DAILY JOURNAL CORPDJCOEarnings & Financial Report
Nasdaq · publishing
Daily Journal Corporation is an American publishing company and technology company headquartered in Los Angeles, California. The company has offices in the California cities of Corona, Oakland, Riverside, Sacramento, San Diego, San Francisco, San Jose, and Santa Ana, as well as in Denver, Colorado; Logan, Utah; Phoenix, Arizona; and Melbourne, Australia. Since being led by Charles T. Munger, its newspapers have focused greatly on reporting about the U.S. legal system.
What changed in DAILY JOURNAL CORP's 10-K — 2022 vs 2023
Top changes in DAILY JOURNAL CORP's 2023 10-K
160 paragraphs added · 139 removed · 113 edited across 5 sections
- Item 7. Management's Discussion & Analysis+52 / −56 · 40 edited
- Item 1. Business+54 / −45 · 39 edited
- Item 1A. Risk Factors+47 / −31 · 28 edited
- Item 2. Properties+4 / −4 · 3 edited
- Item 5. Market for Registrant's Common Equity+3 / −3 · 3 edited
Item 1. Business
Business — how the company describes what it does
39 edited+15 added−6 removed34 unchanged
Item 1. Business
Business — how the company describes what it does
39 edited+15 added−6 removed34 unchanged
2022 filing
2023 filing
A subscription includes online access to the Alameda County foreclosure listing and public record database. San Jose Post-Record. The San Jose Post-Record (the “Post-Record”) has been published since 1910. In addition to general news of local interest, the Post-Record focuses on legal and real estate news. It is published every business day and carries public notice advertising.
A subscription includes online access to the Alameda County foreclosure listing and public record database. - 4 - San Jose Post-Record. The San Jose Post-Record (the “Post-Record”) has been published since 1910. In addition to general news of local interest, the Post-Record focuses on legal and real estate news. It is published every business day and carries public notice advertising.
A subscription includes online access to the Santa Clara County foreclosure listing and public record database. 4 Orange County Reporter. The Orange County Reporter (“Reporter”) has been an adjudicated newspaper of general circulation since 1922. In addition to general news of local interest, the Reporter publishes local and state legal, business and real estate news, and carries public notice advertising.
A subscription includes online access to the Santa Clara County foreclosure listing and public record database. Orange County Reporter. The Orange County Reporter (“Reporter”) has been an adjudicated newspaper of general circulation since 1922. In addition to general news of local interest, the Reporter publishes local and state legal, business and real estate news, and carries public notice advertising.
Commercial advertising consists of display and classified advertising and constituted about 4% of the Company’s total operating revenues in both fiscal 2022 and 2021. 5 Public notice advertising consists of many different types of legal notices required by law to be published in an adjudicated newspaper of general circulation, including notices of death, fictitious business names, trustee sale notices and notices of governmental hearings.
Commercial advertising consists of display and classified advertising and constituted about 4% of the Company’s total operating revenues in both fiscal 2023 and 2022. - 5 - Public notice advertising consists of many different types of legal notices required by law to be published in an adjudicated newspaper of general circulation, including notices of death, fictitious business names, trustee sale notices and notices of governmental hearings.
Item 1. Business Daily Journal Corporation (the “Company”) publishes newspapers and websites reporting California and Arizona news 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.
Item 1. Business Daily Journal Corporation (the “Company”) publishes newspapers and websites reporting California and Arizona news and produces several specialized information publications. 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.
The Daily Journals also include a monthly court directory in booklet form. This directory includes a comprehensive list of sitting judges in all California courts as well as courtroom assignments, phone numbers and courthouse addresses, plus ''Judicial Transitions'' which lists judicial appointments, elevations, confirmations, resignations, retirements and deaths. The Daily Journals are distributed by mail and hand delivery.
The Daily Journals also include a monthly court directory in booklet form. This directory includes a comprehensive list of sitting judges in all California courts as well as courtroom assignments, phone numbers and courthouse addresses, plus a list of judicial appointments, elevations, confirmations, resignations, retirements and deaths. The Daily Journals are distributed by mail and hand delivery.
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. These products are licensed in approximately 30 states and internationally.
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 e-filing and a website to pay traffic citations and fees online. These products are licensed or subscribed to in approximately 30 states, and internationally.
As a technology-based company, Journal Technologies’ success depends on the continued improvement of its products, which is why the costs to update and upgrade them consistently constitute such a significant portion of the Company’s expenses. The Company’s revenues from Journal Technologies’ foreign customers were approximately $4,638,000 in fiscal 2022 and $2,055,000 in 2021.
As a technology-based company, Journal Technologies’ success depends on the continued improvement of its products, which is why the costs to update and upgrade them consistently constitute such a significant portion of the Company’s expenses. The Company’s revenues from Journal Technologies’ foreign customers were approximately $3,293,000 in fiscal 2023 and $4,638,000 in fiscal 2022.
Others provide services for a limited number of customers. As part of the competitive bidding process, many customers will express a preference for, or even require, larger vendors. Many customers desire externally-hosted-Software-as-a-Service (SaaS) solutions to facilitate electronic filing, interface with other justice partners and the public, and publish certain information from case management systems, and simplify provision of these services.
As part of the competitive bidding process, many customers will express a preference for, or even require, larger vendors or specific domain specialization. Many customers desire externally-hosted Software-as-a-Service (SaaS) solutions to facilitate electronic filing, interface with other justice partners and the public, publish certain information from case management systems, and simplify provision of these services.
Public notice advertising revenues and related advertising and other service fees, including trustee sales legal advertising revenues, constituted about ‐‐17% of the Company's total operating revenues in both fiscal 2022 and fiscal 2021.
Public notice advertising revenues and related advertising and other service fees, including trustee sales legal advertising revenues, constituted about 14% of the Company's total operating revenues in fiscal 2023 and about 17% in fiscal 2022.
These changes have included contracting for hand delivery in selected sections of the San Francisco Bay area and in Santa Clara, Alameda, San Diego, Riverside, San Bernardino, Orange and Los Angeles counties, delivering pre-sorted newspapers to the post office on pallets, which facilitates delivery and improves service, and bundling newspapers to reduce per-piece charges.
These changes have included contracting for hand delivery in urban areas of San Francisco, Santa Clara, Alameda, San Diego, Riverside, Orange and Los Angeles counties, delivering pre-sorted newspapers to the post office on pallets, which facilitates delivery and improves service, and bundling newspapers to reduce per-piece charges.
During the past several years, the U.S. Postal Service has increased postal rates. During fiscal 2022, postage increased slightly by $4,000 (1%) to $437,000 from $433,000. Marketing The Company actively promotes its individual newspapers and its multiple newspaper network as well as its other publications. The specialization of each publication creates both target subscribers and target advertisers.
During the past several years, the U.S. Postal Service has increased postal rates. During fiscal 2023, postage increased slightly by $32,000 (7%) to $472,000 from $440,000. Marketing The Company actively promotes its individual newspapers and its multiple newspaper network as well as its other publications. The specialization of each publication creates both target subscribers and target advertisers.
Its operations constituted about 71% of the Company’s total operating revenues in fiscal 2022 and 69% in fiscal 2021.
Its operations constituted about 76% of the Company’s total operating revenues in fiscal 2023 and 71% in fiscal 2022.
At September 30, 2022, the Los Angeles Daily Journal had approximately 3,570 paid subscribers and the San Francisco Daily Journal had approximately 2,070 paid subscribers as compared with total paid subscriptions for both of The Daily Journals of 5,700 at September 30, 2021.
At September 30, 2023, the Los Angeles Daily Journal had approximately 3,591 paid subscribers and the San Francisco Daily Journal had approximately 2,062 paid subscribers as compared with total paid subscriptions for both of The Daily Journals of 5,640 at September 30, 2022.
The gross revenues generated directly by The Daily Journals are attributable approximately 57% to subscriptions and 43% to the sale of advertising and other revenues. Revenues from The Daily Journals constituted approximately 13% of the Company's total operating revenues in fiscal 2022 and 14% in fiscal 2021.
The gross revenues generated directly by The Daily Journals are attributable approximately 56% to subscriptions and 44% to the sale of advertising and other revenues. Revenues from The Daily Journals constituted approximately 11% of the Company's total operating revenues in fiscal 2023 and 13% in fiscal 2022.
The Company maintains a reserve account for estimated losses resulting from the inability of these customers to make required payments, but if the financial conditions of these customers were to deteriorate or the Company’s judgments about their abilities to pay are incorrect, additional allowances might be required, and the Company’s cash flows and results of operations could be materially affected. 9 Inflation The effects of inflation are not significantly any more or less adverse on the Company's businesses than they are on other publishing and software companies.
The Company maintains a reserve account for estimated losses resulting from the inability of these customers to make required payments, but if the financial conditions of these customers were to deteriorate or the Company’s judgments about their abilities to pay are incorrect, additional allowances might be required, and the Company’s cash flows and results of operations could be materially affected.
The Judicial Profiles service contains information concerning nearly all active judges in California. The Judicial Profiles include an interview-based article previously published in The Daily Journals, biographical data and information supplied by participating judges on courtroom procedures and policies. Subscribers may purchase the ten-volume set for Southern California, the eight-volume set for Northern California or individual profiles online.
The Judicial Profiles include an interview-based article previously published in The Daily Journals, biographical data and information supplied by participating judges on courtroom procedures and policies. Subscribers may purchase the ten-volume set for Southern California, the eight-volume set for Northern California or individual profiles online. Advertising and Newspaper Representative. The Company's publications carry commercial advertising and public notice advertising.
Other newspapers do provide some of the same subject coverage as does the Company, but the Company believes its coverage, particularly that of The Daily Journals, is more complete. The Company believes that The Daily Journals are the most important newspapers serving California lawyers on a daily basis.
Other newspapers do provide some of the same subject coverage as does the Company, but the Company believes its coverage, particularly that of The Daily Journals, is more complete.
Such agencies ordinarily receive a commission of 15% to 25% on their sales of advertising in Company and other publications. Commercial advertising agencies also place advertising (including nearly 100% of display advertising) in Company publications and receive commissions for advertising sales.
The Company receives, on a non-exclusive basis, public notice advertising from a number of service providers. Such agencies ordinarily receive a commission of 15% to 25% on their sales of advertising in Company and other publications. Commercial advertising agencies also place advertising (including nearly 100% of display advertising) in Company publications and receive commissions for advertising sales.
Users can pay traffic citations by credit card and get information on traffic school. 6 Almost all of Journal Technologies’ customers are government agencies, and most new software installation and licensing projects are subject to competitive bidding procedures. Accordingly, the ability of Journal Technologies to get new customers is highly unpredictable.
Almost all of Journal Technologies’ customers are government agencies, and most new software installation and licensing projects are subject to competitive bidding procedures. Accordingly, the ability of Journal Technologies to get new customers is highly unpredictable.
Materials and Postage After personnel costs (included in “Salaries and employee benefits” and in “Outside services” in the accompanying consolidated statements of comprehensive (loss) income), postage and paper costs are typically the next two largest expenses for The Traditional Business. Paper and postage accounted for approximately 4% of our traditional publishing segment's operating costs in both fiscal 2022 and 2021.
Materials and Postage After personnel costs (included in “Salaries and employee benefits” and in “Outside services” in the accompanying consolidated statements of comprehensive income (loss)), postage and paper costs are typically the next two largest expenses for T he Traditional Business.
The Company designs its newspapers to fill niches in the news marketplace that are not covered as well by major metropolitan dailies. The in-depth news coverage which the Company's newspapers provide, along with general news coverage, attracts readers who, for personal or professional reasons, desire to keep abreast of topics to which a major newspaper cannot devote significant news space.
The in-depth news coverage which the Company's newspapers provide, along with general news coverage, attracts readers who, for personal or professional reasons, desire to keep abreast of topics to which a major newspaper cannot devote significant news space.
Working Capital Traditionally, the Company had generated sufficient cash flow from operations to cover all its needs without significant borrowing. The Company owns marketable securities with dividends and significant appreciation, providing the Company with additional working capital, subject, of course, to the normal risks associated with owning securities.
Working Capital The Company owns marketable securities with dividends and significant appreciation, providing the Company with working capital in addition to its cash flow from operations, subject, of course, to the normal risks associated with owning securities.
Subscribers are likely to be attracted because of the nature of the information carried by the particular publication, and likely advertisers are those interested in reaching such consumer groups.
Subscribers are likely to be attracted because of the nature of the information carried by the particular publication, and likely advertisers are those interested in reaching such consumer groups. In marketing products, the Company also focuses on its ancillary products which can be of service to subscribers, such as its specialized information services.
Employees The Company had approximately ‐‐‐‐315 full-time employees and contractors and about 10 part-time employees as of September 30, 2022, including about 220 employees and contractors at Journal Technologies. The Company is not a party to any collective bargaining agreements. Certain benefits, including medical insurance, are provided to all full-time employees. Management considers its employee relations to be good.
The Company is not a party to any collective bargaining agreements. Certain benefits, including medical insurance, are provided to all full-time employees. Management considers its employee relations to be good.
CNSB, the Company’s commission-earning selling agent, faces competition from a number of companies based in California, some of which specialize in placing certain types of notices. 8 There is significant competition among a limited number of companies to provide services and software to the courts and other justice agencies, and some of these companies are much larger and have greater access to capital and other resources than Journal Technologies.
There is significant competition among a limited number of companies to provide services and software to the courts and other justice agencies, and some of these companies are much larger and have greater access to capital and other resources than Journal Technologies. Others provide services for a limited number of customers, or in specialized niches.
We will, however, provide these filings in electronic or paper format free of charge upon request addressed to our Secretary at our principal executive offices. Our SEC filings are also available to the public over the Internet at the SEC’s website at www.sec.gov. 10
These filings are not available on our website, www.dailyjournal.com , which is generally dedicated to the content of our publications and services. We will, however, provide these filings in electronic or paper format free of charge upon request addressed to our Secretary at our principal executive offices.
The Company updates these court rules on a monthly basis. In addition, the Company publishes single-volume rules for (1) Los Angeles County; (2) Orange County; (3) San Diego County; (4) the Ninth Circuit and the Central District of California. The single volumes are replaced when there are rule changes.
The Company updates these court rules on a monthly basis. In addition, the Company publishes single-volume rules for Los Angeles and San Diego counties. The single volumes are replaced when there are rule changes. The Judicial Profiles service contains information concerning nearly all active judges in California.
We use the U.S. Postal Service for distribution of roughly 45% of our newspapers. During the past several years, the Company has instituted changes in an attempt to mitigate higher postage costs.
During the past several years, the Company has instituted changes in an attempt to mitigate higher postage costs.
For several years, trustee sales legal advertising revenues were driven by the large number of foreclosures in California and Arizona, for which public notice advertising is required by law.
Effective January 1, 2027 these notices are to be moved to posting on the school district’s website in lieu of being published in a newspaper. For several years, trustee sales legal advertising revenues were driven by the large number of foreclosures in California and Arizona, for which public notice advertising is required by law.
To a considerable extent, the Company also benefits from the fact that subscriptions and some licenses, maintenance and customer support are paid in advance. In fiscal 2013, the Company borrowed $14 million from its investment margin account to purchase all of the outstanding stock of New Dawn Technologies, Inc.
To a considerable extent, the Company also benefits from the fact that subscriptions and some licenses, maintenance and customer support are paid in advance.
Journal Technologies has the following main “eSeries” products: eCourt®, eProsecutor™, eDefender™ and eProbation™ ― browser-based case processing systems that can be used by courts and other justice agencies for all case types because the screens, data elements, business rules, work queues, searches and alerts are highly configurable. eFile™ ― a browser-based interface that allows attorneys and the general public to electronically file documents with the court. ePayIt™ ― a service primarily for the online payment of traffic citations.
Journal Technologies has the following product solutions based on the Company’s core eSeries Framework™ technology: - 6 - eCourt®, eProsecutor™, eDefender™ and eSupervision™ (formerly eProbation)™ ― browser-based case processing systems that can be used by courts and other justice agencies for all case types because the screens, data elements, business rules, work queues, searches and alerts are highly configurable.
The outstanding balance was $75 million at September 30, 2022. Because the Federal Reserve has increased interest rates to help combat inflation and may continue to do so, the Company’s interest expense on the margin account has increased and could increase more in the future.
Because the Federal Reserve has increased interest rates to help combat inflation and may continue to do so, the Company’s interest expense on the margin account has increased and could increase more in the future. - 10 - Access to Our Information The Company files annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”).
An adequate supply of newsprint and other paper is important to the Company's operations. The Company currently does not have a contract with any paper supplier. The Company has always been able to obtain sufficient newsprint for its operations, although past shortages of newsprint have sometimes resulted in higher prices. During fiscal 2022, the price of newsprint increased by 23%.
Paper and postage accounted for approximately 5% of the Traditional Business' operating costs in fiscal 2023 and 4% in fiscal 2022. An adequate supply of newsprint and other paper is important to the Company's operations. The Company currently does not have a contract with any paper supplier.
(“New Dawn”), and another $15.5 million to acquire substantially all of the operating assets and liabilities of ISD Technologies, Inc. (“ISD”), in each case pledging its marketable securities to obtain favorable financing. In addition, there were subsequent borrowings of $45.5 million to purchase additional marketable securities bringing the margin loan balance up to $75 million as of September 30, 2022.
In fiscal 2013, the Company borrowed $14 million from its investment margin account to purchase all of the outstanding stock of New Dawn Technologies, Inc., and another $15.5 million to acquire substantially all of the operating assets and liabilities of ISD Technologies, Inc., in each case pledging its marketable securities to obtain favorable financing.
The Daily Journals face aggressive competition in Los Angeles and San Francisco. All of the Company's publications and products face strong competition from other publications and service companies. Readers of specialized newspapers focus on the amount and quality of general and specialized news, amount and type of advertising, timely delivery and price.
Competition Competition for readers and advertisers is very intense, both by established publications and by new entries into the market. The Daily Journals face aggressive competition in Los Angeles and San Francisco. All of the Company's publications and products face strong competition from other publications and service companies.
The Company's court rules publications face competition from case management systems and the courts themselves. Subscriptions to the single and multi-volume court rules continued to decline during fiscal 2022. The Company's Judicial Profile services have indirect competition because some of the same information is available through other sources, including the courts.
The Company's Judicial Profile services have indirect competition because some of the same information is available through other sources, including the courts. The newspaper industry is experiencing significant secular decline, and the Company’s Traditional Business is no exception.
All of the Company’s other revenues in those years were attributable to the United States. There were no business activities for the newly formed Journal Technologies (Canada) Inc. during fiscal 2022.
The remainder of the Company’s other revenues in those years were attributable to the United States.
The Company has experienced the effects of inflation primarily through increases in costs of personnel. These costs have generally been offset by increased license, maintenance and support fees, which often contain a periodic cost-of-living adjustment.
These costs have generally been offset by increased license, maintenance and support fees, which often contain a periodic cost-of-living adjustment. Also, the Company's investment margin account has an interest rate that fluctuates based on the Federal Funds Rate plus 50 basis points with interest only payable monthly.
The Company believes it has sufficient cash and marketable securities for the foreseeable future.
In addition, there were subsequent borrowings of $45.5 million to purchase additional marketable securities bringing the margin loan balance up to $75 million as of September 30, 2023. The Company believes it has sufficient cash and marketable securities for the foreseeable future.
Removed
Advertising and Newspaper Representative. The Company's publications carry commercial advertising and public notice advertising.
Added
Recently, the California legislature passed a bill (AB542) to be effective January 1, 2024 that will almost certainly result in a decline in legal advertising revenue by reducing the number of publication days in a newspaper for self-service storage facility lien sales. The existing requirement is to publish the notice once per week for two consecutive weeks.
Removed
Recently, however, there have been far fewer foreclosures, and trustee sales legal advertising revenues represented only about 2% of the Company’s total operating revenues in fiscal 2022 and 1% in fiscal 2021.
Added
The bill now allows the notice to be published either once per week for two consecutive weeks in a newspaper or once in a newspaper and once on an internet website that customarily conducts or advertises online auctions or sales. Another bill (AB721) relative to school budget hearing notices, was also passed.
Removed
In marketing products, the Company also focuses on its ancillary products which can be of service to subscribers, such as its specialized information services. 7 The Company receives, on a non-exclusive basis, public notice advertising from a number of service providers.
Added
Those revenues declined significantly in more recent years due to an improved economy and then to the COVID-related foreclosure moratoriums. Because those moratoriums were generally lifted during 2023, trustee sales legal advertising revenues represented about 4% of the Company’s total operating revenues in fiscal 2023 as compared to 2% in fiscal 2022.
Removed
Journal Technologies’ staff includes employees who provide marketing and consulting services which may also result in additional consulting projects and the licensing of products. Most of Journal Technologies’ new projects come from a competitive bidding process. Competition Competition for readers and advertisers is very intense, both by established publications and by new entries into the market.
Added
Journal Technologies offers other, complementary products including: eFile-it™ ― a browser-based interface that allows attorneys and the general public to electronically file documents with the court. ePay-it™ ― a service primarily for the online payment of traffic citations. Users can pay traffic citations by credit card and get information on traffic school.
Removed
Also, the Company maintains an investment margin account for which the interest rate fluctuates based on the Federal Funds Rate plus 50 basis points with interest only payable monthly. The interest rate as of September 30, 2022 was 3%, and it may increase in the future, particularly if the Federal Reserve continues to increase interest rates to help combat inflation.
Added
Journal Technologies (Canada) Journal Technologies (Canada) Inc. was founded in August 2022 as a service company to provide management and advisory services related to corporate leadership, financial management, strategic planning, operational guidance, human resources, project management, software development, professional services, and various other services required by Daily Journal Corporation and Journal Technologies.
Removed
Access to Our Information The Company files annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”). These filings are not available on our website, www.dailyjournal.com , which is generally dedicated to the content of our publications and services.
Added
The Company has always been able to obtain sufficient newsprint for its operations, although past shortages of newsprint have sometimes resulted in higher prices. During fiscal 2023, the price of newsprint did not increase significantly. - 7 - We use the U.S. Postal Service for distribution of roughly 36% of our newspapers.
Added
Journal Technologies’ staff includes employees who are focused on marketing with the intention of growing market share over time, via additional consulting projects and licensing of products.
Added
Most of Journal Technologies’ new projects come from a competitive bidding process, but it is nonetheless important to communicate the Company's offerings to potential customers at trade shows and other channels; understanding what is possible can inform requirements and build confidence over the buying process.
Added
Readers of specialized newspapers focus on the amount and quality of general and specialized news, amount and type of advertising, timely delivery and price. The Company designs its newspapers to fill niches in the news marketplace that are not covered as well by major metropolitan dailies.
Added
The Company believes that The Daily Journals are the most important newspapers serving California lawyers on a daily basis. - 8 - The Company's court rules publications face competition from case management systems and the courts themselves. Subscriptions to the single and multi-volume court rules continued to decline during fiscal 2023.
Added
CNSB, the Company’s commission-earning selling agent, faces competition from a number of companies based in California, some of which specialize in placing certain types of notices.
Added
Remaining competitive requires periodic investment in technology to ensure modern patterns are followed; Journal Technologies is currently embarking on developing next-generation technology and addressing certain technical debt that exists within current generation offerings. - 9 - Employees The Company had approximately 350 full-time employees and contractors and about 10 part-time employees as of September 30, 2023, including about 243 employees and contractors at Journal Technologies and 12 employees and contractors at Journal Technologies (Canada).
Added
Inflation The effects of inflation are not significantly any more or less adverse on the Company's businesses than they are on other publishing and software companies. The Company has experienced the effects of inflation primarily through increases in costs of personnel.
Added
The interest rate as of September 30, 2023 was 6%, and the outstanding balance was $75 million.
Added
Our SEC filings are also available to the public over the Internet at the SEC’s website at www.sec.gov.
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
28 edited+19 added−3 removed26 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
28 edited+19 added−3 removed26 unchanged
2022 filing
2023 filing
While this portfolio has enabled the Company to borrow on very favorable terms for acquisitions and to better compete for case management software opportunities that are usually limited to “large” firms, it is unusual for a public company to invest a significant amount of its available cash in the marketable securities of other public companies.
While this portfolio has enabled the Company to borrow on favorable terms for acquisitions and to better compete for case management software opportunities that are usually limited to “large” firms, it is unusual for a public company to invest a significant amount of its available cash in the marketable securities of other public companies.
Further, the Company does not have an internal audit group, and has not engaged an outside firm to complete the documentation of its internal control assessment to the level required by the applicable criteria. 15 We believe that our overall internal control environment is sufficient for a company of our size.
Further, the Company does not have an internal audit group, and has not engaged an outside firm to complete the documentation of its internal control assessment to the level required by the applicable criteria. We believe that our overall internal control environment is sufficient for a company of our size.
Actions restricting travel, requiring non-essential workers to “stay at home” or causing courts and justice agencies to close or cut back operations can impact the ability of Journal Technologies to complete certain projects that are typically done in-person (and for which payment is usually received upon completion), reduce efiling revenues, affect procurement processes and result in overall payment delays.
Actions restricting travel, requiring non-essential workers to “stay at home” or causing courts and justice agencies to close or cut back operations can impact the ability of Journal Technologies to complete certain projects that are typically done in-person (and for which payment is usually received upon completion), reduce e-filing revenues, affect procurement processes and result in overall payment delays.
The value of these securities could decline, which would adversely affect net income and shareholders’ equity. Also, as of September 30, 2022, the Company’s holdings of marketable securities were concentrated in just eight companies.
The value of these securities could decline, which would adversely affect net income and shareholders’ equity. Also, as of September 30, 2023, the Company’s holdings of marketable securities were concentrated in just eight companies.
Risks Associated with Coronavirus (COVID-19) Pandemic The Company ’ s business is likely to be materially and adversely affected by an epidemic or pandemic such as COVID-19, or by a similar event or the fear of such an event, and the measures that governmental authorities implement to address it.
Risks Associated with a Public Health Event The Company ’ s business is likely to be materially and adversely affected by the emergence or resurgence of an epidemic or pandemic such as COVID-19, or by a similar event or the fear of such an event, and the measures that governmental authorities implement to address it.
There is significant competition among a limited number of companies to provide services and software to courts and other justice agencies, and some of these companies are much larger and have greater access to capital and other resources than Journal Technologies.
Journal Technologies faces significant competition from other case management software vendors. There is significant competition among a limited number of companies to provide services and software to courts and other justice agencies, and some of these companies are much larger and have greater access to capital and other resources than Journal Technologies.
It is not practical to assume that we will be able to offset the decline in subscriptions with increases in the subscription rate, and we expect that our circulation revenues will continue to decline. 12 The Traditional Business is exposed to risks associated with fluctuations in postage and paper costs.
It is not practical to assume that we will be able to offset the decline in subscriptions with increases in the subscription rate, and we cannot anticipate that our circulation revenues will continue to increase. - 13 - The Traditional Business is exposed to risks associated with fluctuations in postage and paper costs.
Normally, the vendor is selected through a bidding process, and often the customers will express a preference for, or even require, larger vendors. An inability to successfully compete in this difficult market could materially affect the earnings of Journal Technologies. The customers of Journal Technologies are public sector entities, which create special issues and risks.
Normally, the vendor is selected through a bidding process, and often the customers will express a preference for, or even require, larger vendors. An inability to successfully compete in this difficult market could materially affect the earnings of Journal Technologies.
At times, the Company may hold marketable securities denominated in currencies other than the United States Dollar. When it does, the Company may be at risk for significant fluctuations in the applicable foreign currency exchange rates, which would affect the profitability of such marketable securities. The Company currently owns one such investment that is denominated in Hong Kong Dollar.
When it does, the Company may be at risk for significant fluctuations in the applicable foreign currency exchange rates, which would affect the profitability of such marketable securities. The Company currently owns one such investment that is denominated in Hong Kong Dollars.
During the past several years, postal rates have increased. Postal rates and fees may increase more in the future. Further, we may not be able to pass on increases in paper and postage costs to our customers.
During the past several years, postal rates have increased. Postal rates and fees may increase more in the future. Further, we may not be able to pass on increases in paper and postage costs to our customers. We expect the Traditional Business to continue to suffer from significant secular decline.
Accordingly, a significant decline in the market value of one or more of the Company’s holdings may not be offset by hypothetically better performance of other holdings. This concentration of risk may result in a more pronounced effect on net income and shareholders’ equity.
Accordingly, a significant decline in the market value of one or more of the Company’s holdings may not be offset by hypothetically better performance of other holdings. This concentration of risk may result in a more pronounced effect on net income and shareholders’ equity. - 15 - The irreplaceable manager of our marketable securities portfolio passed away in November 2023.
As noted above, beginning in fiscal 2019, changes in unrealized gains (losses) on marketable securities are included in the Company’s net income (loss) and thus may have a significant impact on the Company’s reported results depending on the fluctuations of the prices of the marketable securities owned by the Company.
As noted above, beginning in fiscal 2019, changes in unrealized gains (losses) on marketable securities are included in the Company’s net income (loss) and thus may have a significant impact on the Company’s reported results depending on the fluctuations of the prices of the marketable securities owned by the Company. - 16 - We cannot be sure that customer information and systems are fully protected against security breaches.
In addition, we encounter risks related to a longer and more complicated sales cycle than exists for commercial customers, political issues related to resource allocation, administration turnover and preferences for internal case management solutions or for a particular vendor, complicated bidding procedures, and fluctuations in the demand for information technology products and services. 13 Journal Technologies generally recognizes revenues for software installations only upon completion of the applicable services and customer acceptance of the software system.
In addition, we encounter risks related to a longer and more complicated sales cycle than exists for commercial customers, political issues related to resource allocation, administration turnover and preferences for internal case management solutions or for a particular vendor, complicated bidding procedures, and fluctuations in the demand for information technology products and services.
Risks Associated with the Traditional Business Changes in the legal requirement to publish public notice advertising or in the legal ability of our newspapers to publish those notices would have a significant adverse impact on The Traditional Business. 11 From time to time, the legislatures in California and Arizona (and elsewhere) have considered various proposals that would result in the elimination or reduction of the amount of public notice advertising in printed newspapers required by statute, and Arizona approved one such proposal for a particular notice type in fiscal 2017.
From time to time, the legislatures in California and Arizona (and elsewhere) have considered various proposals that would result in the elimination or reduction of the amount of public notice advertising in printed newspapers required by statute, and Arizona approved one such proposal for a particular notice type in fiscal 2017.
In addition, if the adjudication, which is what gives publishers the legal ability to publish public notice advertising, of one or more of the Company’s newspapers were challenged and revoked, those newspapers would no longer be eligible to publish public notice advertising, and it could materially affect the revenues of The Traditional Business.
Effective January 1, 2027 these notices are to be moved to posting on the school district’s website in lieu of being published in a newspaper. - 12 - In addition, if the adjudication, which is what gives publishers the legal ability to publish public notice advertising, of one or more of the Company’s newspapers were challenged and revoked, those newspapers would no longer be eligible to publish public notice advertising, and it could materially affect the revenues of the Traditional Business.
Accordingly, changes in the market prices of the Company’s marketable securities can have a significant impact on the Company’s reported results for a particular period, even though those changes do not bear on the performance of the Company’s operating businesses. 14 The Company may be subject to fluctuations in foreign currency rates for marketable securities that are not denominated in the United States Dollar.
Accordingly, changes in the market prices of the Company’s marketable securities can have a significant impact on the Company’s reported results for a particular period, even though those changes do not bear on the performance of the Company’s operating businesses.
The Company is required to recognize losses in a particular security for financial statement purposes even though the Company has not actually sold the security.
Given the loss of Mr. Munger, the Company does not expect the future financial performance of its marketable securities portfolio to rival its past performance. The Company is required to recognize losses in a particular security for financial statement purposes even though the Company has not actually sold the security.
As COVID-19 spread in March and April 2020, governmental authorities and health officials implemented numerous unprecedented measures to contain the virus, including “stay at home” orders for non-essential workers, travel restrictions, quarantines and business shutdowns.
As COVID-19 spread in early 2020, governmental authorities and health officials implemented numerous unprecedented measures to contain the virus, including “stay at home” orders for non-essential workers, travel restrictions, quarantines and business shutdowns. Most of Journal Technologies’ customers, which are primarily courts and governmental agencies in the United States, Canada and Australia, either closed or significantly scaled back their activities.
Despite our efforts to maintain up-to-date security controls, it is possible that our system could be improperly used to access or misappropriate customer systems or information, including personally identifiable or other confidential information.
Journal Technologies’ software processes and stores customer information in the conduct of its business, including in some cases by utilizing cloud-based systems supplied by third-party vendors. Despite our efforts to maintain up-to-date security controls, it is possible that our system could be improperly used to access or misappropriate customer systems or information, including personally identifiable or other confidential information.
Additional costs may not be recoverable for historic projects with flexible scopes or scopes that are subject to interpretation, or projects that require adjustments due to technology changes that occur due to the passage of time. The end-of-life process for legacy products and customer transitions to new products must be handled effectively.
An inability to realize payment for services performed could materially affect the earnings of Journal Technologies. Additional costs may not be recoverable for historic projects with flexible scopes or scopes that are subject to interpretation, or projects that require adjustments due to technology changes that occur due to the passage of time.
The Traditional Business also operates certain websites that process and, in certain cases, store customer information. A minor security breach was discovered on a website operated by The Traditional Business in early fiscal 2015, and although it was remediated, there can be no assurance that there will not be more material breaches in the future.
Minor security breaches were discovered on websites operated by the Traditional Business in early fiscal 2015 and again in November 2023, and although both incidents were remediated without loss of data or revenue, there can be no assurance that there will not be more material breaches in the future.
The impact on economic activity of these actions or similar actions in the future are likely to significantly impact the Traditional Business’ advertising and subscription revenues. The trend of working from home and using on-line services is also likely to put additional pressure on the newspaper business by impacting circulation numbers that may not be replaced by on-line revenues.
Most people again working from home and using on-line services would likely to put additional pressure on the newspaper business by impacting circulation numbers that may not be replaced by on-line revenues.
In most cases, installation fees are not due until the customer has indicated its satisfaction with the installed system, and it has “gone live”. Accordingly, we do not recognize revenues for installation services or for most other consulting services until after the services have been performed and accepted.
Journal Technologies generally recognizes revenues for software installations only upon completion of the applicable services and customer acceptance of the software system. In most cases, installation fees are not due until the customer has indicated its satisfaction with the installed system, and it has “gone live”.
There are significant risks associated with our ability to complete our services to the satisfaction of our customers and to fulfill the requirements that entitle us to be paid. An inability to realize payment for services performed could materially affect the earnings of Journal Technologies.
Accordingly, we do not recognize revenues for installation services or for most other consulting services until after the services have been performed and accepted. There are significant risks associated with our ability to complete our services to the satisfaction of our customers and to fulfill the requirements that entitle us to be paid.
Disruptions that affect long standing customer relationships can have negative reputational implications for Journal Technologies and that can affect its earnings. Risks Associated with Our Holdings of Marketable Securities A large portion of the Company ’ s assets is held in publicly traded securities, and the prices of those securities may decline.
Risks Associated with Our Holdings of Marketable Securities A large portion of the Company ’ s assets is held in publicly traded securities, and the prices of those securities may decline. As of September 30, 2023, the Company held marketable securities worth approximately $303,128,000, with an unrealized gain for financial statement purposes of $137,716,000.
Most of Journal Technologies’ customers, which are primarily courts and governmental agencies in the United States, Canada and Australia, either closed or significantly scaled back their activities. Similarly, many law firms and companies from which the Traditional Business derives advertising and subscription revenues also curtailed their operations and spending.
Similarly, many law firms and companies from which the Traditional Business derives advertising and subscription revenues also curtailed their operations and spending. The impact on economic activity of a new crisis or a serious mutation of COVID-19 could again threaten the Traditional Business’ advertising and subscription revenues.
The costs to update and upgrade Journal Technologies’ products are expensed as incurred and will impact earnings at least through the foreseeable future. Journal Technologies faces significant competition from other case management software vendors.
The costs to update and upgrade Journal Technologies’ products are expensed as incurred and will impact earnings at least through the foreseeable future. To build out next-generation technology there is up-front investment required, which is now underway. Likewise, investment is required to improve existing technology to simplify the process of configuring, managing and updating systems.
These trends are expected to continue and would adversely affect The Traditional Business. The Company has contracted with a third-party agency to sell display advertising for the Company. Circulation revenues have continued to decline as more and more information has become available online. Law firm mergers have also reduced the number of firms that purchase multiple subscriptions of our newspapers.
These trends are expected to continue and would adversely affect the Traditional Business. During fiscal 2023, we had a slight increase of $9,000 in circulation revenues primarily resulting from some promotional sale efforts which we will continue. However, overall industry-wide circulation revenues have continued to decline as more and more information has become available online.
Removed
Also, while the vast majority of the Company’s employees are currently working from home effectively, a resurgence in serious COVID-19 infections could cause the Company to experience a lack of availability of employees to perform key job functions at particular points in time.
Added
Also, with new norms established, the majority of Journal Technologies employees continue working from home most days, and the long-term downsides of these new norms on innovation and productivity are still being determined. - 11 - Risks Associated with the Maturation of Artificial Intelligence (AI) Technologies The Company ’ s business may be materially affected — either positively or negatively--by the emergence of disruptive new technologies or approaches enabled by the rapid pace of innovation unfolding in the artificial intelligence space.
Removed
As of September 30, 2022, the Company held marketable securities worth approximately $275,529,000, with an unrealized gain for financial statement purposes of $120,692,000.
Added
Worthwhile new technologies capitalize on eliminating old inefficiencies. Just as the emergence and maturation of the Internet and smartphone technologies had profound implications across many industries, AI has the potential to significantly change key factors related to the Traditional Business, Journal Technologies, and companies in the Company’s holdings of marketable securities.
Removed
We cannot be sure that customer information and systems are fully protected against security breaches. Journal Technologies’ software processes and stores customer information in the conduct of its business, including in some cases by utilizing cloud-based systems supplied by third-party vendors.
Added
For the Traditional Business, there may be opportunities to automate or reduce the cost of content creation, or perhaps allow monetization of existing and/or historic content in new ways. Likewise, AI may negatively impact the business in ways that will prove difficult to circumvent.
Added
For Journal Technologies, AI may fundamentally alter or automate key customer workflows over time, obviating the need for its technology. AI will likely also create new and better ways for customers to achieve their mandates.
Added
We are allocating certain resources to ensure we have the capacity to recognize and pursue these opportunities, whether through in-house engineering, partnership, or mergers and acquisitions, but whether we will be successful is uncertain. The process and approach to engineering software itself may change in notable ways, and this could impact the business model of Journal Technologies.
Added
Monitoring potential impacts of AI on companies in our holdings of marketable securities will also require attention. Mitigating risk and capitalizing on potential opportunity requires active engagement.
Added
The Company’s challenge is to find and exploit opportunities to ensure change precipitated by AI provides tailwinds and not headwinds, and to do so in a way that is neither too slow, nor premature.
Added
Risks Associated with the Traditional Business Changes in the legal requirement to publish public notice advertising or in the legal ability of our newspapers to publish those notices would have a significant adverse impact on The Traditional Business.
Added
For example, the California legislature recently passed a bill (AB542) to be effective January 1, 2024 that will almost certainly result in a decline in legal advertising revenue by reducing the number of publication days in a newspaper for self-service storage facility lien sales. The existing requirement is to publish the notice once per week for two consecutive weeks.
Added
The bill now allows the notice to be published either once per week for two consecutive weeks in a newspaper or once in a newspaper and once on an internet website that customarily conducts or advertises online auctions or sales. In time, this has the potential to reduce annual earnings by approximately $150,000 to $200,000 per year.
Added
Another bill (AB721) relative to school budget hearing notices, was also passed.
Added
Law firm mergers have also reduced the number of firms that purchase multiple subscriptions of our newspapers.
Added
The newspaper business has been experiencing significant secular decline for some time, and the Company’s Traditional Business has been no exception. The Company expects its Traditional Business to continue to decline in the years ahead, which could have a material negative impact upon the Company’s revenue, income and future prospects.
Added
These investments are being made to both improve win rates and maximize the efficiency (ergo reduce costs, and increase margins) of building and deploying customer systems. The intention is to improve profitability, but if this development is not done effectively, it may not yield the expected competitive advantages or intended efficiencies.
Added
Likewise, specialized vendors in specific vertical markets may develop or continue to enhance specific solutions for certain customer types that are sufficiently focused and turnkey that Journal Technologies will struggle to compete with them. - 14 - The customers of Journal Technologies are public sector entities, which create special issues and risks.
Added
The end-of-life process for legacy products and customer transitions to new products must be handled effectively. Disruptions that affect long-standing customer relationships can have negative reputational implications for Journal Technologies and that can affect its earnings.
Added
Charles T. Munger, the legendary investor of Berkshire Hathaway fame, has been a director of the Company for many decades, and has long managed the Company’s holdings of marketable securities. Mr. Munger passed away on November 28, 2023. Although the Board will work to ensure that the portfolio remains well-managed, it’s impossible to ever replace Mr. Munger.
Added
The Company may be subject to fluctuations in foreign currency rates for marketable securities that are not denominated in the United States Dollar. At times, the Company may hold marketable securities denominated in currencies other than the United States Dollar.
Added
The Traditional Business also operates certain websites that process and, in certain cases, store customer information.
Item 2. Properties
Properties — owned and leased real estate
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Item 2. Properties
Properties — owned and leased real estate
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2022 filing
2023 filing
The main Los Angeles property is comprised of a two-story, 34,000 square foot building constructed in 1990, which is fully occupied by the Company. Approximately 75% of the building is devoted to office space and the remainder to printing and production equipment and facilities.
Item 2. Properties The main Los Angeles property is comprised of a two-story, 34,000 square foot building constructed in 1990, which is fully occupied by the Company. Approximately 75% of the building is devoted to office space and the remainder to printing and production equipment and facilities.
In 2003, the Company finished building an adjacent 37,000 square foot building and parking facilities on properties it acquired in 1996 and 1998. This building provides additional office, production and storage space. The Company and Journal Technologies occupy this building’s first floor and will complete the build-out of the second floor when needed.
In 2003, the Company finished building an adjacent 37,000 square foot building and parking facilities on properties it acquired in 1996 and 1998. This building provides additional office, production and storage space.
In November 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 for Journal Technologies.
Since a majority of Journal Technologies employees are working remotely from home post-COVID or at clients’ sites, the Company intends to consolidate the two offices into one and will seek to either sell or lease out the adjacent building in 2024. - 17 - In November 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 for Journal Technologies.
Removed
Item 2. Properties The Company owns office and printing facilities in Los Angeles and an office building in Logan, Utah, and leases space for its other offices under operating leases which expire at various dates through October 2023.
Added
This office is also currently underutilized and, therefore, a lease to a third party or other approach may be considered at some point in the future.
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
3 edited+0 added−0 removed3 unchanged
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
3 edited+0 added−0 removed3 unchanged
2022 filing
2023 filing
The Company did not declare or pay any dividends during fiscal 2022 or 2021. A determination by the Company whether or not to pay dividends in the future will depend on numerous factors, including the Company’s earnings, cash flow, financial condition, capital requirements, future prospects, acquisition opportunities, and other relevant factors.
The Company did not declare or pay any dividends during fiscal 2023 or 2022. A determination by the Company whether or not to pay dividends in the future will depend on numerous factors, including the Company’s earnings, cash flow, financial condition, capital requirements, future prospects, acquisition opportunities, and other relevant factors.
The Company’s stock repurchase program remains in effect, but the Company did not repurchase any shares during fiscal 2022 and 2021. 17
The Company’s stock repurchase program remains in effect, but the Company did not repurchase any shares during fiscal 2023 and 2022.
High Low Fiscal 2022 Quarter ended December 31, 2021 $ 415.66 $ 334.92 Quarter ended March 31, 2022 389.90 242.11 Quarter ended June 30, 2022 292.00 242.00 Quarter ended September 30, 2022 286.04 236.01 Fiscal 2021 Quarter ended December 31, 2020 $ 405.00 $ 238.00 Quarter ended March 31, 2021 416.69 311.40 Quarter ended June 30, 2021 363.47 298.00 Quarter ended September 30, 2021 350.00 303.05 As of December 9, 2022, there were approximately 340 holders of record of the Company’s common stock, and the last trade was at $261.15 per share.
High Low Fiscal 2023 Quarter ended December 31, 2022 $ 311.39 $ 245.54 Quarter ended March 31, 2023 315.23 258.00 Quarter ended June 30, 2023 297.75 270.05 Quarter ended September 30, 2023 315.50 282.50 Fiscal 2022 Quarter ended December 31, 2021 $ 415.66 $ 334.92 Quarter ended March 31, 2022 389.90 242.11 Quarter ended June 30, 2022 292.00 242.00 Quarter ended September 30, 2022 286.04 236.01 As of December 26, 2023, there were approximately 317 holders of record of the Company’s common stock, and the last trade was at $349.97 per share.
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
40 edited+12 added−16 removed20 unchanged
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
40 edited+12 added−16 removed20 unchanged
2022 filing
2023 filing
The Company made no transfers in and out of Level 1 and Level 2 measurements in fiscal years 2022 and 2021. During that time all of the Company’s investments have been quoted on public markets and, therefore, all fair value calculations have been based on Level 1 measurements.
The Company made no transfers in and out of Level 1 and Level 2 measurements in fiscal years 2023 and 2022. During that time all of the Company’s investments have been quoted on public markets and, therefore, all fair value calculations have been based on Level 1 measurements.
Deferred consulting fees primarily represent 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.
Deferred consulting fees primarily represent 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 periods.
The Company’s smaller newspapers, those other than the Los Angeles and San Francisco Daily Journals (“The Daily Journals”), accounted for about 88% of the total public notice advertising revenues during fiscal 2022.
The Company’s smaller newspapers, those other than the Los Angeles and San Francisco Daily Journals (“The Daily Journals”), accounted for about 88% of the total public notice advertising revenues during fiscal 2023.
In accordance with ASC 280-10, the Company has two reportable business segments which are: (i) the Traditional Business and (ii) Journal Technologies. The above discussion and analysis should be read in conjunction with the consolidated financial statements and the notes thereto included in this report. 25
In accordance with ASC 280-10, the Company has two reportable business segments which are: (i) the Traditional Business and (ii) Journal Technologies and Journal Technologies (Canada). The above discussion and analysis should be read in conjunction with the consolidated financial statements and the notes thereto included in this report. - 27 -
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.
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 e-file cases and pay traffic citations and other fees.
The court rule and judicial profile services generated about 6% of the total circulation revenues, with the other newspapers and services accounting for the balance.
The court rule and judicial profile services generated about 5% of the total circulation revenues, with the other newspapers and services accounting for the balance.
Also, although we have been able to complete some existing projects remotely, we have been delayed in finishing certain implementations and trainings because of our inability to work with clients in-person. Given that we are typically paid for implementation services upon “go-live” of a system, receipt of those revenues has been delayed.
Also, although we were able to complete many existing projects remotely, we were delayed in finishing certain implementations and trainings because of our inability to work with clients in-person. Given that we are typically paid for implementation services upon “go-live” of a system, recognition of those revenues has been delayed.
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. These products are licensed in 30 states and internationally.
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 e-filing and a website to pay traffic citations and fees online. These products are licensed or subscribed in approximately 30 states and internationally.
For the 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.
For the 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.
During fiscal 2022, the Traditional Business had total operating revenues of $15,922,000, as compared with $15,431,000 in the prior fiscal year.
During fiscal 2023, the Traditional Business had total operating revenues of $16,253,000, as compared with $15,922,000 in the prior fiscal year.
The estimated Incentive Plan’s future commitment is calculated using Level 3 inputs, based on an average of the prior fiscal year (fiscal 2021) and the current year’s pretax earnings before certain items, discounted to the present value at 6% since each granted Incentive Plan Unit will expire over its remaining life term of up to 10 years. 24 ASC 740, Income Taxes , establishes financial accounting and reporting standards for the effect of income taxes.
The estimated Incentive Plan’s future commitment is calculated using Level 3 inputs, based on an average of the prior fiscal year (fiscal 2022) and the current year’s pretax earnings before certain items, discounted to the present value at 6% since each granted Incentive Plan Unit will expire over its remaining life term of up to 10 years.
These securities had approximately $120,692,000 of net unrealized gains before estimated taxes of $32,120,000 which will become due only when we sell securities in which there is unrealized appreciation.
These securities had approximately $137,716,000 of net unrealized gains before estimated taxes of $36,260,000 which will become due only when we sell securities in which there is unrealized appreciation.
Approximately 71% of the Company’s revenues during fiscal 2022 were derived from Journal Technologies, as compared with 69% in the prior fiscal year. In addition, the Company’s revenues have been primarily from the United States, with approximately $4,638,000 (9%) from foreign countries. Almost all of Journal Technologies’ revenues are from governmental agencies.
Approximately 76% of the Company’s revenues during fiscal 2023 were derived from Journal Technologies, as compared with 71% in the prior fiscal year. In addition, the Company’s revenues have been primarily from the United States, with approximately $3,293,000 (5%) from foreign countries. Almost all of Journal Technologies’ revenues are from governmental agencies.
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 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.
Public notice advertising revenues and related advertising and other service fees, including trustee sales legal advertising revenues, constituted about 17% of the Company's total operating revenues for both fiscal 2022 and 2021. 21 The Daily Journals accounted for about 92% of the Traditional Business’ total circulation revenues, which declined by $182,000 (4%) to $4,394,000 from $4,576,000.
Public notice advertising revenues and related advertising and other service fees, including trustee sales legal advertising revenues, constituted about 14% of the Company's total operating revenues for fiscal 2023 and 17% for fiscal 2022. - 23 - The Daily Journals accounted for about 93% of the Traditional Business’ total circulation revenues, which increased by $9,000 to $4,403,000 from $4,394,000.
During fiscal 2022, the Company’s consolidated pretax loss was $102,549,000, as compared to pretax income of $153,050,000 in the prior fiscal year. There was consolidated net loss of $75,624,000 (-$54.81 per share) for fiscal 2022, as compared with consolidated net income of $112,900,000 ($81.77 per share) in the prior fiscal year.
During fiscal 2023, the Company’s consolidated pretax income was $28,102,000, as compared to pretax loss of $102,549,000 in the prior fiscal year. There was consolidated net income of $21,452,000 ($15.58 per share) for fiscal 2023, as compared with consolidated net loss of $75,624,000 (-$54.81 per share) in the prior fiscal year.
Most of the unrealized gains were in the common stocks of three U.S. financial institutions and one foreign manufacturer. 20 Taxes During fiscal 2022, the Company recorded an income tax benefit of $26,925,000 on the pretax loss of $102,549,000.
Most of the unrealized gains were in the common stocks of three U.S. financial institutions and one foreign manufacturer. - 22 - Taxes During fiscal 2023, the Company recorded an income tax provision of $6,650,000 on pretax income of $28,102,000.
Total operating revenues for the Company’s software business were $38,087,000 and $34,494,000, of which $19,459,000 and $14,787,000, respectively, were recognized upon completion of services while $18,628,000 and $19,707,000, respectively, were recognized ratably over the subscription periods. 19 Fiscal 2022 compared with fiscal 2021 Consolidated Financial Comparison Consolidated revenues were $54,009,000 and $49,925,000 for fiscal 2022 and 2021, respectively.
Total operating revenues for the Company’s software business were $51,456,000 and $38,087,000, of which $28,209,000 and $19,459,000, respectively, were recognized upon completion of services while $23,247,000 and $18,628,000, respectively, were recognized ratably over the subscription periods. - 21 - Fiscal 2023 compared with fiscal 2022 Consolidated Financial Comparison Consolidated revenues were $67,709,000 and $54,009,000 for fiscal 2023 and 2022, respectively.
As of September 30, 2022, the Company had working capital of $275,835,000, including the liabilities for deferred subscriptions, deferred consulting fees and deferred maintenance agreements and others of $21,345,000.
As of September 30, 2023, the Company had working capital of $303,207,000, including the liabilities for deferred subscriptions, deferred consulting fees and deferred maintenance agreements and others of $25,539,000.
At September 30, 2022, the aggregate fair market value of the Company’s marketable securities was $275,529,000. These securities had approximately $120,692,000 of net unrealized gains before taxes of $32,120,000. They generated approximately $5,451,000 in dividends income during fiscal 2022, as compared with $2,908,000 in the prior fiscal year.
At September 30, 2023, the aggregate fair market value of the Company’s marketable securities was $303,128,000. These securities had approximately $137,716,000 of net unrealized gains before taxes of $36,260,000. They generated approximately $8,336,000 in dividends and interest income during fiscal 2023, as compared with $5,451,000 in the prior fiscal year.
These costs are expensed as incurred and will impact earnings at least through the foreseeable future.
Journal Technologies continues to update and upgrade its software products. These costs are expensed as incurred and will impact earnings at least through the foreseeable future.
Consequently, the overall effective tax rate for fiscal 2022 was 26.3%, after including the taxes on the realized gains and unrealized losses on marketable securities. For fiscal 2021, the Company recorded a provision for income taxes of $40,150,000 on pretax income of $153,050,000.
Consequently, the overall effective tax rate for fiscal 2022 was 26.3%, after including the taxes on the realized gains and unrealized losses on marketable securities.
Cash, cash equivalents, the proceeds from the sales of marketable securities and additional net borrowing were primarily used to purchase additional marketable securities of $117,678,000. 22 The investments in marketable securities, which had an adjusted cost basis of approximately $154,837,000 and a market value of about $275,529,000 at September 30, 2022, generated approximately $5,451,000 in dividends income during fiscal 2022.
Cash, cash equivalents, and the proceeds from the sales of marketable securities were primarily used to purchase additional marketable securities of $10,001,000. The investments in marketable securities, which had an adjusted cost basis of approximately $165,412,000 and a market value of about $303,128,000 at September 30, 2023, generated approximately $8,336,000 in dividends and interest income during fiscal 2023.
Other general and administrative expenses increased by $1,122,000 (50%) to $3,358,000 from $2,236,000 mainly because there were increased miscellaneous office equipment and software license purchases and business travel expenses as compared to the prior fiscal year.
Other general and administrative expenses increased by $518,000 (15%) to $3,876,000 from $3,358,000 mainly because there were increased business travel expenses as compared to the prior fiscal year period.
ASC 820, Fair Value Measurement and Disclosures , requires the Company to (i) disclose the amounts of transfers in and out of Level 1 and Level 2 fair value measurements and the reasons for the transfers and (ii) present separately information about purchases, sales, issuances and settlements in the reconciliation of Level 3 measurements.
The Company believes its process for developing software is essentially completed concurrent with the establishment of technological feasibility, and accordingly, no software development costs have been capitalized to date. - 26 - ASC 820, Fair Value Measurement and Disclosures , requires the Company to (i) disclose the amounts of transfers in and out of Level 1 and Level 2 fair value measurements and the reasons for the transfers and (ii) present separately information about purchases, sales, issuances and settlements in the reconciliation of Level 3 measurements.
Additional details about each of the reportable segments and its corporate income and expenses is set forth below: Overall Financial Results (000) For the twelve months ended September 30 Reportable Segments Traditional Business Journal Technologies Corporate Total 2022 2021 2022 2021 2022 2021 2022 2021 Revenues Advertising $ 8,591 $ 8,171 $ --- $ --- $ --- $ --- $ 8,591 $ 8,171 Circulation 4,394 4,576 --- --- --- --- 4,394 4,576 Advertising service fees and other 2,937 2,684 --- --- --- --- 2,937 2,684 Licensing and maintenance fees --- --- 19,192 21,044 --- --- 19,192 21,044 Consulting fees --- --- 11,865 6,319 --- --- 11,865 6,319 Other public service fees --- --- 7,030 7,131 --- --- 7,030 7,131 Total operating revenues 15,922 15,431 38,087 34,494 --- --- 54,009 49,925 Operating expenses Salaries and employee benefits 9,618 8,226 27,317 26,004 --- --- 36,935 34,230 Increase to the long-term Supplemental compensation accrual 1,130 1,795 115 40 --- --- 1,245 1,835 Others 4,472 4,967 9,368 6,741 --- --- 13,840 11,708 Total operating expenses 15,220 14,988 36,800 32,785 --- --- 52,020 47,773 Income from operations 702 443 1,287 1,709 --- --- 1,989 2,152 Dividends and interest income --- --- --- --- 5,451 2,908 5,451 2,908 Gains on sale of land --- --- --- --- 272 --- 272 --- Other income --- --- --- --- --- 69 --- 69 Interest expenses on note payable collateralized by real estate and other --- --- --- --- (83 ) (94 ) (83 ) (94 ) Interest expense on margin loans --- --- --- --- (1,026 ) (233 ) (1,026 ) (233 ) Gains on sales of marketable securities, net --- --- --- --- 14,249 41,749 14,249 41,749 Net unrealized (losses) gains on marketable securities --- --- --- --- (123,401 ) 106,499 (123,401 ) 106,499 Pretax income (loss) 702 443 1,287 1,709 (104,538 ) 150,898 (102,549 ) 153,050 Income tax (expense) benefit (185 ) (115 ) (205 ) (425 ) 27,315 (39,610 ) 26,925 (40,150 ) Net income (loss) $ 517 $ 328 $ 1,082 $ 1,284 $ (77,223 ) $ 111,288 $ (75,624 ) $ 112,900 Total assets $ 22,743 $ 22,412 $ 27,868 $ 20,480 $ 268,500 $ 339,664 $ 319,111 $ 382,556 Capital expenditures $ 3 $ 22 $ 33 $ 7 --- --- $ 36 $ 29 During fiscal 2022 and 2021, the Traditional Business had total operating revenues of $15,922,000 and $15,431,000 of which $11,528,000 and $10,855,000, respectively, were recognized after services were provided while $4,394,000 and $4,576,000, respectively, were recognized ratably over the subscription terms.
Additional detail about each of the reportable segments and the Company's corporate income and expenses is set forth below: Overall Financial Results (000) For the twelve months ended September 30 Reportable Segments Traditional Business Journal Technologies Corporate Total 2023 2022 2023 2022 2023 2022 2023 2022 Revenues Advertising $ 8,955 $ 8,591 $ --- $ --- $ --- $ --- $ 8,955 $ 8,591 Circulation 4,403 4,394 --- --- --- --- 4,403 4,394 Advertising service fees and other 2,895 2,937 --- --- --- --- 2,895 2,937 Licensing and maintenance fees --- --- 23,503 19,192 --- --- 23,503 19,192 Consulting fees --- --- 19,776 11,865 --- --- 19,776 11,865 Other public service fees --- --- 8,177 7,030 --- --- 8,177 7,030 Total operating revenues 16,253 15,922 51,456 38,087 --- --- 67,709 54,009 Operating expenses Salaries and employee benefits 10,416 9,618 33,034 26,862 --- --- 43,450 36,480 (Decrease) increase to the long-term Supplemental compensation accrual (470 ) 1,130 175 115 --- --- (295 ) 1,245 Others 3,923 4,472 13,979 9,823 --- --- 17,902 14,295 Total operating expenses 13,869 15,220 47,188 36,800 --- --- 61,057 52,020 Income from operations 2,384 702 4,268 1,287 --- --- 6,652 1,989 Dividends and interest income --- --- --- --- 8,336 5,451 8,336 5,451 Gains on sale of land --- --- --- --- --- 272 --- 272 Interest expenses on note payable collateralized by real estate and other --- --- --- --- (77 ) (83 ) (77 ) (83 ) Interest expense on margin loans --- --- --- --- (4,255 ) (1,026 ) (4,255 ) (1,026 ) Gains on sales of marketable securities, net --- --- --- --- 422 14,249 422 14,249 Net unrealized gains (losses) on marketable securities --- --- --- --- 17,024 (123,401 ) 17,024 (123,401 ) Pretax income (loss) 2,384 702 4,268 1,287 21,450 (104,538 ) 28,102 (102,549 ) Income tax (expense) benefit (520 ) (185 ) (1,450 ) (205 ) (4,680 ) 27,315 (6,650 ) 26,925 Net income (loss) $ 1,864 $ 517 $ 2,818 $ 1,082 $ 16,770 $ (77,223 ) $ 21,452 $ (75,624 ) Total assets $ 18,744 $ 22,743 $ 33,100 $ 27,868 $ 303,016 $ 268,500 $ 354,860 $ 319,111 Capital expenditures $ 70 $ 3 $ 16 $ 33 --- --- $ 86 $ 36 During fiscal 2023 and 2022, the Traditional Business had total operating revenues of $16,253,000 and $15,922,000 of which $11,850,000 and $11,528,000, respectively, were recognized after services were provided while $4,403,000 and $4,394,000, respectively, were recognized ratably over the subscription terms.
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.
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.
This increase of $4,084,000 (8%) was primarily from increases in Journal Technologies’ consulting fees of $5,546,000 and the Traditional Business’ advertising revenues of $420,000 and advertising service fees and other of $253,000, partially offset by decreases in (i) Journal Technologies’ license and maintenance fees of $1,852,000 and other public service fees of $101,000, and (ii) the Traditional Business’ circulation revenues of $182,000.
This increase of $13,700,000 (25%) was primarily from increases in (i) Journal Technologies’ consulting fees of $7,911,000, license and maintenance fees of $4,311,000 and other public service fees of $1,147,000, and (ii) the Traditional Business’ advertising revenues of $364,000, partially offset by a decrease in the Traditional Business’ advertising service fees and other of $42,000.
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 the long-term Incentive Plan liabilities) and income taxes are critical accounting policies and estimates.
Management believes that revenue recognition, accounting for software costs, fair value measurement and disclosures (including the long-term Incentive Plan liabilities) and income taxes are critical accounting policies and estimates. The Company recognizes revenues in accordance with the provisions of ASU No. 2014-09, Revenue from Contracts with Customers (ASC Topic 606) .
The Company’s non-operating income, net of expenses, decreased by $255,436,000 to a loss of $104,538,000 from a gain of $150,898,000 in the prior fiscal year primarily because of the recordings of (i) net unrealized losses on marketable securities of $123,401,000 during fiscal 2022 as compared with net unrealized gains of $106,499,000 in the prior year, and (ii) realized net gains on sales of marketable securities of $14,249,000 during fiscal 2022 as compared with $41,749,000 in the prior year, partially offset by gains of $272,000 on a partial land sale associated with the City of Logan’s street widening project during fiscal 2022 and increases in dividends and interest income of $2,543,000.
These increases were partially offset by (i) the recording of realized net gains on sales of marketable securities of $422,000 during fiscal 2023 as compared with $14,249,000 in the prior fiscal year, (ii) increases in interest expenses of $3,229,000 (315%) to $4,255,000 from $1,026,000 primarily due to the federal interest rate increases, and (iii) gains of $272,000 on a partial land sale associated with the City of Logan’s street widening project during fiscal 2022.
These increases were offset by decreased government notice advertising revenues of $145,000. Trustee sale notices are very much dependent on the number of California and Arizona foreclosures for which public notice advertising is required by law.
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 increased by 22% during fiscal 2023 as compared to the prior fiscal year.
Liquidity and Capital Resources During fiscal 2022, the Company’s cash and cash equivalents, restricted cash, and marketable security positions decreased by $71,215,000, after the sales of marketable securities of approximately $80,570,000 and additional net borrowing of $43,000,000 from the margin loan account, partially offset by the recording of net pretax unrealized losses on marketable securities of $123,401,000.
Liquidity and Capital Resources During fiscal 2023, the Company’s cash and cash equivalents, restricted cash, and marketable security positions increased by $35,269,000, after the sales of marketable securities of approximately $2,826,000, and the recording of net pretax unrealized gains on marketable securities of $17,024,000.
The Traditional Business segment operating expenses, excluding the adjustments to the long-term supplemental compensation accrual, increased by $897,000 (7%) to $14,090,000 from $13,193,000, primarily resulting from the salary adjustments. Journal Technologies During fiscal 2022, Journal Technologies’ business segment pretax income decreased by $422,000 (25%) to $1,287,000 from $1,709,000 in the prior fiscal year.
The Traditional Business segment operating expenses, excluding the adjustments to the long-term supplemental compensation accrual, increased by $249,000 (2%) to $14,339,000 from $14,090,000, primarily resulting from the annual salary adjustments.
The Traditional Business The Traditional Business’ pretax income increased by $259,000 (58%) to $702,000 from $443,000 in the prior fiscal year, primarily resulting from a decrease to the long-term supplemental compensation accrual of $665,000 (37%) to $1,130,000 from $1,795,000 in the prior fiscal year.
The Traditional Business The Traditional Business’ pretax income increased by $1,682,000 (240%) to $2,384,000 from $702,000 in the prior fiscal year, primarily due to a reduced long-term supplemental compensation accrual of $1,600,000 (142%) to a reduction of $470,000 from an addition of $1,130,000 in the prior fiscal year, partially offset by increased personnel costs of $798,000 to $10,416,000 from $9,618,000.
Cash flows from operating activities decreased by $8,547,000 during fiscal 2022 as compared to the prior fiscal year, primarily due to (i) increases in deferred tax benefit of $62,716,000, the Company’s income tax receivable of $1,620,000, and accounts receivable of $4,610,000 mainly resulting from additional billings for go-live projects, (ii) decreases in the Company’s income tax payable of $12,488,000 and (iii) decreases in net accounts payable and accrued liabilities of $212,000 (because of the timing difference in remitting efiling fees to the courts).
The balance on the Company's margin loan secured by the securities portfolio was $75,000,000 at both September 30, 2023 and September 30, 2022. - 24 - Cash flows from operating activities increased by $20,345,000 during fiscal 2023, as compared to the prior fiscal year, primarily due to (i) decreases in the Company’s accounts receivable of $5,651,000 mainly resulting from more collections, its income tax receivable of $2,038,000 and its deferred tax benefit of $36,144,000 and (ii) increases in net accounts payable and accrued liabilities of $230,000 (because of the timing difference in remitting e-filing fees to the courts), deferred revenues of $1,434,000 and income tax payable of $7,313,000.
Instead, it hopes to be a significant software company while it also operates its Traditional Business. 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.
The Company’s goal is simply to continue to develop a successful and profitable software business, while continuing to enjoy the benefit of its Traditional Business for as long as possible. - 25 - Critical Accounting Policies and Estimates The Company’s financial statements and accompanying notes are prepared in accordance with U.S. generally accepted accounting principles.
This was partially offset by (i) increases in net income of $68,604,000, excluding the gains on land sale of $272,000, the increases in unrealized losses on marketable securities of $229,900,000 and decreases in realized net gains on sales of marketable securities of $27,500,000 and (ii) increases in deferred revenues of $4,441,000.
This was partially offset by decreases in net income of $32,228,000, excluding the increases in unrealized gains on marketable securities of $140,425,000; decreases in realized net gains on sales of marketable securities of $13,827,000; additional stock dividends of $2,978,000; and prior year’s gains of $272,00 on land sale associated with Logan City’s street widening project.
Advertising revenues increased by $420,000 (5%) to $8,591,000 from $8,171,000, primarily because of increased commercial advertising revenues of $227,000, legal notice advertising revenues of $104,000 and trustee sale notice advertising revenues of $234,000 primarily resulting from the lifting of the foreclosure moratoriums relative to the “Eviction and Foreclosure Orders” and lenders’ processing files that were already in the pipeline when the pandemic struck.
Advertising revenues increased by $364,000 (4%) to $8,955,000 from $8,591,000, primarily resulting from increased trustee sale notice advertising revenues of $207,000 (mainly because of the lifting of COVID-related foreclosure moratoriums on lenders), legal notice advertising revenues of $53,000, government notice advertising revenues of $44,000 and commercial advertising revenues of $60,000.
Outside services increased by $917,000 (30%) to $4,001,000 from $3,084,000 mainly because of increased third-party hosting fees which were billed to clients. Newsprint and printing expenses increased by $114,000 (18%) to $739,000 from $625,000 primarily resulting from newsprint price increases and additional purchases of printing supplies.
Outside services increased by $2,312,000 (52%) to $6,768,000 from $4,456,000 mainly because of additional contractor services and increased third-party hosting fees which were billed to clients. Equipment maintenance and software increased by $286,000 (28%) to $1,315,000 from $1,029,000 mainly resulting from increased maintenance costs and additional miscellaneous office and enterprise software license purchases.
Operating expenses increased by $4,015,000 (12%) to $36,800,000 from $32,785,000 primarily because of (i) increased personnel costs resulting from the salary adjustments, (ii) increased third-party hosting fees which were billed to clients and (iii) additional miscellaneous office equipment and software license purchases and increased business travel expenses. Journal Technologies continues to update and upgrade its software products.
Operating expenses increased by $10,388,000 (28%) to $47,188,000 from $36,800,000 primarily because of (i) increased personnel costs because of salary adjustments due to recent inflation in the compensation market for talent, (ii) additional contractor services and the hiring of additional staff members to strengthen operational efficiencies, product development, and bolster the teams working on the c ompany’s installation projects, (iii) increased third-party hosting fees which were billed to clients and (iv) increased business travel expenses.
Removed
Management believes that the COVID-19 pandemic has had, and, with the Delta and Omicron variant cases, and most recently the more contagious BA.4.6 and BA.5 sub-variant cases, will continue to have, a significant impact on the Company’s business operations.
Added
Although the World Health Organization has declared an end to the COVID-19 emergency, enduring changes in society resulting from efforts to contain the COVID-19 pandemic are likely to have continuing effects on the Company’s business. For example, for Journal Technologies, there have been several delays or cancellations in government procurement processes.
Removed
It is also possible that governments may again take actions in response to the pandemic and new variants and sub-variants, such as a renewed closure, or scaling back of operations, of courts and other governmental agencies that are the customers of the Company.
Added
This can also create a risk of contract cancellations of in-progress projects, which has not been a common issue to date (although there were two in the past year), and Journal Technologies is working to minimize additional cancellations. - 20 - Reportable Segments The Company’s Traditional Business is one reportable segment and the other is Journal Technologies which includes Journal Technologies, Inc. and Journal Technologies (Canada) Inc.
Removed
Furthermore, even as courts, governmental agencies and other businesses return to more normal operations, there are likely to be changes in those operations and personal behaviors going forward, including limitations on travel and more working from home, which will adversely affect the Company, its financial results and cash flows.
Added
Consolidated operating expenses increased by $9,037,000 (17%) to $61,057,000 from $52,020,000. Total salaries and employee benefits increased by $6,970,000 (19%) to $43,450,000 from $36,480,000 primarily due to the annual salary adjustments and the hiring of additional staff members to strengthen operational efficiencies, product development, and bolster the teams working on the company’s installation projects.
Removed
Due to the uncertainties associated with the duration and severity of the COVID-19 pandemic, the efforts to contain it, and the related changes in business operations and personal behaviors, management cannot at this point estimate the magnitude of its impact on the Company’s business operations.
Added
The Company’s non-operating income, net of expenses, increased by $125,988,000 to $21,450,000 from a loss of $104,538,000 in the prior fiscal year primarily because of (i) the recording of net unrealized gains on marketable securities of $17,024,000 as compared with net unrealized losses of $123,401,000 in the prior fiscal year, and (ii) increases in dividends and interest income of $2,885,000 (53%) to $8,356,000 from $5,451,000.
Removed
In recent years, the newspaper industry, including our Traditional Business, has declined, and we expect this general trend to continue due to the impacts of COVID-19 and its aftermath, including fewer lawyers receiving our newspapers at their offices as they continue to work from home. 18 For Journal Technologies, there have been several delays or cancellations in government procurement processes.
Added
The income tax provisions consisted of tax provisions of $110,000 on the realized gains on marketable securities, $4,140,000 on the unrealized gain on marketable securities, and $2,803,000 on operating income, partially offset by a tax benefit of $403,000 for the dividends received deduction and other permanent differences.
Removed
Reportable Segments The Company’s Traditional Business is one reportable segment and the other is Journal Technologies which includes Journal Technologies, Inc. and Journal Technologies (Canada) Inc. (In August 2022, the Company established a new wholly-owned subsidiary, Journal Technologies (Canada) Inc., in Victoria BC, Canada.
Added
Consequently, the overall effective tax rate for fiscal 2023 was 23.7%, after including the taxes on the realized and unrealized gains on marketable securities. During fiscal 2022, the Company recorded an income tax benefit of $26,925,000 on the pretax loss of $102,549,000.
Removed
Except for a nominal founding cost of approximately $4,000, there were no business activities for this new Canadian company during fiscal 2022.) All inter-segment transactions were eliminated.
Added
Journal Technologies During fiscal 2023, Journal Technologies’ business segment pretax income increased by $2,981,000 (232%) to $4,268,000 from $1,287,000 in the prior fiscal year primarily resulting from increased revenues of $13,369,000, partially offset by increased operating expenses of $10,388,000. Revenues increased by $13,369,000 (35%) to $51,456,000 from $38,087,000 in the prior fiscal year.
Removed
Consolidated operating expenses increased by $4,247,000 (9%) to $52,020,000 from $47,773,000. Total salaries and employee benefits increased by $2,705,000 (8%) to $36,935,000 from $34,230,000 primarily because of salary adjustments. Agency commissions increased by $369,000 (69%) to $905,000 from $536,000 primarily due to increased display advertising agency commissions during fiscal 2022.
Added
Licensing and maintenance fees increased by $4,311,000 (22%) to $23,503,000 from $19,192,000. Consulting fees increased by $7,911,000 (67%) to $19,776,000 from $11,865,000 mainly resulting from more project go-lives (i.e. signoffs by the clients). Other public service fees increased by $1,147,000 (16%) to $8,177,000 from $7,030,000 primarily because of increased e-filing fee revenues.
Removed
The effective rate of 26.2% was higher than the statutory rate of 21% primarily due to the recording of (i) state taxes, which were offset by the dividends received deduction, resulting in a tax provision of $1,260,000 on pretax income before the unrealized and realized gains on marketable securities, (ii) a tax provision of $27,938,000 on the unrealized gains on marketable securities and (iii) a tax provision of $10,952,000 on the realized gains on marketable securities.
Added
Indeed, given the passing of Mr. Munger, the Company does not expect its holdings of marketable securities to generate gains in the future consistent with the past.
Removed
The number of foreclosure notices published by the Company increased by 53% during fiscal 2022 as compared to the prior fiscal year, primarily because of the lifting of foreclosure moratoriums, as discussed above.
Added
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.
Removed
Revenues increased by $3,593,000 (10%) to $38,087,000 from $34,494,000 in the prior fiscal year.
Added
Revenues for consulting are generally 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.
Removed
Licensing and maintenance fees decreased by $1,852,000 (9%) to $19,192,000 from $21,044,000 primarily resulting from the reduction in legacy software products’ maintenance and support revenues as the Company ended effective July 1, 2021 the maintenance of these legacy software products, so as to focus on supporting the Company’s main eSeries products.
Added
ASC 740, Income Taxes , establishes financial accounting and reporting standards for the effect of income taxes.
Removed
Consulting fees increased by $5,546,000 (88%) to $11,865,000 from $6,319,000 mainly resulting from a few long-term projects that went live during the last quarter of fiscal 2022. Other public service fees decreased by $101,000 (1%) to $7,030,000 from $7,131,000 primarily due to decreased traffic citation fee revenues.
Removed
The Company recognizes revenues in accordance with the provisions of ASU No. 2014-09, Revenue from Contracts with Customers (ASC Topic 606) .
Removed
Advertising revenues are recognized when advertisements are published. 23 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.
Removed
The Company believes its process for developing software is essentially completed concurrent with the establishment of technological feasibility, and accordingly, no software development costs have been capitalized to date.