UNITED STATES

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
     
  For the quarterly period ended December 31, 2019
     
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.)

 

915 East First Street    
Los Angeles, California   90012-4050
(Address of principal executive offices)   (Zip code)

 

(213) 229-5300

(Registrant's telephone number, including area code)

 

None

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

   Title of each class    Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $.01 per share DJCO The NASDAQ Stock Market

 

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: ☒    No: ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes: ☒     No: ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer: ☐    Accelerated Filer: ☒
Non-accelerated Filer: ☐   Smaller Reporting Company: ☐
    Emerging Growth Company: ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes: ☐    No: ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date: 1,380,746 shares outstanding at January 31, 2020

 

1

 

 

 

DAILY JOURNAL CORPORATION

 

 

INDEX

 

 

  Page Nos.
PART I  Financial Information  
   
Item 1.  Financial Statements  
   
Consolidated Balance Sheets - December 31, 2019 and September 30, 2019      3
   
Consolidated Statements of Comprehensive Income (Loss) - Three months ended December 31, 2019 and 2018 4
   
Consolidated Statements of Shareholders’ Equity - Three months ended December 31, 2019 and 2018 5
   
Consolidated Statements of Cash Flows - Three months ended December 31, 2019 and 2018  6
   
Notes to Consolidated Financial Statements 
   
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations 13
   
Item 3.  Quantitative and Qualitative Disclosures about Market Risk 19
   
Item 4.  Controls and Procedures 19
   
Part II  Other Information  
   
Item 6.  Exhibits 20

 

2

 
 
 

 

PART I

Item 1. FINANCIAL STATEMENTS

DAILY JOURNAL CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

   

December 31

   

September 30

 
   

2019

   

2019

 

ASSETS

               

Current assets

               

Cash and cash equivalents

  $ 7,376,000     $ 10,630,000  

Marketable securities at fair value -- common stocks of $214,112,000 at December 31, 2019 and $194,581,000 at September 30, 2019

    214,112,000       194,581,000  

Accounts receivable, less allowance for doubtful accounts of $200,000 at December 31, 2019 and September 30, 2019

    7,532,000       7,036,000  

Inventories

    49,000       40,000  

Prepaid expenses and other current assets

    758,000       508,000  

Income tax receivable

  72,000       153,000  

Total current assets

    229,899,000       212,948,000  
                 

Property, plant and equipment, at cost

               

Land, buildings and improvements

    16,534,000       16,499,000  

Furniture, office equipment and computer software

    2,181,000       2,119,000  

Machinery and equipment

    1,750,000       1,750,000  
      20,465,000       20,368,000  

Less accumulated depreciation

    (9,700,000 )     (9,572,000 )
      10,765,000       10,796,000  
Operating lease right-of-use assets     390,000       ---  
                 

Deferred income taxes - Federal

    13,039,000       12,596,000  

Deferred income taxes - State

    766,000       1,036,000  
    $ 254,859,000     $ 237,376,000  
                 

LIABILITIES AND SHAREHOLDERS' EQUITY

               

Current liabilities

               

Accounts payable

  $ 3,857,000     $ 4,520,000  

Accrued liabilities

    5,008,000       5,173,000  

Note payable collateralized by real estate

    128,000       126,000  

Deferred subscriptions

    2,892,000       3,195,000  

Deferred installation contracts

    2,012,000       1,932,000  

Deferred maintenance agreements and others

    14,771,000       15,722,000  

Total current liabilities

    28,668,000       30,668,000  
                 

Long term liabilities

               

Investment margin account borrowings

    29,493,000       29,493,000  

Note payable collateralized by real estate

    1,676,000       1,709,000  

Deferred maintenance agreements

    211,000       335,000  

Accrued liabilities

    290,000       230,000  

Deferred income taxes

    42,611,000       37,241,000  

Total long term liabilities

    74,281,000       69,008,000  
                 

Commitments and contingencies (Notes 8 and 9)

    ---       ---  
                 

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;

               

1,805,053 shares issued, including 424,307 treasury shares, at December 31, 2019 and September 30, 2019

    14,000       14,000  

Additional paid-in capital

    1,755,000       1,755,000  

Retained earnings

    150,141,000       135,931,000  

Total shareholders' equity

    151,910,000       137,700,000  
    $ 254,859,000     $ 237,376,000  

 

See accompanying Notes to Consolidated Financial Statements

 

3

 
 

 

DAILY JOURNAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

   

Three months

ended December 31

 
   

2019

   

2018

 
                 

Revenues

               

Advertising

  $ 2,126,000     $ 2,192,000  

Circulation

    1,312,000       1,338,000  

Advertising service fees and other

    694,000       669,000  

Licensing and maintenance fees

    5,210,000       4,790,000  

Consulting fees

    689,000       541,000  

Other public service fees

    1,646,000       898,000  
      11,677,000       10,428,000  
                 

Costs and expenses

               

Salaries and employee benefits

    8,887,000       8,655,000  

Outside services

    860,000       945,000  

Postage and delivery expenses

    210,000       204,000  

Newsprint and printing expenses

    178,000       176,000  

Depreciation and amortization

    128,000       153,000  

Equipment maintenance and software

    322,000       343,000  

Credit card merchant discount fees

    382,000       270,000  

Rent expenses

    172,000       258,000  

Accounting and legal fees

    256,000       403,000  

Other general and administrative expenses

    1,800,000       1,542,000  
      13,195,000       12,949,000  

Loss from operations

    (1,518,000 )     (2,521,000 )

Other income (expense)

               

Dividends and interest income

    1,680,000       1,530,000  

Other income

    3,000       10,000  

Net unrealized gains on investments

    19,531,000       (28,640,000 )

Interest expense on note payable collateralized by real estate

    (22,000 )     (23,000 )

Interest expense on margin loans and others

    (184,000 )     (206,000 )

Income (loss) before income taxes

    19,490,000       (29,850,000 )

(Provision for) benefit from income taxes

    (5,280,000 )     8,317,000  

Net income (loss)

  $ 14,210,000     $ (21,533,000 )
                 

Weighted average number of common shares outstanding - basic and diluted

    1,380,746       1,380,746  

Basic and diluted net income (loss) per share

  $ 10.29     $ (15.60 )
                 

Comprehensive income (loss)

  $ 14,210,000     $ (21,533,000 )

 

See accompanying Notes to Consolidated Financial Statements.

 

4

 
 

 

DAILY JOURNAL CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

 

                                                   

Accumulated

         
                                   

Additional

           

Other

   

Total

 
   

Common Stock

   

Treasury Stock

   

Paid-in

   

Retained

   

Comprehensive

   

Shareholders'

 
   

Share

   

Amount

   

Share

   

Amount

   

Capital

   

Earnings

   

Income

   

Equity

 
                                                                 

Balance at September 30, 2018

    1,805,053     $ 18,000       (424,307 )   $ (4,000 )   $ 1,755,000     $ 45,361,000     $ 115,786,000     $ 162,916,000  

Adoption of new accounting

pronouncement

    ---       ---       ---       ---       ---       115,786,000       (115,786,000 )     ---  

Net loss

    ---       ---       ---       ---       ---       (21,533,000 )     ---       (21,533,000 )

Balance at December 31, 2018

    1,805,053     $ 18,000       (424,307 )   $ (4,000 )   $ 1,755,000     $ 139,614,000    

$

---     $ 141,383,000  
                                                                 
                                                                 

Balance at September 30, 2019

    1,805,053     $ 18,000       (424,307 )   $ (4,000 )   $ 1,755,000     $ 135,931,000    

$

---     $ 137,700,000  

Net income

    ---       ---       ---       ---       ---       14,210,000       ---       14,210,000  

Balance at December 31, 2019

    1,805,053     $ 18,000       (424,307 )   $ (4,000 )   $ 1,755,000     $ 150,141,000    

$

---     $ 151,910,000  

 

See accompanying Notes to Consolidated Financial Statements

 

5

 
 

 

DAILY JOURNAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   

Three months

ended December 31

 
    2019     2018  

Cash flows from operating activities

               

Net income (loss)

  $ 14,210,000     $ (21,533,000 )

Adjustments to reconcile net loss to net cash used in operations

               

Depreciation and amortization

    128,000       153,000  

Net unrealized (gains) losses on investments

    (19,531,000 )     28,640,000  

Deferred income taxes

    5,197,000       (8,408,000 )

Changes in operating assets and liabilities

               

(Increase) decrease in current assets

               

Accounts receivable, net

    (496,000 )     (2,230,000 )

Inventories

    (9,000 )     (9,000 )

Prepaid expenses and other assets

    (250,000 )     21,000  

Income tax receivable

    81,000       212,000  

Increase (decrease) in liabilities

               

Accounts payable

    (663,000 )     1,216,000  

Accrued liabilities

    (495,000 )     (588,000 )

Deferred subscriptions

    (303,000 )     (227,000 )

Deferred maintenance agreements and others

    (1,075,000 )     368,000  

Deferred installation contracts

    80,000       (112,000 )

Net cash used in operating activities

    (3,126,000 )     (2,497,000 )
                 

Cash flows from investing activities

               

Purchases of property, plant and equipment

    (97,000 )     (84,000 )

Net cash used in investing activities

    (97,000 )     (84,000 )
                 

Cash flows from financing activities

               

Payment of real estate loan principal

    (31,000 )     (29,000 )

Net cash used in financing activities

    (31,000 )     (29,000 )
                 

Decrease in cash and cash equivalents

    (3,254,000 )     (2,610,000 )
                 

Cash and cash equivalents

               

Beginning of period

    10,630,000       9,301,000  

End of period

  $ 7,376,000     $ 6,691,000  
                 

Interest paid during period

  $ 220,000     $ 152,000  

Net income taxes paid (refunded)

  $ 1,000     $ (121,000 )

 

See accompanying Notes to Consolidated Financial Statements.

 

6

 

 

DAILY JOURNAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

Note 1 - The Corporation and Operations

 

Daily Journal Corporation (the “Company”) publishes newspapers and web sites covering California and Arizona and produces several specialized information services. It also serves as a newspaper representative specializing in public notice advertising. This is sometimes referred to as the Company’s “Traditional Business”.

 

Journal Technologies, Inc. (“Journal Technologies”), a wholly-owned subsidiary of Daily Journal, supplies case management software systems and related products to courts, prosecutor and public defender offices, probation departments and other justice agencies, including administrative law organizations, city and county governments and bar associations. These organizations use the Journal Technologies family of products to help manage cases and information electronically, to interface with other critical justice partners and to extend electronic services to the public, including efiling and a website to pay traffic citations and fees online, and bar members. These products are licensed to more than 500 organizations in 42 states and internationally.

 

      Essentially all of the Company’s U.S. operations are based in California, Arizona, Colorado and Utah. The Company also has a presence in Australia where Journal Technologies is working on two important software installation projects.

 

 

Note 2 - Basis of Presentation

 

        In the opinion of the Company, the accompanying interim unaudited consolidated financial statements contain all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of its financial position as of December 31, 2019, its results of operations for the three--months period ended December 31, 2019 and 2018, its consolidated statements of shareholders’ equity for the three months ended December 31, 2019 and 2018 and cash flows for the three-months ended December 31, 2019 and 2018. The results of operations for the three months ended December 31, 2019 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, 2019.

 

       Certain reclassifications of previously reported amounts have been made to conform to the current year’s presentation.

 

7

 

 

 

Note 3 - Accounting Standards Adopted in Fiscal 2020

 

     In February 2016, the Financial Accounting Standard Board issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) which requires that all leases be recognized by lessees on the balance sheet through a right-of-use (ROU) asset and corresponding lease liability, including today’s operating leases.  During the first quarter of fiscal 2020, the Company adopted this standard using the optional adoption method, which does not require an adjustment to comparative period financial statements.  At December 31, 2019, the Company recorded a right-of-use (ROU) asset and lease liability of approximately $390,000 for its operating office leases.  As allowed by the guidance, the Company has elected not to recognize ROU assets and lease liabilities for short-term (less than one year) leases of any class of underlying asset.  ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent its obligation to make rental payments from the leases.  ROU assets and liabilities are required to be recognized based on the present value of lease payments over the lease term.  At December 31, 2019, the Company had office lease obligations of approximately $20,000 beyond one year; it is deemed immaterial for the present value difference.  Operating office leases are included in operating lease ROU assets, current accrued liabilities and long-term accrued liabilities in the Company’s accompanying Consolidated Balance Sheets.  The Company’s adoption of this new standard had no significant impact on the Company’s financial condition, results of operations or disclosures. 

 

 

Note 4 - Revenue Recognition

 

      The Company recognizes revenues in accordance with the provisions of ASU No. 2014-09, Revenue from Contracts with Customers (ASC Topic 606), which it adopted effective October 1, 2017, using the modified retrospective method.

 

       For the Company’s Traditional Business, proceeds from the sale of subscriptions for newspapers, court rule books and other publications and other services are recorded as deferred revenue and are included in earned revenue only when the services are provided, generally over the subscription term. Advertising revenues are recognized when advertisements are published and are net of agency commissions.

 

      Journal Technologies contracts may include several products and services, which are generally distinct and include separate transaction pricing and performance obligations. Most are one-transaction contracts. These current subscription-type contract revenues include (i) implementation consulting fees to configure the system to go-live, (ii) subscription software license, maintenance (including updates and upgrades) and support fees, and (iii) third-party hosting fees when used. Revenues for consulting are recognized at point of delivery (go-live) upon completion of services. These contracts include assurance warranty provisions for limited periods and do not include financing terms. For some contracts, the Company acts as a principal with respect to certain services, such as data conversion, interfaces and hosting that are provided by third-parties, and recognizes such revenues on a gross basis. For legacy contracts with perpetual license arrangements, licenses and consulting services are recognized at point of delivery, and maintenance revenues are recognized ratably after the go-live. Other public service fees are earned and recognized as revenues when the Company processes credit card payments on behalf of the courts via its websites through which the public can efile cases and pay traffic citations and other fees.

 

ASC 606 also requires the capitalization of certain costs of obtaining contracts, specifically sales commissions, which are to be amortized over the expected term of the contracts. For its software contracts, the Company incurs an immaterial amount of sales commission costs which have no significant impact on the Company’s financial condition and results of operations. In addition, the Company’s implementation and fulfillment costs do not meet all criteria required for capitalization.

 

Since the Company recognizes revenues when it can invoice the customer pursuant to the contract for the value of completed performance, as a practical expedient and because reliable estimates cannot be made, it has elected not to include the transaction price allocated to unsatisfied performance obligations. Also, as a practical expedient, the Company has elected not to include its evaluation of variable consideration of certain usage-based public service fees that are included in some contracts. Furthermore, there are no fulfillment costs to be capitalized for the software contracts because these costs do not generate or enhance resources that will be used in satisfying future performance obligations.

 

 

Note 5 - Basic and Diluted Income Per Share

 

       The Company does not have any common stock equivalents, and therefore basic and diluted income (loss) per share are the same.

 

8

 

 

 

Note 6 - Investments in Marketable Securities

 

All investments are classified as “Current assets” because they are available for sale at any time. These “available-for-sale” marketable securities are stated at fair value. The Company uses quoted prices in active markets for identical assets (consistent with the Level 1 definition in the fair value hierarchy) to measure the fair value of its investments on a recurring basis pursuant to ASC 820, Fair Value Measurement.

 

As of December 31, 2019, there were net accumulated unrealized gains of $160,223,000 with these investments. With the adoption of ASU No. 2016-01, Subtopic 825-10 in the prior fiscal year, the Company recorded and included in its net income the net unrealized gains on investments of $19,531,000 for the three months ended December 31, 2019 as compared with a net unrealized losses on investments of $28,640,000 in the prior year period. At September 30, 2019, there were net accumulated unrealized gains of $140,692,000 recorded in the accompanying Consolidated Balance Sheets. Most of the unrealized gains were in the common stocks of three U.S. financial institutions and one foreign manufacturer.

 

Investments in marketable securities as of December 31, 2019 and September 30, 2019 are summarized below.

 

 

     Investments in Marketable Securities  
       
   

December 31, 2019

   

September 30, 2019

 
   

 

Aggregate

fair value

   

 

Adjusted

cost basis

   

Pretax net unrealized

gains

   

 

Aggregate

fair value

   

Amortized/

Adjusted

cost basis

   

Pretax

unrealized

gains

 

Marketable securities

                                               

Common stocks

  $ 214,112,000     $ 53,889,000     $ 160,223,000     $ 194,581,000     $ 53,889,000     $ 140,692,000  

 

 

Note 7 - Income Taxes

 

       For the three months ended December 31, 2019, the Company recorded a provision for income taxes of $5,280,000 on pretax income of $19,490,000.   This was the net result of applying the 19% effective tax rate anticipated for fiscal 2020 to the pretax loss, before the unrealized gains on investments, for the three months ended December 31, 2019. The effective tax rate was less than the statutory rate primarily due to the dividends received deduction and state tax benefits.  In addition, the Company recorded taxes on its unrealized gains on investments of $19,531,000 during the three months ended December 31, 2019.  The effective tax rate for the three months ended December 31, 2019 was 27%, after including the taxes on the unrealized gains on investments.

 

     For the three months ended December 31, 2018, the Company recorded an income tax benefit of $8,317,000 on a pretax loss of $29,850,000.   This was the net result of applying the effective tax rate anticipated for fiscal 2019 to the pretax loss for the three months ended December 31, 2018. The effective tax rate was greater than the statutory rate primarily due to state tax benefits. 

 

      The Company’s effective tax rate was 27% for the three months ended December 31, 2019 as compared with 28% in the prior year period. 

 

      The Company files consolidated federal income tax returns in the United States and with various state jurisdictions and is no longer subject to examinations for fiscal years before fiscal 2016 with regard to federal income taxes and fiscal 2015 for state income taxes. 

 

9

 

 

 

Note 8 - Debt and Commitments

 

During fiscal 2013, the Company borrowed from its investment margin account the aggregate purchase price of $29.5 million for two acquisitions, in each case pledging its marketable securities as collateral. The interest rate for these investment margin account borrowings fluctuates based on the Federal Funds Rate plus 50 basis points with interest only payable monthly. The interest rate as of December 31, 2019 was 2.25%. These investment margin account borrowings do not mature.

 

In 2015, the Company purchased a 30,700 square foot office building constructed in 1998 on about 3.6 acres in Logan, Utah that had been previously leased by Journal Technologies. The Company paid $1.24 million and financed the balance with a real estate bank loan of $2.26 million which bears a fixed interest rate of 4.66% and is repayable in equal monthly installments of about $17,600 through 2030. This loan is secured by the Logan facility and can be paid off at any time without prepayment penalty. This real estate loan had a balance of approximately $1.8 million as of December 31, 2019.

 

      The Company also owns its facilities in Los Angeles and leases space for its other offices under operating leases which expire at various dates through fiscal 2021.

 

 

Note 9 - Contingencies

 

From time to time, the Company is subject to contingencies, including litigation, arising in the normal course of its business. While it is not possible to predict the results of such contingencies, management does not believe the ultimate outcome of these matters will have a material effect on the Company’s financial position or results of operations or cash flows.

 

10

 

 

 

Note 10 - Operating Segments

 

The Company’s reportable segments are: (i) the Traditional Business and (ii) Journal Technologies. All inter-segment transactions were eliminated. Summarized financial information regarding the Company’s reportable segments is shown in the following table:

 

   

Reportable Segments

                 
   

Traditional

Business

   

Journal

Technologies

   

Corporate income

and expenses

   

 

Total

 

Three months ended December 31, 2019

                               
Revenues                                

Advertising

  $ 2,126,000     $ ---     $ ---     $ 2,126,000  

Circulation

    1,312,000       ---       ---       1,312,000  

Advertising service fees and other

    694,000       ---       ---       694,000  

Licensing and maintenance fees

    ---       5,210,000       ---       5,210,000  

Consulting fees

    ---       689,000       ---       689,000  

Other public service fees

    ---       1,646,000       ---       1,646,000  

Operating expenses

    3,998,000       9,197,000       ---       13,195,000  

Income (loss) from operations

    134,000       (1,652,000 )     ---       (1,518,000 )

Dividends and interest income

    ---       ---       1,680,000       1,680,000  

Other income

    ---       ---       3,000       3,000  

Net unrealized gains on investments

    ---       ---       19,531,000       19,531,000  

Interest expenses on note payable collateralized by real estate

    (22,000 )     ---       ---       (22,000 )

Interest expenses on margin loans

    ---       ---       (184,000 )     (184,000 )

Pretax income (loss)

    112,000       (1,652,000 )     21,030,000       19,490,000  

Income tax (expense) benefit

    (30,000 )     510,000       (5,760,000 )     (5,280,000 )

Net income (loss)

    82,000       (1,142,000 )     15,270,000       14,210,000  

Total assets

    17,541,000       20,993,000       216,325,000       254,859,000  

Capital expenditures

    35,000       62,000       ---       97,000

 

 

 

 

Reportable Segments

                 
   

Traditional

Business

   

Journal

Technologies

   

Corporate income

and expenses

   

Total

 

Three months ended December 31, 2018

                               

Revenues

                               

Advertising

  $ 2,192,000     $ ---     $ ---     $ 2,192,000  

Circulation

    1,338,000       ---       ---       1,338,000  

Advertising service fees and other

    669,000       ---       ---       669,000  

Licensing and maintenance fees

    ---       4,790,000       ---       4,790,000  

Consulting fees

    ---       541,000       ---       541,000  

Other public service fees

    ---       898,000       ---       898,000  

Operating expenses

    4,208,000       8,741,000       ---       12,949,000  

Loss from operations

    (9,000 )     (2,512,000 )     ---       (2,521,000 )

Dividends and interest income

    ---       ---       1,530,000       1,530,000  

Other income

    ---       ---       10,000       10,000  

Net unrealized losses on investments

    ---       ---       (28,640,000 )     (28,640,000 )

Interest expenses on note payable collateralized by real estate

    (23,000 )     ---       ---       (23,000 )

Interest expenses on margin loans

    ---       ---       (206,000 )     (206,000 )

Pretax (loss) income

    (32,000 )     (2,512,000 )     (27,306,000 )     (29,850,000 )

Income tax benefit (expense)

    80,000       585,000       7,652,000       8,317,000  

Net income (loss)

    48,000       (1,927,000 )     (19,654,000 )     (21,533,000 )

Total assets

    18,702,000       30,571,000       185,843,000       235,116,000  

Capital expenditures

    50,000       34,000       ---       84,000  

 

11

 

 

        During the three months ended December 31, 2019, the Traditional Business had total revenues of $4,132,000 of which $2,820,000 were recognized, at a point of time, after services were provided and $1,312,000 were recognized ratably over the subscription terms. Total revenues for the Journal Technologies’ software business were $7,545,000 of which $2,454,000 were recognized upon completion of services with customer acceptance while $5,091,000 were recognized ratably over the license and maintenance periods.

 

        During the three months ended December 31, 2018, the Traditional Business had total revenues of $4,199,000 of which $2,861,000 were recognized, at a point of time, after services were provided and $1,338,000 were recognized ratably over the subscription terms.  Total revenues for the Company’s software business were $6,229,000 of which $1,935,000 were recognized upon completion of services with customer acceptance while $4,294,000 were recognized ratably over the license and maintenance periods.

 

        Approximately 65% of the Company’s revenues during the three-month period ended December 31, 2019 were derived from Journal Technologies, as compared with 60% in the prior year period. In addition, the Company’s revenues have been primarily from the United States with approximately 1% from foreign countries. Journal Technologies’ revenues are primarily from governmental agencies.

 

        The following table sets forth certain deferred obligations from October 1, 2019 through December 31, 2019:

 

   

Beginning

Balance

Oct. 1, 2019

   

 

 

Addition

   

 

 

Recognized

   

Ending

Balance

December 31,

2019

 
                                 

Deferred subscriptions

  $ 3,195,000     $ 1,009,000     $ (1,312,000 )   $ 2,892,000  

Deferred installation contracts

    1,932,000       888,000       (808,000 )     2,012,000  

Deferred maintenance agreements

and others

    16,057,000       4,016,000       (5,091,000 )     14,982,000  

 

 

Note 11 - Subsequent Events

 

The Company has completed an evaluation of all subsequent events through the issuance date of these financial statements and concluded that no subsequent events occurred that required recognition to the financial statements or disclosures in the Notes to Consolidated Financial Statements.

 

12

 

 

 
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Results of Operations

 

The Company continues to operate as two different businesses: (1) The Traditional Business, being the business of newspaper publishing and related services that the Company had before 1999 when it purchased a software development company, and (2) Journal Technologies, Inc. (“Journal Technologies”), a wholly-owned subsidiary which supplies case management software systems and related products to courts, prosecutor and public defender offices, probation departments and other justice agencies, including administrative law organizations, city and county governments and bar associations. These organizations use the Journal Technologies family of products to help manage cases and information electronically, to interface with other critical justice partners and to extend electronic services to the public, including efiling and a website to pay traffic citations and fees online, and bar members. These products are licensed to more than 500 organizations in 42 states and internationally.

 

Comparable three-month periods ended December 31, 2019 and 2018

 

Consolidated revenues were $11,677,000 and $10,428,000 for the three months ended December 31, 2019 and 2018, respectively. This increase of $1,249,000 (12%) was primarily from (i) increased Journal Technologies’ license and maintenance fees of $420,000, consulting fees of $148,000 and public service fees of $748,000, and (ii) increased Traditional Business’ government notice advertising net revenues of $40,000 and legal notice advertising net revenues of $61,000, partially offset by a reduction in the Traditional Business’ classified advertising net revenues of $16,000, trustee sale notice advertising net revenues of $37,000 and circulation revenues of $26,000. The Company’s revenues derived from Journal Technologies’ operations constituted about 65% and 60% of the Company’s total revenues for the three months ended December 31, 2019 and 2018, respectively.

 

Consolidated operating expenses increased by $246,000 (2%) to $13,195,000 from $12,949,000. Total salaries and employee benefits increased by $232,000 (3%) to $8,887,000 from $8,655,000 primarily resulting from additional personnel costs for Journal Technologies. Outside services decreased by $85,000 (9%) to $860,000 from $945,000 mainly because of decreased contractor costs for Journal Technologies. Depreciation and amortization costs decreased by $25,000 to $128,000 from $153,000. Credit card merchant discount fees, which represent fees paid to credit card service providers to process payments for the public service fee revenues, increased by $112,000 (41%) to $382,000 from $270,000 mainly resulting from increased efilings. Accounting and legal fees decreased by $147,000 (36%) to $256,000 from $403,000 primarily because of decreased legal fees to review and negotiate Journal Technologies’ contracts with customers.

 

The Company’s non-operating income, net of expenses, increased to $21,008,000 from a loss of $27,329,000 primarily because of the recording of net unrealized gains on investments of $19,531,000 during the three months ended December 31, 2019, as compared with net unrealized losses on investments of $28,640,000 during the prior year period.

 

During the three months ended December 31, 2019, consolidated pretax income was $19,490,000, as compared with pretax loss of $29,850,000 in the prior year period. There was consolidated net income of $14,210,000 ($10.29 per share) after tax provisions for the three months ended December 31, 2019, as compared with a net loss of $21,533,000 (-$15.60 per share) in the prior year period.

 

13

 

 

At December 31, 2019, the aggregate fair market value of the Company’s marketable securities was $214,112,000. These securities had approximately $160,223,000 of net unrealized gains before taxes of $42,611,000, and generated approximately $1,680,000 in dividends income during the three months ended December 31, 2019, which lowers the Company’s effective income tax rate because of the dividends received deduction. Most of the unrealized gains were in the common stocks of three U.S. financial institutions and one foreign manufacturer.

 

Additional detail about each of the Company’s reportable segments, and its corporate income and expenses, is set forth below:

 

Overall Financial Results (000)

 

For the three months ended December 31

 
                                                                 
   

Reportable Segments

                                 
   

Traditional

Business

   

Journal

Technologies

   

Corporate

income and expenses

   

 

Total

 
   

2019

   

2018

   

2019

   

2018

   

2019

   

2018

   

2019

   

2018

 

Revenues

                                                               

Advertising

  $ 2,126     $ 2,192     $ ---     $ ---     $ ---     $ ---     $ 2,126     $ 2,192  

Circulation

    1,312       1,338       ---       ---       ---       ---       1,312       1,338  

Advertising service fees and other

    694       669       ---       ---       ---       ---       694       669  

Licensing and maintenance fees

    ---       ---       5,210       4,790       ---       ---       5,210       4,790  

Consulting fees

    ---       ---       689       541       ---       ---       689       541  

Other public service fees

    ---       ---       1,646       898       ---       ---       1,646       898  

Total revenues

    4,132       4,199       7,545       6,229       ---       ---       11,677       10,428  

Operating expenses

                                                               

Salaries and employee benefits

    2,537       2,624       6,350       6,031       ---       ---       8,887       8,655  

Others

    1,461       1,584       2,847       2,710       ---       ---       4,308       4,294  

Total operating expenses

    3,998       4,208       9,197       8,741       ---       ---       13,195       12,949  

Income (loss) from operations

    134       (9 )     (1,652 )     (2,512 )     ---       ---       (1,518 )     (2,521 )

Dividends and interest income

    ---       ---       ---       ---       1,680       1,530       1,680       1,530  

Other income and capital gains

    ---       ---       ---       ---       3       10       3       10  

Net unrealized losses on investments

    ---       ---       ---       ---       19,531       (28,640 )     19,531       (28,640 )

Interest expenses on note payable collateralized by real estate

    (22 )     (23 )     ---       ---       ---       ---       (22 )     (23 )

Interest expenses on margin loans

    ---       ---       ---       ---       (184 )     (206 )     (184 )     (206 )

Pretax (loss) income

  $ 112     $ (32 )   $ (1,652 )   $ (2,512 )   $ 21,030     $ (27,306 )   $ 19,490     $ (29,850 )

 

The Traditional Business

 

      The Traditional Business had pretax income of $112,000, representing a $144,000 increase from a pretax loss of $32,000 in the prior year period.

 

Advertising revenues increased by $66,000 to $2,126,000 from $2,192,000, primarily because of increased government notice advertising net revenues of $40,000 and legal notice advertising net revenues of $61,000, partially offset by reduced classified advertising net revenues of $16,000 and trustee sale notice advertising net revenues of $37,000.

 

Trustee sale notices are very much dependent on the number of California and Arizona foreclosures for which public notice advertising is required by law. The number of foreclosure notices published by the Company decreased by 13% during the three months ended December 31, 2019 as compared to the prior year period. Because this slowing is expected to continue, the Company expects there will be fewer foreclosure notice and other public notice advertisements and declining revenues for all of fiscal 2020. 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 in the three months ended December 31, 2019. Public notice advertising revenues and related advertising and other service fees constituted about 19% and 21% of the Company’s total revenues for the three months ended December 31, 2019 and 2018, respectively. Because of this concentration, the Company’s revenues would be significantly adversely affected if California and Arizona eliminated the legal requirement to publish public notices in adjudicated newspapers of general circulation, as was implemented in Arizona for one notice type that had represented approximately $500,000 in annual revenues for the Company. Also, if the adjudication of one or more of the Company’s newspapers was challenged and revoked, those newspapers would no longer be eligible to publish public notice advertising, and it could have a material adverse effect on the Company’s revenues.

 

14

 

 

The Los Angeles Daily Journal and San Francisco Daily Journal accounted for about 91% of The Traditional Business’ total circulation revenues, which declined by $26,000 (2%) to $1,312,000 from $1,338,000. The court rule and judicial profile services generated about 7% of the total circulation revenues, with the other newspapers and services accounting for the balance. Advertising service fees and other are Traditional Business segment revenues, which include primarily (i) agency commissions received from outside newspapers in which the advertising is placed, and (ii) fees generated when filing notices with government agencies.

 

The Traditional Business segment operating expenses decreased by $210,000 (5%) to $3,998,000 from $4,208,000, primarily due to decreased personnel costs and outside contract printing and distributing costs.

 

Journal Technologies

 

Journal Technologies’ business segment pretax loss decreased by $860,000 (34%) to $1,652,000 from $2,512,000 for the three months ended December 31, 2019 and 2018, respectively.

 

Revenues increased by $1,316,000 (21%) to $7,545,000 from $6,229,000 in the prior year period. Licensing and maintenance fees increased by $420,000 (9%) to $5,210,000 from $4,790,000. Consulting fees increased by $148,000 (27%) to $689,000 from $541,000 due to more go-lives.

 

Deferred revenues on installation contracts primarily represent the fair value of advances from customers of Journal Technologies for installation services and are recognized upon final project go-lives. Deferred revenues on license and maintenance contracts represent prepayments of annual license and maintenance fees and are recognized ratably over the maintenance period. Other public service fees increased by $748,000 (83%) to $1,646,000 from $898,000 primarily due to additional efiling fee revenues.         

 

Operating expenses increased by $456,000 (5%) to $9,197,000 from $8,741,000, primarily because of increased salaries and employee benefit costs.

 

Taxes

 

For the three months ended December 31, 2019, the Company recorded a provision for income taxes of $5,280,000 on pretax income of $19,490,000.   This was the net result of applying the 19% effective tax rate anticipated for fiscal 2020 to the pretax loss, before the unrealized gains on investments, for the three months ended December 31, 2019. The effective tax rate was less than the statutory rate primarily due to the dividends received deduction and state tax benefits.  In addition, the Company recorded taxes on its unrealized gains on investments of $19,531,000 during the three months ended December 31, 2019.  The effective tax rate for the three months ended December 31, 2019 was 27%, after including the taxes on the unrealized gains on investments.

 

For the three months ended December 31, 2018, the Company recorded an income tax benefit of $8,317,000 on a pretax loss of $29,850,000.   This was the net result of applying the effective tax rate anticipated for fiscal 2019 to the pretax loss for the three months ended December 31, 2018. The effective tax rate was greater than the statutory rate primarily due to state tax benefits. 

 

The Company’s effective tax rate was 27% for the three months ended December 31, 2019 as compared with 28% in the prior year period. 

 

15

 

 

      The Company files consolidated federal income tax returns in the United States and with various state jurisdictions and is no longer subject to examinations for fiscal years before fiscal 2016 with regard to federal income taxes and fiscal 2015 for state income taxes. 

 

Liquidity and Capital Resources

 

During the three months ended December 31, 2019, the Company’s cash and cash equivalents and marketable security positions increased by $16,277,000, including unrealized gains on investments of $19,531,000. Cash and cash equivalents were used for the purchase of capital assets of $97,000 and operating activities of $3,126,000 which included net decreases of $1,298,000 in deferred subscriptions, deferred installation contracts and deferred maintenance agreements and others.

 

The investments in marketable securities, which had an adjusted cost basis of approximately $53,889,000 and a market value of about $214,112,000 at December 31, 2019, generated approximately $1,680,000 in dividends income. These securities had approximately $160,223,000 of net unrealized gains before estimated taxes of $42,611,000 which will become due only when we sell securities in which there is unrealized appreciation. Beginning in fiscal 2019, changes in unrealized gains (losses) on investments are now included in the Company’s net income (loss) and thus may have a significant impact depending on the fluctuations of the market prices of the invested securities.

 

Cash flows from operating activities decreased by $629,000 during the three months ended December 31, 2019 as compared to the prior year period, primarily due to (i) decreases in accounts payable and accrued liabilities of $1,786,000 because of the timing difference in remitting efiling fees to the courts and (ii) decreases in net deferred subscriptions, deferred maintenance agreements and others and deferred installation contracts of $1,327,000, partially offset by decreases in accounts receivable of $1,734,000 resulting from more collections.

 

As of December 31, 2019, the Company had working capital of $201,231,000, including the liabilities for deferred subscriptions, deferred installation and maintenance agreements and others of $19,675,000.

 

The Company believes that it will be able to fund its operations for the foreseeable future through its cash flows from operations and its current working capital and expects that any such cash flows will be invested in its businesses. The Company may or may not have the ability to borrow against its marketable securities. The Company also may entertain additional business acquisition opportunities. Any excess cash flows could be used to reduce the investment margin account liability or note payable collateralized by real estate or invested as management and the Board of Directors deem appropriate at the time.

 

Such investments may include additional securities of the companies in which the Company has already invested, securities of other companies, government securities (including U.S. Treasury Notes and Bills) or other instruments. The decision as to particular investments will be driven by the Company’s belief about the risk/reward profile of the various investment choices at the time, and it may utilize government securities as a default if attractive opportunities for a better return are not available. The Company’s Chairman of the Board, Charles Munger, is also the vice chairman of Berkshire Hathaway Inc., which maintains a substantial investment portfolio. The Company’s Board of Directors has utilized his judgment and suggestions, as well as those of J.P. Guerin, the Company’s vice chairman, when selecting investments, and the Company expects both of them to continue to play an important role in monitoring existing investments and selecting any future investments.

 

16

 

 

As of December 31, 2019, the investments were concentrated in just six companies. Accordingly, a significant decline in the market value of one or more of the Company’s investments may not be offset by the hypothetically better performance of other investments, and that could result in a large decrease in the Company’s shareholders’ equity and net income.

 

Critical Accounting Policies and Estimates

 

        The Company’s financial statements and accompanying notes are prepared in accordance with U.S. generally accepted accounting principles. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. These estimates and assumptions are affected by management’s application of accounting policies. Management believes that revenue recognition, accounting for software costs, fair value measurement and disclosures (including for the long-term Incentive Plan liabilities), testing for goodwill impairment and income taxes are critical accounting policies and estimates.

 

     The Company’s critical accounting policies are detailed in its Annual Report on Form 10-K for the year ended September 30, 2019. The above discussion and analysis should be read in conjunction with the unaudited consolidated financial statements and notes thereto included in this report.

 

17

 

 

Disclosure Regarding Forward-Looking Statements

 

     This Quarterly Report on Form 10-Q 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 document, including but not limited to those in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” 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. There are many factors that could cause actual results to differ materially from those contained in the forward-looking statements. These factors include, among others: risks associated with software development and implementation efforts; Journal Technologies’ reliance on professional services engagements with justice agencies; material changes in the costs of postage and paper; possible changes in the law, particularly changes limiting or eliminating the requirements for public notice advertising; possible loss of the adjudicated status of the Company’s newspapers and their legal authority to publish public notice advertising; a further decline in public notice advertising revenues because of fewer foreclosures; a further decline in subscriber and commercial advertising revenues; possible security breaches of the Company’s software or websites; the Company’s reliance on its president and chief executive officer, who has reduced his work schedule due to a health issue; changes in accounting guidance; material weaknesses in the Company’s internal control over financial reporting; and declines in the market prices of the securities owned by the Company. In addition, such statements could be affected by general industry and market conditions, general economic conditions (particularly in California) and other factors.  Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from those in the forward-looking statements are discussed in this Form 10-Q, including in conjunction with the forward-looking statements themselves. 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 filed by the Company with the Securities and Exchange Commission, including in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2019.

 

18

 

 

 Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

     For information regarding the Company’s market risk, refer to Item 7A – Quantitative and Qualitative Disclosures about Market Risk in the Company’s Form 10-K for the fiscal year ended September 30, 2019. There have been no material changes to the Company’s market risk exposures since September 30, 2019.

 

   Item 4.  CONTROLS AND PROCEDURES

 

     In light of the material weaknesses in the Company’s internal control over financial reporting discussed in the Company’s Form 10-K for the fiscal year ended September 30, 2019, management concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 2019.  There were no material changes in the Company’s internal control over financial reporting or in other factors reasonably likely to affect its internal control over financial reporting during the quarter ended December 31, 2019.

  

19

 

 

PART II

 

Item 6.  Exhibits

 

 

31

Certification by Chief Executive Officer and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

32

Certification by Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

101.INS**

XBRL Instance

 

101.SCH**

XBRL Taxonomy Extension Schema

 

101.CAL**

XBRL Taxonomy Extension Calculation

 

101.DEF**

XBRL Taxonomy Extension Definition

 

101.LAB**

XBRL Taxonomy Extension Labels

 

101.PRE**

XBRL Taxonomy Extension Presentation

 

**

XBRL information is furnished and not filed as a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

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

   

 

Chief Executive Officer 

 

President 

  Chief Financial Officer
  Treasurer
  (Principal Executive Officer
  Principal Financial Officer and
  Principal Accounting Officer)
   
   
DATE: February 7, 2020  

 

20

ex_171070.htm

 

Exhibit 31

 

CERTIFICATIONS BY CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Gerald L. Salzman, certify that:

 

 

1.

I have reviewed this quarterly report on Form 10-Q of Daily Journal Corporation;

 

 

2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

 

 

3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

 

 

4.

I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

a.

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

 

 

b.

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

c.

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

d.

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

 

5.

I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

 

 

a.

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

 

b.

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

Date: February 7, 2020 

 

 

 

 

 

 

       
 

/s/ Gerald L. Salzman 

 

 

 

 

 

 

 

Gerald L. Salzman 

 

 

 

Chief Executive Officer, President, 

 

 

 

Chief Financial Officer and Treasurer

   

 

ex_171071.htm

 

Exhibit 32

 

CERTIFICATION BY CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 

 

     In connection with the Quarterly Report on Form 10-Q of Daily Journal Corporation (the "Company") for the period ended December 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Gerald L. Salzman, President, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

 

 

(1)

the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

 

(2)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

/s/  Gerald L. Salzman

 

 

 

Gerald L. Salzman 

 

Chief Executive Officer, President, 

 

Chief Financial Officer and Treasurer 

 

 

 

   
February 7, 2020  

 

 

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350, and is not being filed as part of the Report or as a separate disclosure document.

 

v3.19.3.a.u2
Note 2 - Basis of Presentation
3 Months Ended
Dec. 31, 2019
Notes to Financial Statements  
Basis of Accounting [Text Block]
Note
2
- Basis of Presentation
 
        In the opinion of the Company, the accompanying interim unaudited consolidated financial statements contain all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of its financial position as of
December 31, 2019,
its results of operations for the
three
--months period ended
December 31, 2019
and
2018,
its consolidated statements of shareholders’ equity for the
three
months ended
December 31, 2019
and
2018
and cash flows for the
three
-months ended
December 31, 2019
and
2018.
The results of operations for the
three
months ended
December 31, 2019
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, 2019.
 
       Certain reclassifications of previously reported amounts have been made to conform to the current year’s presentation.
 
v3.19.3.a.u2
Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($)
3 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Revenue    
Revenues $ 11,677,000 $ 10,428,000
Costs and expenses    
Salaries and employee benefits 8,887,000 8,655,000
Outside services 860,000 945,000
Postage and delivery expenses 210,000 204,000
Newsprint and printing expenses 178,000 176,000
Depreciation and amortization 128,000 153,000
Equipment maintenance and software 322,000 343,000
Credit card merchant discount fees 382,000 270,000
Rent expenses 172,000 258,000
Accounting and legal fees 256,000 403,000
Other general and administrative expenses 1,800,000 1,542,000
13,195,000 [1] 12,949,000
Loss from operations (1,518,000) (2,521,000)
Other income (expense)    
Dividends and interest income 1,680,000 1,530,000
Other income 3,000 10,000
Net unrealized gains on investments 19,531,000 (28,640,000)
Income (loss) before income taxes 19,490,000 (29,850,000)
(Provision for) benefit from income taxes (5,280,000) 8,317,000
Net income (loss) $ 14,210,000 $ (21,533,000)
Weighted average number of common shares outstanding - basic and diluted (in shares) 1,380,746 1,380,746
Basic and diluted net income (loss) per share (in dollars per share) $ 10.29 $ (15.60)
Comprehensive income (loss) $ 14,210,000 $ (21,533,000)
Real Estate Bank Loan Secured by Logan Office [Member]    
Other income (expense)    
Interest expense on debt (22,000) (23,000)
Margin Account [Member]    
Other income (expense)    
Interest expense on debt (184,000) (206,000)
Advertising [Member]    
Revenue    
Revenues 2,126,000 2,192,000
Subscription and Circulation [Member]    
Revenue    
Revenues 1,312,000 1,338,000
Advertising Service Fees and Other [Member]    
Revenue    
Revenues 694,000 669,000
License and Maintenance [Member]    
Revenue    
Revenues 5,210,000 4,790,000
Consulting Fees [Member]    
Revenue    
Revenues 689,000 541,000
Service, Other [Member]    
Revenue    
Revenues $ 1,646,000 $ 898,000
[1] included goodwill impairment of $13,400,000
v3.19.3.a.u2
Note 10 - Operating Segments - Summarized Financial Information for Reportable Segments (Details) - USD ($)
3 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Sep. 30, 2019
Revenue from Contract with Customer, Including Assessed Tax $ 11,677,000 $ 10,428,000  
Operating expenses 13,195,000 [1] 12,949,000  
Income (loss) from operations (1,518,000) (2,521,000)  
Dividends and interest income 1,680,000 1,530,000  
Other income 3,000 10,000  
Net unrealized gains on investments 19,531,000 (28,640,000)  
Pretax income (loss) 19,490,000 (29,850,000)  
Income tax (expense) benefit (5,280,000) 8,317,000  
Net income (loss) 14,210,000 (21,533,000)  
Total assets 254,859,000 235,116,000 $ 237,376,000
Capital expenditures 97,000 84,000  
Real Estate Bank Loan Secured by Logan Office [Member]      
Interest expense on debt (22,000) (23,000)  
Margin Account [Member]      
Interest expense on debt (184,000) (206,000)  
Advertising [Member]      
Revenue from Contract with Customer, Including Assessed Tax 2,126,000 2,192,000  
Subscription and Circulation [Member]      
Revenue from Contract with Customer, Including Assessed Tax 1,312,000 1,338,000  
Advertising Service Fees and Other [Member]      
Revenue from Contract with Customer, Including Assessed Tax 694,000 669,000  
License and Maintenance [Member]      
Revenue from Contract with Customer, Including Assessed Tax 5,210,000 4,790,000  
Consulting Fees [Member]      
Revenue from Contract with Customer, Including Assessed Tax 689,000 541,000  
Service, Other [Member]      
Revenue from Contract with Customer, Including Assessed Tax 1,646,000 898,000  
Traditional Business [Member]      
Revenue from Contract with Customer, Including Assessed Tax 4,132,000 4,199,000  
Journal Technologies [Member]      
Revenue from Contract with Customer, Including Assessed Tax 7,545,000 6,229,000  
Operating Segments [Member] | Traditional Business [Member]      
Operating expenses 3,998,000 4,208,000  
Income (loss) from operations 134,000 (9,000)  
Dividends and interest income  
Other income  
Net unrealized gains on investments  
Pretax income (loss) 112,000 (32,000)  
Income tax (expense) benefit (30,000) 80,000  
Net income (loss) 82,000 48,000  
Total assets 17,541,000 18,702,000  
Capital expenditures 35,000 50,000  
Operating Segments [Member] | Traditional Business [Member] | Real Estate Bank Loan Secured by Logan Office [Member]      
Interest expense on debt (22,000) (23,000)  
Operating Segments [Member] | Traditional Business [Member] | Margin Account [Member]      
Interest expense on debt  
Operating Segments [Member] | Traditional Business [Member] | Advertising [Member]      
Revenue from Contract with Customer, Including Assessed Tax 2,126,000 2,192,000  
Operating Segments [Member] | Traditional Business [Member] | Subscription and Circulation [Member]      
Revenue from Contract with Customer, Including Assessed Tax 1,312,000 1,338,000  
Operating Segments [Member] | Traditional Business [Member] | Advertising Service Fees and Other [Member]      
Revenue from Contract with Customer, Including Assessed Tax 694,000 669,000  
Operating Segments [Member] | Traditional Business [Member] | License and Maintenance [Member]      
Revenue from Contract with Customer, Including Assessed Tax  
Operating Segments [Member] | Traditional Business [Member] | Consulting Fees [Member]      
Revenue from Contract with Customer, Including Assessed Tax  
Operating Segments [Member] | Traditional Business [Member] | Service, Other [Member]      
Revenue from Contract with Customer, Including Assessed Tax  
Operating Segments [Member] | Journal Technologies [Member]      
Operating expenses 9,197,000 [1] 8,741,000  
Income (loss) from operations (1,652,000) (2,512,000)  
Dividends and interest income  
Other income  
Net unrealized gains on investments  
Pretax income (loss) (1,652,000) (2,512,000)  
Income tax (expense) benefit 510,000 585,000  
Net income (loss) (1,142,000) (1,927,000)  
Total assets 20,993,000 30,571,000  
Capital expenditures 62,000 34,000  
Operating Segments [Member] | Journal Technologies [Member] | Real Estate Bank Loan Secured by Logan Office [Member]      
Interest expense on debt  
Operating Segments [Member] | Journal Technologies [Member] | Margin Account [Member]      
Interest expense on debt  
Operating Segments [Member] | Journal Technologies [Member] | Advertising [Member]      
Revenue from Contract with Customer, Including Assessed Tax  
Operating Segments [Member] | Journal Technologies [Member] | Subscription and Circulation [Member]      
Revenue from Contract with Customer, Including Assessed Tax  
Operating Segments [Member] | Journal Technologies [Member] | Advertising Service Fees and Other [Member]      
Revenue from Contract with Customer, Including Assessed Tax  
Operating Segments [Member] | Journal Technologies [Member] | License and Maintenance [Member]      
Revenue from Contract with Customer, Including Assessed Tax 5,210,000 4,790,000  
Operating Segments [Member] | Journal Technologies [Member] | Consulting Fees [Member]      
Revenue from Contract with Customer, Including Assessed Tax 689,000 541,000  
Operating Segments [Member] | Journal Technologies [Member] | Service, Other [Member]      
Revenue from Contract with Customer, Including Assessed Tax 1,646,000 898,000  
Corporate, Non-Segment [Member]      
Operating expenses  
Income (loss) from operations  
Dividends and interest income 1,680,000 1,530,000  
Other income 3,000 10,000  
Net unrealized gains on investments 19,531,000 (28,640,000)  
Pretax income (loss) 21,030,000 (27,306,000)  
Income tax (expense) benefit (5,760,000) 7,652,000  
Net income (loss) 15,270,000 (19,654,000)  
Total assets 216,325,000 185,843,000  
Capital expenditures  
Corporate, Non-Segment [Member] | Real Estate Bank Loan Secured by Logan Office [Member]      
Interest expense on debt  
Corporate, Non-Segment [Member] | Margin Account [Member]      
Interest expense on debt (184,000) (206,000)  
Corporate, Non-Segment [Member] | Advertising [Member]      
Revenue from Contract with Customer, Including Assessed Tax  
Corporate, Non-Segment [Member] | Subscription and Circulation [Member]      
Revenue from Contract with Customer, Including Assessed Tax  
Corporate, Non-Segment [Member] | Advertising Service Fees and Other [Member]      
Revenue from Contract with Customer, Including Assessed Tax  
Corporate, Non-Segment [Member] | License and Maintenance [Member]      
Revenue from Contract with Customer, Including Assessed Tax  
Corporate, Non-Segment [Member] | Consulting Fees [Member]      
Revenue from Contract with Customer, Including Assessed Tax  
Corporate, Non-Segment [Member] | Service, Other [Member]      
Revenue from Contract with Customer, Including Assessed Tax  
[1] included goodwill impairment of $13,400,000
v3.19.3.a.u2
Note 6 - Investments in Marketable Securities - Summary of Investments (Details) - Common Stock [Member] - USD ($)
Dec. 31, 2019
Sep. 30, 2019
Aggregate fair value $ 214,112,000 $ 194,581,000
Amortized/adjusted cost basis 53,889,000 53,889,000
Pretax net unrealized gains $ 160,223,000 $ 140,692,000
v3.19.3.a.u2
Note 6 - Investments in Marketable Securities (Tables)
3 Months Ended
Dec. 31, 2019
Notes Tables  
Schedule of Available-for-sale Securities Reconciliation [Table Text Block]
     
Investments in Marketable Securities
 
       
   
December 31, 2019
   
September 30, 2019
 
   
 
Aggregate
fair value
   
 
Adjusted
cost basis
   
Pretax net unrealized
gains
   
 
Aggregate
fair value
   
Amortized/
Adjusted
cost basis
   
Pretax
unrealized
gains
 
Marketable securities
                                               
Common stocks
  $
214,112,000
    $
53,889,000
    $
160,223,000
    $
194,581,000
    $
53,889,000
    $
140,692,000
 
v3.19.3.a.u2
Note 8 - Debts and Commitments
3 Months Ended
Dec. 31, 2019
Notes to Financial Statements  
Commitments Disclosure [Text Block]
Note
8
- Debt and Commitments
 
During fiscal
2013,
the Company borrowed from its investment margin account the aggregate purchase price of
$29.5
million for
two
acquisitions, in each case pledging its marketable securities as collateral. The interest rate for these investment margin account borrowings fluctuates based on the Federal Funds Rate plus
50
basis points with interest only payable monthly. The interest rate as of
December 31, 2019
was
2.25%.
These investment margin account borrowings do
not
mature.
 
In
2015,
the Company purchased a
30,700
square foot office building constructed in
1998
on about
3.6
acres in Logan, Utah that had been previously leased by Journal Technologies. The Company paid
$1.24
million and financed the balance with a real estate bank loan of
$2.26
million which bears a fixed interest rate of
4.66%
and is repayable in equal monthly installments of about
$17,600
through
2030.
This loan is secured by the Logan facility and can be paid off at any time without prepayment penalty. This real estate loan had a balance of approximately
$1.8
million as of
December 31, 2019.
 
      The Company also owns its facilities in Los Angeles and leases space for its other offices under operating leases which expire at various dates through fiscal
2021.
v3.19.3.a.u2
Note 4 - Revenue Recognition
3 Months Ended
Dec. 31, 2019
Notes to Financial Statements  
Revenue from Contract with Customer [Text Block]
Note
4
- Revenue Recognition
 
      The Company recognizes revenues in accordance with the provisions of ASU
No.
2014
-
09,
Revenue from Contracts with Customers (ASC Topic
606
)
, which it adopted effective
October 1, 2017,
using the modified retrospective method.
 
       
For the Company’s Traditional Business, proceeds from the sale of subscriptions for newspapers, court rule books and other publications and other services are recorded as deferred revenue and are included in earned revenue only when the services are provided, generally over the subscription term. Advertising revenues are recognized when advertisements are published and are net of agency commissions.
 
      Journal Technologies contracts
may
include several products and services, which are generally distinct and include separate transaction pricing and performance obligations. Most are
one
-transaction contracts. These current subscription-type contract revenues include (i) implementation consulting fees to configure the system to go-live, (ii) subscription software license, maintenance (including updates and upgrades) and support fees, and (iii)
third
-party hosting fees when used. Revenues for consulting are recognized at point of delivery (go-live) upon completion of services. These contracts include assurance warranty provisions for limited periods and do
not
include financing terms. For some contracts, the Company acts as a principal with respect to certain services, such as data conversion, interfaces and hosting that are provided by
third
-parties, and recognizes such revenues on a gross basis. For legacy contracts with perpetual license arrangements, licenses and consulting services are recognized at point of delivery, and maintenance revenues are recognized ratably after the go-live. Other public service fees are earned and recognized as revenues when the Company processes credit card payments on behalf of the courts via its websites through which the public can efile cases and pay traffic citations and other fees.
 
ASC
606
also requires the capitalization of certain costs of obtaining contracts, specifically sales commissions, which are to be amortized over the expected term of the contracts. For its software contracts, the Company incurs an immaterial amount of sales commission costs which have
no
significant impact on the Company’s financial condition and results of operations. In addition, the Company’s implementation and fulfillment costs do
not
meet all criteria required for capitalization.
 
Since the Company recognizes revenues when it can invoice the customer pursuant to the contract for the value of completed performance, as a practical expedient and because reliable estimates cannot be made, it has elected
not
to include the transaction price allocated to unsatisfied performance obligations. Also, as a practical expedient, the Company has elected
not
to include its evaluation of variable consideration of certain usage-based public service fees that are included in some contracts. Furthermore, there are
no
fulfillment costs to be capitalized for the software contracts because these costs do
not
generate or enhance resources that will be used in satisfying future performance obligations.
v3.19.3.a.u2
Note 9 - Contingencies
3 Months Ended
Dec. 31, 2019
Notes to Financial Statements  
Commitments and Contingencies Disclosure [Text Block]
Note
9
- Contingencies
 
From time to time, the Company is subject to contingencies, including litigation, arising in the normal course of its business. While it is
not
possible to predict the results of such contingencies, management does
not
believe the ultimate outcome of these matters will have a material effect on the Company’s financial position or results of operations or cash flows.
 
v3.19.3.a.u2
Note 5 - Basic and Diluted Income Per Share
3 Months Ended
Dec. 31, 2019
Notes to Financial Statements  
Earnings Per Share [Text Block]
Note
5
- Basic and Diluted Income Per Share
 
       The Company does
not
have any common stock equivalents, and therefore basic and diluted income (loss) per share are the same.
 
v3.19.3.a.u2
Note 10 - Operating Segments (Tables)
3 Months Ended
Dec. 31, 2019
Notes Tables  
Schedule of Segment Reporting Information, by Segment [Table Text Block]
   
Reportable Segments
                 
   
Traditional
Business
   
Journal
Technologies
   
Corporate income
and expenses
   
 
Total
 
Three months ended December 31, 2019
                               
Revenues                                
Advertising
  $
2,126,000
    $
---
    $
---
    $
2,126,000
 
Circulation
   
1,312,000
     
---
     
---
     
1,312,000
 
Advertising service fees and other
   
694,000
     
---
     
---
     
694,000
 
Licensing and maintenance fees
   
---
     
5,210,000
     
---
     
5,210,000
 
Consulting fees
   
---
     
689,000
     
---
     
689,000
 
Other public service fees
   
---
     
1,646,000
     
---
     
1,646,000
 
Operating expenses
   
3,998,000
     
9,197,000
     
---
     
13,195,000
 
Income (loss) from operations
   
134,000
     
(1,652,000
)    
---
     
(1,518,000
)
Dividends and interest income
   
---
     
---
     
1,680,000
     
1,680,000
 
Other income
   
---
     
---
     
3,000
     
3,000
 
Net unrealized gains on investments
   
---
     
---
     
19,531,000
     
19,531,000
 
Interest expenses on note payable collateralized by real estate
   
(22,000
)    
---
     
---
     
(22,000
)
Interest expenses on margin loans
   
---
     
---
     
(184,000
)    
(184,000
)
Pretax income (loss)
   
112,000
     
(1,652,000
)    
21,030,000
     
19,490,000
 
Income tax (expense) benefit
   
(30,000
)    
510,000
     
(5,760,000
)    
(5,280,000
)
Net income (loss)
   
82,000
     
(1,142,000
)    
15,270,000
     
14,210,000
 
Total assets
   
17,541,000
     
20,993,000
     
216,325,000
     
254,859,000
 
Capital expenditures
   
35,000
     
62,000
     
---
     
97,000
 
 
 
Reportable Segments
     
 
     
 
 
   
Traditional
Business
   
Journal
Technologies
   
Corporate income
and expenses
   
Total
 
Three months ended December 31, 2018
                               
Revenues
                               
Advertising
  $
2,192,000
    $
---
    $
---
    $
2,192,000
 
Circulation
   
1,338,000
     
---
     
---
     
1,338,000
 
Advertising service fees and other
   
669,000
     
---
     
---
     
669,000
 
Licensing and maintenance fees
   
---
     
4,790,000
     
---
     
4,790,000
 
Consulting fees
   
---
     
541,000
     
---
     
541,000
 
Other public service fees
   
---
     
898,000
     
---
     
898,000
 
Operating expenses
   
4,208,000
     
8,741,000
     
---
     
12,949,000
 
Loss from operations
   
(9,000
)    
(2,512,000
)    
---
     
(2,521,000
)
Dividends and interest income
   
---
     
---
     
1,530,000
     
1,530,000
 
Other income
   
---
     
---
     
10,000
     
10,000
 
Net unrealized losses on investments
   
---
     
---
     
(28,640,000
)    
(28,640,000
)
Interest expenses on note payable collateralized by real estate
   
(23,000
)    
---
     
---
     
(23,000
)
Interest expenses on margin loans
   
---
     
---
     
(206,000
)    
(206,000
)
Pretax (loss) income
   
(32,000
)    
(2,512,000
)    
(27,306,000
)    
(29,850,000
)
Income tax benefit (expense)
   
80,000
     
585,000
     
7,652,000
     
8,317,000
 
Net income (loss)
   
48,000
     
(1,927,000
)    
(19,654,000
)    
(21,533,000
)
Total assets
   
18,702,000
     
30,571,000
     
185,843,000
     
235,116,000
 
Capital expenditures
   
50,000
     
34,000
     
---
     
84,000
 
Contract with Customer, Asset and Liability [Table Text Block]
   
Beginning
Balance
Oct. 1, 2019
   
 
 
Addition
   
 
 
Recognized
   
Ending
Balance
December 31,
2019
 
                                 
Deferred subscriptions
  $
3,195,000
    $
1,009,000
    $
(1,312,000
)   $
2,892,000
 
Deferred installation contracts
   
1,932,000
     
888,000
     
(808,000
)    
2,012,000
 
Deferred maintenance agreements
and others
   
16,057,000
     
4,016,000
     
(5,091,000
)    
14,982,000
 
v3.19.3.a.u2
Document And Entity Information - shares
3 Months Ended
Dec. 31, 2019
Jan. 31, 2020
Document Information [Line Items]    
Entity Registrant Name DAILY JOURNAL CORPORATION  
Entity Central Index Key 0000783412  
Trading Symbol djco  
Current Fiscal Year End Date --09-30  
Entity Filer Category Accelerated Filer  
Entity Current Reporting Status Yes  
Entity Emerging Growth Company false  
Entity Small Business false  
Entity Common Stock, Shares Outstanding (in shares)   1,380,746
Entity Shell Company false  
Document Type 10-Q  
Document Period End Date Dec. 31, 2019  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q1  
Amendment Flag false  
Title of 12(b) Security Common Stock, par value $.01 per share  
Entity Interactive Data Current Yes  
v3.19.3.a.u2
Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($)
Common Stock [Member]
Treasury Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
AOCI Attributable to Parent [Member]
Total
Balance (in shares) at Sep. 30, 2018 1,805,053 (424,307)        
Balance at Sep. 30, 2018 $ 18,000 $ (4,000) $ 1,755,000 $ 45,361,000 $ 115,786,000 $ 162,916,000
Adoption of new accounting pronouncement at Sep. 30, 2018 115,786,000 (115,786,000)
Net loss (21,533,000) (21,533,000)
Balance (in shares) at Dec. 31, 2018 1,805,053 (424,307)        
Balance at Dec. 31, 2018 $ 18,000 $ (4,000) 1,755,000 139,614,000 141,383,000
Balance (in shares) at Sep. 30, 2019 1,805,053 (424,307)        
Balance at Sep. 30, 2019 $ 18,000 $ (4,000) 1,755,000 135,931,000 137,700,000
Net loss       14,210,000   14,210,000
Balance (in shares) at Dec. 31, 2019 1,805,053 (424,307)        
Balance at Dec. 31, 2019 $ 18,000 $ (4,000) $ 1,755,000 $ 150,141,000 $ 151,910,000
v3.19.3.a.u2
Note 3 - Accounting Standards Adopted in Fiscal 2020
3 Months Ended
Dec. 31, 2019
Notes to Financial Statements  
New Accounting Pronouncements and Changes in Accounting Principles [Text Block]
Note
3
- Accounting Standards Adopted in Fiscal
2020
 
     In
February 2016,
the Financial Accounting Standard Board issued Accounting Standards Update (“ASU”)
2016
-
02,
Leases (Topic
842
)
which requires that all leases be recognized by lessees on the balance sheet through a right-of-use (ROU) asset and corresponding lease liability, including today’s operating leases.  During the
first
quarter of fiscal
2020,
the Company adopted this standard using the optional adoption method, which does
not
require an adjustment to comparative period financial statements.  At
December 31, 2019,
the Company recorded a right-of-use (ROU) asset and lease liability of approximately
$390,000
for its operating office leases.  As allowed by the guidance, the Company has elected
not
to recognize ROU assets and lease liabilities for short-term (less than
one
year) leases of any class of underlying asset.  ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent its obligation to make rental payments from the leases.  ROU assets and liabilities are required to be recognized based on the present value of lease payments over the lease term.  At
December 31, 2019,
the Company had office lease obligations of approximately
$20,000
beyond
one
year; it is deemed immaterial for the present value difference.  Operating office leases are included in operating lease ROU assets, current accrued liabilities and long-term accrued liabilities in the Company’s accompanying Consolidated Balance Sheets.  The Company’s adoption of this new standard had
no
significant impact on the Company’s financial condition, results of operations or disclosures. 
v3.19.3.a.u2
Note 10 - Operating Segments - Deferred Revenue Obligations (Details)
3 Months Ended
Dec. 31, 2019
USD ($)
Subscription and Circulation [Member]  
Deferred revenue $ 3,195,000
Deferred Revenue, Additions 1,009,000
Deferred Revenue, Revenue Recognized (1,312,000)
Deferred revenue 2,892,000
Installation Contracts [Member]  
Deferred revenue 1,932,000
Deferred Revenue, Additions 888,000
Deferred Revenue, Revenue Recognized (808,000)
Deferred revenue 2,012,000
License and Maintenance [Member]  
Deferred revenue 16,057,000
Deferred Revenue, Additions 4,016,000
Deferred Revenue, Revenue Recognized (5,091,000)
Deferred revenue $ 14,982,000