-----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, FLOatgD6tZUeQPiaY/XOnmfVZ3BKSdMIko1ljOWRl874rKj/gxPlAwBE5Am5jXwy P6hzpPHD9pk+nt3ZtCrqAg== 0000898430-98-000477.txt : 19980217 0000898430-98-000477.hdr.sgml : 19980217 ACCESSION NUMBER: 0000898430-98-000477 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980212 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: SEC FILE NUMBER: 000-14665 FILM NUMBER: 98534434 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 FOR THE PERIOD ENDING 12/31/1997 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, 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 January 31, 1998 -------------------------------------- ------------------------------- Common Stock, par value $ .01 per share 1,621,870 shares 1 of 9 DAILY JOURNAL CORPORATION INDEX Page Nos.
PART I Financial Information Item 1. Financial statements Consolidated Balance Sheet - December 31, 1997 and September 30, 1997 3 Consolidated Statement of Income - Three months ended December 31, 1997 and 1996 4 Consolidated Statement of Cash Flows - Three months ended December 31, 1997 and 1996 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 1. Legal Proceedings 8 Item 6. Exhibits and Reports on Form 8-K 9
2 of 9 PART I Item 1. Financial Statements DAILY JOURNAL CORPORATION - CONSOLIDATED BALANCE SHEET (Unaudited)
December 31 September 30 1997 1997 ------------------------ ------------------------ ASSETS Current assets: Cash and cash equivalents $ 59,000 $ 273,000 U.S. Treasury Bills, at cost plus discount earned 10,396,000 9,832,000 Accounts receivable, less allowance for doubtful accounts of $700,000 5,581,000 6,073,000 Inventories 83,000 58,000 Prepaid expenses and other assets 231,000 160,000 Deferred income taxes 911,000 1,036,000 ------------ ------------ Total current assets 17,261,000 17,432,000 ------------ ------------ Property, plant and equipment, at cost: Land, buildings and improvements 7,763,000 7,763,000 Furniture and office equipment 5,277,000 5,468,000 Machinery and equipment 1,338,000 1,342,000 ------------ ------------ 14,378,000 14,573,000 Less accumulated depreciation (6,381,000) (6,451,000) ------------ ------------ 7,997,000 8,122,000 Deferred income taxes 153,000 231,000 Intangible assets, at cost, less accumulated amortization of $479,000 and $491,000 163,000 182,000 ------------ ------------ $ 25,574,000 $ 25,967,000 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 2,597,000 $ 2,947,000 Accrued liabilities 2,204,000 3,046,000 Income taxes 551,000 274,000 Deferred subscription revenue 6,192,000 6,402,000 ------------ ------------ Total current liabilities 11,544,000 12,669,000 ------------ ------------ 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, outstanding 16,000 16,000 Other paid-in capital 2,062,000 2,062,000 Retained earnings 12,303,000 11,571,000 Less 30,429 treasury shares at cost (351,000) (351,000) ------------ ------------ Total shareholders' equity 14,030,000 13,298,000 ------------ ------------ $ 25,574,000 $ 25,967,000 ============ ============
See accompanying notes to consolidated financial statements. 3 of 9 DAILY JOURNAL CORPORATION CONSOLIDATED STATEMENT OF INCOME (Unaudited)
Three months ended December 31 ----------------- 1997 1996 ----------------------- ----------------------- Revenues: Advertising $4,968,000 $5,139,000 Circulation 2,906,000 2,950,000 Advertising service fees and other 813,000 774,000 ---------- ---------- 8,687,000 8,863,000 ---------- ---------- Costs and expenses: Salaries and employee benefits 3,782,000 3,604,000 Newsprint and printing expenses 849,000 792,000 Commissions and other outside services 1,033,000 1,141,000 Postage and delivery expenses 600,000 620,000 Depreciation and amortization 417,000 368,000 Other 789,000 1,180,000 ---------- ---------- 7,470,000 7,705,000 ---------- ---------- Income before taxes 1,217,000 1,158,000 Provision for income taxes 485,000 460,000 ---------- ---------- Net income $ 732,000 $ 698,000 ========== ========== Weighted average number of common shares outstanding 1,591,441 1,600,050 Net income per share $.46 $.44
See accompanying notes to consolidated financial statements. 4 of 9 DAILY JOURNAL CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
Three months ended December 31 ----------------- 1997 1996 ------------------------ ------------------------ Cash flows from operating activities: Net income $ 732,000 $ 698,000 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization 417,000 368,000 Deferred income taxes 203,000 (51,000) Discount earned on U.S. Treasury Bills (157,000) (105,000) Changes in assets and liabilities: (Increase) decrease in current assets Accounts receivable, net 492,000 1,183,000 Inventories (25,000) 8,000 Prepaid expenses and other assets (71,000) 32,000 Increase (decrease) in current liabilities Accounts payable (350,000) (573,000) Accrued liabilities (842,000) (319,000) Income taxes 277,000 416,000 Deferred subscription revenue (210,000) (21,000) ---------- ------------ Cash provided by operating activities 466,000 1,636,000 ---------- ------------ Cash flows from investing activities: Net investments in U.S. Treasury Bills (407,000) (1,235,000) Capital expenditures (273,000) (187,000) ---------- ------------ Cash used for investing activities (680,000) (1,422,000) ---------- ------------ Cash flows from financing activities: Purchase of common stock - (280,000) ---------- ------------ Cash used for financing activities - (280,000) ---------- ------------ (Decrease) increase in cash and cash equivalents (214,000) (66,000) Cash and cash equivalents: Beginning of period 273,000 1,093,000 ---------- ------------ End of period $ 59,000 $ 1,027,000 ========== ============ Income taxes paid during period $ 4,000 $ 5,000
See accompanying notes to consolidated financial statements. 5 of 9 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 publishes The Code of Colorado Regulations and serves as a newspaper representative specializing in public notice advertising. 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, 1997 and September 30, 1997, the results of operations for the three-month periods ended December 31, 1997 and 1996 and its cash flows for the three months ended December 31, 1997 and 1996. The results of operations for the three months ended December 31, 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, 1997. 6 of 9 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Revenues were $8,687,000 and $8,863,000 for the three months ended December 31, 1997 and 1996, respectively. This decrease of 2% is primarily due to the decline in revenues from publishing foreclosure notices, partially offset by a small increase in classified advertising lineage and the subscription and advertising rate increases. During the three months ended December 31, 1997, classified advertising revenues increased by $219,000 and display advertising revenues were up by $42,000. Public notice advertising revenues decreased by $432,000 primarily resulting from decreased foreclosure notices, and we anticipate this decline to continue. The Company's smaller newspapers, those other than the Los Angeles and San Francisco Daily Journals ("The Daily Journals"), accounted for about 92% of the total public notice advertising revenues. Public notice advertising revenues and related advertising and other service fees constituted about 30% of the Company's total revenues. Circulation revenues decreased an aggregate of $44,000. The Daily Journals accounted for about 64% 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 decreased by $235,000 (3%) from $7,705,000 to $7,470,000. Personnel costs increased an aggregate of $178,000 (5%) primarily due to the normal annual salary adjustments. Newsprint and printing expenses increased by $57,000 primarily because of the increase in newsprint prices. Commissions and other outside services decreased by $108,000 primarily because of less agency foreclosure notice sales. The decrease in other expenses of $391,000 primarily resulted from reduced legal and bad debt expenses. Pretax income in the three months ended December 31, 1997 increased by $59,000 (5%) to $1,217,000 from $1,158,000 in fiscal 1997. The Company's smaller newspapers and its newspaper representative, which specializes in public notice advertising, accounted for about 28% of the Company's pretax income. Net income was $732,000 compared to $698,000 in the comparable prior year period. Net income per share increased to $.46 from $.44. Liquidity and Capital Resources During the three months ended December 31, 1997, the Company's cash and cash equivalent position decreased by $214,000 and the investments in U.S. Treasury Bills increased by $564,000. In addition, cash and cash equivalents were used for the purchase of capital assets of $273,000. The cash provided by operating activities of $466,000 included a net decrease in prepayments for subscriptions of $210,000. 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 decreased by $1,170,000 during the three months ended December 31 1997 primarily from decreases in accounts receivables and current liabilities. As of December 31, 1997, the Company had working capital of $11,909,000 before deducting the liability for deferred subscription revenues of $6,192,000 which will be earned within one year. The cash and short-term investments in U.S. Treasury Bills, aggregating about $10.5 million at December 31, 1997, and the current level of cash provided by operating activities appear adequate to meet the obligations of the Company. 7 of 9 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. 8 of 9 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: February 12, 1998 9 of 9 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME AND IS QULIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS SEP-30-1998 OCT-01-1997 DEC-31-1997 59,000 10,396,000 6,281,000 700,000 83,000 17,261,000 14,378,000 6,381,000 25,574,000 11,544,000 0 0 0 16,000 14,014,000 25,574,000 8,545,000 8,687,000 0 7,442,000 0 28,000 0 1,217,000 485,000 732,000 0 0 0 732,000 .46 .46
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