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, 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 January 31, 1997
Common Stock, par value $ .01 per share 1,627,870 shares
<PAGE>
DAILY JOURNAL CORPORATION
INDEX
Page Nos.
PART I Financial Information
Item 1. Financial statements
Consolidated Balance Sheet -
December 31, 1996 and September 30, 1996 3
Consolidated Statement of Income -
Three months ended December 31, 1996 and 1995 4
Consolidated Statement of Cash Flows -
Three months ended December 31, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II Other Information
Item 6. Exhibits and Reports on Form 8-K 8
<PAGE>
PART I
Item 1. Financial Statements
DAILY JOURNAL CORPORATION - CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,027,000 $ 1,093,000
U.S. Treasury Bills, at cost plus discount earned 6,933,000 5,593,000
Accounts receivable, less allowance for
doubtful accounts of $700,000 and $600,000 4,250,000 5,433,000
Inventories 40,000 48,000
Prepaid expenses and other assets 297,000 329,000
Deferred income taxes 818,000 817,000
Total current assets 13,365,000 13,313,000
Property, plant and equipment, at cost:
Land, buildings and improvements 7,648,000 7,648,000
Furniture and office equipment 4,817,000 4,885,000
Machinery and equipment 1,420,000 1,447,000
13,885,000 13,980,000
Less accumulated depreciation (5,639,000) (5,599,000)
8,246,000 8,381,000
Deferred income taxes 207,000 157,000
Intangible assets, at cost, less accumulated
amortization of $437,000 and $749,000 592,000 638,000
$22,410,000 $22,489,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 2,202,000 $ 2,775,000
Accrued liabilities 2,143,000 2,462,000
Income taxes payable 416,000 --
Deferred subscription revenue 6,503,000 6,524,000
Total current liabilities 11,264,000 11,761,000
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 1,627,870 shares and 1,637,870
shares respectively, outstanding 16,000 16,000
Other paid-in capital 2,070,000 2,082,000
Retained earnings 9,411,000 8,981,000
Less 30,429 treasury shares at cost (351,000) (351,000)
Total shareholders' equity 11,146,000 10,728,000
$22,410,000 $22,489,000
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
DAILY JOURNAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months
ended December 31
<S> <C> <C>
1996 1995
Revenues:
Advertising $5,194,000 $ 4,817,000
Circulation 2,950,000 2,730,000
Advertising service fees and other 719,000 815,000
8,863,000 8,362,000
Costs and expenses:
Salaries and employee benefits 3,604,000 3,497,000
Newsprint and printing expenses 792,000 1,037,000
Commissions and other outside services 1,141,000 1,078,000
Postage and delivery expenses 620,000 615,000
Depreciation and amortization 368,000 327,000
Other, including interest expense 1,180,000 886,000
7,705,000 7,440,000
Income before taxes 1,158,000 922,000
Provision for income taxes 460,000 330,000
Net income $ 698,000 $ 592,000
Weighted average number of common
shares outstanding 1,600,050 1,615,877
Net income per share $ .44 $ .37
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
DAILY JOURNAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months
ended December 31
<S> <C> <C>
1996 1995
Cash flows from operating activities:
Net Income $ 698,000 $ 592,000
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization 368,000 327,000
Deferred income taxes (51,000) 36,000
Discount earned on U.S. Treasury Bills (105,000) (43,000)
Changes in assets and liabilities:
(Increase) decrease in current assets
Accounts receivable, net 1,183,000 850,000
Inventories 8,000 (87,000)
Prepaid expenses and other assets 32,000 108,000
Increase (decrease) in current liabilities
Accounts payable (573,000) (474,000)
Accrued liabilities (319,000) (724,000)
Income taxes payable 416,000 207,000
Deferred subscription revenue (21,000) 189,000
Cash provided by operating activities 1,636,000 981,000
Cash flows from investing activities:
Net investments in U.S. Treasury Bills (1,235,000) (487,000)
Capital expenditures (187,000) (234,000)
Cash used for investing activities (1,422,000) (721,000)
Cash flows from financing activities:
Purchase of common stock (280,000) -
Principal payments of notes payable - (134,000)
Cash used for financing activities (280,000) (134,000)
Increase (decrease) in cash and cash equivalents (66,000) 126,000
Cash and cash equivalents:
Beginning of period 1,093,000 573,000
End of period $1,027,000 $ 699,000
Interest paid during period $ - $ 35,000
Income taxes paid during period $ 5,000 $ -
</TABLE>
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 a newspaper 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 December 31, 1996 and September 30, 1996, the results of
operations for the three month periods ended December 31, 1996 and 1995
and its cash flows for the three months ended December 31, 1996 and 1995.
The results of operations for the three months ended December 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. These financial statements should 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, 1996.
<PAGE>
DAILY JOURNAL CORPORATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Revenues were $8,863,000 and $8,362,000 for the three months ended
December 31, 1996 and 1995, respectively. This increase of 6% is primarily
attributable to subscription and advertising rate increases and additional
public notice lineage partially offset by a decrease in commercial advertising
lineage.
During the three months ended December 31, 1996, classified
advertising revenues increased by $180,000 and display advertising revenues
were up by $41,000. Public notice advertising revenues increased by
$156,000 primarily resulting from increased trustee sale notices, but we
anticipate an overall decline in revenues from publishing foreclosure notices
during this fiscal year. The Company's smaller newspapers, those other than
the Los Angeles and San Francisco Daily Journals ("The Daily Journals"),
accounted for about 86% of the total public notice advertising revenues.
Public notice advertising revenues and related advertising and other service
fees constituted about 32% of the Company's total revenues. Circulation
revenues increased an aggregate of $220,000. 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 24% of the total circulation revenues, with the other
newspapers and services accounting for the balance.
Costs and expenses increased by $265,000 (4%) from $7,440,000 to
$7,705,000. Personnel costs increased an aggregate of $107,000 (3%)
primarily due to the normal annual salary adjustments. Newsprint and
printing expenses decreased by $245,000 primarily because of lower
newsprint costs. Commissions and other outside services increased by
$63,000 primarily because of commissions paid on additional agency public
notice sales. The increase in other expenses of $294,000 includes additional
legal and bad debt expenses.
Pretax income in the three months ended December 31, 1996 increased
$236,000 (26%) to $1,158,000 from $922,000 in fiscal 1996. The
Company's smaller newspapers and its newspaper representative, which
specializes in public notice advertising, accounted for about 41% of the
Company's pretax income. Net income was $698,000 compared to $592,000
in the comparible prior year period. Net income per share increased to $.44
from $.37.
Liquidity and Capital Resources
During the three months ended December 31, 1996, the Company's
cash and cash equivalent position decreased by $66,000 and the investments
in U.S. Treasury Bills increased by $1,340,000. In addition, cash and cash
equivalents were used for the purchase of capital assets of $187,000 and to
purchase common stock for an aggregate amount of $280,000. The cash
provided by operating activities of $1,636,000 included a net decrease in
prepayments for subscriptions of $21,000. 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, 1996, the
Company had working capital of $8,604,000 before deducting the liability
for deferred subscription revenues of $6,503,000 which will be earned within
one year. The cash and short-term investments in U.S. Treasury Bills,
aggregating about $8 million at December 31, 1996, and the current level of
cash provided by operating activities appear adequate to meet the obligations
of the Company.
<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, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Regis-
trant's Consolidated Balance Sheet (Unaudited) as of 12/31/96 and 9/30/96, Stmt.
(Unaudited) for the 3 mos. ended 12/31/96 and 12/31/95, and Stmt. of Cash Flows
(Unaudited) for the 3 mos. ended 12/31/96 and 12/31/95 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-30-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,027,000
<SECURITIES> 6,933,000
<RECEIVABLES> 4,950,000
<ALLOWANCES> 700,000
<INVENTORY> 40,000
<CURRENT-ASSETS> 13,365,000
<PP&E> 13,885,000
<DEPRECIATION> 5,639,000
<TOTAL-ASSETS> 22,410,000
<CURRENT-LIABILITIES> 11,264,000
<BONDS> 0
0
0
<COMMON> 16,000
<OTHER-SE> 11,130,000
<TOTAL-LIABILITY-AND-EQUITY> 22,410,000
<SALES> 8,768,000
<TOTAL-REVENUES> 8,863,000
<CGS> 0
<TOTAL-COSTS> 7,560,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 145,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,158,000
<INCOME-TAX> 460,000
<INCOME-CONTINUING> 698,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 698,000
<EPS-PRIMARY> .44
<EPS-DILUTED> .44
</TABLE>
