NEW YORK — Dow Jones & Company (NYSE: DJ) today reported earnings of 25 cents per diluted share for the second quarter of 2007, compared with 34 cents per diluted share for the second quarter of 2006. Excluding special items, the Company earned 45 cents per diluted share for the second quarter of 2007, up 15.4% from the 39 cents per diluted share earned in the second quarter of 2006.
Revenue increased to $529.7 million, up 16.2% over the second quarter of 2006, driven by the acquisition of Factiva, plus growth at Dow Jones Indexes, international media (including the acquisition of eFinancialNews), The Wall Street Journal Digital Network (formerly known as Dow Jones Online) and other businesses, partially offset by a decline in print advertising revenue at The Wall Street Journal in the U.S. and at Local Media newspapers. Operating income for the quarter declined to $37.9 million from $44.9 million in 2006 on a reported basis, but operating income excluding special items increased 28.2% to $66.3 million from $51.7 million. Adjusted for the impact of recent acquisitions, revenue increased 0.9%, and operating income excluding special items increased 23.9%.
Special Items: In the second quarter of 2007, the Company recorded special items that reduced earnings per share by 20 cents, reflecting a charge of 13 cents for incremental stock-based compensation expense as a result of an increase in the Company?s stock price resulting from the announcement of News Corporation?s proposal to acquire the Company at $60 per share and a 7 cent restructuring charge in connection with a reorganization of the Company?s operations primarily within the Consumer Media segment. In the second quarter of 2006, the Company recorded special items netting to a loss of 5 cents per share, reflecting a restructuring charge in connection with a reorganization of the Company?s operations partially offset by a gain on the sale of certain fixed assets. Please refer to the attached for a description of special items.
Commenting on second quarter results, Rich Zannino, chief executive officer of Dow Jones, said ?Earnings per share before special items increased 15% in the second quarter and 30% year to date. These results provide strong evidence of the success of the transformation plan begun in early 2006. We are overcoming industry-wide softness in print advertising with many initiatives, including the acquisitions of Factiva and eFinancialNews, the redesign of the Journal for the digital age, profitable growth in our Indexes, online and Financial Information Services units, gains in both print and online circulation revenue, and continued expense reductions. We continue to work on these innovations as well as new ones to further reduce our reliance on print advertising and fuel our short- and long-term growth.?
Segment Results
Consumer Media revenue of $290.8 million in the second quarter of 2007 was down slightly versus the same period a year ago as a 1.6% decrease in advertising revenue was partially offset by a 3.0% increase in circulation and other revenue. Advertising revenue at the Wall Street Journal U.S. print edition declined 6.8% (on an 11.4% decline in volume) as weak technology, financial, general and classified advertising more than offset an increase in most consumer categories. This decline was partially offset by a 40.9% jump in ad revenue at international media, a 26.3% increase at Barron?s and a 2.7% increase at The Wall Street Journal Digital Network. Increased circulation revenue included gains at The Wall Street Journal Digital Network and the U.S. print Journal and the acquisition of eFinancialNews. Operating income grew 31.1% to $25.6 million and margin improved 210 basis points to 8.8% in the second quarter of 2007 due to cost-saving initiatives and strong profit leverage on increased revenues. Paid subscribers to The Wall Street Journal Online grew 23.6% in the second quarter to 983,000 driven in part by the success of an offer for new subscribers to receive both the print and Online Journal and by the previously announced change in our methodology to count those subscribers who have paid and registered to use the Online Journal. For more information on this change, please see footnote 2 to the supplemental segment statistical information. Paid subscribers to Barron?s Online grew 42.6% in the second quarter to 97,000.
Enterprise Media revenue of $178.2 million in the second quarter of 2007 increased 81.4% over the same period a year ago, due to gains at Dow Jones Content Technology Solutions driven by the acquisition of Factiva, and strong growth at Dow Jones Indexes (up 41.7%) and Dow Jones Financial Information Services (up 10.2%). Operating income increased 57.2% over last year to $41.4 million and operating margin declined 360 basis points to 23.2% as Factiva operates at a relatively lower margin. Assuming Factiva was owned in both periods, revenue increased 6.6%, operating income increased 44.0% and operating margin improved 600 basis points to 23.2% due to Factiva integration cost savings, other cost saving initiatives and strong profit leverage on increased revenue.
Local Media revenue declined 6.2% to $62.5 million in the second quarter of 2007 compared with the second quarter of 2006. Advertising revenue decreased 8.0% on a 13.2% decline in volume due to soft classified, non-daily, retail, national and preprint advertising revenue, partially offset by increases in print legal notices and online (up 55.2%) advertising revenues. Operating income declined 19.8% to $11.8 million compared with the prior year period, mainly due to the decline in revenue partially offset by lower newsprint expense. Operating margin in the quarter was 18.9%, down from 22.1% last year.
The Company ended the second quarter of 2007 with $392 million in debt compared with $508 million at the end of the first quarter 2007, with the decrease primarily driven by proceeds received from the exercise of employee stock options due to the significant increase in the Company?s share price resulting from the News Corporation bid in the second quarter of 2007. Capital expenditures in the second quarter of 2007 were $18.5 million compared to $19.3 million in the second quarter last year.
Revenue increased to $529.7 million, up 16.2% over the second quarter of 2006, driven by the acquisition of Factiva, plus growth at Dow Jones Indexes, international media (including the acquisition of eFinancialNews), The Wall Street Journal Digital Network (formerly known as Dow Jones Online) and other businesses, partially offset by a decline in print advertising revenue at The Wall Street Journal in the U.S. and at Local Media newspapers. Operating income for the quarter declined to $37.9 million from $44.9 million in 2006 on a reported basis, but operating income excluding special items increased 28.2% to $66.3 million from $51.7 million. Adjusted for the impact of recent acquisitions, revenue increased 0.9%, and operating income excluding special items increased 23.9%.
Special Items: In the second quarter of 2007, the Company recorded special items that reduced earnings per share by 20 cents, reflecting a charge of 13 cents for incremental stock-based compensation expense as a result of an increase in the Company?s stock price resulting from the announcement of News Corporation?s proposal to acquire the Company at $60 per share and a 7 cent restructuring charge in connection with a reorganization of the Company?s operations primarily within the Consumer Media segment. In the second quarter of 2006, the Company recorded special items netting to a loss of 5 cents per share, reflecting a restructuring charge in connection with a reorganization of the Company?s operations partially offset by a gain on the sale of certain fixed assets. Please refer to the attached for a description of special items.
Commenting on second quarter results, Rich Zannino, chief executive officer of Dow Jones, said ?Earnings per share before special items increased 15% in the second quarter and 30% year to date. These results provide strong evidence of the success of the transformation plan begun in early 2006. We are overcoming industry-wide softness in print advertising with many initiatives, including the acquisitions of Factiva and eFinancialNews, the redesign of the Journal for the digital age, profitable growth in our Indexes, online and Financial Information Services units, gains in both print and online circulation revenue, and continued expense reductions. We continue to work on these innovations as well as new ones to further reduce our reliance on print advertising and fuel our short- and long-term growth.?
Segment Results
Consumer Media revenue of $290.8 million in the second quarter of 2007 was down slightly versus the same period a year ago as a 1.6% decrease in advertising revenue was partially offset by a 3.0% increase in circulation and other revenue. Advertising revenue at the Wall Street Journal U.S. print edition declined 6.8% (on an 11.4% decline in volume) as weak technology, financial, general and classified advertising more than offset an increase in most consumer categories. This decline was partially offset by a 40.9% jump in ad revenue at international media, a 26.3% increase at Barron?s and a 2.7% increase at The Wall Street Journal Digital Network. Increased circulation revenue included gains at The Wall Street Journal Digital Network and the U.S. print Journal and the acquisition of eFinancialNews. Operating income grew 31.1% to $25.6 million and margin improved 210 basis points to 8.8% in the second quarter of 2007 due to cost-saving initiatives and strong profit leverage on increased revenues. Paid subscribers to The Wall Street Journal Online grew 23.6% in the second quarter to 983,000 driven in part by the success of an offer for new subscribers to receive both the print and Online Journal and by the previously announced change in our methodology to count those subscribers who have paid and registered to use the Online Journal. For more information on this change, please see footnote 2 to the supplemental segment statistical information. Paid subscribers to Barron?s Online grew 42.6% in the second quarter to 97,000.
Enterprise Media revenue of $178.2 million in the second quarter of 2007 increased 81.4% over the same period a year ago, due to gains at Dow Jones Content Technology Solutions driven by the acquisition of Factiva, and strong growth at Dow Jones Indexes (up 41.7%) and Dow Jones Financial Information Services (up 10.2%). Operating income increased 57.2% over last year to $41.4 million and operating margin declined 360 basis points to 23.2% as Factiva operates at a relatively lower margin. Assuming Factiva was owned in both periods, revenue increased 6.6%, operating income increased 44.0% and operating margin improved 600 basis points to 23.2% due to Factiva integration cost savings, other cost saving initiatives and strong profit leverage on increased revenue.
Local Media revenue declined 6.2% to $62.5 million in the second quarter of 2007 compared with the second quarter of 2006. Advertising revenue decreased 8.0% on a 13.2% decline in volume due to soft classified, non-daily, retail, national and preprint advertising revenue, partially offset by increases in print legal notices and online (up 55.2%) advertising revenues. Operating income declined 19.8% to $11.8 million compared with the prior year period, mainly due to the decline in revenue partially offset by lower newsprint expense. Operating margin in the quarter was 18.9%, down from 22.1% last year.
The Company ended the second quarter of 2007 with $392 million in debt compared with $508 million at the end of the first quarter 2007, with the decrease primarily driven by proceeds received from the exercise of employee stock options due to the significant increase in the Company?s share price resulting from the News Corporation bid in the second quarter of 2007. Capital expenditures in the second quarter of 2007 were $18.5 million compared to $19.3 million in the second quarter last year.
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Conference Call Details
As previously announced, the Company will host an earnings conference call at 10 a.m. EDT today. The call can be accessed via a live Web cast through the Investor Relations section of our Web site, http://www.dowjones.com/, or through a listen-only, dial-in conference line, by dialing 877-407-9205. A replay of the conference call and the full text of the prepared remarks will be available on our Web site in the Investor Relations section shortly after the call concludes.
Conference Call Details
As previously announced, the Company will host an earnings conference call at 10 a.m. EDT today. The call can be accessed via a live Web cast through the Investor Relations section of our Web site, http://www.dowjones.com/, or through a listen-only, dial-in conference line, by dialing 877-407-9205. A replay of the conference call and the full text of the prepared remarks will be available on our Web site in the Investor Relations section shortly after the call concludes.
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