During fiscal 2020, Daily Journal Corporation (NASDAQ:DJCO) had
consolidated revenues of $49,942,000 as compared with $48,655,000
in the prior year. This increase of $1,287,000 was primarily
from Journal Technologies’ increased license and maintenance fees
of $1,468,000, consulting fees of $2,179,000 and public service
fees of $38,000, partially offset by reductions in the Traditional
Business’ display advertising (including conferences which were
discontinued) net revenues of $1,009,000, classified advertising
net revenues of $218,000, trustee sale notice advertising net
revenues of $282,000, legal notice advertising net revenues of
$523,000 and circulation revenues of $159,000.
The Traditional Business had a pretax loss of
$1,814,000, representing a $1,833,000 decrease in income from
pretax income of $19,000 in the prior fiscal year. Journal
Technologies’ pretax income increased by $5,383,000 to $447,000
from a pretax loss of $4,936,000 in the prior fiscal year,
excluding the goodwill impairment loss of $13,400,000 in fiscal
2019. In addition, the Company sold part of its marketable
securities realizing a net gain of $4,193,000 in fiscal 2020.
There were also decreases in net unrealized losses on investments
of $14,616,000 to $3,099,000 in fiscal 2020 from $17,715,000 in the
prior fiscal year. These investments generated approximately
$4,965,000 in dividends income during fiscal 2020. 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. During fiscal 2020, consolidated pretax income was
$4,226,000, as compared with a pretax loss of $31,476,000 in the
prior fiscal year, in each case reflecting dividends received and
the performance of the Company’s investments.
The Company believes that the Coronavirus
pandemic (“COVID-19”) has had, and, with the recent resurgence of
COVID-19 cases, will continue to have a significant impact on the
Company’s business operations. This might include a substantial
decrease in the value of the Company’s marketable securities
portfolio, which is concentrated in the common stocks of three U.S.
financial institutions, or at least a fair degree of
volatility. At September 30, 2020, the Company held
marketable securities valued at $179,368,000, including net
unrealized gains of $137,593,000, and accrued a deferred tax
liability of $35,870,000 for estimated income taxes due only upon
the sales of the net appreciated securities.
For fiscal 2020, the Company recorded an income
tax provision of $185,000 on pretax income of
$4,226,000. The effective tax rate was less than the
statutory rate primarily due to the dividends received deduction
(“DRD”), a benefit resulting from the Coronavirus Aid, Relief and
Economic Security (“CARES”) Act and net state tax
benefits. The effective tax rate for fiscal 2020
was 4.4%, as compared with 20% in the prior fiscal year.
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
tax benefit of $187,000 resulting 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.
During fiscal 2020, the Company recorded net
unrealized losses on investments of $3,099,000. An income tax
benefit of $1,371,000 resulting from these losses was recorded as a
temporary difference in deferred income taxes. The Company
also recorded a capital gain of $4,193,000 on partial sales of its
marketable securities.
For 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 DRD and a benefit for state taxes.
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,
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.
# # #
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(213) 229-5436
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