SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _____________________
Commission File Number 0-14665
DAILY JOURNAL CORPORATION
(Exact name of registrant as specified in its charter)
South Carolina 95-4133299
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
355 South Grand Avenue, 34th Floor
Los Angeles, California 90071-1560
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code:(213) 624-7715
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes: X No:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Class Outstanding at April 30, 1995
Common Stock, par value 1,651,521 shares
$ .01 per share
<PAGE>
PART I
Item 1. Financial Statements
DAILY JOURNAL CORPORATION - CONSOLIDATED BALANCE SHEET
(Unaudited)
March 31 September 30
1995 1994
ASSETS
Current assets:
Cash and cash equivalents $ 56,000 $ 2,068,000
U.S. Treasury Bills,
at cost plus discount earned 1,952,000 1,479,000
Accounts receivable, less allowance for
doubtful accounts of $700,000 and $1,000,000 5,952,000 6,074,000
Inventories 30,000 94,000
Prepaid expenses and other assets 337,000 268,000
Deferred income taxes 1,083,000 1,254,000
Total current assets 9,410,000 11,237,000
Property, plant and equipment, at cost:
Land, buildings and improvements 6,978,000 6,660,000
Furniture and office equipment 5,178,000 5,951,000
Machinery and equipment 1,534,000 1,330,000
13,690,000 13,941,000
Less accumulated depreciation (5,387,000) (5,398,000)
8,303,000 8,543,000
Deferred tax benefits 482,000 104,000
Intangible assets, at cost, less accumulated
amortization of $138,000 and $97,000 1,248,000 48,000
$19,443,000 $19,932,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,646,000 $ 2,697,000
Accrued liabilities, including current
portion of management termination fee
payable of $50,000 2,739,000 3,251,000
Notes payable 536,000 532,000
Deferred subscription revenue 5,942,000 5,679,000
Total current liabilities 10,863,000 12,159,000
Management termination fee payable 2,000 20,000
Notes payable 993,000 1,264,000
Shareholders' equity:
Preferred stock, $.01 par value, 5,000,000
shares authorized and no shares issued - -
Common stock, $.01 par value, 5,000,000
shares authorized, 1,651,521 and 1,654,111
shares, respectively, outstanding 17,000 17,000
Other paid-in capital 2,099,000 2,102,000
Retained earnings 5,820,000 4,721,000
Less 30,429 treasury shares at cost (351,000) (351,000)
Total shareholders' equity 7,585,000 6,489,000
$19,443,000 $19,932,000
See accompanying notes to consolidated financial statements.
<PAGE>
DAILY JOURNAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three months
ended March 31
1995 1994
Revenues:
Advertising $ 4,974,000 $ 4,729,000
Circulation 2,694,000 2,475,000
Advertising service fees and other 868,000 1,085,000
8,536,000 8,289,000
Costs and expenses:
Salaries and employee benefits 3,530,000 3,391,000
Newsprint and printing expenses 969,000 827,000
Commissions and other outside services 1,115,000 1,046,000
Postage and delivery expenses 652,000 594,000
Depreciation and amortization 507,000 509,000
Other, including interest expense 918,000 945,000
7,691,000 7,312,000
Income before taxes 845,000 977,000
Provision for income taxes 340,000 400,000
Net income $ 505,000 $ 577,000
Weighted average number of common
shares outstanding 1,622,746 1,623,690
Net income per share $ .31 $ .36
See accompanying notes to consolidated financial statements.
<PAGE>
DAILY JOURNAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Six months
ended March 31
1995 1994
Revenues:
Advertising $ 9,651,000 $ 9,126,000
Circulation 5,257,000 4,937,000
Advertising service fees and other 1,754,000 2,203,000
16,662,000 16,266,000
Costs and expenses:
Salaries and employee benefits 6,920,000 6,698,000
Newsprint and printing expenses 1,793,000 1,609,000
Commissions and other outside services 2,119,000 2,030,000
Postage and delivery expenses 1,171,000 1,165,000
Depreciation and amortization 947,000 873,000
Other, including interest expense 1,803,000 2,230,000
14,753,000 14,605,000
Income before taxes 1,909,000 1,661,000
Provision for income taxes 765,000 700,000
Net income $ 1,144,000 $ 961,000
Weighted average number of common
shares outstanding 1,623,194 1,623,692
Net income per share $ .70 $ .59
See accompanying notes to consolidated financial statements.
<PAGE>
DAILY JOURNAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Six months
ended March 31
1995 1994
Cash flows from operating activities:
Net income $ 1,144,000 $ 961,000
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization 947,000 873,000
Deferred income taxes (207,000) (3,000)
Discount earned on U.S. Treasury Bills (10,000) -
Gains on sales of capital assets (2,000) -
Changes in assets and liabilities:
(Increase) decrease in current assets
Accounts receivable, net 122,000 383,000
Inventories 64,000 (18,000)
Prepaid expenses and other assets (69,000) 174,000
Increase (decrease) in current liabilities
Accounts payable (1,051,000) (920,000)
Accrued liabilities (512,000) (10,000)
Income taxes payable - (449,000)
Deferred subscription revenue 263,000 110,000
Cash provided by operating activities 689,000 1,101,000
Cash flows from investing activities:
Net investments in U. S. Treasury Bills (463,000) -
Capital expenditures including acquisitions (1,905,000) (410,000)
Cash used for investing activities (2,368,000) (410,000)
Cash flows from financing activities:
Principal payments under management
termination fee payable and notes payable (285,000) (388,000)
Purchase of common stock (48,000) -
Cash used for financing activities (333,000) (388,000)
Increase (decrease) in cash and cash equivalents (2,012,000) 303,000
Cash and cash equivalents:
Beginning of year 2,068,000 2,551,000
End of period $ 56,000 $ 2,854,000
Interest paid during period $ 87,000 $ 103,000
Income taxes paid during period $ 972,000 $ 783,000
See accompanying notes to consolidated financial statements.
<PAGE>
DAILY JOURNAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - The Corporation and Operations:
The Daily Journal Corporation is primarily a gatherer and distributor of
information through its publications and specialized information services.
California Newspaper Service Bureau, Inc., a wholly owned and consolidated
subsidiary since it was acquired in 1990, is a newspaper representative
specializing in public notice advertising. The Public Record Corporation, a
wholly owned and consolidated subsidiary since it was acquired in January
1995, publishes The Code of Colorado Regulations and newspapers for the
Colorado legal profession. Essentially all of the Company's operations are
based in California, Arizona, Colorado and Washington.
Note 2 - Basis of Presentation
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly its financial position as
of March 31, 1995 and September 30, 1994, the results of operations for the
three- and six-month periods ended March 31, 1995 and 1994 and its cash flows
for the six months ended March 31, 1995 and 1994.
The results of operations for the six months ended March 31, 1995 and
1994 are not necessarily indicative of the results to be expected for the full
year.
The consolidated financial statements included herein have been prepared
by the Company pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading. It is suggested
that these financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's Annual Report on
Form 10-K for the fiscal year ended September 30, 1994.
Note 3 - Acquisitions
During the quarter ended March 31, 1995, the Company acquired for about
$463,000 in cash The Public Record Corporation which primarily publishes The
Code of Colorado Regulations and The Brief Times Reporter, a court opinion
service for the Colorado legal profession. In connection with this
acquisition the Company assumed the liability for the unexpired subscriptions
and entered into an employment agreement with a former owner. In addition,
the Company acquired for about $928,000 in cash a small newspaper and land and
building in Phoenix, Arizona. These transactions were accounted for as
purchases. Proforma results of operations have not been presented, as the
effects of these transactions are not material to the Company's operating
results.
<PAGE>
DAILY JOURNAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Revenues were $16,662,000 and $16,266,000 for the six months ended March
31, 1995 and 1994, respectively. This increase of 2% is primarily
attributable to subscription and advertising rate increases and additional
display and classified advertising lineage partially offset by a decrease in
public notice advertising lineage. Recent acquisitions accounted for $157,000
of this increase, while a $223,000 decrease in other revenues resulted from
the discontinuance of certain services for trustee sale customers.
During the first six months of fiscal 1995, display and classified
advertising revenues were up by $284,000 and $315,000, respectively, and
public notice advertising revenues decreased by $74,000 primarily due to a
decline in foreclosure notices. The Company's smaller newspapers, excluding
the Los Angeles and San Francisco Daily Journals ("The Daily Journals"),
account for about 74% of the total public notice advertising revenues. Public
notice advertising revenues and related advertising and other service fees
constituted about 33% of the Company's total revenues. Circulation revenues
increased $320,000 primarily because of rate increases and $131,000 from
publications of the recently acquired The Public Record Corporation. The
Daily Journals account for about 60% of the Company's total circulation
revenues, and their circulation levels increased slightly. The Rule Book and
Judicial Profile services generate about 27% of the total circulation
revenues, with the other newspapers and services accounting for the balance.
Costs and expenses increased by 1% to $14,753,000 from $14,605,000.
Personnel costs increased by $222,000 of which $59,000 resulted from recent
acquisitions. Normal annual salary adjustments accounted for the majority of
this increase in personnel costs. Newsprint and printing expenses increased
by $184,000 primarily because of the higher cost of newsprint. Depreciation
and amortization expenses increased by $74,000 primarily due to more equipment
with shorter periods for depreciation, the write-off of primarily computer
assets and the amortization of recently acquired intangible assets. The
decrease in other expenses of $427,000 includes lower legal and advertising
expenses, office supplies and interest.
Pretax income during the six month period of fiscal 1995 increased
$248,000 (15%) to $1,909,000 from $1,661,000 in the comparable period in
fiscal 1994. The Company's smaller newspapers and its newspaper
representative, which specializes in public notice advertising, accounted for
about 60% of the Company's pretax income. Net income was $1,144,000 compared
to a net income of $961,000 for the six months ended March 31, 1994. Net
income per share increased to $.70 from $.59.
Liquidity and Capital Resources
During the six months ended March 31, 1995, the Company's cash and cash
equivalent position decreased by $2,012,000 while the investments in U. S.
Treasury Bills increased by $473,000. In addition, cash and cash equivalents
were used to reduce notes and management fees payable by $285,000, for the net
purchase of capital assets, including acquisitions, of $1,905,000 and to
purchase common stock for an aggregate amount of $48,000. The cash provided
by operating activities of $689,000 included a net increase in prepayments for
subscriptions of $263,000. Proceeds from the sale of subscriptions from
newspapers, court rule books and other publications are booked as deferred
subscription revenue and are included in earned revenue only over the duration
of the subscriptions. As of March 31, 1994, the Company had working capital
of $4,489,000 before deducting the liability for deferred subscription
revenues of $5,942,000 which will be earned within one year. The cash and
short-term investments in U.S. Treasury Bills, aggregating about $2 million at
March 31, 1995, and the current level of cash provided by operating activities
appear adequate to meet the obligations of the Company. In recent months, in
general, newsprint prices have been rising, and in 1995 postal costs increased
due to new postal rates. These developments are likely to increase total
expenses.
During the quarter ended March 31, 1995, the Company acquired for about
$463,000 in cash The Public Record Corporation which primarily publishes The
Code of Colorado Regulations and The Brief Times Reporter, a court opinion
service for the Colorado legal profession. In connection with this
acquisition the Company assumed the liability for the unexpired subscriptions
and entered into an employment agreement with a former owner. In addition,
the Company acquired for about $928,000 in cash a small newspaper and land and
building in Phoenix, Arizona. These transactions were accounted for as
purchases.
The Company completed in 1990 a new Los Angeles office and printing
facility. This has been financed by a term loan which has a balance payable
of $1,529,000 at March 31, 1995. It bears interest at the prime rate plus one
percentage point and is repayable in equal monthly installments of $45,000
through January 1998. The term loan is secured by all assets of the Company
except real estate. The assets pledged include net accounts receivable of
approximately $6 million. The term loan limits dividends and the amount the
Company can pay to repurchase stock, but the loan may be repaid at any time
without penalty.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DAILY JOURNAL CORPORATION
(Registrant)
/s/ Gerald L. Salzman
Gerald L. Salzman
Chief Financial Officer
DATE: May 16, 1995
