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 December 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 Ave., 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 January 31, 1996
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 -
December 31, 1995 and September 30, 1995 3
Consolidated Statement of Income -
Three months ended December 31, 1995 and 1994 4
Consolidated Statement of Cash Flows -
Three months ended December 31, 1995 and 1994 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-8
PART II Other Information
Item 6. Exhibits and Reports on Form 8-K 9
<PAGE>
PART I
Item 1. Financial Statements
DAILY JOURNAL CORPORATION - CONSOLIDATED BALANCE SHEET
(Unaudited)
December 31 September 30
1995 1995
ASSETS
Current assets:
Cash and cash equivalents $ 699,000 $ 573,000
U.S. Treasury Bills, at cost plus
discount earned 3,464,000 2,934,000
Accounts receivable, less allowance for
doubtful accounts of $600,000 5,681,000 6,531,000
Inventories 204,000 117,000
Prepaid expenses and other assets 270,000 378,000
Deferred income taxes 890,000 951,000
Total current assets 11,208,000 11,484,000
Property, plant and equipment, at cost:
Land, buildings and improvements 6,960,000 6,951,000
Furniture and office equipment 5,090,000 4,884,000
Machinery and equipment 1,567,000 1,548,000
13,617,000 13,383,000
Less accumulated depreciation (5,726,000) (5,461,000)
7,891,000 7,922,000
Deferred tax benefits 247,000 222,000
Intangible assets, at cost, less accumulated
amortization of $325,000 and $263,000 1,062,000 1,124,000
$20,408,000 $20,752,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,016,000 $ 2,490,000
Accrued liabilities 2,102,000 2,826,000
Notes payable 536,000 536,000
Income taxes payable 207,000 -
Deferred subscription revenue 5,987,000 5,798,000
Total current liabilities 10,848,000 11,650,000
Notes payable 591,000 725,000
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,
1,646,306 shares, outstanding 16,000 16,000
Other paid-in capital 2,093,000 2,093,000
Retained earnings 7,211,000 6,619,000
Less 30,429 treasury shares at cost (351,000) (351,000)
Total shareholders' equity 8,969,000 8,377,000
$20,408,000 $20,752,000
See accompanying notes to consolidated financial statements.
<PAGE>
DAILY JOURNAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three months
ended December 31
1995 1994
Revenues:
Advertising $ 4,817,000 $ 4,677,000
Circulation 2,730,000 2,563,000
Advertising service fees and other 815,000 886,000
8,362,000 8,126,000
Costs and expenses:
Salaries and employee benefits 3,497,000 3,390,000
Newsprint and printing expenses 1,037,000 824,000
Commissions and other outside services 1,078,000 1,004,000
Postage and delivery expenses 615,000 519,000
Depreciation and amortization 327,000 440,000
Other, including interest expense 886,000 885,000
7,440,000 7,062,000
Income before taxes 922,000 1,064,000
Provision for income taxes 330,000 425,000
Net income $ 592,000 $ 639,000
Weighted average number of common
shares outstanding 1,615,877 1,623,638
Net income per share $ .37 $ .39
See accompanying notes to consolidated financial statements.
<PAGE>
DAILY JOURNAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Three months ended
December 31
1995 1994
Cash flows from operating activities:
Net income $ 592,000 $ 639,000
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization 327,000 440,000
Deferred income taxes 36,000 (24,000)
Discount earned on U.S. Treasury Bills (43,000) (12,000)
Changes in assets and liabilities:
(Increase) decrease in current assets
Accounts receivable, net 850,000 259,000
Inventories (87,000) (9,000)
Prepaid expenses and other assets 108,000) (53,000)
Increase (decrease) in current liabilities
Accounts payable (474,000) (870,000)
Accrued liabilities (724,000) (504,000)
Income taxes payable 207,000 448,000)
Deferred subscription revenue 189,000 (64,000)
Cash provided by operating activities 981,000 250,000
Cash flows from investing activities:
Net investments in U.S. Treasury Bills (487,000) -
Capital expenditures (234,000) (137,000)
Cash used for investing activities (721,000) (137,000)
Cash flows from financing activities:
Principal payments of notes payable (134,000) (143,000)
Cash used for financing activities (134,000) (143,000)
Increase (decrease) in cash and cash equivalents 126,000 (30,000)
Cash and cash equivalents:
Beginning of period 573,000 2,068,000
End of period $ 699,000 $ 2,038,000
Interest paid during period $ 35,000 $ 44,000
See accompanying notes to consolidated financial statements.
<PAGE>
DAILY JOURNAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - The Corporation and Operations:
The Company publishes newspapers in California, Washington, Arizona,
Colorado and Nevada and the California Lawyer magazine and produces several
specialized information services. It also serves as a newspaper
representative specializing in public notice advertising.
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 December 31, 1995 and September 30, 1995, the results of operations for the
three-month period ended December 31, 1995 and 1994 and its cash flows for the
three months ended December 31, 1995 and 1994.
The results of operations for the three months ended December 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, 1995.
<PAGE>
DAILY JOURNAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Revenues were $8,362,000 and $8,126,000 for the three months ended
December 31, 1995 and 1994, respectively. This increase of 3% is primarily
attributable to the recent acquisitions which accounted for revenues of
$360,000 and to subscription rate increases partially offset by decreases in
classified and display advertising lineage. Public notice advertising lineage
increased.
During the three months ended December 31, 1995, display and classified
advertising revenues were down by $216,000 while public notice advertising
revenues increased by $356,000 primarily resulting from recent acquisitions
and increased trustee sale notices. The Company's smaller newspapers,
excluding the Los Angeles and San Francisco Daily Journals ("The Journals"),
accounted for about 82% of the total public notice advertising revenues.
Public notice advertising revenues and related advertising and other service
fees constituted about 36% of the Company's total revenues. Circulation
revenues increased $167,000 including $152,000 from the recent acquisitions.
The Daily Journals accounted for about 63% of the Company's total circulation
revenues, and their circulation levels decreased slightly. The Rule Book and
Judicial Profile services generated about 23% of the total circulation
revenues, with the other newspapers and services accounting for the balance.
Costs and expenses increased by 6% to $7,440,000 from $7,062,000
including $419,000 from recent acquisitions. Personnel costs increased by
$107,000 of which $153,000 resulted from recent acquisitions. Newsprint and
printing expenses increased by $213,000 primarily because of the higher cost
of newsprint. Postage expenses increased primarily because of increased
postal rates. Depreciation and amortization expenses decreased by $113,000,
mainly due to more assets becoming fully depreciated and partial offset by the
amortization of costs of recent acquisitions.
Pretax income for the three months ended December 31, 1995 decreased
$142,000 (14%) to $922,000 from $1,064,000 in the comparable period in fiscal
1995. The Company's smaller newspapers and its newspaper representative,
which specializes in public notice advertising, accounted for about 64% of the
Company's pretax income. Net income was $592,000 compared to $639,000 in the
comparable prior year period. Net income per share decreased to $.37 from
$.39.
Liquidity and Capital Resources
During the three months ended December 31, 1995, the Company's cash and
cash equivalent position increased by $126,000, and the investments in U. S.
Treasury Bills increased by $530,000. In addition, cash and cash equivalents
were used to reduce notes payable by $134,000 and for the net purchase of
capital assets of $234,000. The cash provided by operating activities of
$981,000 included a net increase in prepayments for subscriptions of $189,000.
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 subscription. As of
December 31, 1995, the Company had working capital of $6,347,000 before
deducting the liability for deferred subscription revenues of $5,987,000 which
will be earned within one year. The cash and short-term investments in U. S.
Treasury Bills, aggregating about $4.2 million at December 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 postal costs have increased due to higher postal
rates. These developments are likely to continue to increase total expenses.
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 $1,127,000 at December 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 $5.7 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 - none
(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: February 12, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Registrant's Consolidated Balance Sheet (Unaudited) as of December 31, 1995 and
Consolidated Statements of Income and Cash Flows (Unaudited) for the three
months ended December 31, 1995 and the notes thereto and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 699,000
<SECURITIES> 3,464,000
<RECEIVABLES> 6,319,000
<ALLOWANCES> 600,000
<INVENTORY> 204,000
<CURRENT-ASSETS> 11,208,000
<PP&E> 13,617,000
<DEPRECIATION> 5,726,000
<TOTAL-ASSETS> 20,408,000
<CURRENT-LIABILITIES> 10,848,000
<BONDS> 591,000
0
0
<COMMON> 16,000
<OTHER-SE> 8,953,000
<TOTAL-LIABILITY-AND-EQUITY> 20,408,000
<SALES> 8,278,000
<TOTAL-REVENUES> 8,362,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 83,000
<INTEREST-EXPENSE> 34,000
<INCOME-PRETAX> 922,000
<INCOME-TAX> 330,000
<INCOME-CONTINUING> 592,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 592,000
<EPS-PRIMARY> .37
<EPS-DILUTED> .37
</TABLE>
