During fiscal 2019, Daily Journal Corporation (NASDAQ:DJCO) had
consolidated revenues of $48,655,000 as compared with $40,703,000
in the prior year. This increase of $7,952,000 was primarily
from (i) Journal Technologies’ increased license and maintenance
fees of $2,954,000, consulting fees of $2,707,000 and public
service fees of $2,370,000, and (ii) the Traditional Business’
increases of display advertising net revenues of $344,000,
including conference revenues, and legal notice advertising net
revenues of $106,000, partially offset by a reduction in the
Traditional Business’ classified advertising net revenues of
$246,000, trustee sale notice advertising net revenues of $196,000
and circulation revenues of $152,000.
The Traditional Business’
pretax income decreased by $218,000 to $19,000 from $237,000 in the
prior year. Journal Technologies’ pretax loss increased by
$3,944,000 to $18,336,000 from $14,392,000, after (i) the goodwill
impairment expenses of $13,400,000 during this fiscal year as
compared with none in the prior fiscal year, and (ii) no
amortization costs of intangible assets during fiscal 2019 (fully
amortized by last year-end) as compared with $3,058,000 in fiscal
2018.
On October 1, 2018, the
Company adopted Accounting Standards Update (“ASU”) No. 2016-01,
Financial Instruments – Overall (Subtopic 825-10):
Recognition and Measurement of Financial Assets and Financial
Liabilities. This ASU requires an entity that holds financial
assets or owes financial liabilities to, among other things,
measure equity investments at fair value and recognize net
unrealized gains (losses) through net income (loss).
Accordingly, the Company’s net loss of $25,216,000 (-$18.26 per
share) for fiscal 2019, included net unrealized losses on
investments of $17,715,000 as well as the goodwill impairment
losses of $13,400,000. For fiscal 2018, the Company
recorded net unrealized gains (losses) for its available-for-sale
marketable securities in other comprehensive income. There
was net income of $8,201,000 ($5.94 per share) in fiscal 2018
primarily because of the tax cuts.
During fiscal 2019, the
Company recorded an income tax benefit of $6,260,000 on a pretax
loss of $31,476,000. The effective tax rate was below the
statutory rate due to the impairment of goodwill, partially offset
by the dividends received deduction and a benefit for state
taxes.
During the prior fiscal
year, the Tax Act reduced the maximum corporate income tax rate
from 35% to 21%. The impact to the Company’s financial
statements in fiscal 2018 was as follows: (i) fiscal 2018
income tax expense or benefit was calculated using a blended rate
of 24.28% pursuant to IRC Section 15, (ii) deferred tax expense
included a discrete net tax benefit of approximately $16 million
resulting from a revaluation of deferred tax assets and liabilities
to the expected tax rate that will be applied when temporary
differences are expected to reverse, (iii) items that were expected
to reverse during fiscal 2018 were valued at the blended rate of
24.28% while temporary differences that will reverse after fiscal
2018 were valued at the 21% rate, and (iv) approximately $20
million of the revaluation of deferred taxes related to items that
were initially recorded as accumulated other comprehensive income.
This revaluation of approximately $20 million was recorded as a
component of income tax expense or benefit in continuing
operations. Consequently, during fiscal 2018, the
Company recorded an income tax benefit of $19,540,000 on a pretax
loss of $11,339,000. The effective tax rate (before the
discrete item discussed above) was greater than the statutory rate
primarily due to the dividends received deduction which increases
the loss for tax purposes.
At September 30, 2019, the
Company held marketable securities valued at $194,581,000,
including net unrealized gains of $140,692,000, and accrued a
deferred tax liability of $37,241,000 for estimated income taxes
due only upon the sales of the net appreciated securities.
**********
Daily Journal Corporation
publishes newspapers and web sites covering California and Arizona,
and produces several specialized information services.
Journal Technologies, Inc. is a wholly-owned subsidiary and
supplies case management software systems and related products to
courts and other justice agencies.
This press release includes
“forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Certain statements
contained in this press release are “forward-looking” statements
that involve risks and uncertainties that may cause actual future
events or results to differ materially from those described in the
forward-looking statements. Words such as “expects,”
“intends,” “anticipates,” “should,” “believes,” “will,” “plans,”
“estimates,” “may,” variations of such words and similar
expressions are intended to identify such forward-looking
statements. We disclaim any intention or obligation to revise
any forward-looking statements whether as a result of new
information, future developments, or otherwise. Although we
believe that the expectations reflected in such forward-looking
statements are reasonable, we can give no assurance that such
expectations will prove to have been correct. Additional
information concerning factors that could cause actual results to
differ materially from those in the forward-looking statements is
contained from time to time in documents we file with the
Securities and Exchange Commission.
# # #
Contact: Tu To (213) 229-5436
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