DAILY JOURNAL CORP — Interim / Quarterly Report 2000

May 12, 2000

SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___ to ___ Commission File Number 0-14665 DAILY JOURNAL CORPORATION ------------------------------------------ (Exact name of registrant as specified in its charter) South Carolina 95-4133299 - ------------------------------ ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 355 South Grand Ave., 34th floor Los Angeles, California 90071-1560 - ----------------------- ---------- (Address of principal executive office) (Zip code) Registrant's telephone number, including area code: (213) 624-7715 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes: X No: Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. Class Outstanding at April 30, 2000 - --------------------------------------- ------------------------------ Common Stock, par value $ .01 per share 1,583,506 shares 1 DAILY JOURNAL CORPORATION INDEX

2 PART I Item 1. Financial Statements DAILY JOURNAL CORPORATION - CONSOLIDATED BALANCE SHEET (Unaudited)

See accompanying notes to consolidated financial statements. 3 DAILY JOURNAL CORPORATION CONSOLIDATED STATEMENT OF INCOME (Unaudited)

See accompanying notes to consolidated financial statements. 4 DAILY JOURNAL CORPORATION CONSOLIDATED STATEMENT OF INCOME (Unaudited)

See accompanying notes to consolidated financial statements. 5 DAILY JOURNAL CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

See accompanying notes to consolidated financial statements. 6 DAILY JOURNAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1 - The Corporation and Operations: The Company publishes newspapers in California, Washington, Arizona, Colorado and Nevada and the California Lawyer magazine and produces several specialized information services. It also publishes The Code of Colorado Regulations and serves as a newspaper representative specializing in public notice advertising. SUSTAIN Technologies, Inc., an 86% owned subsidiary and consolidated since it was acquired in January 1999, provides the SUSTAIN(R) family of products which consist of technologies and applications to enable justice agencies to automate their operations. Essentially all of the Company's operations are based in California, Arizona, Colorado, Nevada, Washington and Virginia. Note 2 - Basis of Presentation: In the opinion of the Company, the accompanying interim unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary for a fair statement of its financial position as of March 31, 2000 and September 30, 1999, the results of operations for the three-and six- month periods ended March 31, 2000 and 1999 and its cash flows for the six months ended March 31, 2000 and 1999. The results of operations for the six months ended March 31, 2000 and 1999 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, 1999. Note 3 - Basic and Diluted Earnings Per Share: Basic and diluted earnings per share is calculated by dividing the net income by the weighted average number of common stock outstanding. Note 4 - Operating Segments: The Company has adopted SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information which became effective during last fiscal year. As a result of its acquisition of Sustain, the Company now has two segments of business. The Company's reportable segments are strategic business units that offer different products and/or services. The accounting policies of the reportable segments are the same as those described in Note 2 above. Inter-segment transactions were eliminated, and the reported segment loss of Sustain was net of the minority interest. Summarized financial information concerning the Company's reportable segments is shown in the following table:

7 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Revenues were $18,850,000 and $18,093,000 for the six months ended March 31, 2000 and 1999, respectively. This increase of 4% is primarily attributable to the acquisition of 80% of Sustain in January 1999 (and the subsequent repurchase of about 6% of Sustain in March 2000) which accounted for additional revenues of $1,279,000 and to advertising and subscription rate increases, partially offset primarily by the decline in revenues from publishing foreclosure notices. During the six months ended March 31, 2000, display advertising and conference revenues were down by $165,000 while classified advertising revenues increased by $313,000. Public notice advertising revenues decreased by $564,000 primarily resulting from decreased foreclosure notices, and the Company anticipates this decline to continue because of a lower volume. The Company's smaller newspapers, those other than the Los Angeles and San Francisco Daily Journals ("The Daily Journals"), accounted for about 93% of the total public notice advertising revenues. Public notice advertising revenues and related advertising and other service fees constituted about 23% of the Company's total revenues. Circulation revenues decreased an aggregate of $73,000 (1%). The Daily Journals accounted for about 68% of the Company's total circulation revenues, and their circulation levels decreased slightly. The Rule Book and Judicial Profile services generated about 20% of the total circulation revenues, with the other newspapers and services accounting for the balance. Costs and expenses increased by $1,512,000 (10%) from $15,751,000 to $17,263,000. Sustain accounted for additional expenses of $2,022,000. Total personnel costs were $8,957,000, representing an increase of $1,017,000 (13%) of which $754,000 were from Sustain. Newsprint and printing expenses decreased by $153,000 (9%) primarily because of the decrease in newsprint prices. Commissions and other outside services increased by $368,000 (17%) primarily due to Sustain's additional outside service expenses of $240,000, partially offset by the decline in commission expenses because of fewer agency commissionable foreclosure notice sales. Depreciation and amortization expenses increased by $544,000 primarily as a result of the amortization of Sustain's assets, including $411,000 for the amortization of Daily Journal's purchased computer software and goodwill. The decrease in other expenses of $191,000 (9%) primarily resulted from less legal expenses. Pretax income in the six months ended March 31, 2000 decreased by $755,000 (32%) to $1,587,000 from $2,342,000 in fiscal 1999, primarily because of Sustain's loss. The Company's smaller newspapers and its newspaper representative, which specializes in public notice advertising, accounted for about 39% of the Company's pretax income. Net income was $981,000 compared to $1,438,000 in the comparable prior year period. Net income per share decreased to $.63 from $.91. Liquidity and Capital Resources During the six months ended March 31, 2000, the Company's cash and cash equivalent position increased by $679,000, and the investments in U.S. Treasury Bills decreased by $1,767,000. Cash and cash equivalents were used for the net purchase of capital assets of $3,140,000, including repurchase of one-third of the minority interest of Sustain in March and significant investments in Sustain software to better serve the courts, and to purchase treasury and common stock for an aggregate amount of $767,000. The cash provided by operating activities of $2,714,000 included a net decrease in prepayments for 8 subscriptions and others of $500,000. Proceeds from the sale of subscriptions from newspapers, court rule books and other publications and for software maintenance and other services are booked as deferred revenue and are included in earned revenue only when the services are provided. The cash flows from operating activities increased by $1,700,000 during the six months ended March 31, 2000 primarily because of the increase in accounts payable. As of March 31, 2000, the Company had working capital of $11,549,000 before deducting the liability for deferred subscription revenues and other revenues of $7,318,000 which will be earned within one year. The cash and short-term investments in U.S. Treasury Bills, aggregating about $8.3 million at March 31, 2000, and the current level of cash provided by operating activities appear adequate to meet the obligations of the Company. The Company did not experience any significant operational or financial problems related to Year 2000 issues. Due, however, to the inherent uncertainty of the Year 2000 problem, the Company cannot ensure that it will not be impacted by any Year 2000 related problems in the future. Disclosure regarding Forward-Looking Statements This Report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Certain statements contained in this document, including without limitation those contained under the captions "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," are forward-looking statements. Forward-looking statements include statements which are predictive in nature, which depend upon or refer to future events or conditions, which include words such as "expects", "anticipates", "intends", "plans", "believes", "estimates", or similar expressions. In addition, any statements concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects, and possible future Company actions, which may be provided by management, are also forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from those in the forward-looking statements are disclosed in this Report, including without limitation in conjunction with the forward-looking statements themselves. The Company has no specific intention to update these forward-looking statements. 9 DAILY JOURNAL CORPORATION PART II - OTHER INFORMATION Item 1. Legal Proceedings: On November 22, 1996, Metropolitan News Company, a Los Angeles company that publishes various small newspapers, filed a lawsuit against the Company and Charles T. Munger in Los Angeles County Superior Court. The lawsuit alleges that the Company violated certain provisions of the California Business and Professions Code concerning below-cost sales, geographic price discrimination, and unfair competition. Metropolitan News sued for injunctive relief and monetary damages. On July 14, 1999, a jury returned a verdict in favor of the Company on all of Metropolitan News' claims. In addition, on July 16, 1999, the court held that Metropolitan News' claims failed as a matter of law. Metropolitan News has appealed this judgment, but no hearing date for the appeal has been set. The Company intends to contest the appeal vigorously. 10 DAILY JOURNAL CORPORATION PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders: The Company's annual meeting was held on February 9, 2000. The matters submitted to a vote of security holders were the election of directors and the ratification of the appointment of PriceWaterhouseCoopers LLP as independent accountants for the Company for the current fiscal year. Each of the nominees to the Board of directors was elected. The following votes were received as to the election of the board of directors:

PriceWaterhouseCoopers LLP was ratified as the Company's independent accountants with 1,443,850 votes in favor, 1,729 votes against, 2,398 abstentions and no broker non-votes. 11 DAILY JOURNAL CORPORATION PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K: (A) Exhibits - The following exhibit is filed herewith: 27 Financial Data Schedule (B) Reports on Form 8-K - None SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DAILY JOURNAL CORPORATION (Registrant) /s/ Gerald L. Salzman Gerald L. Salzman Chief Financial Officer DATE: May 12, 2000 12