During the six months ended March 31, 2019, Daily Journal
Corporation (NASDAQ:DJCO) had consolidated revenues of $21,140,000
as compared with $19,590,000 in the prior year period. This
increase of $1,550,000 was primarily from (i) Journal Technologies’
increased license and maintenance fees of $1,099,000 and public
service fees of $819,000 and (ii) the Traditional Business’
increases of government notices and agency commission revenues of
$80,000, partially offset by a reduction in Journal Technologies’
consulting fees of $267,000 due to fewer go-lives, and decreases in
the Traditional Business’ trustee sale notice advertising revenues
of $100,000 and circulation revenues of $108,000.
The Traditional Business’ pretax loss decreased
by $61,000 to $189,000 from $250,000. Journal Technologies’ pretax
loss also decreased by $2,568,000 to $5,048,000 from $7,616,000,
after including the amortization costs of intangible assets of $0
and $1,810,000 for the six months ended March 31, 2019 and 2018,
respectively. This decrease in amortization expenses was
partially offset by increased Journal Technologies’ personnel
costs.
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
$16,515,000 for the six month period ended March 31, 2019, included
net unrealized losses on investments of $20,143,000. For the
prior year period, the Company recorded net unrealized gains for
its available-for-sale marketable securities in other comprehensive
income.
The Company’s non-operating income, net of
expenses, decreased to a loss of $17,923,000 from income of
$5,375,000 primarily because of a recording of the net unrealized
losses on investments of $20,143,000 pursuant to the newly adopted
accounting standard mentioned above, as compared with a capital
gain of $3,180,000 from the sale of bonds during the prior year
period.
For the six months ended March 31, 2019, the
Company recorded an income tax benefit of $6,600,000 on a pretax
loss of $23,115,000. This was the net result of applying the
effective tax rate anticipated for fiscal 2019 to the pretax loss
for the six months ended March 31, 2019. The effective tax rate was
greater than the statutory rate primarily due to the dividends
received deduction and state tax benefits.
During the prior fiscal year, the December 2017
Tax Cuts and Jobs Act reduced the maximum corporate income tax rate
from 35% to 21%. The impact to the Company’s financial statements
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, on a pretax loss of $2,443,000
for the six months ended March 31, 2018, the Company recorded an
income tax benefit of $16,950,000. The income tax benefit was also
the result of applying the effective tax rate anticipated for
fiscal 2018 to the pretax loss for the six-month period ended March
31, 2018.
There was a consolidated net loss of $16,515,000
(-$11.96 per share) for the six months ended March 31, 2019
primarily because it included the net unrealized losses on
investments of $20,143,000. There was net income of $14,507,000
($10.51 per share) in the prior year period because of the tax
cuts.
At March 31, 2019, the Company held marketable
securities valued at $192,153,000, including net unrealized gains
of $138,264,000, and accrued a deferred tax liability of
$36,606,000 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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