What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2020-12-17 compared with 2019-12-12 · 81 added, 78 removed, 167 unchanged (49% of the section changed)

Daily Journal Corporation (the “Company”) publishes newspapers and websites covering California and Arizona and produces several specialized information services.

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.

(“Journal Technologies”), a wholly owned subsidiary of the Company, supplies case management software systems and related products to courts and other justice agencies, county governments and bar associations.

These organizations use the Journal Technologies family of products to help manage cases and information electronically, to interface with other critical justice partners and to extend electronic services to bar members and the public, including efiling and a website to pay traffic citations and fees online.

(“Journal Technologies”), a wholly-owned subsidiary of the Company, supplies case management software systems and related products to courts, prosecutor and public defender offices, probation departments and other justice agencies, including administrative law organizations, city and county governments and bar associations.

These organizations use the Journal Technologies family of products to help manage cases and information electronically, to interface with other critical justice partners and to extend electronic services to the public, including efiling and a website to pay traffic citations and fees online, and bar members.

These products are licensed to more than 500 organizations in 42 states and internationally.

Essentially all of the Company’s U.S.

operations are based in California, Arizona, Colorado and Utah.

The Company also has a presence in Australia where Journal Technologies is working on two important software installation projects.

Financial information of the Company, including information about each of the Company’s reportable segments, is set forth in Item 8 (“Financial Statements and Supplementary Data”).

Essentially all of the Company’s U.S.

operations are based in California, Arizona and Utah.

The Company also has a presence in Australia where Journal Technologies is working on three software installation projects.

Financial information of the Company, including information about each of the Company’s reportable segments, is set forth in Item 8 (“Financial Statements and Supplementary Data”).

Products and Services

2 unchanged sentences

The Company publishes 10 newspapers of general circulation.

Each newspaper, in addition to news of interest to the general public, has a particular area of in-depth focus with regard to its news coverage, thereby attracting readers interested in obtaining information about that area through a newspaper format.

Each newspaper, in addition to news of interest to the general public, has a particular area of in-depth focus for its news coverage, attracting readers interested in obtaining specific information through a newspaper format.

The publications are based in the following cities:

22 unchanged sentences

The Daily Journals.

The Los Angeles Daily Journal and the San Francisco Daily Journal (together, “The Daily Journals”) are each published every weekday except certain holidays and were established in 1888 and 1893, respectively.

In addition to covering state and local news of general interest, these newspapers focus on law and its impact on society.

6 unchanged sentences

The gross revenues generated directly by The Daily Journals are attributable approximately 67% to subscriptions and 33% to the sale of advertising and other revenues.

Revenues from The Daily Journals constituted approximately 16% of the Company's total fiscal 2019 revenues, 19% in 2018, 20% in 2017, 20% in 2016 and 18% in 2015.

Revenues from The Daily Journals constituted approximately 14% of the Company's total fiscal 2020 revenues and 16% in 2019.

It is the policy of The Daily Journals (1) to take no editorial position on the legal and political controversies of the day but instead to publish well-written editorial views of others on many sides of a controversy, and (2) to try to report on factual events with technical competence, objectivity and accuracy.

It is believed that this policy suits a professional readership of exceptional intelligence and education, which is the target readership for the newspapers.

Moreover, The Daily Journals believe that they bear a duty to their readership, particularly judges and justices, as a self-imposed public trust, regardless, within reason, of short-term income penalties.

The Company believes that this policy of The Daily Journals is in the long-term interest of the Company’s shareholders.

The Daily Journals contain the Daily Appellate Report which provides the full text and case summaries of all opinions certified for publication by the California Supreme Court, the California Courts of Appeal, the U.S.

Moreover, the Company believes that The Daily Journals bear a duty to their readership, particularly judges and justices, as a self-imposed public trust, regardless, within reason, of short-term income penalties.

The Company believes that this policy of The Daily Journals is in the long-term interest of the Company’s shareholders.

The Daily Journals include the Daily Appellate Report, providing full text and case summaries of all opinions certified for publication by the California Supreme Court, the California Courts of Appeal, the U.S.

Supreme Court, the U.S.

20 unchanged sentences

The Inter-City Express.

The Inter-City Express (the “Express”) has been published since 1909.

It covers general news of local interest and focuses its coverage on news about the real estate and legal communities in the Oakland/San Francisco area.

2 unchanged sentences

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.

2 unchanged sentences

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.

17 unchanged sentences

The specialized information services offered by the Company have grown out of its newspaper operations or have evolved in response to requests of its newspaper subscribers.

The Company has several court rules services, including a multi-volume, loose-leaf sets for certain state and federal courts in California.

The Company has several court rules services, including multi-volume, loose-leaf sets for certain state and federal courts in California.

The Northern California set consists of nine volumes.

4 unchanged sentences

(3) San Diego County;

(4) Ventura, Santa Barbara and San Luis Obispo counties;

and (5) the Ninth Circuit and the Central District of California.

(4) the Ninth Circuit and the Central District of California.

The single volumes are normally updated or replaced when there are rule changes.

2 unchanged sentences

Subscribers may purchase the ten-volume set for Southern California, the eight-volume set for Northern California or individual profiles online.

The Company also provides online foreclosure information to about 30 customers.

The Company also provides online foreclosure information to about seven customers.

This service primarily provides distressed property information, some of which also appears in some of the Company's newspapers.

1 unchanged sentence

The Company's publications carry commercial advertising and public notice advertising.

Commercial advertising consists of display and classified advertising and constituted about 6% of the Company’s total operating revenues in fiscal 2019, 7% in 2018, 7% in 2017, 7% in 2016 and 8% in 2015.

Commercial advertising consists of display and classified advertising and constituted about 4% of the Company’s total operating revenues in fiscal 2020 and 6% in 2019.

Classified advertising revenues have continued to decline primarily due to the continued downturn in the employment advertising marketplace and online competition.

1 unchanged sentence

The major types of public notice advertisers are real estate-related businesses and trustees, governmental agencies, attorneys, and businesses or individuals filing fictitious business name statements.

Many government agencies use the Company’s Internet-based advertising system to produce and send their notices to the Company.

California Newspaper Service Bureau (“CNSB”), a division of the Company, is a statewide newspaper representative (commission-earning selling agent) specializing since 1934 in public notice advertising.

CNSB places public notices and other forms of advertising with adjudicated newspapers of general circulation, most of which are not owned by the Company.

Public notice advertising revenues and related advertising and other service fees, including trustee sales legal advertising revenues, constituted about 18% of the Company's total operating revenues in fiscal 2019, 21% in 2018, 21% in 2017, 23% in 2016 and 22% in 2015.

Most of these revenues were generated by (i) notices published in the Company’s newspapers, (ii) commissions and similar fees received from other publications in which the advertising was placed, and (iii) service fees to file notices with government agencies.

Trustee sales legal advertising revenues alone represented about 2% of the Company’s total operating revenues in fiscal 2019, 3% in 2018, 4% in 2017, 5% in 2016 and 6% in 2015.

Many government agencies use the Company’s Internet-based advertising system to produce and send their notices to the Company for publication.

A fictitious business name website enables individuals to send their statements to the Company for filing and publication, and another website enables attorneys and individuals to send probate, civil, corporate, public sale and other types of public notices to the Company.  California Newspaper Service Bureau (“CNSB”), a division of the Company, is a statewide newspaper representative (commission-earning selling agent) specializing since 1934 in public notice advertising.

CNSB places public notices and other forms of advertising with adjudicated newspapers of general circulation, most of which are not owned by the Company, and produces a legal advertising page for some other newspapers.

Public notice advertising revenues and related advertising and other service fees, including trustee sales legal advertising revenues, constituted about 15% of the Company's total operating revenues in fiscal 2020 and 18% in 2019.

Trustee sales legal advertising revenues alone represented about 1% of the Company’s total operating revenues in fiscal 2020 and 2% in 2019.

For several years, these revenues were driven by the large number of foreclosures in California and Arizona, for which public notice advertising is required by law, but the number of foreclosures has continued to decline since 2010.

In addition, in many states, including California and Arizona, legislatures have considered various proposals which would result in the elimination or reduction of the amount of public notice advertising required by statute, and Arizona approved one such proposal effective in 2017 that virtually eliminated the publication of one particular notice type.

There is a risk that such laws could change in a manner that would have a significant adverse impact on the Company’s public notice advertising revenues.

Other revenues are attributable to service fees from users of an online foreclosure/fictitious business name database, fees from attorneys taking continuing legal education tests published in The Daily Journals and online, and other miscellaneous fees.

There is a risk that such laws could change in a manner that would have a significant adverse impact on the Company’s public notice advertising revenues.

Other revenues are attributable to service fees from users of an online foreclosure/fictitious business name databases, fees from attorneys taking continuing legal education tests published in The Daily Journals and online, and other miscellaneous fees.

Journal Technologies

Journal Technologies provides case management software and related services to courts and other justice agencies.

Its operations constituted about 65% of the Company’s total operating revenues in fiscal 2019, 58% in 2018, 58% in 2017, 56% in 2016 and 57% in 2015.

Its operations constituted about 71% of the Company’s total operating revenues in fiscal 2020 and 65% in 2019.

Journal Technologies earns revenue from license, maintenance and support fees paid by customers to use its software products;

consulting fees paid by customers for installation, implementation and training services;

and fees generated by the use of secure websites through which the general public can pay traffic citations and fees and e-file cases.

Journal Technologies has the following main 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 using the Internet at any time.

ePayIt™ — a service primarily for the online payment of traffic citations.

Users can pay traffic citations using the Internet at any time with a credit card, and can obtain traffic school and other information.

Almost all of Journal Technologies’ customers are government agencies, and most new software installation and licensing projects are subject to competitive bidding procedures.

and fees generated by the use of secure websites through which the general public can pay traffic citations and fees and e-file cases. 

Journal Technologies has the following main “eSeries”

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. 

Users can pay traffic citations by credit card, and get information on traffic school.

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.

In addition, budget constraints, especially during stressful economic times, could force governmental agencies to defer or forgo consulting services or even to stop paying their annual software maintenance fees.

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 $436,000 in fiscal 2019, $336,000 in 2018, $276,000 in 2017, $221,000 in 2016 and $278,000 in 2015.

All of the Company’s other revenues in those years were attributable to the United States.

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 $1,687,000 in fiscal 2020 and $436,000 in 2019.

All of the Company’s other revenues in those years were attributable to the United States.

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 The Traditional Business.

Paper and postage accounted for approximately 4% of our traditional publishing segment's operating costs in fiscal 2019, 5% in 2018, 5% in 2017, 6% in 2016 and 6% in 2015.

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 The Traditional Business.

Paper and postage accounted for approximately 4% of our traditional publishing segment's operating costs in both fiscal 2020 and 2019.

Paper prices may fluctuate substantially in the future, and periodic postal rate increases could significantly impact income from operations.

7 unchanged sentences

During the past several years, the Company has instituted changes in an attempt to mitigate higher postage costs.

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 implementing a method of bundling newspapers which reduces the per piece charges.

In addition, the Company has an ink jet labeler which eliminates paper labels and enables the Company to receive bar code discounts from the postal service on some of its newspapers.

4 unchanged sentences

Postal Service has increased postal rates.

(There were decreases in the Company’s aggregate postage costs during fiscal 2019 primarily due to subscriber loss.)

(Decreases in the Company’s aggregate postage costs during fiscal 2020 were primarily due to subscriber loss and increased online-only subscribers during the COVID-19 period.)   

The Company actively promotes its individual newspapers and its multiple newspaper network as well as its other publications.

The Company's staff includes a number of employees whose primary responsibilities include attracting new subscribers and advertisers.

The specialization of each publication creates both target subscribers and target advertisers.

1 unchanged sentence

In marketing products, the Company also focuses on its ancillary products which can be of service to subscribers, such as its specialized information services.

The Company receives, on a non-exclusive basis, public notice advertising from a number of agencies.

The Company receives, on a non-exclusive basis, public notice advertising for a number of service providers.

Such agencies ordinarily receive a commission of 15% to 25% on their sales of advertising in Company publications.

Commercial advertising agencies also place advertising in Company publications and receive commissions for advertising sales.

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.

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 for readers and advertisers is very intense, both by established publications and by new entries into the market.

9 unchanged sentences

The Company's Judicial Profile services have indirect competition because some of the same information is available through other sources, including the courts.

The steady decline in recent years in the number of subscriptions to The Daily Journals and court rule publications is likely to continue and will certainly impact the Company’s future revenues.

In attracting commercial advertisers, the Company competes with other newspapers and magazines, television, radio and other media, including electronic and online systems for employment-related classified advertising.

Factors which may affect competition for advertisers are the cost for such advertising compared with other media, and the size and characteristics of the readership of the Company's publications.

Internet sites devoted to recruitment have become significant competitors of our newspapers and websites for classified advertising.

Internet sites devoted to personnel recruitment have become significant competitors of our newspapers and websites for classified advertising.

In addition, there has been a steady consolidation of companies serving the legal marketplace, resulting in an ever-smaller group of companies placing display advertising.

Consequently, retaining advertising revenues remains a challenge.

The Company competes with anywhere from one serious competitor to many competing newspapers for public notice advertising revenue in all of its markets.

To reduce costs, the Company has contracted with an outside advertising agency to conduct sales of its display advertising.

The Company competes with at least one serious competitor for public notice advertising revenue in each of its markets.

Large metropolitan general interest newspapers normally do not carry a significant amount of legal advertising, although recently they too have solicited certain types of public notice advertising.

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.

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.

1 unchanged sentence

As part of the competitive bidding process, many customers will express a preference for, or even require, larger vendors.

Many customers desire Internet-based solutions to centralize operations, facilitate electronic filing and other interfaces with other justice partners and the public, and publish certain information from case management systems.

Journal Technologies’ product lines provide versions of these services, but there are many uncertainties in the process of courts and other agencies migrating to newer Internet-based systems, including whether Journal Technologies’ versions of case management systems will find general acceptance and whether the update, upgrade and modification of such systems can be done in a cost-effective manner.

Many customers desire Internet-based solutions to centralize operations, facilitate electronic filing, interface with other justice partners and the public, and publish certain information from case management systems.

Journal Technologies’

product lines provide versions of these services, but there are many uncertainties in the process of courts and other agencies migrating to newer Internet-based systems, including whether Journal Technologies’

versions of case management systems will find general acceptance and whether the update, upgrade and modification of such systems can be done in a cost-effective manner.

To focus on supporting the Company’s main eSeries products, the Company has announced an end to the maintenance of legacy software products purchased as part of the New Dawn and ISD acquisitions in fiscal 2013 on June 30, 2021.

The Company competes on a variety of factors, including price, technological capabilities and services to accommodate the individual requirements of each customer.

The Company has approximately 375 full-time employees and contractors and about 10 part-time employees as of September 30, 2019.

This includes about 250 full-time employees and contractors of Journal Technologies.

The Company had approximately 312 full-time employees and contractors and about 8 part-time employees as of September 30, 2020, including about 215 full-time employees and contractors at Journal Technologies.

The Company is not a party to any collective bargaining agreements.

1 unchanged sentence

Management considers its employee relations to be good.

The Company relies heavily on Gerald Salzman, who serves as president, chief executive officer, chief financial officer, treasurer and assistant secretary.

Salzman’s services were no longer available to the Company, it is unlikely that the Company could find a single replacement to perform all of the duties now handled by him, and it could have a significant adverse effect on the Company’s business.

The Company does not carry key man life insurance, nor has it entered into an employment agreement with Mr.

In April 2018, Mr.

Salzman suffered a Transient Ischemic Attack (TIA) stroke.

He was released from the hospital after one night and has since been working mostly from home, performing his executive roles with the Company while continuing to undergo physical therapy.

He has reduced his work schedule to a more sustainable level and has delegated certain of his duties to other managers.

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 significant built-in appreciation, providing the Company with additional working capital, subject, of course, to the normal risks associated with owning securities.

To a considerable extent, the Company also benefits from the fact that subscriptions and some licenses, maintenance and consulting fees are paid in advance.

Traditionally, the Company had generated sufficient cash flow and dividends from operations to cover all its needs without significant borrowing.

The Company owns marketable securities with significant appreciation, providing the Company with additional working capital, subject, of course, to the normal risks associated with owning securities.

To a considerable extent, the Company also benefits from the fact that subscriptions and some licenses, maintenance, customer support and consulting fees 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.

(“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.

(“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.

The Company believes it has sufficient cash and marketable securities for the foreseeable future.

If the Company’s overall cash needs exceed cash flow and its current working capital, the Company may still have the ability to borrow against its marketable securities on favorable terms, or it may attempt to secure additional financing which may or may not be available on acceptable terms.

The Company could also sell marketable securities to generate cash, if necessary.

The Company has sold some securities and could sell additional marketable securities to generate cash, if necessary.

The Company extends unsecured credit to most of its advertising customers.

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 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, newsprint, postage and services.

These costs have generally been offset by periodic price increases for advertising and newspaper subscription rates;

license, maintenance and support rates, but with frequent exceptions during several years when the Company has experienced substantial increases in postage and newsprint expenses and additional costs related to Journal Technologies.

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.   

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.

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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business