During the fiscal year ended September 30, 2012, consolidated pretax income of Daily Journal Corporation (NASDAQ:DJCO) decreased by $4,099,000 to $7,901,000 from $12,000,000 in the prior year, primarily resulting from (i) a reduction in trustee sale notice and related service fee revenues of $2,216,000, partially offset by a reduction in operating costs and expenses of $519,000 and an increase in dividends and interest income of $734,000, and (ii) the recording of an impairment loss of $2,855,000 ($1,720,000 net of taxes) related to the marketable securities of one issuer held by the Company as an investment. This impairment does not necessarily indicate the loss in value of these securities is permanent. U.S. GAAP requires that the Company recognize other-than-temporary impairment losses in earnings rather than in accumulated comprehensive income when the security prices remain below cost for a period of time that may be deemed excessive even in instances where the Company possesses the ability and intent to hold the security.
The Company’s traditional business segment income from operations decreased by $1,547,000 to $10,877,000 from $12,424,000 primarily because of the reduction in trustee sale notice and related service fee revenues, partially offset by the reduction in operating costs and expenses, including a reduction in expenses related to the Company’s Management Incentive Plan, professional service fees and rents.
Sustain’s business segment had a pretax loss of $2,188,000 compared to $1,622,000 in the prior year period primarily due to an increase in personnel costs and a decrease in consulting and support revenues from governmental agencies, reflecting in part continuing governmental budget constraints.
Comprehensive income includes net income and net unrealized gains on investments, net of taxes.
Comprehensive Income | |||||||
| Fiscal ended September 30 | |||||||
| 2012 | 2011 | ||||||
| Net income | $ | 5,541,000 | $ | 7,840,000 | |||
Net change in unrealized appreciation of investments (net of taxes) | 15,085,000 | (3,627,000 | ) | ||||
Reclassification of other-than-temporary impairment losses recognized in net income (net of taxes) | 1,720,000 | --- | |||||
| Comprehensive income | $ | 22,346,000 | $ | 4,213,000 | |||
Consolidated revenues were $31,874,000 and $34,513,000 for fiscal 2012 and 2011, respectively. This decrease of $2,639,000 was primarily from decreases of $2,216,000 in trustee sale notice and related service fee revenues and $237,000 in circulation revenues. Although public notice advertising revenues were down compared to the prior year period, the Company still continued to benefit from the large number of foreclosures in California and Arizona for which public notice advertising is required by law.
At September 30, 2012, the Company held marketable securities valued at $102,156,000, including unrealized gains of $52,464,000. It accrued a liability of $20,898,000 for income taxes due only upon the sales of the appreciated securities. The marketable securities consist of common stocks of three Fortune 200 companies, two foreign companies and certain bonds of a sixth, and most of the unrealized gains were in the common stocks.
Consolidated net income was $5,541,000 and $7,840,000 for the fiscal year ended September 30, 2012 and 2011, respectively. Net income per share decreased to $4.01 from $5.68, primarily due to the recording of the after-tax impairment losses on investments of $1,720,000.
| Financial Information for the Company’s Reportable Segments | ||||||||||||
| Traditional business | Sustain | Total | ||||||||||
| Fiscal 2012 | ||||||||||||
| Revenues | $ | 28,956,000 | $ | 2,918,000 | $ | 31,874,000 | ||||||
| Income (loss) from operations | 10,877,000 | (2,195,000 | ) | 8,682,000 | ||||||||
|
Other-than-temporary impairment losses
on investments | 2,855,000 | --- | 2,855,000 | |||||||||
| Pretax income (loss) | 10,089,000 | (2,188,000 | ) | 7,901,000 | ||||||||
| Income tax (expense) benefit | (3,340,000 | ) | 980,000 | (2,360,000 | ) | |||||||
| Net income (loss) | 6,749,000 | (1,208,000 | ) | 5,541,000 | ||||||||
| Fiscal 2011 | ||||||||||||
| Revenues | $ | 31,532,000 | $ | 2,981,000 | $ | 34,513,000 | ||||||
| Income (loss) from operations | 12,424,000 | (1,622,000 | ) | 10,802,000 | ||||||||
| Pretax income (loss) | 13,622,000 | (1,622,000 | ) | 12,000,000 | ||||||||
| Income tax (expense) benefit | (4,735,000 | ) | 575,000 | (4,160,000 | ) | |||||||
| Net income (loss) | 8,887,000 | (1,047,000 | ) | 7,840,000 | ||||||||
Daily Journal Corporation publishes newspapers and web sites covering California and Arizona, as well as the California Lawyer magazine, and produces several specialized information services. Sustain Technologies, Inc., a wholly owned subsidiary, supplies case management software systems and related products to courts and other justice agencies. In December 2012, the Company purchased all of the outstanding stock of New Dawn Technologies, Inc. based in Logan, Utah, which provides products and services similar to those of Sustain.
Daily Journal Corporation’s Form 10-K for the fiscal year ended September 30, 2012 is expected to be filed electronically with the Securities and Exchange Commission today. We invite your attention to the Form 10-K which contains our consolidated financial statements, management’s discussion and analysis of financial condition and results of operations and other information.
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, including our Annual Report on Form 10-K we expect to file today for the fiscal year ended September 30, 2012
Contacts:
Tu To, 213-229-5436
