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, 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 July 31, 1996
Common Stock, par value $.01 per share 1,639,906 shares
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DAILY JOURNAL CORPORATION
INDEX
Page Nos.
PART I Financial Information
Item 1. Financial statements
Consolidated Balance Sheet -
June 30, 1996 and September 30, 1995 3
Consolidated Statement of Income -
Three months ended June 30, 1996 and 1995 4
Consolidated Statement of Income -
Nine months ended June 30, 1996 and 1995 5
Consolidated Statement of Cash Flows -
Nine months ended June 30, 1996 and 1995 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations8-9
PART IIOther Information
Item 6. Exhibits and Reports on Form 8-K 10
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PART I
Item 1. Financial Statements
DAILY JOURNAL CORPORATION - CONSOLIDATED BALANCE SHEET
(Unaudited)
June 30 September 30
1996 1995
ASSETS
Current assets:
Cash and cash equivalents $ 380,000 $ 573,000
U.S. Treasury Bills, at cost plus
discount earned 3,964,000 2,934,000
Accounts receivable, less allowance for
doubtful accounts of $600,000 6,548,000 6,531,000
Inventories 167,000 117,000
Prepaid expenses and other assets 295,000 378,000
Deferred income taxes 759,000 951,000
Total current assets 12,113,000 11,484,000
Property, plant and equipment, at cost:
Land, buildings and improvements 7,658,000 6,951,000
Furniture and office equipment 5,238,000 4,884,000
Machinery and equipment 1,477,000 1,548,000
14,373,000 13,383,000
Less accumulated depreciation (5,999,000) (5,461,000)
8,374,000 7,922,000
Deferred tax benefits 335,000 222,000
Intangible assets, at cost, less
accumulated amortization of $451,000
and $263,000 936,000 1,124,000
$21,758,000 $20,752,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,203,000 $2,490,000
Accrued liabilities 2,453,000 2,826,000
Notes payable 536,000 536,000
Income taxes payable 73,000 -
Deferred subscription revenue 6,352,000 5,798,000
Total current liabilities 11,617,000 11,650,000
Notes payable - 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,
1,639,906 shares, outstanding 16,000 16,000
Other paid-in capital 2,085,000 2,093,000
Retained earnings 8,391,000 6,619,000
Less 30,429 treasury shares at cost (351,000) (351,000)
Total shareholders' equity 10,141,000 8,377,000
$21,758,000 $20,752,000
See accompanying notes to consolidated financial statements.
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DAILY JOURNAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three months
ended June 30
1996 1995
Revenues:
Advertising $ 5,836,000 $ 5,547,000
Circulation 2,811,000 2,731,000
Advertising service fees and other 979,000 935,000
9,626,000 9,213,000
Costs and expenses:
Salaries and employee benefits 3,534,000 3,589,000
Newsprint and printing expenses 995,000 995,000
Commissions and other outside services 1,381,000 1,317,000
Postage and delivery expenses 588,000 644,000
Depreciation and amortization 353,000 518,000
Other, including interest expense 1,485,000 1,140,000
8,336,000 8,203,000
Income before taxes 1,290,000 1,010,000
Provision for income taxes 525,000 435,000
Net income $ 765,000 $ 575,000
Weighted average number of common
shares outstanding 1,615,823 1,619,435
Net income per share $ .47 $ .36
See accompanying notes to consolidated financial statements.
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DAILY JOURNAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Nine months
ended June 30
1996 1995
Revenues:
Advertising $15,900,000 $15,198,000
Circulation 8,139,000 7,988,000
Advertising service fees and other 2,657,000 2,689,000
26,696,000 25,875,000
Costs and expenses:
Salaries and employee benefits 10,617,000 10,509,000
Newsprint and printing expenses 2,984,000 2,788,000
Commissions and other outside services 3,639,000 3,436,000
Postage and delivery expenses 1,762,000 1,815,000
Depreciation and amortization 1,070,000 1,465,000
Other, including interest expense 3,400,000 2,943,000
23,472,000 22,956,000
Income before taxes 3,224,000 2,919,000
Provision for income taxes 1,300,000 1,200,000
Net income $ 1,924,000 $ 1,719,000
Weighted average number of common
shares outstanding 1,615,859 1,621,937
Net income per share $ 1.19 $ 1.06
See accompanying notes to consolidated financial statements.
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DAILY JOURNAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Nine months
ended June 30
1996 1995
Cash flows from operating activities:
Net income $ 1,924,000 $ 1,719,000
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization 1,070,000 1,465,000
Deferred income taxes 79,000 133,000
Discount earned on U.S.
Treasury Bills (59,000) (40,000)
Gains on sales of capital assets - (2,000)
Changes in assets and liabilities:
(Increase) decrease in current assets
Accounts receivable, net (17,000) (664,000)
Inventories (50,000) (31,000)
Prepaid expenses and other assets 83,000 (38,000)
Increase (decrease) in current liabilities
Accounts payable (287,000) (558,000)
Accrued liabilities (373,000) (405,000)
Income taxes payable 73,000 95,000
Deferred subscription revenue 554,000 68,000
Cash provided by operating
activities 2,997,000 1,742,000
Cash flows from investing activities:
Net investments in U. S. Treasury Bills (971,000) (463,000)
Capital expenditures including
acquisitions (1,334,000) (2,212,000)
Cash used for investing
activities (2,305,000) (2,675,000)
Cash flows from financing activities:
Principal payments of notes payable (725,000) (422,000)
Purchase of common stock (160,000) (152,000)
Cash used for financing activities (885,000) (574,000)
Increase (decrease) in cash and cash
equivalents (193,000) (1,507,000)
Cash and cash equivalents:
Beginning of year 573,000 2,068,000
End of period $ 380,000 $ 561,000
Interest paid during period $ 92,000 $ 130,000
Income taxes paid during period $ 1,061,000 $ 972,000
See accompanying notes to consolidated financial statements.
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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 June 30, 1996 and September 30, 1995, the results of operations for the
three- and nine-month periods ended June 30, 1996 and 1995 and its cash flows
for the nine months ended June 30, 1996 and 1995.
The results of operations for the three and nine months ended June 30,
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, 1995.
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DAILY JOURNAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Revenues were $26,696,000 and $25,875,000 for the nine months ended June
30, 1996 and 1995, respectively. This increase of 3% is primarily
attributable to the recent acquisitions which accounted for additional
revenues of $588,000 and to subscription rate increases partially offset by
decreases in classified and display advertising lineage. Public notice
advertising lineage increased.
During the nine months ended June 30, 1996, display and classified
advertising revenues were down by $359,000 while public notice advertising
revenues increased by $1,061,000 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 83% of the total public notice advertising
revenues. Public notice advertising revenues and related advertising and
other service fees constituted about 37% of the Company's total revenues.
Circulation revenues increased an aggregate of $151,000 of which $180,000
resulted from the recent acquisitions. The Daily Journals accounted for about
62% 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 2% from $22,956,000 to $23,472,000
including $644,000 from recent acquisitions. Personnel costs increased an
aggregate of $108,000 of which $293,000 resulted from recent acquisitions.
Newsprint and printing expenses increased by $196,000 primarily because of the
higher cost of newsprint. Commissions and other outside services increased by
$203,000 primarily because of commissions paid on additional agency sales.
Depreciation and amortization expenses decreased by $395,000, mainly due to
more assets becoming fully depreciated and partial offset by the amortization
of costs of recent acquisitions. The increase in other expenses of $457,000
primarily includes additional legal and bad debt expenses.
Pretax income for the nine months ended June 30, 1996 increased $305,000
(10%) to $3,224,000 from $2,919,000 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 63% of the
Company's pretax income. Net income was $1,924,000 compared to $1,719,000 in
the comparable prior year period. Net income per share increased to $1.19
from $1.06.
Liquidity and Capital Resources
During the nine months ended June 30, 1996, the Company's cash and cash
equivalent position decreased by $193,000, and the investments in U. S.
Treasury Bills increased by $1,030,000. In addition, cash and cash
equivalents were used to reduce notes payable by $725,000, for the net
purchase of capital assets of $1,334,000, including land of $705,000 and to
purchase common stock for an aggregate amount of $160,000. The cash provided
by operating activities of $2,997,000 included a net increase in prepayments
for subscriptions of $554,000. 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 June 30, 1996, the Company had working capital of
$6,848,000 before deducting the liability for deferred subscription revenues
of $6,352,000 which will be earned within one year. The cash and short-term
investments in U. S. Treasury Bills, aggregating about $4.3 million at June
30, 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 $705,000, and after
improvements, this will be used, at least in the near term, for additional
parking. The Company completed in 1990 a new Los Angeles office and
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printing facility. This had been financed by a term loan which had a balance
payable of $536,000 at June 30, 1996, and this balance was paid off in July
1996.
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DAILY JOURNAL CORPORATION
PART II - OTHER INFORMATION
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)
/s/ Gerald L. Salzman
Gerald L. Salzman
Chief Financial Officer
DATE: August 9, 1996
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