During the six months ended March 31, 2018, Daily Journal
Corporation (NASDAQ:DJCO) had consolidated revenues of $19,590,000
as compared with $20,269,000 in the prior year period. This
decrease of $679,000 was primarily from decreased Journal
Technologies’ consulting fees of $951,000, which are recognized
upon project go-lives, and a reduction in The Traditional
Business’s trustee sale notice and its related service fee revenues
of $109,000, commercial advertising and Conference revenues of
$40,000, and circulation revenues of $154,000, partially offset by
increased Journal Technologies’ license and maintenance fees of
$483,000 and public service fees of $123,000.
The Company’s Traditional Business segment’s
pretax loss decreased by $4,000 to $250,000 from $254,000.
Journal Technologies business segment’s pretax loss increased by
$2,464,000 to $7,616,000 from $5,152,000, after the amortization
costs of intangible assets of $1,810,000 and $2,447,000 for the six
months ended March 31, 2018 and 2017, respectively. This
increase in loss mainly resulted from increased Journal
Technologies’ personnel costs and computer services.
The Company’s non-operating income, net of
expenses, increased by $2,298,000 (75%) to $5,375,000 from
$3,077,000 primarily because of the capital gains of $3,180,000
from the sale of bond investments, partially offset by the prior
year’s reversal of accrued interest and penalty expenses of
$743,000 for uncertain and unrecognized tax benefits. For the six
months ended March 31, 2018, consolidated pretax loss was
$2,443,000, as compared with $3,042,000 in the prior year
period.
The December 2017 Tax Cuts and Jobs Act (“Tax
Act”) reduced the maximum corporate income tax rate from 35% to
21%, effective January 1, 2018. The Company has completed its
review of the Tax Act. The impact to its financial statements
is as follows: (i) current income tax expense or benefit is
calculated using a blended rate of 24.28% pursuant to IRC Section
15, (ii) deferred tax expense includes 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 are expected to reverse during fiscal 2018 are
valued at the blended rate of 24.28% while temporary differences
that will reverse after fiscal 2018 are valued at the 21% rate, and
(iv) approximately $20 million of the revaluation of deferred taxes
relates 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.
For the six months ended March 31, 2018, the
Company recorded an income tax benefit of $16,950,000 on pretax
loss of $2,443,000 primarily resulting from the Tax Act. The
income tax benefit was the result of applying the effective tax
rate anticipated for fiscal 2018 to pretax loss for the six-month
period ended March 31, 2018. The effective tax rate
(before the discrete Tax Act item mentioned above) was greater than
the statutory rate primarily due to the dividends received
deduction which increases the loss for tax purposes. On
pretax loss of $3,042,000 for the six months ended March 31, 2017,
the Company recorded an income tax benefit of $4,550,000 which was
the net result of applying the effective tax rate anticipated for
fiscal 2017 to pretax loss for the six months ended March 31, 2017
and included reversals of an accrued liability of approximately
$2,665,000 for uncertain and unrecognized tax benefits, its related
accrued interest and penalty expense of $743,000 and a related
temporary book-tax difference of $352,000 in deferred tax
liability. The effective tax rate (before this discrete item)
was greater than the statutory rate mainly resulting from the
dividends received deduction. The Company’s effective tax
rate was 694% and 150% for the six months ended March 31, 2018 and
2017, respectively.
There was consolidated net income of $14,507,000
($10.51 per share) after tax benefits, primarily due to tax cuts,
for the six months ended March 31, 2018, as compared with
$1,508,000 ($1.09 per share) in the prior year period.
At March 31, 2018, the Company held marketable
securities valued at $217,803,000, including net unrealized gains
of $159,354,000, and accrued a liability of $42,369,000 for income
taxes due only upon the sales of the net appreciated
securities.
Comprehensive income includes net income and
unrealized net (losses) gains on investments, net of taxes, as
summarized below:
Comprehensive Income |
|
Six months ended March 31 |
|
|
2018 |
|
|
|
2017 |
|
|
|
Net
income |
$ |
14,507,000 |
|
|
$ |
1,508,000 |
Net
(decrease) increase in unrealized appreciation of marketable
securities (net of taxes) |
|
(1,743,000 |
) |
|
|
19,657,000 |
|
$ |
12,764,000 |
|
|
$ |
21,165,000 |
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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