SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 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 July 31, 1995
Common Stock, par value $ .01 per share 1,646,306 shares
<PAGE>
DAILY JOURNAL CORPORATION
INDEX
Page Nos.
PART I Financial Information
Item 1. Financial statements
Consolidated Balance Sheet -
June 30, 1995 and September 30, 1994 3
Consolidated Statement of Income -
Three months ended June 30, 1995 and 1994 4
Consolidated Statement of Income
Nine months ended June 30, 1995 and 1994 5
Consolidated Statement of Cash Flows -
Nine months ended June 30, 1995 and 1994 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
PART II Other Information
Item 6. Exhibits and Reports on Form 8-K 10
<PAGE>
PART I
Item 1. Financial Statements
DAILY JOURNAL CORPORATION - CONSOLIDATED BALANCE SHEET
(Unaudited)
June 30 September 30
1995 1994
ASSETS
Current assets:
Cash and cash equivalents $ 561,000 $ 2,068,000
U.S. Treasury Bills,
at cost plus discount earned 1,981,000 1,479,000
Accounts receivable, less allowance for
doubtful accounts of $700,000 and
$1,000,000 6,738,000 6,074,000
Inventories 125,000 94,000
Prepaid expenses and other assets 306,000 268,000
Deferred income taxes 1,074,000 1,254,000
Total current assets 10,785,000 11,237,000
Property, plant and equipment, at cost:
Land, buildings and improvements 6,971,000 6,660,000
Furniture and office equipment 4,956,000 5,951,000
Machinery and equipment 1,548,000 1,330,000
13,475,000 13,941,000
Less accumulated depreciation (5,321,000) (5,398,000)
8,154,000 8,543,000
Deferred tax benefits 151,000 104,000
Intangible assets, at cost, less
accumulated amortization of
$201,000 and $97,000 1,187,000 48,000
$20,277,000 $19,932,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,139,000 $2,697,000
Accrued liabilities, including current
portion of management termination
fee payable of $43,750 2,846,000 3,251,000
Income tax payable 95,000 -
Notes payable 536,000 532,000
Deferred subscription revenue 5,747,000 5,679,000
Total current liabilities 11,363,000 12,159,000
Management termination fee payable - 20,000
Notes payable 859,000 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, 1,646,321
and 1,654,111 shares, respectively,
outstanding 16,000 17,000
Other paid-in capital 2,093,000 2,102,000
Retained earnings 6,297,000 4,721,000
Less 30,429 treasury shares at cost (351,000) (351,000)
Total shareholders' equity 8,055,000 6,489,000
$20,277,000 $19,932,000
See accompanying notes to consolidated financial statements.
<PAGE>
DAILY JOURNAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three months
ended June 30
1995 1994
Revenues:
Advertising $ 5,547,000 $ 4,959,000
Circulation 2,731,000 2,520,000
Advertising service fees and other 935,000 1,148,000
9,213,000 8,627,000
Costs and expenses:
Salaries and employee benefits 3,589,000 3,373,000
Newsprint and printing expenses 995,000 836,000
Commissions and other outside services 1,317,000 1,082,000
Postage and delivery expenses 644,000 576,000
Depreciation and amortization 518,000 484,000
Other, including interest expense 1,140,000 1,146,000
8,203,000 7,497,000
Income before taxes 1,010,000 1,130,000
Provision for income taxes 435,000 475,000
Net income $ 575,000 $ 655,000
Weighted average number of common
shares outstanding 1,619,435 1,623,682
Net income per share $ .36 $ .40
See accompanying notes to consolidated financial statements.
<PAGE>
DAILY JOURNAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Nine months
ended June 30
1995 1994
Revenues:
Advertising $15,198,000 $ 14,085,000
Circulation 7,988,000 7,457,000
Advertising service fees and other 2,689,000 3,351,000
25,875,000 24,893,000
Costs and expenses:
Salaries and employee benefits 10,509,000 10,071,000
Newsprint and printing expenses 2,788,000 2,445,000
Commissions and other outside services 3,436,000 3,112,000
Postage and delivery expenses 1,815,000 1,741,000
Depreciation and amortization 1,465,000 1,357,000
Other, including interest expense 2,943,000 3,376,000
22,956,000 22,102,000
Income before taxes 2,919,000 2,791,000
Provision for income taxes 1,200,000 1,175,000
Net income $ 1,719,000 $ 1,616,000
Weighted average number of common
shares outstanding 1,621,937 1,623,689
Net income per share $ 1.06 $ 1.00
See accompanying notes to consolidated financial statements.
<PAGE>
DAILY JOURNAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Nine months
ended June 30
1995 1994
Cash flows from operating activities:
Net income $ 1,719,000 $ 1,616,000
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization 1,465,000 1,357,000
Deferred income taxes 133,000 30,000
Discount earned on U.S. Treasury Bills (40,000) -
Gains on sales of capital assets (2,000) -
Changes in assets and liabilities:
(Increase) decrease in current assets
Accounts receivable, net (664,000) (99,000)
Inventories (31,000) (5,000)
Prepaid expenses and other assets (38,000) 181,000
Increase (decrease) in current
liabilities
Accounts payable (558,000) (421,000)
Accrued liabilities (405,000) 282,000
Income taxes payable 95,000 (137,000)
Deferred subscription revenue 68,000 334,000
Cash provided by operating
activities 1,742,000 3,138,000
Cash flows from investing activities:
Net investments in U. S. Treasury Bills (463,000) -
Capital expenditures including
acquisitions (2,212,000) (957,000)
Cash used for investing
activities (2,675,000) (957,000)
Cash flows from financing activities:
Principal payments under management
termination fee payable and notes
payable (422,000) (731,000)
Purchase of common stock (152,000) -
Cash used for financing
activities (574,000) (731,000)
Increase (decrease) in cash and
cash equivalents (1,507,000) 1,450,000
Cash and cash equivalents:
Beginning of year 2,068,000 2,551,000
End of period $ 561,000 $ 4,001,000
Interest paid during period $ 130,000 $ 153,000
Income taxes paid during period $ 972,000 $ 879,000
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 June 30, 1995 and September 30, 1994, the results of operations for the
three- and nine-month periods ended June 30, 1995 and 1994 and its cash flows
for the nine months ended June 30, 1995 and 1994.
The results of operations for the nine months ended June 30, 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
In January 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, in March 1995, 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 $25,875,000 and $24,893,000 for the nine months ended June
30, 1995 and 1994, respectively. This increase of 4% is primarily
attributable to subscription and advertising rate increases and additional
display advertising lineage partially offset by decreases in classified and
public notice advertising lineage. Recent acquisitions accounted for $502,000
of this increase, while a $351,000 decrease in other revenues resulted from
the discontinuance of certain services for trustee sale customers.
During the first nine months of fiscal 1995, display and classified
advertising revenues were up by $512,000 and $345,000, respectively, and
public notice advertising revenues increased by $256,000 primarily resulting
from recent acquisitions. The Company's smaller newspapers, excluding the Los
Angeles and San Francisco Daily Journals ("The Daily Journals"), account for
about 77% of the total public notice advertising revenues. Public notice
advertising revenues and related advertising and other service fees
constituted about 34% of the Company's total revenues. Circulation revenues
increased $531,000, including $270,000 from 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 decreased 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 4% to $22,956,000 from $22,102,000.
Personnel costs increased by $438,000 of which $206,000 resulted from recent
acquisitions. Normal annual salary adjustments accounted for the balance of
this increase in personnel costs. Newsprint and printing expenses increased
by $343,000 primarily because of the higher cost of newsprint. Advertising
agency commissions increased by $165,000 because of additional agency sales.
Depreciation and amortization expenses increased by $108,000 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 $433,000 includes lower legal,
advertising, and interest expenses.
Pretax income during the nine-month period of fiscal 1995 increased
$128,000 (5%) to $2,919,000 from $2,791,000 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 61% of the
Company's pretax income. Net income was $1,719,000 compared to a net income
of $1,616,000 for the nine months ended June 30, 1994. Net income per share
increased to $1.06 from $1.00.
Liquidity and Capital Resources
During the nine months ended June 30, 1995, the Company's cash and cash
equivalent position decreased by $1,507,000 while the investments in U. S.
Treasury Bills increased by $502,000. In addition, cash and cash equivalents
were used to reduce notes and management fees payable by $422,000, for the net
purchase of capital assets, including acquisitions, of $2,212,000 and to
purchase common stock for an aggregate amount of $152,000. The cash provided
by operating activities of $1,742,000 included a net increase in prepayments
for subscriptions of $68,000. 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 June 30, 1995, the Company had working capital of
$5,169,000 before deducting the liability for deferred subscription revenues
of $5,747,000 which will be earned within one year. The cash and short-term
investments in U.S. Treasury Bills, aggregating about $2.5 million at June 30,
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.
In January 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, in March 1995 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.
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 $1,395,000 at June 30, 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 $6.7 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>
DAILY JOURNAL CORPORATION
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K:
(A) Exhibits
27 Financial Data Schedule
(B) Reports on Form 8-K - None
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: August 10, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Registrant's Consolidated Balance Sheet (Unaudited) as of June 30, 1995 and
Consolidated Statement of Income (Unaudited) for the six months ended June 30,
1995 and the notes thereto and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 561,000
<SECURITIES> 1,981,000
<RECEIVABLES> 7,438,000
<ALLOWANCES> 700,000
<INVENTORY> 125,000
<CURRENT-ASSETS> 10,785,000
<PP&E> 13,475,000
<DEPRECIATION> 5,321,000
<TOTAL-ASSETS> 20,277,000
<CURRENT-LIABILITIES> 11,363,000
<BONDS> 859,000
<COMMON> 16,000
0
0
<OTHER-SE> 8,039,000
<TOTAL-LIABILITY-AND-EQUITY> 20,277,000
<SALES> 25,610,000
<TOTAL-REVENUES> 25,875,000
<CGS> 0
<TOTAL-COSTS> 22,667,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 161,000
<INTEREST-EXPENSE> 128,000
<INCOME-PRETAX> 2,919,000
<INCOME-TAX> 1,200,000
<INCOME-CONTINUING> 1,719,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,719,000
<EPS-PRIMARY> 1.06
<EPS-DILUTED> 1.06
</TABLE>
