Daily Journal Corporation Announces Financial Results for the six months ended March 31, 2018
May 08, 2018 at 12:34 PM EDT
LOS ANGELES, May 08, 2018 (GLOBE NEWSWIRE) -- During the six months ended March 31, 2018, Daily Journal Corporation (NASDAQ:DJCO) had consolidated revenues of $19,590,000 as compared with $20,269,000 in the prior year period. This decrease of $679,000 was primarily from decreased Journal Technologies’ consulting fees of $951,000, which are recognized upon project go-lives, and a reduction in The Traditional Business’s trustee sale notice and its related service fee revenues of $109,000, commercial advertising and Conference revenues of $40,000, and circulation revenues of $154,000, partially offset by increased Journal Technologies’ license and maintenance fees of $483,000 and public service fees of $123,000.
The Company’s Traditional Business segment’s pretax loss decreased by $4,000 to $250,000 from $254,000. Journal Technologies business segment’s pretax loss increased by $2,464,000 to $7,616,000 from $5,152,000, after the amortization costs of intangible assets of $1,810,000 and $2,447,000 for the six months ended March 31, 2018 and 2017, respectively. This increase in loss mainly resulted from increased Journal Technologies’ personnel costs and computer services.
The Company’s non-operating income, net of expenses, increased by $2,298,000 (75%) to $5,375,000 from $3,077,000 primarily because of the capital gains of $3,180,000 from the sale of bond investments, partially offset by the prior year’s reversal of accrued interest and penalty expenses of $743,000 for uncertain and unrecognized tax benefits. For the six months ended March 31, 2018, consolidated pretax loss was $2,443,000, as compared with $3,042,000 in the prior year period.
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 Company has completed its review of the Tax Act. The impact to its financial statements is as follows: (i) current income tax expense or benefit is calculated using a blended rate of 24.28% pursuant to IRC Section 15, (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 are expected to reverse during fiscal 2018 are valued at the blended rate of 24.28% while temporary differences that will reverse after fiscal 2018 are 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.
For the six months ended March 31, 2018, the Company recorded an income tax benefit of $16,950,000 on pretax loss of $2,443,000 primarily resulting from the Tax Act. The income tax benefit was the result of applying the effective tax rate anticipated for fiscal 2018 to pretax loss for the six-month period ended March 31, 2018. The effective tax rate (before the discrete Tax Act item mentioned above) was greater than the statutory rate primarily due to the dividends received deduction which increases the loss for tax purposes. On pretax loss of $3,042,000 for the six months ended March 31, 2017, the Company recorded an income tax benefit of $4,550,000 which was the net result of applying the effective tax rate anticipated for fiscal 2017 to pretax loss for the six months ended March 31, 2017 and included reversals of an accrued liability of approximately $2,665,000 for uncertain and unrecognized tax benefits, 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. The Company’s effective tax rate was 694% and 150% for the six months ended March 31, 2018 and 2017, respectively.
There was consolidated net income of $14,507,000 ($10.51 per share) after tax benefits, primarily due to tax cuts, for the six months ended March 31, 2018, as compared with $1,508,000 ($1.09 per share) in the prior year period.
At March 31, 2018, the Company held marketable securities valued at $217,803,000, including net unrealized gains of $159,354,000, and accrued a liability of $42,369,000 for income taxes due only upon the sales of the net appreciated securities.
Comprehensive income includes net income and unrealized net (losses) gains on investments, net of taxes, as summarized below:
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.