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LOS ANGELES, Dec. 17, 2020 (GLOBE NEWSWIRE) -- During fiscal 2020, Daily Journal Corporation (NASDAQ:DJCO) had consolidated revenues of $49,942,000 as compared with $48,655,000 in the prior year. This increase of $1,287,000 was primarily from Journal Technologies’ increased license and maintenance fees of $1,468,000, consulting fees of $2,179,000 and public service fees of $38,000, partially offset by reductions in the Traditional Business’ display advertising (including conferences which were discontinued) net revenues of $1,009,000, classified advertising net revenues of $218,000, trustee sale notice advertising net revenues of $282,000, legal notice advertising net revenues of $523,000 and circulation revenues of $159,000.
The Traditional Business had a pretax loss of $1,814,000, representing a $1,833,000 decrease in income from pretax income of $19,000 in the prior fiscal year. Journal Technologies’ pretax income increased by $5,383,000 to $447,000 from a pretax loss of $4,936,000 in the prior fiscal year, excluding the goodwill impairment loss of $13,400,000 in fiscal 2019. In addition, the Company sold part of its marketable securities realizing a net gain of $4,193,000 in fiscal 2020. There were also decreases in net unrealized losses on investments of $14,616,000 to $3,099,000 in fiscal 2020 from $17,715,000 in the prior fiscal year. These investments generated approximately $4,965,000 in dividends income during fiscal 2020. In the future, dividends income from the Company’s portfolio is expected to decrease, because these investments include the common stocks of three U.S. banks, at least one of which has decided to reduce its dividends. During fiscal 2020, consolidated pretax income was $4,226,000, as compared with a pretax loss of $31,476,000 in the prior fiscal year, in each case reflecting dividends received and the performance of the Company’s investments.
The Company believes that the Coronavirus pandemic (“COVID-19”) has had, and, with the recent resurgence of COVID-19 cases, will continue to have a significant impact on the Company’s business operations. This might include a substantial decrease in the value of the Company’s marketable securities portfolio, which is concentrated in the common stocks of three U.S. financial institutions, or at least a fair degree of volatility. At September 30, 2020, the Company held marketable securities valued at $179,368,000, including net unrealized gains of $137,593,000, and accrued a deferred tax liability of $35,870,000 for estimated income taxes due only upon the sales of the net appreciated securities.
For fiscal 2020, the Company recorded an income tax provision of $185,000 on pretax income of $4,226,000. The effective tax rate was less than the statutory rate primarily due to the dividends received deduction (“DRD”), a benefit resulting from the Coronavirus Aid, Relief and Economic Security (“CARES”) Act and net state tax benefits. The effective tax rate for fiscal 2020 was 4.4%, as compared with 20% in the prior fiscal year.
The CARES Act, which was signed into law on March 27, 2020, contains two federal tax provisions beneficial to the Company. One provision provides that net operating losses arising in tax years beginning in 2018 that were previously only available to be carried forward, can now be carried back to the five previous years. In addition, any alternative minimum tax credits carried forward from prior years can be claimed as a refund in years beginning in 2018. Consequently, the Company recorded a tax benefit resulting from carrying back a portion of the net operating loss generated in fiscal 2019 to fiscal 2014. The Company anticipates receiving a refund for all taxes and alternative minimum taxes paid in fiscal 2014. The tax benefit of $187,000 resulting from carrying back the net operating loss is primarily attributable to the difference in the federal tax rates of 34% in fiscal 2014 and 21% in fiscal 2019.
During fiscal 2020, the Company recorded net unrealized losses on investments of $3,099,000. An income tax benefit of $1,371,000 resulting from these losses was recorded as a temporary difference in deferred income taxes. The Company also recorded a capital gain of $4,193,000 on partial sales of its marketable securities.
For fiscal 2019, the Company recorded an income tax benefit of $6,260,000 on a pretax loss of $31,476,000. The effective tax rate was below the statutory rate due to the impairment of goodwill, partially offset by the DRD and a benefit for state taxes.
For risk factors associated with the Company’s businesses, please see “Item 1A – Risk Factors” of the Company’s annual report on Form 10-K for the fiscal year ended September 30, 2020.
Daily Journal Corporation publishes newspapers and web sites covering California and Arizona, and produces several specialized information services. Journal Technologies, Inc. is a wholly-owned subsidiary and supplies case management software systems and related products to courts and other justice agencies.
This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Certain statements contained in this press release are “forward-looking” statements that involve risks and uncertainties that may cause actual future events or results to differ materially from those described in the forward-looking statements. Words such as “expects,” “intends,” “anticipates,” “should,” “believes,” “will,” “plans,” “estimates,” “may,” variations of such words and similar expressions are intended to identify such forward-looking statements. We disclaim any intention or obligation to revise any forward-looking statements whether as a result of new information, future developments, or otherwise. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in documents we file with the Securities and Exchange Commission.
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