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 March 31, 1996
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 April 30, 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 -
March 31, 1996 and September 30, 1995 3
Consolidated Statement of Income -
Three months ended March 31, 1996 and 1995 4
Consolidated Statement of Income - 5
Six months ended March 31, 1996 and 1995
Consolidated Statement of Cash Flows -
Three months ended March 31, 1996 and 1995 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 4. Submission of Matters to a Vote of
Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 10
<PAGE>
PART I
Item 1. Financial Statements
DAILY JOURNAL CORPORATION - CONSOLIDATED BALANCE SHEET
(Unaudited)
March 31 September 30
1996 1995
ASSETS
Current assets:
Cash and cash equivalents $ 274,000 $ 573,000
U.S. Treasury Bills, at cost plus
discount earned 3,930,000 2,934,000
Accounts receivable, less allowance
for doubtful accounts of $600,000 6,230,000 6,531,000
Inventories 179,000 117,000
Prepaid expenses and other assets 260,000 378,000
Deferred income taxes 831,000 951,000
Total current assets 11,704,000 11,484,000
Property, plant and equipment, at cost:
Land, buildings and improvements 6,955,000 6,951,000
Furniture and office equipment 5,010,000 4,884,000
Machinery and equipment 1,477,000 1,548,000
13,442,000 13,383,000
Less accumulated depreciation (5,709,000) (5,461,000)
7,733,000 7,922,000
Deferred tax benefits 291,000 222,000
Intangible assets, at cost, less accumulated
amortization of $388,000 and $263,000 999,000 1,124,000
$20,727,000 $20,752,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,714,000 $ 2,490,000
Accrued liabilities 2,243,000 2,826,000
Notes payable 536,000 536,000
Income taxes payable 108,000 -
Deferred subscription revenue 6,133,000 5,798,000
Total current liabilities 10,734,000 11,650,000
Notes payable 457,000 725,000
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 7,778,000 6,619,000
Less 30,429 treasury shares at cost (351,000) (351,000)
Total shareholders' equity 9,536,000 8,377,000
$20,727,000 $20,752,000
See accompanying notes to consolidated financial statements.
<PAGE>
DAILY JOURNAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three months
ended March 31
1996 1995
Revenues:
Advertising $ 5,247,000 $ 4,974,000
Circulation 2,598,000 2,694,000
Advertising service fees and other 863,000 868,000
8,708,000 8,536,000
Costs and expenses:
Salaries and employee benefits 3,586,000 3,530,000
Newsprint and printing expenses 952,000 969,000
Commissions and other outside services 1,180,000 1,115,000
Postage and delivery expenses 559,000 652,000
Depreciation and amortization 390,000 507,000
Other, including interest expense 1,029,000 918,000
7,696,000 7,691,000
Income before taxes 1,012,000 845,000
Provision for income taxes 445,000 340,000
Net income $ 567,000 $ 505,000
Weighted average number of common
shares outstanding 1,615,877 1,622,746
Net income per share $ .35 $ .31
See accompanying notes to consolidated financial statements.
<PAGE>
DAILY JOURNAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Six months
ended March 31
1996 1995
Revenues:
Advertising $10,064,000 $ 9,651,000
Circulation 5,328,000 5,257,000
Advertising service fees and other 1,678,000 1,754,000
17,070,000 16,662,000
Costs and expenses:
Salaries and employee benefits 7,083,000 6,920,000
Newsprint and printing expenses 1,989,000 1,793,000
Commissions and other outside services 2,258,000 2,119,000
Postage and delivery expenses 1,174,000 1,171,000
Depreciation and amortization 717,000 947,000
Other, including interest expense 1,915,000 1,803,000
15,136,000 14,753,000
Income before taxes 1,934,000 1,909,000
Provision for income taxes 775,000 765,000
Net income $ 1,159,000 $ 1,144,000
Weighted average number of common
shares outstanding 1,615,877 1,623,194
Net income per share $ .72 $ .70
See accompanying notes to consolidated financial statements.
<PAGE>
DAILY JOURNAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Six months
ended March 31
1996 1995
Cash flows from operating activities:
Net income $ 1,159,000 $ 1,144,000
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization 717,000 947,000
Deferred income taxes 51,000 (207,000)
Discount earned on U.S. Treasury Bills (25,000) (10,000)
Gains on sales of capital assets - (2,000)
Changes in assets and liabilities:
(Increase) decrease in current assets
Accounts receivable, net 301,000 122,000
Inventories (62,000) 64,000
Prepaid expenses and other assets 118,000 (69,000)
Increase (decrease) in current liabilities
Accounts payable (776,000) (1,051,000)
Accrued liabilities (583,000) (512,000)
Income taxes payable 108,000 -
Deferred subscription revenue 335,000 263,000
Cash provided by operating activities 1,343,000 689,000
Cash flows from investing activities:
Net investments in U. S. Treasury Bills (971,000) (463,000)
Capital expenditures including acquisitions (403,000) (1,905,000)
Cash used for investing activities (1,374,000) (2,368,000)
Cash flows from financing activities:
Principal payments under management
termination fee payable and notes payable (268,000) (285,000)
Purchase of common stock - (48,000)
Cash used for financing activities (268,000) (333,000)
Increase (decrease) in cash and cash equivalents (299,000) (2,012,000)
Cash and cash equivalents:
Beginning of year 573,000 2,068,000
End of period $ 274,000 $ 56,000
Interest paid during period $ 65,000 $ 87,000
Income taxes paid during period $ 529,000 $ 972,000
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. 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, 1996 and September 30, 1995, the results of operations for the
three- and six-month periods ended March 31, 1996 and 1995 and its cash flows
for the six months ended March 31, 1996 and 1995.
The results of operations for the six months ended March 31, 1996 and 1995
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 $17,070,000 and $16,662,000 for the six months ended
March 31, 1996 and 1995, respectively. This increase of 2% is primarily
attributable to the recent acquisitions which accounted for additional
revenues of $729,000 and to subscription rate increases partially offset by
decreases in classified and display advertising lineage. Public notice
advertising lineage increased.
During the six months ended March 31, 1996, display and classified
advertising revenues were down by $380,000 while public notice advertising
revenues increased by $793,000 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 Daily
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 33% of the Company's total revenues.
Circulation revenues increased an aggregate of $71,000 of which $183,000
resulted from the recent acquisitions. The Daily Journals accounted for about
61% 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 3% from $14,753,000 to $15,136,000
including $837,000 from recent acquisitions. Personnel costs increased an
aggregate of $163,000 of which $341,000 resulted from recent acquisitions.
Newsprint and printing expenses increased by $196,000 primarily because of the
higher cost of newsprint. Depreciation and amortization expenses decreased by
$230,000, mainly due to more assets becoming fully depreciated and partial
offset by the amortization of costs of recent acquisitions.
Pretax income for the six months ended March 31, 1996 increased $25,000
(1%) to $1,934,000 from $1,909,000 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 57% of the
Company's pretax income. Net income was $1,159,000 compared to $1,144,000 in
the comparable prior year period. Net income per share increased to $.72 from
$.70.
Liquidity and Capital Resources
During the six months ended March 31, 1996, the Company's cash and cash
equivalent position decreased by $299,000, and the investments in U. S.
Treasury Bills increased by $996,000. In addition, cash and cash equivalents
were used to reduce notes payable by $268,000 and for the net purchase of
capital assets of $403,000. The cash provided by operating activities of
$1,343,000 included a net increase in prepayments for subscriptions of
$335,000. 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 March 31, 1996, the Company had working capital of $7,103,000 before
deducting the liability for deferred subscription revenues of $6,133,000 which
will be earned within one year. The cash and short-term investments in U. S.
Treasury Bills, aggregating about $4.2 million at March 31, 1996, and the
current level of cash provided by operating activities appear adequate to meet
the obligations of the Company. In April 1996 the Company purchased land near
the Los Angeles facility for $700,000, and after improvements, this will be
used, at least in the near term, for additional parking.
<PAGE>
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 $993,000 at March 31, 1996. 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 $6.2 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 4. Submission of Matters to a Vote of Security Holders
The Company's annual meeting was held on February 8, 1996. The matters
submitted to a vote of security holders were the election of directors and the
ratification of the appointment of Price Waterhouse LLP as independent
accountants for the Company for the current fiscal year.
Each of the nominees to the Board of directors was elected. The following
votes were received as to the election of the board of directors:
Votes
Withheld Broker
Nominee's Name For Authority Non-Votes
Charles T. Munger 1,017,833 2,576 0
J. P. Guerin 1,017,754 2,661 0
Gerald L. Salzman 1,017,848 2,561 0
Donald W. Killian, Jr. 1,017,578 2,831 0
George C. Good 1,017,503 2,906 0
Price Waterhouse was ratified as the Company's independent accountants
with 1,017,854 votes in favor, 391 votes against, 2,164 abstentions and no
broker non-votes.
Item 6. Exhibits and Reports on Form 8-K:
(A) Exhibits - none
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)
Gerald L. Salzman
Chief Financial Officer
DATE: May 2, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Regi-
strant's Consolidated Balance Sheet (Unaudited) as of 3/31/96, and Consolidated
Statements of Income (Unaudited) for the 3 months and 6 months ended 3/31/96 and
of Cash Flows (Unaudited) for the 3 months ended 3/31/96 and the notes thereto
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 274,000
<SECURITIES> 3,930,000
<RECEIVABLES> 6,854,000
<ALLOWANCES> 600,000
<INVENTORY> 179,000
<CURRENT-ASSETS> 11,704,000
<PP&E> 13,442,000
<DEPRECIATION> 5,709,000
<TOTAL-ASSETS> 20,727,000
<CURRENT-LIABILITIES> 10,734,000
<BONDS> 457,000
0
0
<COMMON> 16,000
<OTHER-SE> 9,520,000
<TOTAL-LIABILITY-AND-EQUITY> 20,727,000
<SALES> 16,894,000
<TOTAL-REVENUES> 17,070,000
<CGS> 0
<TOTAL-COSTS> 14,970,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 104,000
<INTEREST-EXPENSE> 63,000
<INCOME-PRETAX> 1,934,000
<INCOME-TAX> 775,000
<INCOME-CONTINUING> 1,159,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,159,000
<EPS-PRIMARY> .72
<EPS-DILUTED> .72
</TABLE>
