During fiscal 2018, Daily Journal Corporation (NASDAQ:DJCO) had
consolidated revenues of $40,703,000 as compared with $41,384,000
in the prior year. This decrease of $681,000 was primarily
from (i) a $1,644,000 reduction in Journal Technologies’ consulting
fees due to fewer go-lives in fiscal 2018 and (ii) a reduction in
The Traditional Business’s trustee sale notice and related service
fee revenues of $168,000 and a reduction in its circulation
revenues of $253,000, partially offset by increased Journal
Technologies’ license and maintenance fees of $1,188,000 and public
service fees of $173,000.
The Traditional Business’ pretax income
increased by $597,000 to pretax income of $237,000 from a pretax
loss of $360,000. Journal Technologies’ pretax loss increased
by $2,250,000 to $14,392,000 from $12,142,000, after recording the
interest and penalty expense reversal of $743,000 for uncertain and
unrecognized tax benefits in the prior year and including the
amortization costs of intangible assets of $3,058,000 for fiscal
2018 and $4,895,000 for fiscal 2017. This increase in loss mainly
resulted from increased Journal Technologies’ personnel costs and
computer services.
The Company’s non-operating income, net of
expenses, decreased by $2,378,000 to $2,721,000 from $5,099,000
primarily resulting from (i) the non-cash other-than-temporary
impairment losses on investments of $4,560,000, partially offset by
the capital gains on sales of marketable securities and others of
$3,182,000, (ii) increases in the interest rate on the two
acquisition margin loans of $229,000 and (iii) the prior year’s
interest and penalty expense reversal of $743,000 for uncertain and
unrecognized tax benefits. For fiscal 2018,
consolidated pretax loss was $11,339,000, as compared with
$8,068,000 in the prior year.
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 impact to the Company’s
financial statements is as follows: (i) current income tax
expense or benefit is calculated using a blended rate of 24.28%,
(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 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
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.
During fiscal 2018, the Company recorded an
income tax benefit of $19,540,000 on the pretax loss of
$11,339,000. The effective tax rate (before the discrete Tax
Act items discussed above) was greater than the statutory rate
primarily due to the dividends received deduction which increases
the loss for tax purposes. On a pretax loss of $8,068,000 for
fiscal 2017, the Company recorded an income tax benefit of
$7,150,000 which included reversals of an accrued liability of
approximately $2,665,000 for uncertain and unrecognized tax
benefits relating to an acquisition in fiscal 2013, 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.
There was consolidated net income of $8,201,000
($5.94 per share) for fiscal 2018 primarily due to the tax benefits
resulting from the Tax Act as compared with a net loss of $918,000
(-$0.66 per share) in the prior year.
At September 30, 2018, the Company held
marketable securities valued at $212,296,000, including net
unrealized gains of $158,407,000, and accrued a liability of
$42,151,000 for estimated income taxes due only upon the sales of
the net appreciated securities.
Comprehensive income includes net income (loss)
and unrealized net (losses) gains on investments, net of taxes, as
summarized below:
Comprehensive Income (Loss) |
|
Fiscal |
|
|
2018 |
|
|
2017 |
|
|
|
|
Net
income (loss) |
$ |
8,201,000 |
|
$ |
(918,000 |
) |
Net
increase (decrease) in unrealized appreciation of
investments (net of taxes) |
|
(5,823,000 |
) |
|
35,316,000 |
|
Reclassification
adjustment of other-than-temporary impairment losses
recognized in net income (net of taxes) |
|
3,350,000 |
|
|
--- |
|
|
$ |
5,728,000 |
|
$ |
34,398,000 |
|
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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