XML 31 R7.htm IDEA: XBRL DOCUMENT
v2.4.1.9

Note 2 - Basis of Presentation and Restatement | 9 Months Ended
--- | ---
Jun. 30, 2014
Notes to Financial Statements |
Basis of Accounting [Text Block] | Note 2 - Basis of Presentation and Restatement Basis of Presentation In the opinion of the Company, the accompanying interim unaudited consolidated financial statements contain all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of its financial position as of June 30, 2014 (as restated), its results of operations for the three- and nine-month periods ended June 30, 2014 (as restated) and 2013 and its cash flows for the nine-month periods ended June 30, 2014 (as restated) and 2013. The results of operations for the three and nine months ended June 30, 2014 (as restated) are not necessarily indicative of the results to be expected for the full year. The consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2013. Certain reclassifications of previously reported amounts have been made to conform to the current year’s presentation. Restatement The Company’s consolidated balance sheet at June 30, 2014, its consolidated statements of comprehensive income (loss) for the three months and nine months ended June 30, 2014 and its consolidated statement of cash flows for the nine months ended June 30, 2014 have been restated to correct a misstatement in the accounting for income taxes in connection with one of its acquisitions. This resulted in the recording of an uncertain tax position liability in connection with the income tax treatment of deferred revenue from one of the Company's acquisitions in fiscal 2013, thus primarily offsetting the previous income tax benefit recorded in the third quarter of fiscal 2014. The subject acquisition was treated as an asset purchase pursuant to Section 338(h)(10) of the Internal Revenue Code. At the time of the purchase, no deferred tax assets or deferred tax benefits were established. The Company has now accrued a liability for its uncertain tax position of approximately $3,018,000 which should be recorded in the third quarter of fiscal 2014 when the tax return was prepared, to primarily offset the previously recorded substantial tax benefit. If recognized, it is expected these unrecognized tax benefits would not have a significant impact to the Company’s effective tax rate. The Company evaluated a tax position taken on its prior year tax return and determined that the position does not meet the more likely than not criteria. The prior year’s income tax return which was filed in July 2014 reflected an income tax position contrary to the one accounted for in purchase accounting in December 2012. The recording of this liability results in an increase in the income tax provision of $2,285,000. Interest and penalties of $518,000 were also recorded as “interest and penalty expenses accrued for uncertain and unrecognized tax benefits”. The Company does not anticipate a significant increase or decrease in this liability in the next twelve months. A reconciliation showing the effects of the restatement on the financial statements included in the original Form 10-Q is provided below: DAILY JOURNAL CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) The effects of the restatement on our consolidated balance sheet as of June 30, 2014 are as follows:
|  | As of June 30, 2014 |
|  | Previously |  |  |  |  |  |  |  |  |
|  | Reported |  |  | Adjustments |  |  | Restated |
ASSETS |  |  |  |  |  |  |  |  |  |  |  |
Current assets |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 14,750,000 |  |  | $ | --- |  |  | $ | 14,750,000 |
Marketable securities, including common stocks of $158,630,000 and bonds of $8,193,000 at June 30, 2014 and common stocks of $129,699,000 and bonds of $7,295,000 at September 30, 2013 |  |  | 166,823,000 |  |  |  | --- |  |  |  | 166,823,000 |
Accounts receivable, less allowance for doubtful accounts of $250,000 at June 30, 2014 and September 30, 2013, respectively |  |  | 6,850,000 |  |  |  | --- |  |  |  | 6,850,000 |
Inventories |  |  | 48,000 |  |  |  | --- |  |  |  | 48,000 |
Prepaid expenses and other assets |  |  | 1,336,000 |  |  |  | --- |  |  |  | 1,336,000 |
Income tax receivable |  |  | 1,757,000 |  |  |  | (339,000 | ) |  |  | 1,418,000 |
Total current assets |  |  | 191,564,000 |  |  |  | (339,000 | ) |  |  | 191,225,000 |
Property, plant and equipment, at cost |  |  |  |  |  |  |  |  |  |  |  |
Land, buildings and improvements |  |  | 12,861,000 |  |  |  | --- |  |  |  | 12,861,000 |
Furniture, office equipment and computer software |  |  | 2,958,000 |  |  |  | --- |  |  |  | 2,958,000 |
Machinery and equipment |  |  | 2,039,000 |  |  |  | --- |  |  |  | 2,039,000 |
|  |  | 17,858,000 |  |  |  | --- |  |  |  | 17,858,000 |
Less accumulated depreciation |  |  | (8,716,000 | ) |  |  | --- |  |  |  | (8,716,000 | )
|  |  | 9,142,000 |  |  |  | --- |  |  |  | 9,142,000 |
Intangibles, net |  |  | 18,967,000 |  |  |  | --- |  |  |  | 18,967,000 |
Goodwill |  |  | 13,400,000 |  |  |  | --- |  |  |  | 13,400,000 |
Deferred income taxes |  |  | 1,877,000 |  |  |  | 1,072,000 |  |  |  | 2,949,000 |
|  | $ | 234,950,000 |  |  | $ | 733,000 |  |  | $ | 235,683,000 |
LIABILITIES AND SHAREHOLDERS' EQUITY |  |  |  |  |  |  |  |  |  |  |  |
Current liabilities |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable |  | $ | 4,406,000 |  |  | $ | --- |  |  | $ | 4,406,000 |
Accrued liabilities |  |  | 3,067,000 |  |  |  | --- |  |  |  | 3,067,000 |
Deferred subscriptions |  |  | 3,145,000 |  |  |  | --- |  |  |  | 3,145,000 |
Deferred installation contracts |  |  | 8,412,000 |  |  |  | --- |  |  |  | 8,412,000 |
Deferred maintenance agreements and others |  |  | 7,321,000 |  |  |  | --- |  |  |  | 7,321,000 |
Deferred income taxes, net |  |  | 43,917,000 |  |  |  | --- |  |  |  | 43,917,000 |
Total current liabilities |  |  | 70,268,000 |  |  |  | --- |  |  |  | 70,268,000 |
Long term liabilities |  |  |  |  |  |  |  |  |  |  |  |
Investment margin account borrowings |  |  | 29,493,000 |  |  |  | --- |  |  |  | 29,493,000 |
Deferred maintenance agreements |  |  | 211,000 |  |  |  | --- |  |  |  | 211,000 |
Income tax payable |  |  | --- |  |  |  | 3,018,000 |  |  |  | 3,018,000 |
Accrued interest and penalty for uncertain and unrecognized tax benefits |  |  | --- |  |  |  | 518,000 |  |  |  | 518,000 |
Accrued liabilities |  |  | 1,200,000 |  |  |  | --- |  |  |  | 1,200,000 |
Total long term liabilities |  |  | 30,904,000 |  |  |  | 3,536,000 |  |  |  | 34,440,000 |
Commitments and contingencies (Note 11) |  |  | --- |  |  |  | --- |  |  |  |  |
Shareholders' equity |  |  |  |  |  |  |  |  |  |  |  |
Preferred stock, $.01 par value, 5,000,000 shares authorized and no shares issued |  |  | --- |  |  |  | --- |  |  |  | --- |
Common stock, $.01 par value, 5,000,000 shares authorized; 1,805,053 shares issued, including 424,307 treasury shares, at June 30, 2014 and September 30, 2013 |  |  | 14,000 |  |  |  | --- |  |  |  | 14,000 |
Additional paid-in capital |  |  | 1,755,000 |  |  |  | --- |  |  |  | 1,755,000 |
Retained earnings |  |  | 59,924,000 |  |  |  | (2,803,000 | ) |  |  | 57,121,000 |
Accumulated other comprehensive income |  |  | 72,085,000 |  |  |  | --- |  |  |  | 72,085,000 |
Total shareholders' equity |  |  | 133,778,000 |  |  |  | (2,803,000 | ) |  |  | 130,975,000 |
|  | $ | 234,950,000 |  |  | $ | 733,000 |  |  | $ | 235,683,000 |
DAILY JOURNAL CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) The effects of the restatement on our consolidated statement of comprehensive income (loss) for the three months ended June 30, 2014 are as follows:
|  | Three months ended June 30, 2014 |
|  | Previously Reported |  |  | Adjustments |  |  | Restated |
Revenues |  |  |  |  |  |  |  |  |  |  |  |
Advertising |  | $ | 2,976,000 |  |  | $ | --- |  |  | $ | 2,976,000 |
Circulation |  |  | 1,502,000 |  |  |  | --- |  |  |  | 1,502,000 |
Advertising service fees and other |  |  | 771,000 |  |  |  | --- |  |  |  | 771,000 |
Information systems and services |  |  | 5,898,000 |  |  |  | --- |  |  |  | 5,898,000 |
|  |  | 11,147,000 |  |  |  | --- |  |  |  | 11,147,000 |
Costs and expenses |  |  |  |  |  |  |  |  |  |  |  |
Salaries and employee benefits |  |  | 6,175,000 |  |  |  | --- |  |  |  | 6,175,000 |
Other outside services |  |  | 822,000 |  |  |  | --- |  |  |  | 822,000 |
Postage and delivery expenses |  |  | 335,000 |  |  |  | --- |  |  |  | 335,000 |
Newsprint and printing expenses |  |  | 368,000 |  |  |  | --- |  |  |  | 368,000 |
Depreciation and amortization |  |  | 1,385,000 |  |  |  | --- |  |  |  | 1,385,000 |
Other general and administrative expenses |  |  | 2,325,000 |  |  |  | --- |  |  |  | 2,325,000 |
|  |  | 11,410,000 |  |  |  | --- |  |  |  | 11,410,000 |
Loss from operations |  |  | (263,000 | ) |  |  | --- |  |  |  | (263,000 | )
Other income (expense) |  |  |  |  |  |  |  |  |  |  |  |
Dividends and interest income |  |  | 824,000 |  |  |  | --- |  |  |  | 824,000 |
Other income |  |  | 26,000 |  |  |  | --- |  |  |  | 26,000 |
Interest and penalty expenses accrued for uncertain and unrecognized tax benefits |  |  | --- |  |  |  | (518,000 | ) |  |  | (518,000 | )
Interest expense |  |  | (56,000 | ) |  |  | --- |  |  |  | (56,000 | )
Income before taxes |  |  | 531,000 |  |  |  | (518,000 | ) |  |  | 13,000 |
Benefit from income taxes |  |  | (2,310,000 | ) |  |  | 2,285,000 |  |  |  | (25,000 | )
Net income |  | $ | 2,841,000 |  |  | $ | (2,803,000 | ) |  | $ | 38,000 |
Weighted average number of common shares outstanding - basic and diluted |  |  | 1,380,746 |  |  |  | --- |  |  |  | 1,380,746 |
Basic and diluted net income per share |  | $ | 2.06 |  |  | $ | (2.03 | ) |  | $ | 0.03 |
Comprehensive (loss) income |  |  |  |  |  |  |  |  |  |  |  |
Net income |  | $ | 2,841,000 |  |  | $ | (2,803,000 | ) |  | $ | 38,000 |
Net decrease in unrealized appreciation of investments (net of taxes) |  |  | (689,000 | ) |  |  | --- |  |  |  | (689,000 | )
|  | $ | 2,152,000 |  |  | $ | (2,803,000 | ) |  | $ | (651,000 | )
DAILY JOURNAL CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) The effects of the restatement on our consolidated statement of comprehensive income (loss) for the nine months ended June 30, 2014 are as follows:
|  | Nine months ended June 30, 2014 |
|  | Previously Reported |  |  | Adjustments |  |  | Restated |
Revenues |  |  |  |  |  |  |  |  |  |  |  |
Advertising |  | $ | 8,620,000 |  |  | $ | --- |  |  | $ | 8,620,000 |
Circulation |  |  | 4,518,000 |  |  |  | --- |  |  |  | 4,518,000 |
Advertising service fees and other |  |  | 2,108,000 |  |  |  | --- |  |  |  | 2,108,000 |
Information systems and services |  |  | 16,680,000 |  |  |  | --- |  |  |  | 16,680,000 |
|  |  | 31,926,000 |  |  |  | --- |  |  |  | 31,926,000 |
Costs and expenses |  |  |  |  |  |  |  |  |  |  |  |
Salaries and employee benefits |  |  | 19,032,000 |  |  |  | --- |  |  |  | 19,032,000 |
Other outside services |  |  | 2,409,000 |  |  |  | --- |  |  |  | 2,409,000 |
Postage and delivery expenses |  |  | 961,000 |  |  |  | --- |  |  |  | 961,000 |
Newsprint and printing expenses |  |  | 948,000 |  |  |  | --- |  |  |  | 948,000 |
Depreciation and amortization |  |  | 4,134,000 |  |  |  | --- |  |  |  | 4,134,000 |
Other general and administrative expenses |  |  | 6,492,000 |  |  |  | --- |  |  |  | 6,492,000 |
|  |  | 33,976,000 |  |  |  | --- |  |  |  | 33,976,000 |
Loss from operations |  |  | (2,050,000 | ) |  |  | --- |  |  |  | (2,050,000 | )
Other income (expense) |  |  |  |  |  |  |  |  |  |  |  |
Dividends and interest income |  |  | 2,100,000 |  |  |  | --- |  |  |  | 2,100,000 |
Other income |  |  | 77,000 |  |  |  | --- |  |  |  | 77,000 |
Interest and penalty expenses accrued for uncertain and unrecognized tax benefits |  |  | --- |  |  |  | (518,000 | ) |  |  | (518,000 | )
Interest expense |  |  | (173,000 | ) |  |  | --- |  |  |  | (173,000 | )
Loss before taxes |  |  | (46,000 | ) |  |  | (518,000 | ) |  |  | (564,000 | )
Provision for (benefit from) income taxes |  |  | (2,300,000 | ) |  |  | 2,285,000 |  |  |  | (15,000 | )
Net (loss) income |  | $ | 2,254,000 |  |  | $ | (2,803,000 | ) |  | $ | (549,000 | )
Weighted average number of common shares outstanding - basic and diluted |  |  | 1,380,746 |  |  |  | --- |  |  |  | 1,380,746 |
Basic and diluted net income (loss) per share |  | $ | 1.63 |  |  | $ | (2.03 | ) |  | $ | (0.40 | )
Comprehensive income |  |  |  |  |  |  |  |  |  |  |  |
Net (loss) income |  | $ | 2,254,000 |  |  | $ | (2,803,000 | ) |  | $ | (549,000 | )
Net increase in unrealized appreciation of investments (net of taxes) |  |  | 18,177,000 |  |  |  | --- |  |  |  | 18,177,000 |
|  | $ | 20,431,000 |  |  | $ | (2,803,000 | ) |  | $ | 17,628,000 |
DAILY JOURNAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) The effects of the restatement on our consolidated statement of cash flows for the nine months ended June 30, 2014 are as follows:
|  | Nine months ended June 30 |
|  | Previously Reported |  |  | Adjustments |  |  | Restated |
Cash flows from operating activities |  |  |  |  |  |  |  |  |  |  |  |
Net (loss) income |  | $ | 2,254,000 |  |  | $ | (2,803,000 | ) |  | $ | (549,000 | )
Adjustments to reconcile net income to net cash provided by operations |  |  |  |  |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 4,134,000 |  |  |  | --- |  |  |  | 4,134,000 |
Deferred income taxes |  |  | (884,000 | ) |  |  | (1,072,000 | ) |  |  | (1,956,000 | )
Discounts earned on bonds |  |  | (2,000 | ) |  |  | --- |  |  |  | (2,000 | )
Changes in assets and liabilities |  |  |  |  |  |  |  |  |  |  |  |
Decrease (increase) in current assets (net of acquisition) |  |  |  |  |  |  |  |  |  |  |  |
Accounts receivable, net |  |  | (536,000 | ) |  |  | --- |  |  |  | (536,000 | )
Inventories |  |  | 8,000 |  |  |  | --- |  |  |  | 8,000 |
Prepaid expenses and other assets |  |  | 622,000 |  |  |  | --- |  |  |  | 622,000 |
Income tax receivable |  |  | (1,452,000 | ) |  |  | 339,000 |  |  |  | (1,113,000 | )
Increase (decrease) in liabilities (net of acquisition) |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable |  |  | 147,000 |  |  |  | --- |  |  |  | 147,000 |
Accrued liabilities |  |  | (2,019,000 | ) |  |  | 518,000 |  |  |  | (1,501,000 | )
Income taxes |  |  | --- |  |  |  | 3,018,000 |  |  |  | 3,018,000 |
Deferred subscriptions |  |  | (389,000 | ) |  |  | --- |  |  |  | (389,000 | )
Deferred maintenance agreements and others |  |  | 399,000 |  |  |  | --- |  |  |  | 399,000 |
Deferred installation contracts |  |  | 1,533,000 |  |  |  | --- |  |  |  | 1,533,000 |
Net cash provided by operating activities |  |  | 3,815,000 |  |  |  | --- |  |  |  | 3,815,000 |
Cash flows from investing activities |  |  |  |  |  |  |  |  |  |  |  |
Maturities and sales of U.S. Treasury Bills |  |  | --- |  |  |  | --- |  |  |  | --- |
Acquisition of New Dawn Technologies, Inc. (net of cash acquired) |  |  | --- |  |  |  | --- |  |  |  | --- |
Purchases of property, plant and equipment |  |  | (403,000 | ) |  |  | --- |  |  |  | (403,000 | )
Net cash used in investing activities |  |  | (403,000 | ) |  |  | --- |  |  |  | (403,000 | )
Cash flows from financing activities |  |  |  |  |  |  |  |  |  |  |  |
Investment margin account borrowing |  |  | --- |  |  |  | --- |  |  |  | --- |
Cash provided by financing activities |  |  | --- |  |  |  | --- |  |  |  | --- |
Increase in cash and cash equivalents |  |  | 3,412,000 |  |  |  | --- |  |  |  | 3,412,000 |
Cash and cash equivalents |  |  |  |  |  |  |  |  |  |  |  |
Beginning of period |  |  | 11,338,000 |  |  |  | --- |  |  |  | 11,338,000 |
End of period |  | $ | 14,750,000 |  |  | $ | --- |  |  | $ | 14,750,000 |

X
- Definition The entire disclosure for the basis of accounting, or basis of presentation, used to prepare the financial statements (for example, US Generally Accepted Accounting Principles, Other Comprehensive Basis of Accounting, IFRS). + References No definition available. + Details
Name: | us-gaap_BasisOfAccounting
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- Details
Name: | us-gaap_DisclosureTextBlockAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration