Daily Journal Corporation Announces Financial Results for fiscal year ended September 30, 2018

Los Angeles, California, UNITED STATES

LOS ANGELES, Dec. 12, 2018 (GLOBE NEWSWIRE) -- During fiscal 2018, Daily Journal Corporation (NASDAQ:DJCO) had consolidated revenues of $40,703,000 as compared with $41,384,000 in the prior year.  This decrease of $681,000 was primarily from (i) a $1,644,000 reduction in Journal Technologies’ consulting fees due to fewer go-lives in fiscal 2018 and (ii) a reduction in The Traditional Business’s trustee sale notice and related service fee revenues of $168,000 and a reduction in its circulation revenues of $253,000, partially offset by increased Journal Technologies’ license and maintenance fees of $1,188,000 and public service fees of $173,000.

The Traditional Business’ pretax income increased by $597,000 to pretax income of $237,000 from a pretax loss of $360,000.  Journal Technologies’ pretax loss increased by $2,250,000 to $14,392,000 from $12,142,000, after recording the interest and penalty expense reversal of $743,000 for uncertain and unrecognized tax benefits in the prior year and including the amortization costs of intangible assets of $3,058,000 for fiscal 2018 and $4,895,000 for fiscal 2017. This increase in loss mainly resulted from increased Journal Technologies’ personnel costs and computer services.    

The Company’s non-operating income, net of expenses, decreased by $2,378,000 to $2,721,000 from $5,099,000 primarily resulting from (i) the non-cash other-than-temporary impairment losses on investments of $4,560,000, partially offset by the capital gains on sales of marketable securities and others of $3,182,000, (ii) increases in the interest rate on the two acquisition margin loans of $229,000 and (iii) the prior year’s interest and penalty expense reversal of $743,000 for uncertain and unrecognized tax benefits.   For fiscal 2018, consolidated pretax loss was $11,339,000, as compared with $8,068,000 in the prior year. 

The December 2017 Tax Cuts and Jobs Act (“Tax Act”) reduced the maximum corporate income tax rate from 35% to 21%, effective January 1, 2018.  The impact to the Company’s financial statements is as follows:  (i) current income tax expense or benefit is calculated using a blended rate of 24.28%, (ii) deferred tax expense includes a discrete net tax benefit of approximately $16 million resulting from a revaluation of deferred tax assets and liabilities to the expected tax rate that will be applied when temporary differences are expected to reverse, (iii) items that were expected to reverse during fiscal 2018 were valued at the blended rate of 24.28% while temporary differences that will reverse after fiscal 2018 were valued at the 21% rate, and (iv) approximately $20 million of the revaluation of deferred taxes relates to items that were initially recorded as accumulated other comprehensive income.  This revaluation of approximately $20 million was recorded as a component of income tax expense or benefit in continuing operations. 

During fiscal 2018, the Company recorded an income tax benefit of $19,540,000 on the pretax loss of $11,339,000.  The effective tax rate (before the discrete Tax Act items discussed above) was greater than the statutory rate primarily due to the dividends received deduction which increases the loss for tax purposes.  On a pretax loss of $8,068,000 for fiscal 2017, the Company recorded an income tax benefit of $7,150,000 which included reversals of an accrued liability of approximately $2,665,000 for uncertain and unrecognized tax benefits relating to an acquisition in fiscal 2013, its related accrued interest and penalty expense of $743,000 and a related temporary book-tax difference of $352,000 in deferred tax liability.  The effective tax rate (before this discrete item) was greater than the statutory rate mainly resulting from the dividends received deduction. 

There was consolidated net income of $8,201,000 ($5.94 per share) for fiscal 2018 primarily due to the tax benefits resulting from the Tax Act as compared with a net loss of $918,000 (-$0.66 per share) in the prior year.  

At September 30, 2018, the Company held marketable securities valued at $212,296,000, including net unrealized gains of $158,407,000, and accrued a liability of $42,151,000 for estimated income taxes due only upon the sales of the net appreciated securities. 

Comprehensive income includes net income (loss) and unrealized net (losses) gains on investments, net of taxes, as summarized below:

Comprehensive Income (Loss)
  2018  2017 
Net income (loss)$  8,201,000 $  (918,000)
Net increase (decrease) in unrealized appreciation
  of investments (net of taxes)



Reclassification adjustment of other-than-temporary
  impairment losses recognized in net income
  (net of taxes)



 $5,728,000 $34,398,000 

Daily Journal Corporation publishes newspapers and web sites covering California and Arizona, and produces several specialized information services.  Journal Technologies, Inc. is a wholly-owned subsidiary and supplies case management software systems and related products to courts and other justice agencies. 

This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Certain statements contained in this press release are “forward-looking” statements that involve risks and uncertainties that may cause actual future events or results to differ materially from those described in the forward-looking statements.  Words such as “expects,” “intends,” “anticipates,” “should,” “believes,” “will,” “plans,” “estimates,” “may,” variations of such words and similar expressions are intended to identify such forward-looking statements.  We disclaim any intention or obligation to revise any forward-looking statements whether as a result of new information, future developments, or otherwise.  Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in documents we file with the Securities and Exchange Commission.

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