-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DvkYpPurXNqJf5DDlrkG4mnN/fjH0uBsB+XodsvCeVr8eShuj2zJyi1Kza74/tWU djzg0H5myhNJ19TGCYxhyg== 0000898430-97-003197.txt : 19970805 0000898430-97-003197.hdr.sgml : 19970805 ACCESSION NUMBER: 0000898430-97-003197 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970804 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DAILY JOURNAL CORP CENTRAL INDEX KEY: 0000783412 STANDARD INDUSTRIAL CLASSIFICATION: NEWSPAPERS: PUBLISHING OR PUBLISHING & PRINTING [2711] IRS NUMBER: 954133299 STATE OF INCORPORATION: SC FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14665 FILM NUMBER: 97650807 BUSINESS ADDRESS: STREET 1: 915 E FIRST STREET CITY: LOS ANGELES STATE: CA ZIP: 90012 BUSINESS PHONE: 2132295436 MAIL ADDRESS: STREET 1: 915 E FIRST STREET CITY: LOS ANGELES STATE: CA ZIP: 90012 FORMER COMPANY: FORMER CONFORMED NAME: DAILY JOURNAL CO DATE OF NAME CHANGE: 19870427 10-Q 1 FORM 10-Q 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, 1997 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, 1997 Common Stock, par value $ .01 per share ---------------------------- 1,621,870 shares 1 of 10 DAILY JOURNAL CORPORATION INDEX
Page Nos. PART I Financial Information Item 1. Financial statements Consolidated Balance Sheet - June 30, 1997 and September 30, 1996 3 Consolidated Statement of Income - Three months ended June 30, 1997 and 1996 4 Consolidated Statement of Income - 5 Nine months ended June 30, 1997 and 1996 Consolidated Statement of Cash Flows - Nine months ended June 30, 1997 and 1996 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II Other Information Item 1. Legal Proceedings 9 Item 6. Exhibits and Reports on Form 8-K 10
2 of 10 PART I Item 1. Financial Statements DAILY JOURNAL CORPORATION - CONSOLIDATED BALANCE SHEET (Unaudited)
June 30 September 30 1997 1996 --------------- ------------- ASSETS Current assets: Cash and cash equivalents $ 196,000 $ 1,093,000 U.S. Treasury Bills, at cost plus discount earned 8,907,000 5,593,000 Accounts receivable, less allowance for doubtful accounts of $700,000 and $600,000 5,929,000 5,433,000 Inventories 53,000 48,000 Prepaid expenses and other assets 363,000 329,000 Deferred income taxes 897,000 817,000 ------------ ------------ Total current assets 16,345,000 13,313,000 ------------ ------------ Property, plant and equipment, at cost: Land, buildings and improvements 7,655,000 7,648,000 Furniture and office equipment 5,303,000 4,885,000 Machinery and equipment 1,420,000 1,447,000 ------------ ------------ 14,378,000 13,980,000 Less accumulated depreciation (6,301,000) (5,599,000) ------------ ------------ 8,077,000 8,381,000 Deferred income taxes 313,000 157,000 Intangible assets, at cost, less accumulated amortization of $363,000 and $749,000 310,000 638,000 ------------ ------------ $ 25,045,000 $ 22,489,000 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 3,162,000 $ 2,775,000 Accrued liabilities 2,808,000 2,462,000 Income taxes payable 339,000 - Deferred subscription revenue 6,212,000 6,524,000 ------------ ------------ Total current liabilities 12,521,000 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; 1,621,870 shares and 1,637,870 shares respectively, outstanding 16,000 16,000 Other paid-in capital 2,062,000 2,082,000 Retained earnings 10,797,000 8,981,000 Less 30,429 treasury shares at cost (351,000) (351,000) ------------ ------------ Total shareholders' equity 12,524,000 10,728,000 ------------ ------------ $ 25,045,000 $ 22,489,000 ============ ============
See accompanying notes to consolidated financial statements. DAILY JOURNAL CORPORATION CONSOLIDATED STATEMENT OF INCOME (Unaudited) 3 of 10
Three months ended June 30 ------------------------------------------------- 1997 1996 ----------------------- ----------------------- Revenues: Advertising $5,573,000 $5,864,000 Circulation 2,915,000 2,811,000 Advertising service fees and other 917,000 951,000 ---------- ---------- 9,405,000 9,626,000 ---------- ---------- Costs and expenses: Salaries and employee benefits 3,589,000 3,534,000 Newsprint and printing expenses 907,000 995,000 Commissions and other outside services 1,128,000 1,381,000 Postage and delivery expenses 596,000 588,000 Depreciation and amortization 654,000 353,000 Other, including interest expense 1,078,000 1,485,000 ---------- ---------- 7,952,000 8,336,000 ---------- ---------- Income before taxes 1,453,000 1,290,000 Provision for income taxes 580,000 525,000 ---------- ---------- Net income $ 873,000 $ 765,000 ========== ========== Weighted average number of common shares outstanding 1,591,441 1,615,823 Net income per share $ .55 $ .47
See accompanying notes to consolidated financial statements. 4 of 10 DAILY JOURNAL CORPORATION CONSOLIDATED STATEMENT OF INCOME (Unaudited)
Nine months ended June 30 ------------------------------------------------- 1997 1996 ----------------------- ----------------------- Revenues: Advertising $16,047,000 $15,976,000 Circulation 8,590,000 8,139,000 Advertising service fees and other 2,398,000 2,581,000 ----------- ----------- 27,035,000 26,696,000 ----------- ----------- Costs and expenses: Salaries and employee benefits 10,826,000 10,617,000 Newsprint and printing expenses 2,482,000 2,984,000 Commissions and other outside services 3,253,000 3,639,000 Postage and delivery expenses 1,753,000 1,762,000 Depreciation and amortization 1,311,000 1,070,000 Other, including interest expense 3,676,000 3,400,000 ----------- ----------- 23,301,000 23,472,000 ----------- ----------- Income before taxes 3,734,000 3,224,000 Provision for income taxes 1,490,000 1,300,000 ----------- ----------- Net income $ 2,244,000 $ 1,924,000 =========== =========== Weighted average number of common shares outstanding 1,595,401 1,615,859 Net income per share $1.41 $1.19
See accompanying notes to consolidated financial statements. 5 of 10 DAILY JOURNAL CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
Nine months ended June 30 --------------------------------------------------- 1997 1996 ------------------------ ------------------------ Cash flows from operating activities: Net income $2,244,000 $ 1,924,000 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization 1,311,000 1,070,000 Deferred income taxes (236,000) 79,000 Discount earned on U.S. Treasury Bills (133,000) (59,000) Changes in assets and liabilities: (Increase) decrease in current assets Accounts receivable, net (496,000) (17,000) Inventories (5,000) (50,000) Prepaid expenses and other assets (34,000) 83,000 Increase (decrease) in current liabilities Accounts payable 387,000 (287,000) Accrued liabilities 346,000 (373,000) Income taxes payable 339,000 73,000 Deferred subscription revenue (312,000) 554,000 ---------- ----------- Cash provided by operating activities 3,411,000 2,997,000 ---------- ----------- Cash flows from investing activities: Net investments in U.S. Treasury Bills (3,181,000) (971,000) Capital expenditures (679,000) (1,334,000) ------------ ---------- Cash used for investing activities (3,860,000) (2,305,000) ------------ ---------- Cash flows from financing activities: Principal payments of notes payable - (725,000) Purchase of common stock (448,000) (160,000) ----------- ---------- Cash used for financing activities (448,000) (885,000) ----------- ---------- Increase (decrease) in cash and cash equivalents (897,000) (193,000) Cash and cash equivalents: Beginning of period 1,093,000 573,000 ---------- ------------ End of period $ 196,000 $ 380,000 ========== ============ Interest paid during period $ - $ 92,000 Income taxes paid during period $1,297,000 $ 1,061,000
See accompanying notes to consolidated financial statements. 6 of 10 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 June 30, 1997 and September 30, 1996, the results of operations for the three- and nine-month periods ended June 30, 1997 and 1996 and its cash flows for the nine months ended June 30, 1997 and 1996. The results of operations for the nine months ended June 30, 1997 and 1996 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. 7 of 10 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Revenues were $27,035,000 and $26,696,000 for the nine months ended June 30, 1997 and 1996, respectively. This increase of 1% is primarily attributable to subscription and advertising rate increases and partially offset by a decrease in public notice advertising lineage. During the nine months ended June 30, 1997, classified advertising revenues increased by $444,000 and display advertising revenues were up by $186,000. Public notice advertising revenues decreased by $559,000 primarily resulting from decreased trustee sale notices, and we anticipate this decline to continue 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 87% 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 $451,000. 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 24% of the total circulation revenues, with the other newspapers and services accounting for the balance. Costs and expenses decreased by $171,000 (1%) from $23,472,000 to $23,301,000. Personnel costs increased an aggregate of $209,000 (2%) primarily due to the normal annual salary adjustments. Newsprint and printing expenses decreased by $502,000 primarily because of lower newsprint costs. Commissions and other outside services decreased by $386,000 primarily because of less agency sales. Depreciation and amortization expenses increased by $241,000 mainly due to the accelerated write-off of intangible assets and computer assets. The increase in other expenses of $276,000 includes additional legal expenses. Pretax income in the nine months ended June 30, 1997 increased $510,000 (16%) to $3,734,000 from $3,224,000 in fiscal 1997. The Company's smaller newspapers and its newspaper representative, which specializes in public notice advertising, accounted for about 47% of the Company's pretax income. Net income was $2,244,000 compared to $1,924,000 in the comparible prior year period. Net income per share increased to $1.41 from $1.19. Liquidity and Capital Resources During the nine months ended June 30, 1997, the Company's cash and cash equivalent position decreased by $897,000 and the investments in U.S. Treasury Bills increased by $3,314,000. In addition, cash and cash equivalents were used for the purchase of capital assets of $679,000 and to purchase common stock for an aggregate amount of $448,000. The cash provided by operating activities of $3,411,000 included a net decrease in prepayments for subscriptions of $312,000. 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. The cash flows from operating activities increased by $414,000 during the nine months ended June 30, 1997 primarily from increased net income and increased depreciation and amortization costs. As of June 30, 1997, the Company had working capital of $10,036,000 before deducting the liability for deferred subscription revenues of $6,212,000 which will be earned within one year. The cash and short-term investments in U.S. Treasury Bills, aggregating about $9 million at June 30, 1997, and the current level of cash provided by operating activities appear adequate to meet the obligations of the Company. 8 of 10 DAILY JOURNAL CORPORATION PART II - OTHER INFORMATION Item 1. Legal Proceedings: On August 25, 1995, Jeffrey Barge, an individual, filed a lawsuit captioned Barge v. Daily Journal Corporation, et al., in the Supreme Court of the State of New York. The action subsequently was removed to federal court and transferred to the United States District Court for the Central District of California. The complaint alleges, among other things, that Mr. Salzman, the Company's President, had conversations with Mr. Barge about buying a newspaper Mr. Barge owned in Seattle, Washington prior to the date on which the Company started a competing newspaper in the Seattle area, and that in doing so, Mr. Salzman caused the Company to misuse certain confidential information allegedly provided to Mr. Salzman by Mr. Barge and to engage in unfair competition. Mr. Barge also alleges that various present and former employees of the Company caused defamatory statements to be made about Mr. Barge. The complaint seeks, among other things, damages in the amount of approximately $4.6 million. The Company believes that the action is without merit and is defending it vigorously. 9 of 10 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 4, 1997 10 of 10 EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS SEP-30-1997 OCT-01-1996 JUN-30-1997 196,000 8,907,000 6,629,000 700,000 53,000 16,345,000 14,378,000 6,301,000 25,045,000 12,521,000 0 0 0 16,000 12,508,000 25,045,000 26,704,000 27,035,000 0 23,102,000 0 200,000 0 3,734,000 1,490,000 2,244,000 0 0 0 2,244,000 1.41 1.41
-----END PRIVACY-ENHANCED MESSAGE-----