoing figures includes such shares. In addition, various other shares are also included more than once in the foregoing figures as a result of other shared ownership arrangements. Each of James H. Ottaway, Sr., Ruth B. Ottaway, James H. Ottaway, Jr., David B. Ottaway and Ruth Ottaway Sherer shares voting power over 2,817,451 shares of Common Stock and 1,679,014 shares of Class B Common Stock and investment power over 28,080 shares of Common Stock and 1,540 shares of Class B Common Stock. Ruth Ottaway Sherer has sole voting and investment power over 172,170 shares of Common Stock and 37,189 shares of Class B Common Stock. (i) As of December 31, 1997, which is the most recent date as of which the company has such information, State Street Bank & Trust Company held all of these shares as trustee, disclaimed beneficial ownership of them and shared voting and investment power with persons named above as to 4,685,182 shares of Common Stock and 3,197,032 shares of Class B Common Stock. Security Ownership of Directors and Management The following table sets forth information as of January 22, 1998, with respect to the number of shares of Common Stock and Class B Common Stock owned by each director and nominee for director, the five most highly compensated executive officers, and all directors, nominees and executive officers as a group.
PAGE 66
=========================================================================== Shares Percent Beneficially of Common Stock Owned Class Equivalents Name (1) (2) (3) - ---------------------------------------------------------------------------
Rand V. Araskog(4) Common 8,000 * 27,073 Class B 700 * - --------------------------------------------------------------------------- Christopher Bancroft(5)(6)(7) Common 4,797,405 6.4% 1,128 Class B 3,820,360 17.7% - --------------------------------------------------------------------------- Kenneth L. Burenga(4) Common 127,987 * - Class B 3,015 * - --------------------------------------------------------------------------- William C. Cox, Jr.(5)(6)(8) Common 247,276 * 685 Class B 639,061 3.0% - --------------------------------------------------------------------------- Harvey Golub Common 2,000 * 1,110 Class B - * - --------------------------------------------------------------------------- Leslie Hill(5)(6)(9) Common 117,437 * 504 Class B 68,943 * - --------------------------------------------------------------------------- Irvine O. Hockaday, Jr. Common 3,000 * 6,479 Class B - * - --------------------------------------------------------------------------- Vernon E. Jordan, Jr. Common 270 * 7,144 Class B 105 * - --------------------------------------------------------------------------- Peter R. Kann(4) Common 230,923 * 5,505 Class B 4,027 * - --------------------------------------------------------------------------- David K.P. Li Common 8,030 * 8,025 Class B - * - --------------------------------------------------------------------------- Jane C. MacElree(5)(6)(10) Common 6,507,784 8.6% 457 Class B 3,892,016 18.1% - --------------------------------------------------------------------------- M. Peter McPherson Common - * - Class B - * - --------------------------------------------------------------------------- Frank N. Newman Common 200 * 457 Class B - * - --------------------------------------------------------------------------- James H. Ottaway, Jr.(11) Common 2,886,226 3.8% - Class B 1,679,014 7.8% - --------------------------------------------------------------------------- Peter G. Skinner (4) Common 72,070 * - Class B - * - --------------------------------------------------------------------------- William C. Steere, Jr. Common 1,000 * 1,238 Class B - * - ---------------------------------------------------------------------------
PAGE 67 =========================================================================== Shares Percent Beneficially of Common Stock Owned Class Equivalents Name (1) (2) (3) - ---------------------------------------------------------------------------
Carl M. Valenti(4) Common 105,860 * - Class B 2,087 * - --------------------------------------------------------------------------- All directors and executive Common 15,169,567 20.1% 60,466 officers as a group Class B 10,111,536 46.9% (19 persons)(12) ===========================================================================
(1) Except as otherwise indicated, the beneficial owner has sole voting and investment power. Includes shares of Common Stock subject to options exercisable within 60 days after January 22, 1998 held by: Mr. Burenga (103,368 shares), Mr. Cox (24,905 shares), Mr. Kann (153,385 shares), Mr. Ottaway (63,699 shares), Mr. Skinner (62,230 shares) and Mr. Valenti (71,641 shares). (2) For purposes of computing the percentages above, the number of shares of Common Stock outstanding includes any shares which may be acquired by the named person within 60 days after January 22, 1998. An asterisk under the column "Percent of Class" indicates that the named person beneficially owns less than one percent of the shares of Common Stock or Class B Common Stock outstanding. (3) Under the directors' deferred stock equivalent compensation plan (see page 60), each non-employee director is credited with $20,000 worth of stock equivalents per year. Certain directors have elected to defer receipt of some or all of their fees payable in cash and have invested such deferred amounts in stock equivalents. Amounts previously accrued under the terminated retirement plan for non-employee directors by directors who continued to serve on the Board after the 1997 Annual Meeting, were added to such director's deferred compensation accounts and certain directors have elected to invest such accrued amount in stock equivalents. Also, certain executive officers have elected to have the amounts allocated to their accounts under the Supplementary Benefit Plan (see footnote (3) of the Summary Compensation Table on page 57) deemed to be invested in stock equivalents. (4) Includes shares owned by, or jointly with, spouses, as follows: Mr. Burenga - 7,522 shares of Common Stock and 1,292 shares of Class B Common Stock owned by his spouse; Mr. Kann - 8,332 shares of Common Stock and 124 shares of Class B Common Stock owned by his spouse; Mr. Skinner - 2,762 shares of Common Stock owned jointly with his spouse; Mr. Valenti - 664 shares of Common Stock owned by his spouse and 409 shares of Common Stock owned jointly with his spouse. Includes, with respect to Messrs. Kann and Valenti, 32,686 and 19,190 shares of Common Stock, respectively, subject to options exercisable within 60 days after January 22, 1998 held by their respective spouses. Mr. Burenga shares voting and investment power with his spouse as to those shares owned by her. Messrs. Kann and Valenti disclaim beneficial ownership of the shares owned by their respective spouses. Mr. Skinner shares voting and investment power with his spouse as to those shares owned jointly.
PAGE 68 (5) Mr. Cox is the brother of Mrs. MacElree. Mr. Cox and Mrs. MacElree are first cousins of Mr. Bancroft. Ms. Hill is the daughter of Mrs. MacElree. (6) As of January 1, 1998, Mr. Cox, Mr. Bancroft, Mrs. MacElree and Ms. Hill, certain of their relatives, and certain trusts and charitable organizations established by them owned beneficially a total of 24,913,657 shares (33%) of the outstanding Common Stock and 17,359,716 shares (80%) of the outstanding Class B Common Stock. Such shares account for approximately 64% of the votes represented by the outstanding Common Stock and Class B Common Stock. Mr. Cox, Mr. Bancroft, Mrs. MacElree and Ms. Hill, trusts as to which they or certain of their relatives are trustees or have beneficial or reversionary interests, and the trustees of such trusts, may be considered in control of the company and therefore its "parent." (7) Includes 287,405 shares of Common Stock and 343,360 shares of Class B Common Stock held by Mr. Bancroft as trustee of a revocable trust, as to which he shares voting and investment power with other trustees and as to which he could acquire sole voting and investment power if he were to revoke the trust. Also includes 4,510,000 shares of Common Stock and 3,477,000 shares of Class B Common Stock held by Mr. Bancroft as trustee, as to which he shares voting and investment power with other trustees. (8) Includes 58,351 shares of Common Stock and 207,400 shares of Class B Common Stock held by a revocable trust for the benefit of Mr. Cox, as to which he could acquire sole voting and Investment power if he were to revoke the trust. Also includes 164,014 shares of Common Stock and 431,621 shares of Class B Common Stock, as to which Mr. Cox disclaims beneficial ownership, as follows: 85,514 shares of Common Stock and 379,791 shares of Class B Common Stock held by Mr. Cox as trustee, as to which he shares voting and investment power; 50,500 shares of Common Stock and 27,130 shares of Class B Common Stock held by trustees for Mr. Cox's spouse; and 29,000 shares of Common Stock and 24,700 shares of Class B Common Stock held by a foundation of which Mr. Cox is President. (9) Includes 6,006 shares of Common Stock and 1,618 shares of Class B Common Stock owned by Ms. Hill's spouse and minor children. (10) Includes 819,015 shares of Common Stock and 541,583 shares of Class B Common Stock held by Mrs. MacElree as trustee of a revocable trust, as to which she shares voting and investment power with other trustees and as to which she could acquire sole voting and investment power if she were to revoke the trust. Also includes 5,531,471 shares of Common Stock and 3,348,848 shares of Class B Common Stock held by Mrs. MacElree as trustee, as to which she disclaims beneficial ownership and shares voting and investment power with other trustees and 4,255 shares of Common Stock and 1,585 shares of Class B Common Stock owned by her spouse. (11) See footnote (h) starting on page 65 of this Form 10-K for a description of Mr. Ottaway's ownership of Common Stock and Class B Common Stock. (12) Includes 573,989 shares of Common Stock subject to options that may be exercised by executive officers and directors within 60 days after January 22, 1998. Also includes shares owned by or jointly with their spouses and by their children and relatives sharing their homes.
PAGE 69 ITEM 13. Certain Relationships and Related Transactions. During 1997, Akin, Gump, Strauss, Hauer & Feld, the law firm of which Mr. Jordan is a senior partner, rendered certain legal services to the company. The company expects that this law firm will continue to render legal services to the company in 1998. Karen Elliott House, President/International Group of the company and the spouse of Mr. Kann, received a salary and bonus in 1997 of $400,000. An aggregate of $75,729 was contributed to Ms. House's account under the Dow Jones Profit Sharing Retirement Plan and the related Supplementary Benefit Plan in respect of 1997. Ms. House received a payout for 1997 of 1,400 shares of Common Stock with a fair market value as of January 21, 1998 of $71,925 under the Dow Jones 1992 Long Term Incentive Plan in respect of the four-year performance period 1994-1997. Ms. House also received contingent stock rights and stock options under the Dow Jones 1997 Long Term Incentive Plan. Ms. House's compensation is set by the Compensation Committee of the Board of Directors.
PAGE 70 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, 1997, 1996 and 1995 24 Consolidated balance sheets, December 31, 1997 and 1996 25-26 Consolidated statements of cash flows for the years ended December 31, 1997, 1996 and 1995 27-28 Consolidated statements of stockholders' equity for the years ended December 31, 1997, 1996 and 1995 29 Notes to financial statements 30-47 Report of independent accountants 48 (a) (2) Financial Statement Schedules: Included in Part IV of this report: Report and consent of independent accountants 75 II - Valuation and qualifying accounts and reserves 76 Other schedules have been omitted since they are either not required or not applicable.
PAGE 71 (a) (3) Exhibits Exhibit Number Document ------- -------- 3.1 The Restated Certificate of Incorporation of the company, as amended, is hereby incorporated by reference to Exhibit 19.1 to its Form 10-Q for the quarter ended March 31, 1988. 3.2 The Bylaws of the company is hereby incorporated by reference to Exhibit 19.2 to its Form 10-Q for the quarter ended September 30, 1987. 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 Dow Jones 1983 Executive Incentive Plan, as amended, is hereby incorporated by reference to Exhibit 10.3 to its Form 10-K for the year ended December 31, 1983. 10.4 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. 10.5 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. 10.6 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. 10.7 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. 10.8 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 Dow Jones Credit Agreement dated November 16, 1994 between the company and Chemical Bank is hereby incorporated by reference to Exhibit 10.9 to its Form 10-K for the year ended December 31, 1994.
PAGE 72 Exhibit Number Document ------- -------- * 10.10 First Amendment to the Dow Jones Credit Agreement dated December 31, 1997 between the company and The Chase Manhattan Bank. * 10.11 Retirement Agreement dated December 30, 1997 between the company and Mr. Valenti. 21 List of Subsidiaries. 23 Consent of Coopers & Lybrand, independent accountants, is contained on page 75 of this report. * 27 Financial Data Schedule * Securities and Exchange Commission and New York Stock Exchange copies only. (b) Reports on Form 8-K On a Form 8-K, dated November 19, 1997, under Item 5. Other Events and Item 7. Financial Statements, Pro Forma Financial Information and Exhibits, Dow Jones filed a copy of a press release that the company had issued on that date.
PAGE 73 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. By Thomas G. Hetzel ------------------------- Comptroller (Chief Accounting Officer) Dated: March 16, 1998 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 16, 1998 Chief Executive Officer Kenneth L. Burenga - -------------------------- President March 16, 1998 Chief Operating Officer Kevin J. Roche - -------------------------- Vice President/Finance March 16, 1998 Chief Financial Officer Harvey Golub - -------------------------- Director March 16, 1998 James Q. Riordan - -------------------------- Director March 16, 1998
PAGE 74 Signature Title Date - --------- ----- ---- Frank N. Newman - --------------------------- Director March 16, 1998 William C. Cox Jr. - --------------------------- Director March 16, 1998 Jane C. MacElree - --------------------------- Director March 16, 1998 Leslie Hill - --------------------------- Director March 16, 1998 Christopher Bancroft - --------------------------- Director March 16, 1998 William C. Steere Jr. - --------------------------- Director March 16, 1998 Irvine O. Hockaday Jr. - --------------------------- Director March 16, 1998 Vernon E. Jordan Jr. - --------------------------- Director March 16, 1998 James H. Ottaway Jr. - --------------------------- Director March 16, 1998 Rand V. Araskog - --------------------------- Director March 16, 1998
PAGE 75 INDEPENDENT ACCOUNTANTS' REPORT ON FINANCIAL STATEMENT SCHEDULES ----------------------- To the Board of Directors and Stockholders of Dow Jones & Company, Inc.: Our report on the consolidated financial statements of Dow Jones & Company, Inc. and its Subsidiaries is included on page 48 of this 1997 Form 10-K. In connection with our audits of such financial statements, we have also audited the related financial statement schedules listed in the index on page 70 of this Form 10-K. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. COOPERS & LYBRAND L.L.P. New York, New York January 29, 1998 CONSENT OF INDEPENDENT ACCOUNTANTS ----------------------- We consent to the incorporation by reference in the Registration Statements on Form S-3 (File No. 333-2071) and Form S-8 (File Nos. 2-72684, 2-95540, 33-35211, 33-45962, 33-45963, 33-49311 and 33-55079) of Dow Jones & Company, Inc. of our report dated January 29, 1998 appearing on page 48 of this 1997 Form 10-K. We also consent to the incorporation by reference of our report on the financial statement schedules, which appears above. COOPERS & LYBRAND L.L.P. New York, New York March 16, 1998
PAGE 76
Schedule II DOW JONES & COMPANY, INC. and its Subsidiaries SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS for the years ended December 31, 1997, 1996 and 1995 (in thousands) Additions ------------------------ Balance at Charged to Charged Balance Beginning Cost and to Other at End Description of Period Expenses Accounts(A) Deductions(B) of Period ----------- --------- --------- ---------- ------------ ---------
Year ended December 31, 1997: Reserves deducted from assets - allowance for doubtful accounts $16,234 $10,743 $4,134 $14,666 $16,445 ======= ======= ====== ======= ======= Year ended December 31, 1996: Reserves deducted from assets - allowance for doubtful accounts $13,402 $8,827 $4,062 $10,057 $16,234 ======= ====== ====== ======= ======= Year ended December 31, 1995: Reserves deducted from assets - allowance for doubtful accounts $14,870 $6,176 $3,572 $11,216 $13,402 ======= ====== ====== ======= ======= Notes: (A) Recoveries of accounts previously written off and reductions of revenue. (B) Accounts written off as uncollectible and credits issued to customers.
EX-10.10
2
Exhibit 10.10
PAGE 1
EXECUTION COPY
FIRST AMENDMENT
FIRST AMENDMENT dated as of December 31, 1997 (this
"Amendment") among DOW JONES & COMPANY, INC., a Delaware
corporation (the "Company"), the several banks parties to the
Revolving Credit Agreement referred to below (the "Banks") and THE
CHASE MANHATTAN BANK, as agent for the Banks (in such capacity,
the "Agent").
WITNESSETH
WHEREAS, the Company, the Banks and the Agent are
parties to the Revolving Credit Agreement dated as of November 16,
1994 (the "Existing Credit Agreement"; the Existing Credit
Agreement as amended by this Amendment, the "Credit Agreement");
and
WHEREAS, the Company has requested that the Banks amend
certain provisions of the Existing Credit Agreement, and the Banks
are agreeable to such request on the terms and conditions of this
Amendment;
NOW, THEREFORE, in consideration of the premises and of
the mutual convenants contained herein, the Company, the Banks and
the Agent hereby agree as follows:
1. Definitions. Unless otherwise defined herein,
terms defined in the Existing Credit Agreement shall be used as so
defined.
2. Amendment to Subsection 6.2 of the Existing Credit
Agreement. Subsection 6.2(a) of the Existing Credit Agreement is
hereby amended by deleting such subsection in its entirety and
substituting in lieu thereof the following:
"(a) consolidate or merge with or into, or sell, convey
transfer or lease in a single transaction or in a series
of related transactions any substantial part of its
assets to, any other Person, except (i) a sale of the
business currently conducted by Dow Jones Markets
Holdings, Inc. and its Subsidiaries (whether through a
sale of stock or assets, a merger or consolidation or
otherwise) for an aggregate cash purchase price not less
than the fair market value thereof, (ii) any such
consolidation, merger, sale, conveyance, transfer or
lease when the only parties to such transaction or
series of transactions are one of its Subsidiaries and
one or more of its other Subsidiaries, (iii) any such
sale, conveyance, transfer or lease to the Company by
one or more of its Subsidiaries and (iv) the merger or
consolidation of the Company with another corporation,
PAGE 2 provided that the Company is the surviving corporation and that, after giving effect to such consolidation or merger, no Default or Event of Default has occurred and is continuing." 3. Amendment to Subsection 6.3 of the Existing Credit Agreement. Subsection 6.3 of the Existing Credit Agreement is hereby amended by deleting such subsection in its entirety. 4. Amendment to Subsection 6.4 of the Existing Credit Agreement. Subsection 6.4 of the Existing Credit Agreement is hereby amended by deleting such subsection in its entirety and substituting in lieu thereof the following: "6.4 Maintenance of Ratio of Consolidated Total Indebtedness to Consolidated Total Capitalization. Permit the ratio of Consolidated Total Indebtedness to Consolidated Total Capitalization to exceed 0.60 to 1 at any time." 5. Amendment to Section 1 of the Existing Credit Agreement. Section 1 of the Existing Credit Agreement is hereby amended as follows: (a) by deleting the definitions of "Consolidated Cash Flow" and "Consolidated Total Liabilities" in their entirety; and (b) by adding in proper alphabetical order the following definitions: "Consolidated Cash Flow": for any period, Consolidated Net Income of the Company and its Subsidiaries for such period plus the aggregate amounts deducted in determining such Consolidated Net Income in respect of (i) Consolidated Interest Expense, (ii) amortization expenses, (iii) depreciation expenses, (iv) income taxes for such period and (v) any extraordinary accounting charge or write down taken by the Company in the fourth quarter of 1997 in respect of Dow Jones Markets Holdings, Inc., each of clauses (i), (ii), (iii), (iv) and (v) determined in accordance with GAAP, but after deducting in the calculation thereof, income representing equity in the earnings of Affiliates not received in cash or, as the case may be, after restoring thereto deductions representing equity in the losses of Affiliates for which neither Dow Jones nor any of its Subsidiaries is liable.
PAGE 3 "Consolidated Total Capitalization": at a particular date, the sum of Consolidated Net worth and Consolidated Total Indebtedness. "Consolidated Total Indebtedness": at a particular date, all items which would, in conformity with GAAP, be classified as Indebtedness on a consolidated balance sheet of the Company and its Subsidiaries as at such date, but in any event including without any duplication (a) indebtedness arising under acceptance facilities and the face amount of all letters of credit issued for the account of the Company and any Subsidiary and all drafts drawn thereunder, (b) all Indebtedness secured by any Lien on any property owned by the Company or any Subsidiary even though the Company or such Subsidiary has not assumed or otherwise become liable for the payment thereof and (c) all Contingent Obligations of the Company and its Subsidiaries in respect of Indebtedness of other Persons. 6. Condition to Effectiveness. This Amendment shall become effective upon receipt by the Agent of executed counterparts (or facsimile confirmation of the execution of counterparts) of this Amendment by the Company and the Required Banks. 7. Representations and Warranties. The Company represents and warrants to the Agent and to each Bank that as of the date hereof: (a) the representations and warranties made by the Company in the Credit Agreement are true and correct in all material respects on and as of the date hereof (except to the extent that such representations and warranties are expressly stated to relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects on and as of such earlier date) prior to and after giving effect to this Amendment; and (b) no Default or Event of Default shall have occurred and be continuing as of the date hereof. 8. Continuing Effect. Except as expressly amended hereby, the Existing Credit Agreement shall continue to be and shall remain in full force and effect in accordance with its terms. 9. GOVERNING LAW. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. 10. Counterparts. This Amendment may be executed by the parties hereto in any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument.
PAGE 4 11. Payment of Expenses. The Company agrees to pay and reimburse the Agent for all of its out-of-pocket costs and reasonable expenses incurred to date in connection with this Amendment, including, without limitation, the reasonable fees and disbursements of legal counsel to the Agent. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their properly and duly authorized officers as of the day and year first above written. DOW JONES & COMPANY, INC. By: /s/ Leonard E. Doherty Name: Leonard E. Doherty Title: Treasurer THE CHASE MANHATTAN BANK, as Agent and as a Bank By: /s/ Ann B. Kerns Name: Ann B. Kerns Title: Vice President BANK OF HAWAII By: /s/ J. Bryan Scearce Name: J. Bryan Scearce Title: Vice President BAYERISCHE LANDESBANK GIROZENTRALE, Caymen Islands Branch By: /s/ Peter Obermann Name: Peter Obermann Title: Senior Vice President By: /s/ Alexander Kohnert Name: Alexander Kohnert Title: Vice President DAI-ICHI KANGYO By: /s/ David McCann Name: David McCann Title: A.V.P.
PAGE 5 DEUTSCHE BANK AG, New York and/or Cayman Island Branch By: /s/ V. Shannon Sewsankar Name: V. Shannon Sewsankar Title: Assistant Vice President FIRST UNION NATIONAL BANK By: /s/ Bruce W. Loftin Name: Bruce W. Loftin Title: Senior Vice President FUJI BANK, LIMITED By: /s/ Raymond Ventura Name: Raymond Ventura Title: Vice President and Manager LLOYDS BANK, PLC By: /s/ David C. Rodway Name: David C. Rodway Title: Assistant Vice President LONG TERM CREDIT BANK OF JAPAN By: /s/ Shuichi Tajima Name: Shuichi Tajima Title: Deputy General Manager NORTHERN TRUST COMPANY By: /s/ Russell R. Rockenbach Name: Russell R. Rockenbach Title: Second Vice President SAKURA BANK, LIMITED By: /s/ Yasumasa Kikuchi Name: Yasumasa Kikuchi Title: Senior Vice President
PAGE 6 FLEET NATIONAL BANK By: /s/ Jeffrey C. Lynch Name: Jeffrey C. Lynch Title: Vice President SOCIETE GENERALE, New York Branch By: /s/ Elaine Khalil Name: Elaine Khalil Title: Vice President THE TORONTO-DOMINION BANK By: /s/ Jorge A. Garcia Name: Jorge A. Garcia Title: MGR. CR. ADMIN. WACHOVIA BANK OF GEORGIA By: /s/ Jennifer Mooney Name: Jennifer Mooney Title: Vice President WESTDEUTSCHE LANDESBANK GIROZENTRALE By: /s/ Kheil A. McIntyre Name: Kheil A. McIntyre Title: Vice President By: /s/ Salvatore Battmen Name: Salvatore Battmen Title: Vice President Credit Department SUMITOMO BANK, LIMITED By: /s/ John C. Kissinger Name: John C. Kissinger Title: Joint General Manager
EX-10.11
3
Exhibit 10.11
PAGE 1
December 30, 1997
TO: Carl Valenti
Dear Carl:
This will confirm our discussions concerning your
retirement from Dow Jones and your subsequent consulting and
non-competition agreements.
Consistent with your decision to retire from Dow
Jones, you will continue as an employee of the company until
March 31, 1998, at which time you will resign as an employee
of the company (including its subsidiaries) and retire from
service. Your salary will continue through March 31, 1998 at
the current monthly rate of $37,750, and you will receive a
pro rata contribution to your profit-sharing and supplemental
executive retirement plan ("serp") accounts for the portion of
1998 that you remain an employee of the company.
Simultaneously with the execution and delivery of this letter
you are also executing and delivering the release and
settlement agreement attached hereto as attachment 1.
Between now and March 31, 1998 you will have such
duties as the company may reasonably specify, it being
understood that your principal objectives will be to cooperate
in an orderly and amicable transfer of your duties.
During the 21 month period commencing on April 1,
1998 and ending on December 31, 1999 you will (a) refrain from
engaging in any business activity that is competitive in any
material respect with the businesses of Dow Jones and its
subsidiaries as they exist on the date hereof, and (b) provide
such consulting services as Dow Jones may reasonably request
from time to time in connection with the company's
international newswire relationships and such other matters as
the company may deem appropriate. Notwithstanding the
foregoing, if Dow Jones divests itself of ownership of Dow
Jones Markets in whole or in substantial part, your
obligations under clause (a) will terminate on the first
anniversary of the closing of such divestiture if such
anniversary occurs before December 31, 1999.
PAGE 2 In consideration of your agreements in this letter and in attachment 1 hereto, and in consideration of your performance of your consulting and non-competition obligations hereunder, Dow Jones will pay you an aggregate of $792,750 in 21 equal monthly installments of $37,750 each commencing on April 1, 1998 and ending on December 1, 1999. In addition, the company will credit your deferred compensation account (a) on December 31, 1998 with an amount equal to the sum of the amounts that would have been credited to your profit-sharing and serp accounts had you been an employee of the company between April 1, 1998 and December 31, 1998 having earned an aggregate salary during such 9 month period of $339,750, and (b) on December 31, 1999 with an amount equal to the sum of the amounts that would have been credited to your profit- sharing and serp accounts had you been an employee of the company on December 31, 1999 having earned an aggregate salary of $453,000 for the year then ended. Finally, (a) you may continue to use the parking space in the garage of 200 Liberty Street until December 31, 1998 (or, if earlier, until you sell your apartment at 21 South End Avenue), (b) you will continue to be entitled to the executive tax and financial planning benefit until April 15, 2000, (c) you will continue to be entitled to the executive physical exam benefit for the years 1998 and 1999, and (d) the company will provide you with a complementary subscription to its electronic information products until December 31, 1999. The rights you have accrued to date in the company's employee and executive benefit, insurance, incentive, stock option and similar plans, programs and agreements will apply to you, except as expressly set forth herein, in the manner set forth therein. All of the provisions of the company's employee and executive benefit, insurance, incentive, stock option and similar plans, programs and agreements relating to retirement and retirees will apply to you in the manner set forth in those plans, programs and agreements. Without limiting the generality of the foregoing, contingent stock awards under the Executive Incentive Plan, if any, that may be granted to you under outstanding contingent stock rights will be granted pro rata and (a) in the case of the award in respect of the 1995-1998 performance period, in the amount called for by the agreement covering such award, and (b) in the cases of the awards in respect of the 1996-1999 and 1997- 2000 award periods, in such amounts as the Compensation Committee may, in its discretion, determine as set forth in the agreements covering such awards. The company will withhold from amounts due hereunder all applicable withholding taxes and other similar deductions.
PAGE 3 Except to the extent that disclosure is required by law or stock exchange regulation the company's SEC filings or otherwise, you and Dow Jones will keep the terms of this agreement and the attached release and settlement agreement in strict confidence. Notwithstanding the above, you may disclose information in this agreement to your attorneys or tax advisors, provided they agree to keep the information confidential, and to government tax agencies, and you may disclose the non-competition provision of this agreement to potential employers or business associates. This letter agreement and the attached release and settlement agreement set forth the entire agreement between you and Dow Jones and supersede all prior agreements or understandings, whether oral or written. Very truly yours, /s/ Peter R. Kann Peter R. Kann Accepted and agreed upon: /s/ Carl M. Valenti Carl M. Valenti
PAGE 4 Attachment 1 RELEASE AND SETTLEMENT AGREEMENT I, Carl M. Valenti, residing at 43 Spruce Road, East Windsor, NJ 08520, agree to retire from, and thereby terminate my employment with, Dow Jones & Company, Inc. ("Dow Jones") effective March 31, 1998. In consideration of the undertakings of Dow Jones and other consideration set forth in the letter (the "Letter") from Peter R. Kann to me of December 30, 1997, I do hereby release, acquit and forever discharge Dow Jones, it successors and assigns, and all employees of Dow Jones individually and collectively, from all grievances, claims, demands, actions and causes of action of any nature whatsoever arising out of or based on my employment or separation from employment by Dow Jones. I acknowledge and agree that I hereby relinquish any right to and shall be forever barred from bringing or instituting any action of any nature whatsoever, either individually or as a member of a class or group, based on my employment or separation from employment by Dow Jones in any federal, state or local judicial, quasi-judicial, administrative or other forum of competent jurisdiction in the United Sates or in any other country, including but not limited to arbitration proceedings, courts, agencies, commissions, the Equal Employment Opportunity Commission, the National Labor Relations Board, labor departments, or civil rights divisions or offices. In addition to the waivers of claims or rights above, I waive any right that I may have to assert a claim of age discrimination under the Age Discrimination in Employment Act which prohibits my employer from discriminating against me on the basis of my age. I do so in return for the consideration specified in the Letter that I would not otherwise be entitled to. I do not waive any rights or claims that may arise after this date. I have been afforded 21 days to decide whether I should sign this Release and Settlement Agreement. I understand that I will have a period of seven days during which I may revoke this Release and Settlement Agreement and that this Release and Settlement Agreement will not become effective or enforceable until such seven-day period has expired. I am advised by Dow Jones that I should consult an attorney prior to signing this Release and Settlement Agreement. I acknowledge and warrant that no promise or inducement not expressed herein or in the Letter has been made to me; that in executing this Release and Settlement Agreement I am not relying upon any other statement or representation made by any representative of Dow Jones; that the above- mentioned consideration constitutes full satisfaction and settlement of any such claims, demands, actions or causes of action, should any exist or if any were to be filed; that I am legally competent to execute this Release and Settlement Agreement; and that before signing it I read it thoroughly and
PAGE 5 understand its meaning and effect and have executed it fully cognizant of the rights I am relinquishing and the consideration therefor. /s/ Carl M. Valenti Carl M. Valenti Date: 12/31/97 Witness: /s/ James A. Scaduto Date: 12/31/97
EX-21
4
SUBSIDIARIES OF THE COMPANY
Exhibit 21 PAGE 1
SUBSIDIARIES OF THE COMPANY Jurisdiction of Incorporation or Name of Subsidiary Organization - ------------------ ----------------
Dow Jones AER Company, Inc. Delaware Economic Research Company, Inc. Delaware Dow Jones Broadcasting (Asia), Inc. Delaware Dow Jones Broadcasting (Europe), Inc. Delaware Dow Jones Broadcasting (USA), Inc. Delaware Dow Jones Canada, Inc. Canada Dow Jones Financial Publishing Corp. Delaware Dow Jones Information Publishing, Inc. Delaware Dow Jones Information Services International (HK) Ltd. Hong Kong Dow Jones International Marketing Services (U.K.), Ltd. United Kingdom Dow Jones International Marketing Services GmbH Germany Dow Jones International Marketing Services, Inc. Delaware Dow Jones (Japan) K.K. Japan Dow Jones Newsprint Company, Inc. Delaware Dow Jones Printing Company (Asia), Inc. Delaware Dow Jones Publishing Company (Asia), Inc. (90% owned) Delaware Dow Jones Publishing Company (Europe), Inc. Delaware Dow Jones Real Estate Development Corporation Delaware Dow Jones Southern Holding Company, Inc. Delaware Dow Jones Ventures II, Inc. Delaware Dow Jones Ventures III, Inc. Delaware Dow Jones Virginia Company, Inc. Delaware Federal Filings, Incorporated Delaware IDD Enterprises, L.P. Delaware National Delivery Service, Inc. Delaware Ottaway Newspapers, Inc. Delaware Essex County Newspapers, Inc. Massachusetts News-Sun, Inc. Arizona ONI Press, Inc. Delaware Research and Marketing Solutions, Inc. Delaware The Inquirer & Mirror, Inc. Massachusetts Portuguese-American Publications, Inc. Massachusetts Review Publishing Company Limited Hong Kong The China Phone Book Co. Ltd. Hong Kong Dow Jones Markets Holdings, Inc. Delaware Dow Jones Markets Canada Inc. Ontario Dow Jones Markets Systems, Inc. California Dow Jones BD Services, Inc Delaware Dow Jones Markets Italia s.p.A Italy Indepth Data, Inc. Delaware Dow Jones Markets, Inc. New York Dow Jones Markets Puerto Rico, Inc. Delaware Telerate Financial Services Co. Delaware Dow Jones Markets International Inc. Delaware
PAGE 2
Jurisdiction of Incorporation or Name of Subsidiary Organization - ------------------ ----------------
Dow Jones Markets International Company (100% owned Partnership) Delaware Dow Jones Markets (Panama) Inc. Panama Servicios Informativos Telerate (Chile) Limitada Chile Dow Jones Markets Asia-Pacific Singapore Pte Ltd Singapore Dow Jones Markets (Australia) Pty Limited Australia Telerate (Bahamas) Limited Bahamas Dow Jones Markets Belgium SA Belgium Dow Jones Markets Cyprus Limited Cyprus Dow Jones Markets Danmark A/S Denmark Dow Jones Markets Limited United Kingdom Dow Jones Markets Finland OY Finland Dow Jones Markets France SA France Dow Jones Markets Hellas A.E. Greece Dow Jones Markets Ireland Limited Ireland Dow Jones Markets Netherlands BV Netherlands Dow Jones Markets Espana S.A. Spain Dow Jones Markets Sweden AB Sweden Dow Jones Markets (Thailand) Limited Thailand Dow Jones Markets Technical Services Limited United Kingdom Telefin SA Greece Dow Jones Markets (Switzerland) AG Switzerland Dow Jones Markets (Singapore) Pte Ltd Singapore Dow Jones Markets de Venezuela, C.A. Venezuela Dow Jones Markets (Hong Kong) Limited Hong Kong Dow Jones Markets (Asia Pacific) Limited Hong Kong Dow Jones Markets Financial Information Services, Inc. Delaware Dow Jones Telerate Argentina S.A. Argentina Dow Jones Markets Finansal Sistemler A.S. Turkey Dow Jones Markets Informacao Financeira, Lda. Portugal Dow Jones Markets Ges.m.b.H. Austria Dow Jones Markets Luxembourg SARL Luxembourg Dow Jones Markets (Malaysia) SDN BHD Malaysia Dow Jones Markets (New Zealand) Ltd. New Zealand Advance Pacific Limited Cook Islands Dow Jones Markets GmbH Germany Dow Jones Markets Norway AS Norway Dow Jones Markets (South Africa) (Pty) Limited South Africa Dow Jones Support Limited Liability Company Russia All of the above subsidiaries are included in the consolidated financial statements.
EX-27
5
FINANCIAL DATA SCHEDULE
5
0000029924
DOW JONES & COMPANY, INC.
1,000
YEAR
DEC-31-1997
JAN-01-1997
DEC-31-1997
23,763
0
311,695
16,445
13,104
506,553
2,451,589
1,667,552
1,919,734
672,395
228,806
0
0
102,181
678,641
1,919,734
2,572,518
2,572,518
1,417,522
1,417,522
1,001,263
0
19,367
(763,884)
37,796
(802,132)
0
0
0
(802,132)
(8.36)
(8.36)
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