During the nine months ended June 30, 2020, Daily Journal
Corporation (NASDAQ:DJCO) had consolidated revenues of $36,907,000
as compared with $35,658,000 in the prior year period. This
increase of $1,249,000 was primarily from Journal Technologies’
increased license and maintenance fees of $1,002,000, consulting
fees of $1,498,000 and public service fees of $265,000, partially
offset by reductions in the Traditional Business’ display
advertising (including conferences which were discontinued) net
revenues of $679,000, classified advertising net revenues of
$153,000, trustee sale notice advertising net revenues of $149,000,
legal notice advertising net revenues of $330,000 and circulation
revenues of $73,000.
The Traditional Business had a pretax loss of
$634,000, representing a $793,000 decrease in income from pretax
income of $159,000 in the prior year period. Journal
Technologies’ pretax loss decreased by $2,842,000 to $1,452,000
from $4,294,000. During the nine months ended June 30, 2020,
the consolidated pretax loss was $39,102,000, as compared with
$17,672,000 in the prior year period.
The Company believes that the Coronavirus
pandemic has had, and will continue to have, a significant impact
on the Company’s business operations. For the three months
ended June 30, 2020, the Company experienced a material negative
impact on its Traditional Business’ revenues which decreased
substantially by $1,376,000 (31%) to $3,131,000 from $4,507,000 due
to the closures and scaling back of operations of courts and other
governmental agencies. This is important to note because the
Company’s quarterly pretax income of $18,594,000, which increased
from $5,443,000 in the prior year period, is due primarily to the
recording of unrealized gains on investments of $16,489,000 for the
Company’s marketable securities portfolio, as the stock market
recovered some of the ground it lost from its plunge in March
2020. These investments generated approximately $1,596,000 in
dividends income during such period. In the future, dividends
income from the Company’s portfolio is expected to decrease,
because these investments include the common stocks of three U.S.
banks, at least one of which has decided to reduce its
dividends. At June 30, 2020, the Company held marketable
securities valued at $153,390,000, including net unrealized gains
of $99,501,000, and accrued a deferred tax liability of $25,886,000
for estimated income taxes due only upon the sales of the net
appreciated securities.
For the nine months ended June 30, 2020, the
Company recorded an income tax benefit of $11,260,000 on a pretax
loss of $39,102,000. This was the net result of applying the
effective tax rate anticipated for fiscal 2020 to the pretax loss,
before the unrealized losses on investments, for the nine months
ended June 30, 2020. The effective tax rate was more than the
statutory rate primarily due to the dividends received deduction,
which increased the taxable loss, and state tax
benefits. In addition, the Company recorded tax
benefits of (i) $187,000 resulting from the Coronavirus Aid, Relief
and Economic Security (“CARES”) Act (see below) and (ii)
$11,166,000 for the unrealized losses on investments during the
nine months ended June 30, 2020. The effective tax rate for
the nine months ended June 30, 2020 was 29%, after including the
tax benefits from the CARES Act and the unrealized losses on
investments.
The CARES Act, which was signed into law on
March 27, 2020, contains two federal tax provisions beneficial to
the Company. One provision provides that net operating losses
arising in tax years beginning in 2018, that were previously only
available to be carried forward, can now be carried back to the
five previous years. In addition, any alternative minimum tax
credits carried forward from prior years can be claimed as a refund
in years beginning in 2018. Consequently, the Company
recorded a tax benefit resulting from carrying back a portion of
the net operating loss generated in fiscal 2019 to fiscal
2014. The Company anticipates receiving a refund for all
taxes and alternative minimum taxes paid in fiscal 2014. The
resulting tax benefit from carrying back the net operating loss is
primarily attributable to the difference in the federal tax rates
of 34% in fiscal 2014 and 21% in fiscal 2019.
For the nine months ended June 30, 2019, the
Company recorded an income tax benefit of $4,980,000 on a pretax
loss of $17,672,000. This was the net result of applying the
effective tax rate anticipated for fiscal 2019 to the pretax loss
for the nine months ended June 30, 2019. The effective tax
rate was greater than the statutory rate primarily due to the
dividends received deduction and state tax benefits.
For risk factors associated with the Company’s
businesses, please see “Item 1A – Risk Factors” of the Company’s
annual report on Form 10-K for the fiscal year ended September 30,
2019, as well as the information relating to the Coronavirus
pandemic contained in “Item 1A – Risk Factors” of the Company’s
Form 10-Q for the nine-month period ended June 30, 2020.
**********
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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