##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended: September 30, 2009
 OR
 o
    
    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: 001-33603
 Dolan Media Company
 (Exact name of registrant as specified in its charter)
 Delaware(State or other jurisdiction 
of incorporation or organization)
    
    43-2004527(I.R.S. Employer
Identification No.)
 
 222 South Ninth Street, Suite 2300,
Minneapolis, Minnesota 55402  (Address, including zip code of registrants principal executive offices)
 
 (612) 317-9420  Registrants telephone number, including area code
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o
 Yes o No þ




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##### 



PART I  FINANCIAL INFORMATION
    
    
    1Item 1. Financial Statements
    
    
    1Condensed Consolidated Balance Sheets as of September 30, 2009 (unaudited) and December 31, 2008
    
    
    1Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2009 and 2008
    
    
    2Unaudited Condensed Consolidated Statements of Stockholders Equity as of September 30, 2009
    
    
    3Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2009 and 2008
    
    
    4Notes to Unaudited Condensed Consolidated Interim Financial Statements
    
    
    5Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    43Item 4. Controls and Procedures
    
    
    44PART II  OTHER INFORMATION
    
    
    44Item 1. Legal Proceedings
    
    
    44Item 1A. Risk Factors
    
    
    44Item 2. Unregistered Sales of Securities and Use of Proceeds
    
    
    47Item 3. Defaults Upon Senior Securities
    
    
    47Item 4. Submission of Matters to a Vote of Security Holders
    
    
    47Item 5. Other Information
    
    
    47Item 6. Exhibits
    
    
    48SIGNATURES
    
    
    50Exhibit 2.1Exhibit 10.8Exhibit 10.9Exhibit 10.10Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2Exhibit 99.1




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements
 Dolan Media Company
 
 Condensed Consolidated Balance Sheets
(in thousands, except share data)
 September 30,
    
    
    December 31,2009
    
    
    2008(unaudited)ASSETSCurrent assetsCash and cash equivalents
    
    $
    20,640
    
    
    $
    2,456Accounts receivable, including unbilled
services (net of allowances for doubtful
accounts of $914 and $1,398 as of September
30, 2009 and December 31, 2008,
respectively)
    
    
    53,338
    
    
    
    38,776Unbilled pass-through costs
    
    
    14,893
    
    
    
    7,164Prepaid expenses and other current assets
    
    
    4,642
    
    
    
    4,881Deferred income taxes
    
    
    397
    
    
    
    397Total current assets
    
    
    93,910
    
    
    
    53,674Investments
    
    
    16,923
    
    
    
    16,663Property and equipment, net
    
    
    15,534
    
    
    
    21,438Finite-life intangible assets, net
    
    
    166,515
    
    
    
    254,917Indefinite life intangible assets
    
    
    203,108
    
    
    
    118,983Other assets
    
    
    5,490
    
    
    
    5,166Total assets
    
    $
    501,480
    
    
    $
    470,841LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term debt
    
    $
    12,825
    
    
    $
    12,048Due to sellers of acquired businesses
    
    
    13,000
    
    
    
    75Accounts payable
    
    
    7,015
    
    
    
    9,116Accrued pass-through liabilities
    
    
    27,356
    
    
    
    21,598Accrued compensation
    
    
    7,801
    
    
    
    7,673Accrued liabilities
    
    
    4,277
    
    
    
    2,738Deferred revenue
    
    
    15,738
    
    
    
    13,014Total current liabilities
    
    
    88,012
    
    
    
    66,262Long-term debt, less current portion
    
    
    133,675
    
    
    
    143,450Deferred income taxes
    
    
    7,644
    
    
    
    18,266Deferred revenue and other liabilities
    
    
    4,772
    
    
    
    5,136Total liabilities
    
    
    234,103
    
    
    
    233,114Redeemable noncontrolling interest
    
    
    28,484
    
    
    
    15,760Commitments and contingencies (Note 13)Stockholders equityCommon stock, $0.001 par value;
authorized: 70,000,000 shares;
outstanding: 30,079,014 and 29,955,018
shares as of September 30, 2009 and
December 31, 2008, respectively
    
    
    30
    
    
    
    30Preferred stock, $0.001 par value;
authorized: 5,000,000 shares; designated: 5,000 shares of Series A Junior
Participating Preferred Stock; no shares
outstanding
    
    
    
    
    
    
    Additional paid-in capital
    
    
    285,513
    
    
    
    291,310Accumulated deficit
    
    
    (46,650
    )
    
    
    (69,373
    )Total stockholders equity
    
    
    238,893
    
    
    
    221,967Total liabilities and stockholders equity
    
    $
    501,480
    
    
    $
    470,841
   1




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##### Table of Contents



Dolan Media Company
 
 Unaudited Condensed Consolidated Statements of Operations
(in thousands, except share and per share data)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008RevenuesProfessional Services
    
    $
    39,996
    
    
    $
    25,673
    
    
    $
    126,322
    
    
    $
    62,542Business Information
    
    
    22,348
    
    
    
    22,211
    
    
    
    66,998
    
    
    
    68,406Total revenues
    
    
    62,344
    
    
    
    47,884
    
    
    
    193,320
    
    
    
    130,948Operating expensesDirect operating: Professional Services
    
    
    15,553
    
    
    
    9,941
    
    
    
    46,693
    
    
    
    22,688Direct operating: Business Information
    
    
    6,952
    
    
    
    7,961
    
    
    
    21,827
    
    
    
    23,686Selling, general and administrative
    
    
    22,910
    
    
    
    18,950
    
    
    
    66,073
    
    
    
    51,787Break-up fee
    
    
    
    
    
    
    1,500
    
    
    
    
    
    
    
    1,500Amortization
    
    
    3,924
    
    
    
    3,050
    
    
    
    13,219
    
    
    
    7,587Depreciation
    
    
    2,264
    
    
    
    1,501
    
    
    
    6,738
    
    
    
    3,790Total operating expenses
    
    
    51,603
    
    
    
    42,903
    
    
    
    154,550
    
    
    
    111,038Equity in earnings of affiliates
    
    
    731
    
    
    
    1,329
    
    
    
    3,461
    
    
    
    4,355Operating income
    
    
    11,472
    
    
    
    6,310
    
    
    
    42,231
    
    
    
    24,265Non-operating income (expense)Interest expense, net of interest income
    
    
    (1,607
    )
    
    
    (1,851
    )
    
    
    (5,305
    )
    
    
    (4,611
    )Non-cash interest income (expense) related to
interest rate swaps
    
    
    205
    
    
    
    (80
    )
    
    
    735
    
    
    
    (58
    )Other income
    
    
    23
    
    
    
    11
    
    
    
    1,469
    
    
    
    34Total non-operating expense
    
    
    (1,379
    )
    
    
    (1,920
    )
    
    
    (3,101
    )
    
    
    (4,635
    )Income before income taxes
    
    
    10,093
    
    
    
    4,390
    
    
    
    39,130
    
    
    
    19,630Income tax expense
    
    
    (3,529
    )
    
    
    (1,471
    )
    
    
    (13,207
    )
    
    
    (7,257
    )Net income
    
    
    6,564
    
    
    
    2,919
    
    
    
    25,923
    
    
    
    12,373Less: Net income attributable to the
redeemable noncontrolling interest
    
    
    (694
    )
    
    
    (466
    )
    
    
    (3,200
    )
    
    
    (1,516
    )Net income attributable to Dolan Media Company
    
    $
    5,870
    
    
    $
    2,453
    
    
    $
    22,723
    
    
    $
    10,857Earnings per share  basic:Net income attributable to Dolan Media Company
    
    $
    0.20
    
    
    $
    0.09
    
    
    $
    0.76
    
    
    $
    0.42Accretion of redeemable noncontrolling
interest, net of tax
    
    
    (0.02
    )
    
    
    
    
    
    
    (0.26
    )
    
    
    Net income attributable to Dolan Media
Company common stockholders
    
    $
    0.18
    
    
    $
    0.09
    
    
    $
    0.50
    
    
    $
    0.42Weighted average shares outstanding  basic
    
    
    29,843,444
    
    
    
    27,926,118
    
    
    
    29,821,661
    
    
    
    25,940,102Earnings per share  diluted:Net income attributable to Dolan Media Company
    
    $
    0.20
    
    
    $
    0.09
    
    
    $
    0.76
    
    
    $
    0.42Accretion of redeemable noncontrolling
interest, net of tax
    
    
    (0.02
    )
    
    
    
    
    
    
    (0.26
    )
    
    
    Net income attributable to Dolan Media
Company common stockholders
    
    $
    0.18
    
    
    $
    0.09
    
    
    $
    0.50
    
    
    $
    0.42Weighted average shares outstanding  diluted
    
    
    29,932,275
    
    
    
    28,059,701
    
    
    
    29,908,462
    
    
    
    26,105,413
   2




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##### Table of Contents



Dolan Media Company
 
 Unaudited Condensed
Consolidated Statements of Stockholders Equity
 AdditionalCommon Stock
    
    
    Paid-In
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    TotalBalance (deficit) at December 31, 2007
    
    
    25,088,718
    
    
    $
    25
    
    
    $
    212,364
    
    
    $
    (83,676
    )
    
    $
    128,713Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,303
    
    
    
    14,303Private placement of common stock, net
of offering costs
    
    
    4,000,000
    
    
    
    4
    
    
    
    60,483
    
    
    
    
    
    
    
    60,487Issuance of common stock in a business
acquisition
    
    
    825,528
    
    
    
    1
    
    
    
    16,460
    
    
    
    
    
    
    
    16,461Issuance of common stock pursuant to
the exercise of stock options under
the 2007 incentive compensation plan
    
    
    8,089
    
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    21Stock-based compensation expense,
including issuance of restricted stock
(shares are net of forfeitures)
    
    
    32,683
    
    
    
    
    
    
    
    1,918
    
    
    
    
    
    
    
    1,918Tax benefit on stock options exercised
    
    
    
    
    
    
    
    
    
    
    64
    
    
    
    
    
    
    
    64Balance (deficit) at December 31, 2008
    
    
    29,955,018
    
    
    $
    30
    
    
    $
    291,310
    
    
    $
    (69,373
    )
    
    $
    221,967Net income attributable to Dolan Media
Company
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,723
    
    
    
    22,723Accretion of redeemable noncontrolling
interest, net of tax
    
    
    
    
    
    
    
    
    
    
    (7,665
    )
    
    
    
    
    
    
    (7,665
    )Net income attributable to Dolan Media
Company common stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,058Issuance of common stock pursuant to
the exercise of stock options under
the 2007 incentive compensation plan
    
    
    5,033
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    7Stock-based compensation expense,
including issuance of restricted stock
(shares are net of forfeitures)
    
    
    118,963
    
    
    
    
    
    
    
    1,861
    
    
    
    
    
    
    
    1,861Balance (deficit) at September 30, 2009
    
    
    30,079,014
    
    
    $
    30
    
    
    $
    285,513
    
    
    $
    (46,650
    )
    
    $
    238,893
   3




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##### Table of Contents



Dolan Media Company
 
 Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
 Nine Months EndedSeptember 30,2009
    
    
    2008Cash flows from operating activitiesNet income
    
    $
    25,923
    
    
    $
    12,373Distributions received from The Detroit Legal News Publishing, LLC
    
    
    4,200
    
    
    
    5,600Distributions paid to holders of noncontrolling interest
    
    
    (3,145
    )
    
    
    (1,351
    )Non-cash operating activities:Amortization
    
    
    13,219
    
    
    
    7,587Depreciation
    
    
    6,738
    
    
    
    3,790Equity in earnings of affiliates
    
    
    (3,461
    )
    
    
    (4,355
    )Stock-based compensation expense
    
    
    1,861
    
    
    
    1,341Deferred income taxes
    
    
    166
    
    
    
    (576
    )Change in value of interest rate swap and accretion of interest on
note payable
    
    
    (731
    )
    
    
    213Amortization of debt issuance costs
    
    
    182
    
    
    
    156Change in accounting estimate related to self-insured medical reserve
    
    
    
    
    
    
    (470
    )Changes in operating assets and liabilities, net of effects of
business acquisitions:Accounts receivable and unbilled pass-through costs
    
    
    (22,290
    )
    
    
    (9,354
    )Prepaid expenses and other current assets
    
    
    239
    
    
    
    (1,840
    )Other assets
    
    
    (507
    )
    
    
    90Accounts payable and accrued liabilities
    
    
    7,110
    
    
    
    1,048Deferred revenue
    
    
    2,600
    
    
    
    1,959Net cash provided by operating activities
    
    
    32,104
    
    
    
    16,211Cash flows from investing activitiesAcquisitions and investments
    
    
    (2,441
    )
    
    
    (183,518
    )Capital expenditures
    
    
    (2,584
    )
    
    
    (3,957
    )Other
    
    
    100
    
    
    
    100Net cash used in investing activities
    
    
    (4,925
    )
    
    
    (187,375
    )Cash flows from financing activitiesNet payments on senior revolving note
    
    
    
    
    
    
    90,000Proceeds from borrowings or conversions on senior term notes
    
    
    
    
    
    
    25,000Payments on senior long-term debt
    
    
    (7,250
    )
    
    
    (2,746
    )Proceeds from private placement of common stock, net of offering costs
    
    
    
    
    
    
    60,541Capital contribution from holder of noncontrolling interest
    
    
    
    
    
    
    1,179Payment on unsecured note payable
    
    
    (1,750
    )
    
    
    (1,750
    )Payment of deferred financing costs
    
    
    
    
    
    
    (404
    )Proceeds from stock option exercises
    
    
    7
    
    
    
    3Other
    
    
    (2
    )
    
    
    (6
    )Net cash (used) provided by financing activities
    
    
    (8,995
    )
    
    
    171,817Net increase in cash and cash equivalents
    
    
    18,184
    
    
    
    653Cash and cash equivalents at beginning of the period
    
    
    2,456
    
    
    
    1,346Cash and cash equivalents at end of the period
    
    $
    20,640
    
    
    $
    1,999
   4




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##### Table of Contents



Notes to Unaudited Condensed Consolidated Interim Financial Statements
 Note 1. Nature of Business and Significant Accounting Policies
 Basis of Presentation
      Use of Derivative Instruments:
 Fair Value of Financial Instruments:
  5




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##### Table of Contents



New Accounting Pronouncements:
    6




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##### Table of Contents



Note 2. Basic and Diluted Income Per Share
  in thousands, except per
share amounts
 Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income attributable to Dolan Media Company
    
    $
    5,870
    
    
    $
    2,453
    
    
    $
    22,723
    
    
    $
    10,857Accretion of redeemable noncontrolling interest, net of tax
    
    
    (372
    )
    
    
    
    
    
    
    (7,665
    )
    
    
    Net income attributable to Dolan Media Company common
stockholders
    
    $
    5,498
    
    
    $
    2,453
    
    
    $
    15,058
    
    
    $
    10,857Basic:Weighted average common shares outstanding
    
    
    30,080
    
    
    
    28,093
    
    
    
    30,023
    
    
    
    26,106Weighted average common shares of unvested restricted stock
    
    
    (237
    )
    
    
    (167
    )
    
    
    (201
    )
    
    
    (166
    )Shares used in the computation of basic net income per share
    
    
    29,843
    
    
    
    27,926
    
    
    
    29,822
    
    
    
    25,940Net income attributable to Dolan Media Company common
stockholders per share  basic
    
    $
    0.18
    
    
    $
    0.09
    
    
    $
    0.50
    
    
    $
    0.42Diluted:Shares used in the computation of basic net income per share
    
    
    29,843
    
    
    
    27,926
    
    
    
    29,822
    
    
    
    25,940Stock options and restricted stock
    
    
    89
    
    
    
    134
    
    
    
    86
    
    
    
    165Shares used in the computation of dilutive net income per
share
    
    
    29,932
    
    
    
    28,060
    
    
    
    29,908
    
    
    
    26,105Net income attributable to Dolan Media Company common
stockholders per share  diluted
    
    $
    0.18
    
    
    $
    0.09
    
    
    $
    0.50
    
    
    $
    0.42
   7




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##### Table of Contents



Note 3. Acquisitions
  Wilford & Geske
 Midwest Law Printing Co., Inc.:
 National Default Exchange, L.P. and related entities:
 Amortization
    
    
    Preliminary
    
    
    FinalPeriod
    
    
    Allocation
    
    
    AllocationLong-term service agreement
    
    25 years
    
    
    $
    154,000
    
    
    $
    59,728Customer list
    
    15 years
    
    
    
    
    
    
    
    19,565Non-compete agreements
    
    5 years
    
    
    
    5,000
    
    
    
    3,198Finite-life intangible assets
    
    
    
    
    
    
    159,000
    
    
    
    82,491Trade names
    
    
    
    
    
    
    
    
    
    
    6,537Goodwill
    
    
    
    
    
    
    37,827
    
    
    
    116,927Indefinite life intangible asset
    
    
    
    
    
    
    37,827
    
    
    
    123,464Software
    
    2 years
    
    
    
    6,949
    
    
    
    5,542Total
    
    
    
    
    
    $
    203,776
    
    
    $
    211,497
   8




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##### Table of Contents



Break-up Fee
 Pro Forma Information: (in thousands, except per share data):
 Pro FormaThree Months
    
    
    Nine MonthsEnded
    
    
    EndedSeptember 30,
    
    
    September 30,2008
    
    
    2008Total revenues
    
    $
    61,446
    
    
    $
    186,519Net income attributable to Dolan Media Company common stockholders
    
    
    2,566
    
    
    
    11,446Net income attributable to Dolan Media Company common
stockholders per share:Basic
    
    $
    0.09
    
    
    $
    0.43Diluted
    
    $
    0.09
    
    
    $
    0.43Actual/Pro forma weighted average shares outstanding:Basic
    
    
    28,482
    
    
    
    26,675Diluted
    
    
    28,610
    
    
    
    26,839
  9




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##### Table of Contents



Note 4. Investments
 (in
thousands)
 Accounting
    
    
    Percent
    
    
    September 30,
    
    
    December 31,Method
    
    
    Ownership
    
    
    2009
    
    
    2008The Detroit Legal News Publishing, LLC
    
    Equity
    
    
    
    35
    
    
    $
    15,680
    
    
    $
    16,226GovDelivery, Inc.
    
    Equity
    (1)
    
    
    22
    
    
    
    1,243
    
    
    
    437Total
    
    
    
    
    
    
    
    
    
    $
    16,923
    
    
    $
    16,663
 (1)
    
     The percentage of ownership for GovDelivery, Inc. is shown on a common stock
equivalent basis. in thousands
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008The Detroit Legal News Publishing, LLC
    
    $
    924
    
    
    $
    1,329
    
    
    $
    3,654
    
    
    $
    4,355GovDelivery, Inc.
    
    
    (193
    )
    
    
    
    
    
    
    (193
    )
    
    
    Total
    
    $
    731
    
    
    $
    1,329
    
    
    $
    3,461
    
    
    $
    4,355
  The Detroit Legal News Publishing, LLC:
  (in thousands)
 As of September 30,
    
    
    As of December 31,2009
    
    
    2008Carrying value of investment
    
    $
    15,680
    
    
    $
    16,226Underlying finite-lived customer list, net of amortization
    
    
    9,298
    
    
    
    10,429
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Equity in earnings of
DLNP, net of
amortization of
customer list
    
    $
    924
    
    
    $
    1,329
    
    
    $
    3,654
    
    
    $
    4,355Distributions received
    
    
    700
    
    
    
    2,100
    
    
    
    4,200
    
    
    
    5,600Amortization expense
    
    
    377
    
    
    
    377
    
    
    
    1,131
    
    
    
    1,131
  10




---



##### Table of Contents



(in thousands)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues
    
    $
    9,565
    
    
    $
    11,676
    
    
    $
    33,048
    
    
    $
    36,113Cost of revenues
    
    
    3,807
    
    
    
    4,874
    
    
    
    13,245
    
    
    
    14,413Gross profit
    
    
    5,758
    
    
    
    6,802
    
    
    
    19,803
    
    
    
    21,700Selling, general and administrative expenses
    
    
    1,663
    
    
    
    1,593
    
    
    
    4,989
    
    
    
    4,825Operating income
    
    
    4,095
    
    
    
    5,209
    
    
    
    14,814
    
    
    
    16,875Net income
    
    $
    3,717
    
    
    $
    4,873
    
    
    $
    13,670
    
    
    $
    15,673Companys 35% share of net income
    
    $
    1,301
    
    
    $
    1,706
    
    
    $
    4,784
    
    
    $
    5,486Less amortization of intangible assets
    
    
    377
    
    
    
    377
    
    
    
    1,130
    
    
    
    1,131Equity in earnings of DLNP, LLC
    
    $
    924
    
    
    $
    1,329
    
    
    $
    3,654
    
    
    $
    4,355
 GovDelivery, Inc.:
  Note 5. Intangible Assets
 Indefinite Life Intangible Assets:
 (in
thousands)
 Professional
    
    
    BusinessServices
    
    
    Information
    
    
    TotalBalance as of December 31, 2008
    
    $
    59,751
    
    
    $
    59,232
    
    
    $
    118,983Barrett-NDEx
    
    
    77,588
    
    
    
    
    
    
    
    77,588Balance as of September 30, 2009
    
    $
    137,339
    
    
    $
    59,232
    
    
    $
    196,571
   11




---



##### Table of Contents



Finite-Life Intangible Assets: (in thousands, except amortization
periods)
 As of September 30, 2009
    
    
    As of December 31, 2008Amortization
    
    
    Gross
    
    
    Accumulated
    
    
    
    
    
    
    Gross
    
    
    AccumulatedPeriod
    
    
    Amount
    
    
    Amortization
    
    
    Net
    
    
    Amount
    
    
    Amortization
    
    
    NetMastheads
    
    
    30
    
    
    $
    11,965
    
    
    $
    (2,096
    )
    
    $
    9,869
    
    
    $
    11,965
    
    
    $
    (1,796
    )
    
    $
    10,169Advertising customer lists
    
    
    5-11
    
    
    
    16,566
    
    
    
    (7,480
    )
    
    
    9,086
    
    
    
    16,566
    
    
    
    (6,286
    )
    
    
    10,280Subscriber customer lists
    
    
    2-14
    
    
    
    7,645
    
    
    
    (3,218
    )
    
    
    4,427
    
    
    
    7,645
    
    
    
    (2,666
    )
    
    
    4,979Professional services
customer lists
    
    
    7
    
    
    
    7,707
    
    
    
    (4,542
    )
    
    
    3,165
    
    
    
    7,632
    
    
    
    (3,717
    )
    
    
    3,915Noncompete agreements
    
    
    5
    
    
    
    3,948
    
    
    
    (2,309
    )
    
    
    1,639
    
    
    
    5,750
    
    
    
    (666
    )
    
    
    5,084NDeX long-term service
contracts
    
    
    15-25
    
    
    
    120,857
    
    
    
    (18,115
    )
    
    
    102,742
    
    
    
    213,877
    
    
    
    (10,779
    )
    
    
    203,098NDeX customer lists
    
    
    14-15
    
    
    
    32,831
    
    
    
    (1,918
    )
    
    
    30,913
    
    
    
    13,267
    
    
    
    (1,065
    )
    
    
    12,202Customer relationships
    
    
    14
    
    
    
    3,283
    
    
    
    (668
    )
    
    
    2,615
    
    
    
    3,283
    
    
    
    (496
    )
    
    
    2,787SunWel contract
    
    
    7
    
    
    
    3,322
    
    
    
    (1,263
    )
    
    
    2,059
    
    
    
    3,322
    
    
    
    (919
    )
    
    
    2,403Total intangibles
    
    
    
    
    
    $
    208,124
    
    
    $
    (41,609
    )
    
    $
    166,515
    
    
    $
    283,307
    
    
    $
    (28,390
    )
    
    $
    254,917
  Note 6. Long-Term Debt, Capital Lease Obligation
 (in thousands)
 September 30,
    
    
    December 31,2009
    
    
    2008Senior secured debt (see below):Senior variable-rate term note, payable in quarterly
installments with a balloon payment due August 8,
2014
    
    $
    146,500
    
    
    $
    153,750Senior variable-rate revolving note due August 8, 2012
    
    
    
    
    
    
    Total senior secured debt
    
    
    146,500
    
    
    
    153,750Unsecured note payable
    
    
    
    
    
    
    1,746Capital lease obligations
    
    
    
    
    
    
    2146,500
    
    
    
    155,498Less current portion
    
    
    12,825
    
    
    
    12,048Long-term debt, less current portion
    
    $
    133,675
    
    
    $
    143,450
 Senior Secured Debt:
  Unsecured Note Payable :
  12




---



##### Table of Contents



Note 7. Common and Preferred Stock
  Note 8. Income Taxes
   Note 9. Other Income
  Note 10. Major Customers and Related Parties
  Note 11. Reportable Segments
   13




---



##### Table of Contents



in thousands
 Professional
    
    
    BusinessServices
    
    
    Information
    
    
    Corporate
    
    
    Total(In thousands)Three Months Ended September 30, 2009Revenues
    
    $
    39,996
    
    
    $
    22,348
    
    
    $
    
    
    
    $
    62,344Direct operating expenses
    
    
    15,553
    
    
    
    6,952
    
    
    
    
    
    
    
    22,505Selling, general and administrative expenses
    
    
    10,537
    
    
    
    8,770
    
    
    
    3,603
    
    
    
    22,910Amortization and depreciation
    
    
    4,663
    
    
    
    1,322
    
    
    
    203
    
    
    
    6,188Equity in earnings of affiliates
    
    
    
    
    
    
    731
    
    
    
    
    
    
    
    731Operating income (loss)
    
    $
    9,243
    
    
    $
    6,035
    
    
    $
    (3,806
    )
    
    $
    11,472Three Months Ended September 30, 2008Revenues
    
    $
    25,673
    
    
    $
    22,211
    
    
    $
    
    
    
    $
    47,884Direct operating expenses
    
    
    9,941
    
    
    
    7,961
    
    
    
    
    
    
    
    17,902Selling, general and administrative expenses
    
    
    6,646
    
    
    
    9,486
    
    
    
    2,818
    
    
    
    18,950Break-up fee
    
    
    
    
    
    
    
    
    
    
    1,500
    
    
    
    1,500Amortization and depreciation
    
    
    3,059
    
    
    
    1,275
    
    
    
    217
    
    
    
    4,551Equity in earnings of affiliates
    
    
    
    
    
    
    1,329
    
    
    
    
    
    
    
    1,329Operating income (loss)
    
    $
    6,027
    
    
    $
    4,818
    
    
    $
    (4,535
    )
    
    $
    6,310
 Professional
    
    
    BusinessServices
    
    
    Information
    
    
    Corporate
    
    
    Total(In thousands)Nine Months Ended September 30, 2009Revenues
    
    $
    126,322
    
    
    $
    66,998
    
    
    $
    
    
    
    $
    193,320Direct operating expenses
    
    
    46,693
    
    
    
    21,827
    
    
    
    
    
    
    
    68,520Selling, general and administrative expenses
    
    
    31,361
    
    
    
    25,699
    
    
    
    9,013
    
    
    
    66,073Amortization and depreciation
    
    
    15,325
    
    
    
    3,955
    
    
    
    677
    
    
    
    19,957Equity in earnings of affiliates
    
    
    
    
    
    
    3,461
    
    
    
    
    
    
    
    3,461Operating income (loss)
    
    $
    32,943
    
    
    $
    18,978
    
    
    $
    (9,690
    )
    
    $
    42,231Nine Months Ended September 30, 2008Revenues
    
    $
    62,542
    
    
    $
    68,406
    
    
    $
    
    
    
    $
    130,948Direct operating expenses
    
    
    22,688
    
    
    
    23,686
    
    
    
    
    
    
    
    46,374Selling, general and administrative expenses
    
    
    15,889
    
    
    
    29,311
    
    
    
    6,587
    
    
    
    51,787Break-up fee
    
    
    
    
    
    
    
    
    
    
    1,500
    
    
    
    1,500Amortization and depreciation
    
    
    7,124
    
    
    
    3,663
    
    
    
    590
    
    
    
    11,377Equity in earnings of affiliates
    
    
    
    
    
    
    4,355
    
    
    
    
    
    
    
    4,355Operating income (loss)
    
    $
    16,841
    
    
    $
    16,101
    
    
    $
    (8,677
    )
    
    $
    24,265
 Note 12. Share-Based Compensation
   Stock Options:
  Dividend yield
    
    
    0.0
    %Expected volatility
    
    
    48.0
    %Risk free interest rate
    
    
    2.0
    %Expected term of options
    
    4.75 yearsWeighted average grant date fair value
    
    $
    5.35
  14




---



##### Table of Contents



Weighted
    
    
    Weighted
    
    
    Weighted AverageNumber of
    
    
    Average Grant
    
    
    Average
    
    
    RemainingShares
    
    
    Date Fair Value
    
    
    Exercise Price
    
    
    Contractual LifeOutstanding options at December 31, 2008
    
    
    1,352,992
    
    
    $
    4.54
    
    
    $
    14.21
    
    
    6.06 Yrs.Granted
    
    
    414,882
    
    
    
    5.35
    
    
    
    12.51
    
    
    
    Exercised
    
    
    (5,375
    )
    
    
    1.35
    
    
    
    2.22
    
    
    
    Canceled or forfeited
    
    
    (98,168
    )
    
    
    4.95
    
    
    
    14.38
    
    
    
    Outstanding options at September 30, 2009
    
    
    1,664,331
    
    
    $
    4.73
    
    
    $
    13.81
    
    
    5.56 Yrs.Options exercisable at September 30, 2009
    
    
    571,290
    
    
    $
    4.31
    
    
    $
    13.21
    
    
    5.10 Yrs.
  Restricted Stock Grants:
 WeightedAverageNumber
    
    
    Grant Dateof Shares
    
    
    Fair ValueNonvested, December 31, 2008
    
    
    149,296
    
    
    $
    15.30Granted
    
    
    129,990
    
    
    
    12.51Vested
    
    
    (43,233
    )
    
    
    15.06Canceled or forfeited
    
    
    (11,027
    )
    
    
    14.01Nonvested, September 30, 2009
    
    
    225,026
    
    
    $
    13.80
  Note 13. Contingencies and Commitments
 Litigation:
 NDeX:
  15




---



##### Table of Contents



Note 14. Subsequent Events
  Albertelli.
  DiscoverReady :
   Purchase
Price Allocation and Pro Forma Financial Information.
 Second Amendment to Credit Agreement.
  16




---



##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
  
    
    our business operates in highly competitive markets and depends upon the
economies and the demographics of the legal, financial and real estate sectors in the
markets we serve and changes in those sectors could have an adverse effect on our revenues,
cash flows and profitability;
 
    
    NDeXs business revenues are very concentrated, as NDeX currently provides
mortgage default processing services to eight law firm customers, and if the number of case
files referred to our law firm customers, and ultimately to NDeX for processing, decreases
or fails to increase, it may affect the cash flow of our law firm customers and their
ability to pay us timely for services we perform and may also adversely affect our
operating results and ability to execute our growth strategy;
 
    
    the key attorneys at each of NDeXs law firm customers are employed by NDeX,
some of whom, including David A. Trott, the chairman and chief executive officer of NDeX,
also hold a direct or indirect equity interest in NDeX. As a result, these key attorneys
may, in certain circumstances, have interests that differ from or conflict with our
interests;
 
    
    government regulation of sub-prime, Alt-A and other residential mortgage
products, including bills introduced in states where we do business (such as recently
enacted foreclosure legislation in Michigan and Indiana), the Hope for Homeowners Act, the
Emergency Economic Stabilization Act and Homeowner Affordability and Stability Plan, the
Streamlined Modification Program, Protecting Tenants at Foreclosure Act of 2009, and
voluntary foreclosure relief programs developed by lenders, loan servicers and the Hope Now
Alliance, a consortium that includes loan servicers, may have an adverse affect on and
restrict our mortgage default processing services and public notice operations;
 
    
    we have owned and operated DiscoverReady, LLC for a very short period of time
and we are highly dependent on the skills and knowledge of the individuals serving as chief
executive officer and president of DiscoverReady as none of our executive officers have
managed or operated a discovery management and document review services company prior to
this acquisition;
 
    
    DiscoverReadys business revenues are very concentrated among a few customers
and if these customers choose to manage their discovery with their own staff or by engaging
another provider and if we are unable to develop new customer relationships, our operating
results and the ability to execute our growth strategy may be adversely affected;
 
    
    we are dependent on our senior management team, especially James P. Dolan, our
founder, chairman, president and chief executive officer; Scott J. Pollei, our executive
vice president and chief operating officer; Mark W.C. Stodder, our executive vice
president-business information; David A. Trott, chairman and chief executive officer, NDeX,
and Vicki J. Duncomb, our vice president and chief financial officer;
  17




---



##### Table of Contents




    
    the acquisition of DiscoverReady may expose us to particular business and
financial risks that include, but are not limited to: (1) diverting managements time,
attention and resources from managing the business; (2) incurring significant additional
capital expenditures and operating expenses to improve, coordinate or integrate managerial,
operational, financial and administrative systems; (3) failing to integrate the operations,
personnel and internal controls of DiscoverReady into our company or to manage
DiscoverReady or our growth; and (4) facing operational difficulties in new markets or with
new product and service offerings;
 
    
    we intend to continue to pursue acquisition opportunities, which we may not do
successfully and which may subject us to considerable business and financial risks, and we
may be required to incur additional indebtedness or raise additional capital to fund these
acquisitions and this additional cash may not be available to us on satisfactory terms or
at all;
 
    
    growing our business may place a strain on our management and internal
systems, processes and controls; and
 
    
    we incurred additional indebtedness to close the acquisitions of Barrett-NDEx
and DiscoverReady and this additional debt consumed a significant portion of our ability to
borrow and may limit our ability to pursue other acquisitions or growth strategies.
    Overview
    18




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##### Table of Contents



Recent Developments
 New Line of Business in Professional Services Division
    Regulatory Environment
   19




---



##### Table of Contents



Adoption of Stockholder Rights Plan
    20




---



##### Table of Contents



Recent Acquisitions
  DiscoverReady:
  .
  Albertelli:
  21




---



##### Table of Contents



Barrett-NDEx:
   22




---



##### Table of Contents



Revenues
  
    
    64.2% and 65.3%, respectively, from our Professional Services Division; and
 
    
    35.8% and 34.7%, respectively, from our Business Information Division.
 Professional Services.
   23




---



##### Table of Contents



Business Information.
    24




---



##### Table of Contents



Operating Expenses
  
    
    Direct operating expenses, which consist primarily of the cost of compensation and
employee benefits for the processing staff at NDeX and Counsel Press and our editorial
personnel in our Business Information Division, production and distribution expenses, such
as compensation (including stock-based compensation expense) and employee benefits for
personnel involved in the production and distribution of our business information products,
the cost of newsprint and delivery of our business information products, and packaging and
data service fees in connection with our California foreclosure files;
 
    
    Selling, general and administrative expenses, which consist primarily of the cost of
compensation (including stock-based compensation expense) and employee benefits for our
sales, human resources, accounting and information technology personnel, publishers and
other members of management, rent, other sales and marketing related expenses and other
office-related payments;
 
    
    Depreciation expense, which represents the cost of fixed assets and software allocated
over the estimated useful lives of these assets, with such useful lives ranging from two to
thirty years; and
 
    
    Amortization expense, which represents the cost of finite-lived intangibles acquired
through business combinations allocated over the estimated useful lives of these
intangibles, with such useful lives ranging from two to thirty years.
  Equity in Earnings of Affiliates
 The Detroit Legal News Publishing, LLC.
 GovDelivery, Inc.
 Noncontrolling Interest
   25




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##### Table of Contents



Three Months ended September 30,
    
    
    Nine Months ended September 30,(In thousands)
    
    
    (In thousands)2009
    
    
    2008
    
    
    2009
    
    
    2008APC Investments
    
    $
    414
    
    
    $
    362
    
    
    $
    1,562
    
    
    $
    1,098Feiwell & Hannoy
    
    
    93
    
    
    
    81
    
    
    
    350
    
    
    
    253Sellers of
Barrett-NDEx (as a
group)*
    
    
    327
    
    
    
    
    
    
    
    1,233
    
    
    
    Total
    
    $
    834
    
    
    $
    443
    
    
    $
    3,145
    
    
    $
    1,351
 *
    
    Members of NDeX since September 2, 2008.   .
   26




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##### Table of Contents



Critical Accounting Policies and Estimates
    Revenue Recognition
    27




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##### Table of Contents



Goodwill, Other Intangible Assets and Other Long-Lived Assets
   Share-based Compensation Expense
   2009Dividend yield
    
    
    0.0
    %Expected volatility
    
    
    48.0
    %Risk free interest rate
    
    
    2.0
    %Expected term of options
    
    4.75 yearsWeighted average grant date fair value
    
    $
    5.35
     28




---



##### Table of Contents



Income Taxes
  Allowances for Doubtful Accounts
   New Accounting Pronouncements
 Form 10-Q
  29




---



##### Table of Contents



RESULTS OF OPERATIONS
 in thousands, except per share data
 Three Months Ended September 30,% of
    
    
    
    
    
    
    % of2009
    
    
    Revenues
    
    
    2008
    
    
    RevenuesRevenues:Professional Services
    
    $
    39,996
    
    
    
    64.2
    %
    
    $
    25,673
    
    
    
    53.6
    %Business Information
    
    
    22,348
    
    
    
    35.8
    %
    
    
    22,211
    
    
    
    46.4
    %Total revenues
    
    
    62,344
    
    
    
    100.0
    %
    
    
    47,884
    
    
    
    100.0
    %Operating expenses:Professional Services
    
    
    30,753
    
    
    
    49.3
    %
    
    
    19,646
    
    
    
    41.0
    %Business Information
    
    
    17,044
    
    
    
    27.3
    %
    
    
    18,722
    
    
    
    39.1
    %Unallocated corporate operating expenses
    
    
    3,806
    
    
    
    6.1
    %
    
    
    4,535
    
    
    
    9.5
    %Total operating expenses
    
    
    51,603
    
    
    
    82.8
    %
    
    
    42,903
    
    
    
    89.6
    %Equity in earnings of affiliates
    
    
    731
    
    
    
    1.2
    %
    
    
    1,329
    
    
    
    2.8
    %Operating income
    
    
    11,472
    
    
    
    18.4
    %
    
    
    6,310
    
    
    
    13.2
    %Interest expense, net
    
    
    (1,607
    )
    
    
    (2.6
    )%
    
    
    (1,851
    )
    
    
    (3.9
    )%Non-cash interest income related to interest rate swaps
    
    
    205
    
    
    
    0.3
    %
    
    
    (80
    )
    
    
    (0.2
    )%Other income, net
    
    
    23
    
    
    
    
    
    
    
    11
    
    
    
    0.0
    %Income before income taxes
    
    
    10,093
    
    
    
    16.2
    %
    
    
    4,390
    
    
    
    9.2
    %Income tax expense
    
    
    (3,529
    )
    
    
    (5.7
    )%
    
    
    (1,471
    )
    
    
    (3.1
    )%Net income before noncontrolling interest
    
    
    6,564
    
    
    
    10.5
    %
    
    
    2,919
    
    
    
    6.1
    %Less: Net income attributable to the redeemable
noncontrolling interest
    
    
    (694
    )
    
    
    (1.1
    )%
    
    
    (466
    )
    
    
    (1.0
    )%Net income attributable to Dolan Media Company
    
    $
    5,870
    
    
    
    9.4
    %
    
    $
    2,453
    
    
    
    5.1
    %Net income attributable to Dolan Media Company per diluted
share
    
    $
    0.20
    
    
    
    
    
    
    $
    0.09Accretion of redeemable noncontrolling interest, net of tax
    
    
    (0.02
    )
    
    
    
    
    
    
    Net income attributable to Dolan Media Company common
stockholders per diluted share
    
    $
    0.18
    
    
    
    
    
    
    $
    0.09Weighted average diluted shares outstanding
    
    
    29,932
    
    
    
    
    
    
    
    28,060
 Nine Months Ended September 30,% of
    
    
    
    
    
    
    % of2009
    
    
    Revenues
    
    
    2008
    
    
    RevenuesRevenues:Professional Services
    
    $
    126,322
    
    
    
    65.3
    %
    
    $
    62,542
    
    
    
    47.8
    %Business Information
    
    
    66,998
    
    
    
    34.7
    %
    
    
    68,406
    
    
    
    52.2
    %Total revenues
    
    
    193,320
    
    
    
    100.0
    %
    
    
    130,948
    
    
    
    100.0
    %Operating expenses:Professional Services
    
    
    93,379
    
    
    
    48.3
    %
    
    
    45,701
    
    
    
    34.9
    %Business Information
    
    
    51,481
    
    
    
    26.6
    %
    
    
    56,660
    
    
    
    43.3
    %Unallocated corporate operating expenses
    
    
    9,690
    
    
    
    5.0
    %
    
    
    8,677
    
    
    
    6.6
    %Total operating expenses
    
    
    154,550
    
    
    
    79.9
    %
    
    
    111,038
    
    
    
    84.8
    %Equity in earnings of affiliates
    
    
    3,461
    
    
    
    1.8
    %
    
    
    4,355
    
    
    
    3.3
    %Operating income
    
    
    42,231
    
    
    
    21.8
    %
    
    
    24,265
    
    
    
    18.5
    %Interest expense, net
    
    
    (5,305
    )
    
    
    (2.7
    )%
    
    
    (4,611
    )
    
    
    (3.5
    )%Non-cash interest income related to interest rate swaps
    
    
    735
    
    
    
    0.4
    %
    
    
    (58
    )
    
    
    0.0
    %Other income, net
    
    
    1,469
    
    
    
    0.8
    %
    
    
    34
    
    
    
    0.0
    %Income before income taxes
    
    
    39,130
    
    
    
    20.2
    %
    
    
    19,630
    
    
    
    15.0
    %Income tax expense
    
    
    (13,207
    )
    
    
    (6.8
    )%
    
    
    (7,257
    )
    
    
    (5.5
    )%Net income before noncontrolling interest
    
    
    25,923
    
    
    
    13.4
    %
    
    
    12,373
    
    
    
    9.4
    %Less: Net income attributable to the redeemable
noncontrolling interest
    
    
    (3,200
    )
    
    
    (1.7
    )%
    
    
    (1,516
    )
    
    
    (1.2
    )%Net income attributable to Dolan Media Company
    
    $
    22,723
    
    
    
    11.8
    %
    
    $
    10,857
    
    
    
    8.3
    %Net income attributable to Dolan Media Company per diluted
share
    
    $
    0.76
    
    
    
    
    
    
    $
    0.42Accretion of redeemable noncontrolling interest, net of tax
    
    
    (0.26
    )
    
    
    
    
    
    
    Net income attributable to Dolan Media Company common
stockholders per diluted share
    
    $
    0.50
    
    
    
    
    
    
    $
    0.42Weighted average diluted shares outstanding
    
    
    29,908
    
    
    
    
    
    
    
    26,105
  30




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##### Table of Contents



Three Months Ended September 30, 2009
Compared to Three Months Ended September 30, 2008
 Revenues
 Three Months Ended September 30,2009
    
    
    2008
    
    
    Increase($s in millions)Total revenues
    
    $
    62.3
    
    
    $
    47.9
    
    
    $
    14.5
    
    
    
    30.2
    %
     31




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##### Table of Contents



Operating Expenses
 Three Months Ended September 30,2009
    
    
    2008
    
    
    Increase (Decrease)($s in millions)Total operating expenses
    
    $
    51.6
    
    
    $
    42.9
    
    
    $
    8.7
    
    
    
    20.3
    %Direct operating expense
    
    
    22.5
    
    
    
    17.9
    
    
    
    4.6
    
    
    
    25.7
    %Selling, general and
administrative expenses
    
    
    22.9
    
    
    
    19.0
    
    
    
    4.0
    
    
    
    20.9
    %Break-up fee
    
    
    
    
    
    
    1.5
    
    
    
    (1.5
    )
    
    Not meaningfulDepreciation expense
    
    
    2.3
    
    
    
    1.5
    
    
    
    0.8
    
    
    
    50.8
    %Amortization expense
    
    
    3.9
    
    
    
    3.1
    
    
    
    0.9
    
    
    
    28.7
    %
  Direct Operating Expenses.
 Selling, General and Administrative Expenses.
 Break-up Fee.
 Depreciation and Amortization Expense.
  32




---



##### Table of Contents



Interest Expense, Net
 Three Months Ended September 30,2009
    
    
    2008
    
    
    Increase (Decrease)($s in millions)Total interest expense, net
    
    $
    1.6
    
    
    $
    1.9
    
    
    $
    (0.2
    )
    
    
    (13.2
    )%Interest on bank credit facility
    
    
    1.1
    
    
    
    1.6
    
    
    
    (0.5
    )
    
    
    (31.1
    )%Cash interest expense on interest rate swaps
    
    
    0.4
    
    
    
    0.2
    
    
    
    0.2
    
    
    
    98.6
    %Amortization of deferred financing fees
    
    
    0.1
    
    
    
    0.1
    
    
    
    
    
    
    
    (2.5
    )%Other
    
    
    
    
    
    
    (0.1
    )
    
    
    
    
    
    Not meaningful
  Non-Cash Interest Income (Expense) Related to Interest Rate Swaps
 Three Months Ended September 30,2009
    
    
    2008
    
    
    Increase($s in millions)Non-cash interest income (expense)
related to interest
rate swaps
    
    $
    0.2
    
    
    $
    (0.1
    )
    
    $
    0.3
    
    
    Not meaningful
  Income Tax Expense
 Three Months Ended September 30,2009
    
    
    2008
    
    
    Increase($s in millions)Income tax expense
    
    $
    3.5
    
    
    $
    1.5
    
    
    $
    2.1
    
    
    
    139.9
    %
  Professional Services Division Results
 Revenues
 Three Months Ended September 30,2009
    
    
    2008
    
    
    Increase($s in millions)Total Professional Services Division revenues
    
    $
    40.0
    
    
    $
    25.7
    
    
    $
    14.3
    
    
    
    55.8
    %Mortgage default processing service revenues
    
    
    35.9
    
    
    
    21.2
    
    
    
    14.7
    
    
    
    69.6
    %Appellate services revenues
    
    
    4.0
    
    
    
    4.5
    
    
    
    (0.4
    )
    
    
    (9.5
    )%
   33




---



##### Table of Contents



Operating Expenses
 Three Months Ended September 30,2009
    
    
    2008
    
    
    Increase($s in millions)Total operating expenses
    
    $
    30.8
    
    
    $
    19.6
    
    
    $
    11.1
    
    
    
    56.5
    %Direct operating expense
    
    
    15.6
    
    
    
    9.9
    
    
    
    5.6
    
    
    
    56.5
    %Selling, general and
administrative expenses
    
    
    10.5
    
    
    
    6.6
    
    
    
    3.9
    
    
    
    58.5
    %Depreciation expense
    
    
    1.5
    
    
    
    0.8
    
    
    
    0.7
    
    
    
    90.2
    %Amortization expense
    
    
    3.1
    
    
    
    2.2
    
    
    
    0.9
    
    
    
    38.8
    %
    Business Information Division Results
 Revenues
 Three Months Ended September 30,2009
    
    
    2008
    
    
    Increase (decrease)($s in millions)Total Business Information Division Revenues
    
    $
    22.3
    
    
    $
    22.2
    
    
    $
    0.1
    
    
    
    0.6
    %Display and classified advertising revenues
    
    
    6.6
    
    
    
    8.4
    
    
    
    (1.8
    )
    
    
    (21.7
    )%Public notice revenues
    
    
    12.3
    
    
    
    10.2
    
    
    
    2.1
    
    
    
    21.0
    %Circulation revenues
    
    
    3.2
    
    
    
    3.3
    
    
    
    (0.2
    )
    
    
    (4.9
    )%Other revenues
    
    
    0.3
    
    
    
    0.3
    
    
    
    
    
    
    
    (1.9
    )%
    34




---



##### Table of Contents



Operating Expenses
 Three Months Ended September 30,2009
    
    
    2008
    
    
    Increase (decrease)($s in millions)Total operating expenses
    
    $
    17.0
    
    
    $
    18.7
    
    
    $
    (1.7
    )
    
    
    (9.0
    )%Direct operating expense
    
    
    7.0
    
    
    
    8.0
    
    
    
    (1.0
    )
    
    
    (12.7
    )%Selling, general and administrative expenses
    
    
    8.8
    
    
    
    9.5
    
    
    
    (0.7
    )
    
    
    (7.5
    )%Depreciation expense
    
    
    0.5
    
    
    
    0.5
    
    
    
    
    
    
    
    9.3
    %Amortization expense
    
    
    0.8
    
    
    
    0.8
    
    
    
    
    
    
    
    0.4
    %
    35




---



##### Table of Contents



Nine Months Ended September 30, 2009
Compared to Nine Months Ended September 30, 2008
 Revenues
 Nine Months Ended September 30,2009
    
    
    2008
    
    
    Increase($s in millions)Total revenues
    
    $
    193.3
    
    
    $
    130.9
    
    
    $
    62.4
    
    
    
    47.6
    %
    Operating Expenses
 Nine Months Ended September 30,2009
    
    
    2008
    
    
    Increase($s in millions)Total operating expenses
    
    $
    154.6
    
    
    $
    111.0
    
    
    $
    43.5
    
    
    
    39.2
    %Direct operating expense
    
    
    68.5
    
    
    
    46.4
    
    
    
    22.1
    
    
    
    47.8
    %Selling, general and
administrative expenses
    
    
    66.1
    
    
    
    51.8
    
    
    
    14.3
    
    
    
    27.6
    %Break-up fee
    
    
    
    
    
    
    1.5
    
    
    
    (1.5
    )
    
    Not meaningfulDepreciation expense
    
    
    6.7
    
    
    
    3.8
    
    
    
    2.9
    
    
    
    77.8
    %Amortization expense
    
    
    13.2
    
    
    
    7.6
    
    
    
    5.6
    
    
    
    74.2
    %
  Direct Operating Expenses.
 Selling, General and Administrative Expenses.
  36




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##### Table of Contents



Break-up Fee.
 Depreciation and Amortization Expense.
 Other Income, Net
 Nine Months Ended September 30,2009
    
    
    2008
    
    
    Increase($s in millions)Other income, net
    
    $
    1.5
    
    
    $
    
    
    
    $
    1.5
    
    
    Not meaningful
  Interest Expense, Net
 Nine Months Ended September 30,2009
    
    
    2008
    
    
    Increase (decrease)($s in millions)Total interest expense, net
    
    $
    5.3
    
    
    $
    4.6
    
    
    $
    0.7
    
    
    
    15.1
    %Interest on bank credit facility
    
    
    4.0
    
    
    
    3.9
    
    
    
    0.1
    
    
    
    2.7
    %Cash interest expense on interest rate swaps
    
    
    1.2
    
    
    
    0.5
    
    
    
    0.7
    
    
    
    139.4
    %Amortization of deferred financing fees
    
    
    0.2
    
    
    
    0.2
    
    
    
    
    
    
    
    16.9
    %Other
    
    
    (0.1
    )
    
    
    0.1
    
    
    
    (0.1
    )
    
    Not meaningful
  Non-Cash Interest Income (Expense) Related to Interest Rate Swaps
 Nine Months Ended September 30,2009
    
    
    2008
    
    
    Increase($s in millions)Non-cash interest income (expense)
related to interest
rate swaps
    
    $
    0.7
    
    
    $
    (0.1
    )
    
    $
    0.8
    
    
    Not meaningful
   37




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##### Table of Contents



Income Tax Expense
 Nine Months Ended September 30,2009
    
    
    2008
    
    
    Increase($s in millions)Income tax expense
    
    $
    13.2
    
    
    $
    7.3
    
    
    $
    6.0
    
    
    
    82.0
    %
  Professional Services Division Results
 Revenues
 Nine Months Ended September 30,2009
    
    
    2008
    
    
    Increase (Decrease)($s in millions)Total Professional Services Division revenues
    
    $
    126.3
    
    
    $
    62.5
    
    
    $
    63.8
    
    
    
    102.0
    %Mortgage default processing service revenues
    
    
    115.2
    
    
    
    51.1
    
    
    
    64.1
    
    
    
    125.6
    %Appellate services revenues
    
    
    11.1
    
    
    
    11.5
    
    
    
    (0.4
    )
    
    
    (3.1
    )%
    Operating Expenses
 Nine Months Ended September 30,2009
    
    
    2008
    
    
    Increase($s in millions)Total operating expenses
    
    $
    93.4
    
    
    $
    45.7
    
    
    $
    47.7
    
    
    
    104.3
    %Direct operating expense
    
    
    46.7
    
    
    
    22.7
    
    
    
    24.0
    
    
    
    105.8
    %Selling, general and
administrative expenses
    
    
    31.4
    
    
    
    15.9
    
    
    
    15.5
    
    
    
    97.4
    %Depreciation expense
    
    
    4.5
    
    
    
    1.8
    
    
    
    2.7
    
    
    
    145.0
    %Amortization expense
    
    
    10.8
    
    
    
    5.3
    
    
    
    5.5
    
    
    
    104.7
    %
  38




---



##### Table of Contents



Business Information Division Results
 Revenues
 Nine Months Ended September 30,2009
    
    
    2008
    
    
    Increase (decrease)($s in millions)Total Business Information Division Revenues
    
    $
    67.0
    
    
    $
    68.4
    
    
    $
    (1.4
    )
    
    
    (2.1
    )%Display and classified advertising revenues
    
    
    20.2
    
    
    
    25.3
    
    
    
    (5.1
    )
    
    
    (20.1
    )%Public notice revenues
    
    
    35.8
    
    
    
    31.4
    
    
    
    4.4
    
    
    
    14.0
    %Circulation revenues
    
    
    9.9
    
    
    
    10.4
    
    
    
    (0.6
    )
    
    
    (5.4
    )%Other revenues
    
    
    1.1
    
    
    
    1.3
    
    
    
    (0.2
    )
    
    
    (11.7
    )%
      39




---



##### Table of Contents



Operating Expenses
 Nine Months Ended September 30,2009
    
    
    2008
    
    
    Increase (decrease)($s in millions)Total operating expenses
    
    $
    51.5
    
    
    $
    56.7
    
    
    $
    (5.2
    )
    
    
    (9.1
    )%Direct operating expense
    
    
    21.8
    
    
    
    23.7
    
    
    
    (1.9
    )
    
    
    (7.8
    )%Selling, general and administrative expenses
    
    
    25.7
    
    
    
    29.3
    
    
    
    (3.6
    )
    
    
    (12.3
    )%Depreciation expense
    
    
    1.5
    
    
    
    1.4
    
    
    
    0.2
    
    
    
    13.5
    %Amortization expense
    
    
    2.4
    
    
    
    2.3
    
    
    
    0.1
    
    
    
    4.8
    %
   Off Balance Sheet Arrangements
  Liquidity and Capital Resources
  September 30,
    
    
    December 31,2009
    
    
    2008Cash and cash equivalents
    
    $
    20,640
    
    
    $
    2,456Working capital (deficit)
    
    
    5,898
    
    
    
    (12,588
    )Long-term debt, less current portion
    
    
    133,675
    
    
    
    143,450
 Nine MonthsEnded September 30,2009
    
    
    2008Net cash provided by operating activities
    
    $
    32,104
    
    
    $
    16,211Net cash used in investing activities:Acquisitions and investments
    
    
    (2,441
    )
    
    
    (183,518
    )Capital expenditures
    
    
    (2,584
    )
    
    
    (3,957
    )Net cash (used) provided by financing activities
    
    
    (8,995
    )
    
    
    171,817
 Cash Flows Provided by Operating Activities
    40




---



##### Table of Contents



September 30,
    
    
    December 31,2009
    
    
    2008Allowance for doubtful accounts (in thousands)
    
    $
    914
    
    
    $
    1,398Allowance for doubtful accounts as a percentage of gross accounts receivable
    
    
    1.7
    %
    
    
    3.5
    %Day sales outstanding
    
    
    79.4
    
    
    
    62.6
    Cash Flows Used in Investing Activities
   41




---



##### Table of Contents



Cash Flows (Used) Provided by Financing Activities
    Credit Agreement.
   42




---



##### Table of Contents



Future Needs
    
 Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
 .
     43




---



##### Table of Contents



Item 4.
    
    Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
  
 Item 1A.
    
    Risk Factors
    44




---



##### Table of Contents



We have owned and operated DiscoverReady, LLC for a very short period of time and none of our
executive officers have managed or operated a discovery management and document review services
company prior to this acquisition.
   DiscoverReadys business revenues are very concentrated among a few customers and if these
customers choose to manage their discovery with their own staff or by engaging another provider and if
we are unable to develop new customer relationships, our operating results and the ability to
execute our growth strategy may be adversely affected.
  Regulation of the legal profession may constrain the operations of the businesses in our
Professional Services division, and numerous issues arising out of that regulation, its
interpretation or its evolution could impair our ability to provide professional services to our
customers and reduce our revenues and profitability.
   45




---



##### Table of Contents




    
    State or local bar associations, state or local prosecutors or other persons may
challenge the services provided by APC, Counsel Press or DiscoverReady as constituting the
unauthorized practice of law. Any
such challenge could have a disruptive effect upon the operations of our business, including
the diversion of significant time and attention of our senior management. We may also incur
significant expenses in connection with such a challenge, including substantial fees for
attorneys and other professional advisors. If a challenge to any of these businesses were
successful, we may need to materially modify our professional services operations in a
manner that could adversely affect that divisions revenues and profitability and we could
be subject to a range of penalties that could damage our reputation in the legal markets we
serve. In addition, any similar challenge to the operations of NDeXs law firm customers
could adversely impact their mortgage default business, which would in turn adversely affect
our Professional Service Divisions revenues and profitability;
 
    
    The services agreements to which NDeX is a party could be deemed to be unenforceable if
a court were to determine that such agreements constituted an impermissible fee sharing
arrangement between the law firm and NDeX; and
 
    
    Applicable laws, regulations and codes of ethics, including their interpretation and
enforcement, could change in a manner that restricts NDeXs, Counsel Presss or
DiscoverReadys operations. Any such change in laws, policies or practices could increase
our cost of doing business or adversely affect our revenues and profitability.
 Claims, even if not valid, that our case management software systems, document conversion system,
document review systems or other proprietary software products and information systems infringe on
the intellectual property rights of others could increase our expenses or inhibit us from offering
certain services.
   46




---



##### Table of Contents



We may be required to incur additional indebtedness if any of the holders of noncontrolling
interest in NDeX or DiscoverReady exercise their put rights with respect to their interest in such
entities or if we exercise our call right with respect to DiscoverReady.
    
 Item 2.
    
    Unregistered Sales of Securities and Use of Proceeds
  
 Item 3.
    
    Defaults Upon Senior Securities
  
 Item 4.
    
    Submission of Matters to a Vote of Security Holders
  
 Item 5.
    
    Other Information
    47




---



##### Table of Contents



Item 6.
    
    Exhibits
 ExhibitNo
    
    Title
    
    Method of Filing2.1
    *
    
    Membership Interests
Purchase Agreement by and
among DiscoverReady LLC, DR
Holdco LLC, Steven R.
Harber, David Shub, James K.
Wagner, Paul Yerkes, C.
Parkhill Mays and Dolan
Media Company dated November
2, 2009
    
    Filed herewith.10.1
    
    
    Amendment No. 5 to the
American Processing Company,
LLC Operating Agreement
dated July 1, 2009
    
    Incorporated by reference to
Exhibit 10.2 of our
quarterly report on Form
10-Q filed with the SEC on
August 7, 2009.10.2
    
    
    Separation Agreement and
General Release between
Dolan Media Company and Mark
E. Baumbach dated July 28,
2009
    
    Incorporated by reference to
Exhibit 10.1 of our current
report on Form 8-K filed
with the SEC on July 28,
2009.10.3
    
    
    Amended and Restated
Employment Agreement between
Dolan Media Company and
Scott J. Pollei dated August
1, 2009
    
    Incorporated by reference to
Exhibit 10.1 of our current
report on Form 8-K filed
with the SEC on August 4,
2009.10.4
    
    
    Employment Agreement between
Dolan Media Company and
Vicki J. Duncomb dated
August 1, 2009
    
    Incorporated by reference to
Exhibit 10.2 of our current
report on Form 8-K filed
with the SEC on August 4,
2009.10.5
    
    
    Second Amendment to
Employment Agreement between
Dolan Media Company and Mark
W.C. Stodder dated August 1,
2009
    
    Incorporated by reference to
Exhibit 10.7 of our
quarterly report on Form
10-Q filed with the SEC on
August 7, 2009.10.6
    
    
    Services Agreement among
American Processing Company,
LLC (d/b/a NDeX) and James
E. Albertelli, P.A. dated
October 1, 2009
    
    Incorporated by reference to
Exhibit 10.1 of our current
report on Form 8-K filed
with the SEC on October 5,
2009. Portions of this
exhibit were omitted and
have been filed separately
with the Secretary of the
SEC pursuant to an
application for confidential
treatment under Rule 406 of
the Securities Act.10.7
    
    
    Asset Purchase Agreement
among Dolan Media Company,
American Processing Company,
LLC (d/b/a NDeX), James E.
Albertelli, P.A., The
Albertelli Firm, P.C.,
Albertelli Title, Inc. and
James E. Albertelli dated
October 1, 2009
    
    Incorporated by reference to
Exhibit 10.2 of our current
report on Form 8-K filed
with the SEC on October 5,
2009.10.8
    
    
    Consulting Agreement between
Mark E. Baumbach and Dolan
Media Company dated
September 28, 2009
    
    Filed herewith.
  48




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##### Table of Contents



ExhibitNo
    
    Title
    
    Method of Filing10.9
    
    
    Third Amended and Restated
Limited Liability Company
Agreement of DiscoverReady,
LLC dated as of November 2,
2009
    
    Filed herewith.10.10
    
    
    Second Amendment to Second
Amended and Restated Credit
Agreement with Dolan Media
Company, its consolidated
subsidiaries and a syndicate
of lenders dated November 2,
2009
    
    Filed herewith.31.1
    
    
    Section 302 Certification of
James P. Dolan
    
    Filed herewith.31.2
    
    
    Section 302 Certification of
Vicki J. Duncomb
    
    Filed herewith.32.1
    
    
    Section 906 Certification of
James P. Dolan
    
    Furnished herewith.32.2
    
    
    Section 906 Certification of
Vicki J. Duncomb
    
    Furnished herewith.99.1
    
    
    Press Release of Dolan Media
Company dated November 6,
2009
    
    Filed herewith.
 
 *
    
    The schedules and exhibits to the Membership Interests Purchase Agreement have been omitted
pursuant to Item 601(b)(2) of Regulation S-K. We agree to furnish supplementally to the SEC,
upon request, a copy of the omitted schedules and exhibits.  49




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##### Table of Contents



SIGNATURES
  Dated: November 6, 2009
    DOLAN MEDIA COMPANYBy:
    /s/ James P. DolanJames P. DolanChairman,
Chief Executive Officer and
President (Principal Executive Officer)Dated: November 6, 2009By:
    /s/ Vicki J. DuncombVicki J. DuncombVice President and Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)  50




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##### Table of Contents



Exhibit Index
 ExhibitNo
    
    Title
    
    Method of Filing2.1
    *
    
    Membership Interests Purchase Agreement by
and among DiscoverReady LLC, DR Holdco
LLC, Steven R. Harber, David Shub, James
K. Wagner, Paul Yerkes, C. Parkhill Mays
and Dolan Media Company dated November 2,
2009
    
    Filed herewith.10.8
    
    
    Consulting Agreement between Mark E.
Baumbach and Dolan Media Company dated
September 28, 2009
    
    Filed herewith.10.9
    
    
    Third Amended and Restated Limited
Liability Company Agreement of
DiscoverReady, LLC dated as of November
2, 2009
    
    Filed herewith.10.10
    
    
    Second Amendment to Second Amended and
Restated Credit Agreement with Dolan Media
Company, its consolidated subsidiaries and
a syndicate of lenders dated November 2,
2009
    
    Filed herewith.31.1
    
    
    Section 302 Certification of James P. Dolan
    
    Filed herewith.31.2
    
    
    Section 302 Certification of Vicki J.
Duncomb
    
    Filed herewith.32.1
    
    
    Section 906 Certification of James P. Dolan
    
    Furnished herewith.32.2
    
    
    Section 906 Certification of Vicki J.
Duncomb
    
    Furnished herewith.99.1
    
    
    Press Release of Dolan Media Company dated
November 6, 2009
    
    Filed herewith.
 
 *
    
    The schedules and exhibits to the Membership Interests Purchase Agreement have been omitted
pursuant to Item 601(b)(2) of Regulation S-K. We agree to furnish supplementally to the SEC,
upon request, a copy of the omitted schedules and exhibits.