##### 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: March 31, 2008
 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.)
 
 706 Second Avenue South, Suite 1200,
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
  Large accelerated filer o
    
    Accelerated filer
o
    
    Non-accelerated filer
þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



PART I  FINANCIAL INFORMATION
    
    
    1Item 1. Financial Statements
    
    
    1Condensed Consolidated Balance Sheets as of March 31, 2008 (unaudited) and December 31, 2007
    
    
    1Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended March 31,
2008 and March 31, 2007
    
    
    2Unaudited
Condensed Consolidated Statements of Stockholders Equity (Deficit) as of March 31, 2008
    
    
    3Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31,
2008 and March 31, 2007
    
    
    4Notes to Unaudited Condensed Consolidated Interim Financial Statements
    
    
    5Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    36Item 4T. Controls and Procedures
    
    
    36PART II  OTHER INFORMATION
    
    
    37Item 1. Legal Proceedings
    
    
    37Item 1A. Risk Factors
    
    
    37Item 2. Unregistered Sales of Securities and Use of Proceeds
    
    
    37Item 3. Defaults Upon Senior Securities
    
    
    37Item 4. Submission of Matters to a Vote of Security Holders
    
    
    37Item 5. Other Information
    
    
    37Item 6. Exhibits
    
    
    38SIGNATURES
    
    
    39Section 302 Certification of James P. DolanSection 302 Certification of Scott J. PolleiSection 906 Certification of James P. DolanSection 906 Certification of Scott J. Pollei




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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)
 March 31,
    
    
    December 31,2008
    
    
    2007(unaudited)ASSETSCurrent assetsCash and cash equivalents
    
    $
    1,037
    
    
    $
    1,346Accounts receivable, including unbilled
services (net of allowances for doubtful
accounts of $1,149 and $1,283 as of March
31, 2008 and December 31, 2007,
respectively)
    
    
    26,526
    
    
    
    20,689Prepaid expenses and other current assets
    
    
    2,601
    
    
    
    2,649Deferred income taxes
    
    
    259
    
    
    
    259Total current assets
    
    
    30,423
    
    
    
    24,943Investments
    
    
    18,636
    
    
    
    18,479Property and equipment, net
    
    
    13,578
    
    
    
    13,066Finite-life intangible assets, net
    
    
    101,300
    
    
    
    88,946Goodwill
    
    
    82,217
    
    
    
    79,044Other assets
    
    
    1,713
    
    
    
    1,889Total assets
    
    $
    247,867
    
    
    $
    226,367LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term debt
    
    $
    6,102
    
    
    $
    4,749Accounts payable
    
    
    5,041
    
    
    
    6,068Accrued compensation
    
    
    3,542
    
    
    
    4,677Accrued liabilities
    
    
    4,703
    
    
    
    2,922Due to sellers of acquired businesses
    
    
    1,100
    
    
    
    600Deferred revenue
    
    
    11,966
    
    
    
    11,387Total current liabilities
    
    
    32,454
    
    
    
    30,403Long-term debt, less current portion
    
    
    68,625
    
    
    
    56,301Deferred income taxes
    
    
    4,393
    
    
    
    4,393Deferred revenue and other liabilities
    
    
    5,246
    
    
    
    3,890Total liabilities
    
    
    110,718
    
    
    
    94,987Minority interest in consolidated subsidiary
(redemption value of $14,773 as of March 31,
2008)
    
    
    3,567
    
    
    
    2,204Commitments and contingencies (Note 12)Stockholders equityCommon
stock, $0.001 par value; authorized:
70,000,000 shares; outstanding: 25,085,170
and 25,088,718 shares as of March 31, 2008
and December 31, 2007, respectively
    
    
    25
    
    
    
    25Preferred stock, $0.001 par value;
authorized: 5,000,000 shares; no shares
outstanding
    
    
    
    
    
    
    Additional paid-in capital
    
    
    212,763
    
    
    
    212,364Accumulated deficit
    
    
    (79,206
    )
    
    
    (83,213
    )Total stockholders equity
    
    
    133,582
    
    
    
    129,176Total liabilities and stockholders equity
    
    $
    247,867
    
    
    $
    226,367
  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 EndedMarch 31,2008
    
    
    2007RevenuesBusiness Information
    
    $
    22,771
    
    
    $
    19,480Professional Services
    
    
    18,740
    
    
    
    16,215Total revenues
    
    
    41,511
    
    
    
    35,695Operating expensesDirect operating: Business Information
    
    
    7,572
    
    
    
    6,817Direct operating: Professional Services
    
    
    6,311
    
    
    
    5,625Selling, general and administrative
    
    
    16,103
    
    
    
    13,330Amortization
    
    
    2,219
    
    
    
    1,844Depreciation
    
    
    1,101
    
    
    
    755Total operating expenses
    
    
    33,306
    
    
    
    28,371Equity in earnings of The Detroit Legal News Publishing, LLC
    
    
    1,557
    
    
    
    915Operating income
    
    
    9,762
    
    
    
    8,239Non-operating expenseNon-cash interest expense related to redeemable preferred stock
    
    
    
    
    
    
    (29,942
    )Interest expense, net of interest income
    
    
    (2,451
    )
    
    
    (2,035
    )Other income (expense)
    
    
    11
    
    
    
    (8
    )Total non-operating expense
    
    
    (2,440
    )
    
    
    (31,985
    )Income (loss) before income taxes and minority interest
    
    
    7,322
    
    
    
    (23,746
    )Income tax expense
    
    
    (2,758
    )
    
    
    (3,140
    )Minority interest in net income of subsidiary
    
    
    (557
    )
    
    
    (900
    )Net income (loss)
    
    $
    4,007
    
    
    $
    (27,786
    )Net income (loss) per share:Basic
    
    $
    0.16
    
    
    $
    (2.98
    )Diluted
    
    $
    0.16
    
    
    $
    (2.98
    )Weighted average shares outstanding:*Basic
    
    
    24,936,007
    
    
    
    9,324,000Diluted
    
    
    25,215,956
    
    
    
    9,324,000
 
 *
    
    Reflects 9 for 1 stock split described in Note 7  2




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##### Table of Contents



Dolan Media Company
 
 Unaudited Condensed Consolidated Statements of Stockholders Equity (Deficit)
 (in thousands, except share data)
 AdditionalCommon Stock
    
    
    Paid-In
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    TotalBalance (deficit) at December 31,
2006
    
    
    9,324,000
    
    
    $
    1
    
    
    $
    303
    
    
    $
    (29,179
    )
    
    $
    (28,875
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (54,034
    )
    
    
    (54,034
    )Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    970
    
    
    
    
    
    
    
    970Preferred stock series C conversion
    
    
    5,093,155
    
    
    
    5
    
    
    
    73,844
    
    
    
    
    
    
    
    73,849Initial public offering proceeds,
net of underwriting discount and
offering costs
    
    
    10,500,000
    
    
    
    11
    
    
    
    137,255
    
    
    
    
    
    
    
    137,266Issuance of restricted stock, net
of forfeitures
    
    
    171,563
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    8
    
    
    
    (8
    )
    
    
    
    
    
    
    Balance (deficit) at December 31,
2007
    
    
    25,088,718
    
    
    $
    25
    
    
    $
    212,364
    
    
    $
    (83,213
    )
    
    $
    129,176Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,007
    
    
    
    4,007Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    399
    
    
    
    
    
    
    
    399Forfeitures of restricted stock
    
    
    (3,548
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance (deficit) at March 31, 2008
    
    
    25,085,170
    
    
    $
    25
    
    
    $
    212,763
    
    
    $
    (79,206
    )
    
    $
    133,582
  3




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##### Table of Contents



Dolan Media Company
 
 Unaudited Condensed Consolidated Statements of Cash Flows
 (in thousands)
 Three Months EndedMarch 31,2008
    
    
    2007Cash flows from operating activitiesNet income (loss)
    
    $
    4,007
    
    
    $
    (27,786
    )Distributions received from The Detroit Legal News Publishing, LLC
    
    
    1,400
    
    
    
    1,400Minority interest distributions paid
    
    
    (373
    )
    
    
    (466
    )Non-cash operating activities:Amortization
    
    
    2,219
    
    
    
    1,844Depreciation
    
    
    1,101
    
    
    
    755Equity in earnings of The Detroit Legal News Publishing, LLC
    
    
    (1,557
    )
    
    
    (915
    )Minority interest
    
    
    557
    
    
    
    900Stock-based compensation expense
    
    
    399
    
    
    
    10Change in value of interest rate swap and accretion of interest on
note payable
    
    
    1,209
    
    
    
    259Non-cash interest related to redeemable preferred stock
    
    
    
    
    
    
    29,975Amortization of debt issuance costs
    
    
    47
    
    
    
    40Changes in operating assets and liabilities, net of effects of
business acquisitions:Accounts receivable
    
    
    (5,837
    )
    
    
    (1,870
    )Prepaid expenses and other current assets
    
    
    (2
    )
    
    
    281Other assets
    
    
    115
    
    
    
    (400
    )Accounts payable and accrued liabilities
    
    
    (302
    )
    
    
    3,498Deferred revenue
    
    
    769
    
    
    
    (353
    )Net cash provided by operating activities
    
    
    3,752
    
    
    
    7,172Cash flows from investing activitiesAcquisitions and investments
    
    
    (17,422
    )
    
    
    (17,288
    )Capital expenditures
    
    
    (1,442
    )
    
    
    (1,346
    )Net cash used in investing activities
    
    
    (18,864
    )
    
    
    (18,634
    )Cash flows from financing activitiesNet (payments) borrowings on senior revolving note
    
    
    (9,000
    )
    
    
    4,000Proceeds
from borrowings or conversions on senior term notes (Note 6)
    
    
    25,000
    
    
    
    10,000Payments on senior long-term debt
    
    
    (625
    )
    
    
    (1,750
    )Capital contribution from minority partner
    
    
    1,179
    
    
    
    Payment on unsecured note payable
    
    
    (1,750
    )
    
    
    Payments of offering costs
    
    
    
    
    
    
    (132
    )Payments of deferred financing costs
    
    
    (1
    )
    
    
    (36
    )Net cash provided by financing activities
    
    
    14,803
    
    
    
    12,082Net (decrease) increase in cash and cash equivalents
    
    
    (309
    )
    
    
    620Cash and cash equivalents at beginning of the period
    
    
    1,346
    
    
    
    786Cash and cash equivalents at end of the period
    
    $
    1,037
    
    
    $
    1,406
  4




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##### Table of Contents



Dolan Media Company
 
 Notes to Unaudited Condensed Consolidated Interim Financial Statements
 Note 1. Nature of Business and Significant Accounting Policies
 Basis of
Presentation
    Use of Estimates in the Preparation of Financial Statements
 New Accounting Pronouncements:
 5




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##### Table of Contents



Dolan Media Company
Notes to Unaudited Condensed Consolidated Interim Financial Statements
   Level 1
    
    Unadjusted quoted prices in active markets for identical assets or liabilitiesLevel 2
    
    Unadjusted quoted prices in active markets for similar assets or liabilities, orUnadjusted quoted prices for identical or similar
assets or liabilities in markets that are not active,
orInputs other than quoted prices that are observable
for
the asset or liabilityLevel 3
    
    Unobservable inputs for the asset or liability
  .
   6




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##### Table of Contents



Dolan Media Company
Notes to Unaudited Condensed Consolidated Interim Financial Statements
    Note
2. Basic and Diluted Net Income (Loss) Per Share
  in thousands,
except per share amounts
 Three MonthsEnded March 31,2008
    
    
    2007Net income (loss)
    
    $
    4,007
    
    
    $
    (27,786
    )Basic:Weighted average common shares outstanding
    
    
    25,085
    
    
    
    9,324Weighted average common shares of unvested restricted stock
    
    
    (149
    )
    
    
    Shares used in the computation of basic net income (loss) per share
    
    
    24,936
    
    
    
    9,324Net income (loss) per share  basic
    
    $
    0.16
    
    
    $
    (2.98
    )Diluted:Shares used in the computation of basic net income (loss) per share
    
    
    24,936
    
    
    
    9,324Stock options
    
    
    280
    
    
    
    Shares used in the computation of dilutive net income (loss) per share
    
    
    25,216
    
    
    
    9,324Net income (loss) per share  diluted
    
    $
    0.16
    
    
    $
    (2.98
    )
 7




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##### Table of Contents



Dolan Media Company
Notes to Unaudited Condensed Consolidated Interim Financial Statements
  Note 3. Acquisitions
  Legal and Business Publishers, Inc. The Mecklenburg Times
  Wilford & Geske
   8




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##### Table of Contents



Dolan Media Company
Notes to Unaudited Condensed Consolidated Interim Financial Statements
  Minnesota Political Press: Politics in
Minnesota
 in thousands
 Legal and
    
    
    
    
    
    
    MNBusiness
    
    
    Wilford
    
    
    PoliticalPublishers
    
    
    & Geske
    
    
    Press
    
    
    TotalAssets acquired and liabilities assumed at their fair values:Property and equipment
    
    $
    50
    
    
    $
    126
    
    
    $
    
    
    
    $
    176Noncompete agreement
    
    
    250
    
    
    
    
    
    
    
    
    
    
    
    250APC long-term service contract
    
    
    
    
    
    
    10,983
    
    
    
    
    
    
    
    10,983Other finite-life intangible assets
    
    
    3,030
    
    
    
    
    
    
    
    310
    
    
    
    3,340Goodwill
    
    
    
    
    
    
    2,573
    
    
    
    
    
    
    
    2,573Total consideration, including direct expenses
    
    $
    3,330
    
    
    $
    13,682
    
    
    $
    310
    
    
    $
    17,322
 Pro Forma Information (unaudited):
 Pro FormaThree Months EndedMarch 31,2008
    
    
    2007Total revenues
    
    $
    42,469
    
    
    $
    38,474Net income (loss)
    
    
    4,117
    
    
    
    (27,325
    )Net income (loss) per share:Basic
    
    $
    0.17
    
    
    $
    (2.93
    )Diluted
    
    $
    0.16
    
    
    $
    (2.93
    )Pro forma weighted average shares outstanding:Basic
    
    
    24,936
    
    
    
    9,324Diluted
    
    
    25,216
    
    
    
    9,324
 9




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##### Table of Contents



Dolan Media Company
Notes to Unaudited Condensed Consolidated Interim Financial Statements
 Note 4. Investments
 (in thousands)
 Accounting
    
    
    Percent
    
    
    March 31,
    
    
    December 31,Method
    
    
    Ownership
    
    
    2008
    
    
    2007The Detroit Legal News Publishing, LLC
    
    Equity
    
    
    35
    
    
    $
    17,736
    
    
    $
    17,579GovDelivery, Inc.
    
    Cost
    
    
    15
    
    
    
    900
    
    
    
    900Total
    
    
    
    
    
    
    
    
    
    $
    18,636
    
    
    $
    18,479
 The Detroit Legal News Publishing, LLC:
  (in thousands)
 As of March 31,
    
    As of December 31,2008
    
    2007Carrying value of investment
    
    $
    17,736
    
    
    $
    17,579Underlying finite-lived customer list, net of amortization
    
    
    11,560
    
    
    
    11,937
 Three Months Ended March 31,2008
    
    2007Equity in earnings of DLNP, net of amortization of customer list
    
    $
    1,557
    
    
    $
    915Distributions received
    
    
    1,400
    
    
    
    1,400Amortization expense
    
    
    377
    
    
    
    360
 (in thousands)
 Three Months Ended March 31,2008
    
    
    2007Revenues
    
    $
    12,405
    
    
    $
    9,070Cost of revenues
    
    
    4,742
    
    
    
    3,863Gross profit
    
    
    7,663
    
    
    
    5,207Selling, general and administrative expenses
    
    
    2,117
    
    
    
    1,568Operating income
    
    
    5,546
    
    
    
    3,639Net income
    
    $
    5,527
    
    
    $
    3,642Companys 35% share of net income
    
    $
    1,934
    
    
    $
    1,275Less amortization of intangible assets
    
    
    377
    
    
    
    360Equity in earnings of DLNP, LLC
    
    $
    1,557
    
    
    $
    915
 GovDelivery, Inc.:
 10




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##### Table of Contents



Dolan Media Company
Notes to Unaudited Condensed Consolidated Interim Financial Statements
 Note 5. Goodwill and Finite-life Intangible Assets
 Goodwill:
 (in thousands)
 Business
    
    
    ProfessionalInformation
    
    
    Services
    
    
    TotalBalance as of December 31, 2007
    
    $
    58,632
    
    
    $
    20,412
    
    
    $
    79,044Venture Publications, Inc.*
    
    
    600
    
    
    
    
    
    
    
    600American Processing Company (Wilford & Geske)
    
    
    
    
    
    
    2,573
    
    
    
    2,573Balance as of March 31, 2008
    
    $
    59,232
    
    
    $
    22,985
    
    
    $
    82,217
 
 *
    
    Represents an accrual for an additional cash payment owed to Venture Publications in connection with
certain revenue targets set forth in the asset purchase agreement. This has been accounted for as
additional purchase price. Finite-Life Intangible Assets:
 Note 6. Long-Term Debt, Capital Lease Obligation
 (in
thousands)
 March 31,
    
    
    December 31,2008
    
    
    2007(unaudited)Senior secured debt (see below):Senior variable-rate term note, payable in
quarterly installments with a balloon payment
due August 8, 2014
    
    $
    73,125
    
    
    $
    48,750Senior variable-rate revolving note
    
    
    
    
    
    
    9,000Total senior secured debt
    
    
    73,125
    
    
    
    57,750Unsecured note payable
    
    
    1,594
    
    
    
    3,290Capital lease obligations
    
    
    8
    
    
    
    1074,727
    
    
    
    61,050Less current portion
    
    
    6,102
    
    
    
    4,749Long-term debt, less current portion
    
    $
    68,625
    
    
    $
    56,301
 Senior Secured Debt:
 The Mecklenburg Times
 11




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##### Table of Contents



Dolan Media Company
Notes to Unaudited Condensed Consolidated Interim Financial Statements
 Unsecured Note Payable :
 Note 7. Common and Preferred Stock
   Note 8. Income Taxes
  Accounting for Uncertainty
in Income Taxes  an Interpretation of FASB Statement No. 109
 Note 9. Major Customers and Related Parties
   12




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Dolan Media Company
Notes to Unaudited Condensed Consolidated Interim Financial Statements
   Note 10. Reportable Segments
  Reportable Segments
Three Months Ended March 31, 2008 and 2007
 Business
    
    
    ProfessionalInformation
    
    
    Services
    
    
    Corporate
    
    
    Total(In thousands)Three Months Ended March 31, 2008Revenues
    
    $
    22,771
    
    
    $
    18,740
    
    
    $
    
    
    
    $
    41,511Direct operating expenses
    
    
    7,572
    
    
    
    6,311
    
    
    
    
    
    
    
    13,883Selling,
general and administrative expenses
    
    
    9,622
    
    
    
    4,657
    
    
    
    1,824
    
    
    
    16,103Amortization and depreciation
    
    
    1,158
    
    
    
    1,983
    
    
    
    179
    
    
    
    3,320Equity in Earnings of DLNP, LLC
    
    
    1,557
    
    
    
    
    
    
    
    
    
    
    
    1,557Operating income (loss)
    
    $
    5,976
    
    
    $
    5,789
    
    
    $
    (2,003
    )
    
    $
    9,762Three Months Ended March 31, 2007Revenues
    
    $
    19,480
    
    
    $
    16,215
    
    
    $
    
    
    
    $
    35,695Direct operating expenses
    
    
    6,817
    
    
    
    5,625
    
    
    
    
    
    
    
    12,442Selling,
general and administrative expenses
    
    
    8,043
    
    
    
    4,063
    
    
    
    1,224
    
    
    
    13,330Amortization and depreciation
    
    
    1,042
    
    
    
    1,445
    
    
    
    112
    
    
    
    2,599Equity in Earnings of DLNP, LLC
    
    
    915
    
    
    
    
    
    
    
    
    
    
    
    915Operating income (loss)
    
    $
    4,492
    
    
    $
    5,083
    
    
    $
    (1,336
    )
    
    $
    8,239
 Note 11. Share-Based Compensation
  13




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##### Table of Contents



Dolan Media Company
Notes to Unaudited Condensed Consolidated Interim Financial Statements
  Stock Options.
 Restricted Stock Grants.
 Note 12. Contingencies and Commitments
 Litigation:
 14




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##### 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;
    
    a decrease in paid subscriptions to our print publications could continue to adversely
affect our circulation revenues to the extent we are not able to sufficiently continue
increasing our print subscription rates and adversely affect our advertising and display
revenues to the extent advertisers begin placing fewer print advertisements with us due to
print decreased readership;
    
    we have owned and operated the businesses in our Professional Services Division (APC and
Counsel Press) for a short period of time;
    
    APCs business revenues are very concentrated, as APC currently provides mortgage
default processing services to only three customers, Trott & Trott, Feiwell & Hannoy and
Wilford & Geske, and if the number of case files referred to APC by these law firm
customers decreases or fails to increase, our operating results and ability to execute our
growth strategy could be adversely affected;
    
    the key attorneys at each of APCs three law firm customers are employed by APC and
APCs president, two of its four executive vice presidents and its two senior executives in
Indiana hold an indirect equity interest in APC. 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 non-traditional mortgage products,
including voluntary programs adopted by lenders and loan servicers, may have an adverse
affect on or restrict APCs operations;
    
    a key component of our operating income and operating cash flows has been, and may
continue to be, our minority equity investment in The Detroit Legal
News Publishing, LLC;
    
    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 Financial Officer; Mark W.C. Stodder, our Executive Vice President
Business Information; and David A. Trott, President, APC;
    
    we intend to continue to pursue acquisition opportunities, which we may not do
successfully and which may subject us to considerable business and financial risk, and we
may be required to incur additional indebtedness or raise additional capital to fund these
acquisitions; and
 15




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##### Table of Contents




    
    growing our business may place a strain on our management and internal systems,
processes and controls.
   Overview
  Recent Developments
 Increases in our Ownership in APC
  Initial Public Offering
  16




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##### Table of Contents



Recent Acquisitions
  Business Information
 The Mecklenburg Times The Mecklenburg Times
  Professional Services
   17




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##### Table of Contents



Revenues
  
    
    54.9% from our Business Information Division; and
    
    45.1% from our Professional Services Division.
 Business Information.
   18




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##### Table of Contents



Professional Services.
     19




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##### Table of Contents



Operating Expenses
  
    
    Direct operating expenses, which consist primarily of the cost of compensation and
employee benefits for our editorial personnel in our Business Information Division and the
processing staff at APC and Counsel Press, and 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 the cost of delivery of our business information products;
    
    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 one to thirty years.
  Equity in Earnings of The Detroit Legal News Publishing
   Minority Interest in Net Income of Subsidiary
  20




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##### Table of Contents




    
    a 9.1% membership interest in APC held by (1) Trott & Trott from January 1, 2008 through
January 31, 2008 and (2) APC Investments, LLC, a limited liability company owned by the
shareholders of Trott & Trott, including APC President Dave Trott and APCs two executive
vice presidents in Michigan, from February 1, 2008 through March 31, 2008; and
    
    a 2.3% membership interest in APC that Feiwell & Hannoy held for the period of January 1,
2008 through February 21, 2008 and a 2.0% membership interest in APC that Feiwell & Hannoy
held for the period of February 22, 2008 through March 31, 2008.
   
    
    $0.3 million and $0.4 million to Trott & Trott (or APC Investments, LLC since February 1,
2008), respectively; and
    
    $0.1 million to Feiwell & Hannoy in both periods.
  Critical Accounting Policies
    Purchase Accounting
 The Mecklenberg Times
 21




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##### Table of Contents



Valuation of Our Company Equity Securities
   www.sec.gov.
 Goodwill, Other Intangible Assets and Other Long-Lived Assets
  Share-Based Compensation Expense
  Stock Options.
 22




---



##### Table of Contents



Restricted
Stock.
 Income Taxes
  Accounts Receivable Allowances
  23




---



##### Table of Contents



New Accounting Pronouncements
  24




---



##### Table of Contents



Adjusted EBITDA
 before
 
    
    non-cash interest expense related to redeemable preferred stock;
    
    interest expense, net;
    
    income tax expense;
    
    depreciation and amortization;
    
    non-cash compensation expense; and
    
    minority interest in net income of subsidiary;
 25




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##### Table of Contents



after
 
    
    minority interest distributions paid.
 Managements Use of Adjusted EBITDA
     26




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##### Table of Contents



Three Months Ended March 31,2008
    
    
    2007Net income (loss)
    
    $
    4,007
    
    
    $
    (27,786
    )Non-cash interest expense related to redeemable preferred stock
    
    
    
    
    
    
    29,942Interest expense, net
    
    
    2,451
    
    
    
    2,035Income tax expense
    
    
    2,758
    
    
    
    3,140Amortization of intangibles
    
    
    2,219
    
    
    
    1,844Depreciation expense
    
    
    1,101
    
    
    
    755Amortization of DLNP intangible
    
    
    377
    
    
    
    360Non-cash compensation expense
    
    
    399
    
    
    
    10Minority interest in net income of subsidiary
    
    
    557
    
    
    
    900Cash distributions to minority interest
    
    
    (373
    )
    
    
    (466
    )Adjusted EBITDA
    
    $
    13,496
    
    
    $
    10,734
 RESULTS OF OPERATIONS
 in thousands
 Three Months Ended March 31,% of
    
    
    
    
    
    
    % of2008
    
    
    Revenues
    
    
    2007
    
    
    RevenuesRevenues:Business Information
    
    $
    22,771
    
    
    
    54.9
    %
    
    $
    19,480
    
    
    
    54.6
    %Professional Services
    
    
    18,740
    
    
    
    45.1
    %
    
    
    16,215
    
    
    
    45.4
    %Total revenues
    
    
    41,511
    
    
    
    100.0
    %
    
    
    35,695
    
    
    
    100.0
    %Operating expenses:Business Information
    
    
    18,352
    
    
    
    44.2
    %
    
    
    15,903
    
    
    
    44.6
    %Professional Services
    
    
    12,951
    
    
    
    31.2
    %
    
    
    11,132
    
    
    
    31.2
    %Unallocated corporate operating expenses
    
    
    2,003
    
    
    
    4.8
    %
    
    
    1,336
    
    
    
    3.7
    %Total operating expenses
    
    
    33,306
    
    
    
    80.2
    %
    
    
    28,371
    
    
    
    79.5
    %Equity in earnings of The Detroit Legal
News Publishing, LLC, net of
amortization
    
    
    1,557
    
    
    
    3.8
    %
    
    
    915
    
    
    
    2.6
    %Operating income
    
    
    9,762
    
    
    
    23.5
    %
    
    
    8,239
    
    
    
    23.1
    %Non-cash interest expense related to
redeemable preferred stock
    
    
    
    
    
    
    0.0
    %
    
    
    (29,942
    )
    
    
    (83.9
    )%Interest expense, net
    
    
    (2,451
    )
    
    
    (5.9
    )%
    
    
    (2,035
    )
    
    
    (5.7
    )%Other income (expense), net
    
    
    11
    
    
    
    0.0
    %
    
    
    (8
    )
    
    
    0.0
    %Income (loss) before income taxes
    
    
    7,322
    
    
    
    17.6
    %
    
    
    (23,746
    )
    
    
    (66.5
    )%Income tax expense
    
    
    (2,758
    )
    
    
    (6.6
    )%
    
    
    (3,140
    )
    
    
    (8.8
    )%Minority interest
    
    
    (557
    )
    
    
    (1.3
    )%
    
    
    (900
    )
    
    
    (2.5
    )%Net income (loss)
    
    $
    4,007
    
    
    
    9.7
    %
    
    $
    (27,786
    )
    
    
    (77.8
    )%Adjusted EBITDA
    
    $
    13,496
    
    
    
    32.5
    %
    
    $
    10,734
    
    
    
    30.1
    %
 27




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##### Table of Contents



Three Months Ended March 31, 2008
Compared to Three Months Ended March 31, 2007
 Revenues
 Three Months Ended March 31,2008
    
    
    2007
    
    
    Increase($s in millions)Total revenues
    
    $
    41.5
    
    
    $
    35.7
    
    
    $
    5.8
    
    
    
    16.3
    %
  
    
    $1.6 million of revenues from businesses we acquired on
or after January 1, 2007, which we refer to as acquired
businesses. These revenues consisted of:
(1) $0.6 million in revenues from the assets of Venture
Publications (including the Mississippi Business Journal)
acquired on March 30, 2007; (2) $0.3 million in
revenues from the assets of Legal and Business Publishers (including
The Mecklenburg Times) acquired on February 13, 2008; and
(3) $0.6 million in revenues from the mortgage default
processing services business of Wilford & Geske acquired on
February 22, 2008. Acquired businesses do not include fold in
acquisitions, which we define below. In making this comparison, we
did not consider the mortgage default processing services business of
Feiwell & Hannoy as an acquired business
because we acquired this business on January 9, 2007 and owned
this business for all but five business days of the first quarter of
2007.
    
    $4.3 million of revenues from organic revenue growth. We
define organic revenue growth as the net increase in revenue produced
by: (1) businesses we owned and operated prior to January 1,
2007, which we refer to as existing businesses;
(2) customer lists, goodwill or other finite-life intangibles we
purchased on or after January 1, 2007, and integrated into our
existing businesses; and (3) businesses that we account for as
acquisitions under the purchase method of accounting in accordance
with SFAS No. 141 Business Combinations, but do not
report separately for internal financial purposes, which we refer to
as fold in acquisitions. In the first quarter of 2008,
almost all of this revenue growth was a result of our existing
businesses.
  Operating Expenses
 Three Months Ended March 31,2008
    
    2007
    
    Increase($s in millions)Total operating expenses
    
    $
    33.3
    
    
    $
    28.4
    
    
    $
    4.9
    
    
    
    17.4
    %Direct operating expense
    
    
    13.9
    
    
    
    12.4
    
    
    
    1.4
    
    
    
    11.6
    %Selling, general and administrative expenses
    
    
    16.1
    
    
    
    13.3
    
    
    
    2.8
    
    
    
    20.8
    %Depreciation expense
    
    
    1.1
    
    
    
    0.8
    
    
    
    0.3
    
    
    
    45.8
    %Amortization expense
    
    
    2.2
    
    
    
    1.8
    
    
    
    0.4
    
    
    
    20.3
    %
  28




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##### Table of Contents



Direct Operating Expenses.
 Selling, General and Administrative Expenses.
 Depreciation and Amortization Expense.
 Adjusted EBITDA
 Three Months Ended March 31,2008
    
    2007
    
    Increase($s in millions)Adjusted EBITDA
    
    $
    13.5
    
    
    $
    10.7
    
    
    $
    2.8
    
    
    
    25.7
    %Adjusted EBITDA margin
    
    
    32.5
    %
    
    
    30.1
    %
    
    
    2.4
    %
    
    
    8.0
    %
  Non-Cash Interest Expense Related to Redeemable Preferred Stock
 Three Months Ended March 31,2008
    
    2007
    
    Decrease($s in millions)Non-cash interest
expense related to
redeemable
preferred stock
    
    $
    
    $
    29.9
    
    
    $
    (29.9
    )
    
    
    (100
    %)
  29




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##### Table of Contents



Interest Expense, Net
 Three Months Ended March 31,2008
    
    2007
    
    Increase($s in millions)Interest expense, net
    
    $
    2.5
    
    
    $
    2.0
    
    
    $
    0.4
    
    
    
    20.4
    %
  Income Tax Expense
 Three Months Ended March 31,2008
    
    2007
    
    Decrease($s in millions)Income tax expense
    
    $
    2.8
    
    
    $
    3.1
    
    
    $
    (0.4
    )
    
    
    (12.2
    )%
  Business Information Division Results
 Revenues
 Three Months Ended March 31,2008
    
    2007
    
    Increase (decrease)($s in millions)Total Business Information Division Revenues
    
    $
    22.8
    
    
    $
    19.5
    
    
    $
    3.3
    
    
    
    16.9
    %Display and classified advertising revenues
    
    
    8.1
    
    
    
    7.5
    
    
    
    0.6
    
    
    
    8.0
    %Public notice revenues
    
    
    10.6
    
    
    
    7.6
    
    
    
    3.1
    
    
    
    40.6
    %Circulation revenues
    
    
    3.5
    
    
    
    3.6
    
    
    
    (0.2
    )
    
    
    (5.1
    )%Other revenues
    
    
    0.5
    
    
    
    0.7
    
    
    
    (0.2
    )
    
    
    (26.2
    )%
  The Mecklenburg Times
 30




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##### Table of Contents



The Daily Record
 Operating Expenses
 Three Months Ended March 31,2008
    
    2007
    
    Increase($s in millions)Total operating expenses
    
    $
    18.4
    
    
    $
    15.9
    
    
    $
    2.4
    
    
    
    15.4
    %Direct operating expense
    
    
    7.6
    
    
    
    6.8
    
    
    
    0.8
    
    
    
    11.1
    %Selling, general and administrative expenses
    
    
    9.6
    
    
    
    8.0
    
    
    
    1.6
    
    
    
    19.6
    %Depreciation expense
    
    
    0.4
    
    
    
    0.3
    
    
    
    0.1
    
    
    
    36.6
    %Amortization expense
    
    
    0.7
    
    
    
    0.7
    
    
    
    
    
    
    
    0.7
    %
  Professional Services Division Results
 Revenues
 Three Months Ended December 31,2008
    
    2007
    
    Increase (decrease)($s in millions)Total Professional Services Division revenues
    
    $
    18.7
    
    
    $
    16.2
    
    
    $
    2.5
    
    
    
    15.6
    %Mortgage default processing service revenues
    
    
    15.0
    
    
    
    12.1
    
    
    
    2.9
    
    
    
    23.8
    %Appellate services revenues
    
    
    3.7
    
    
    
    4.1
    
    
    
    (0.4
    )
    
    
    (9.0
    )%
   31




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##### Table of Contents



Operating Expenses
 Three Months Ended December 31,2008
    
    2007
    
    Increase($s in millions)Total operating expenses
    
    $
    13.0
    
    
    $
    11.1
    
    
    $
    1.8
    
    
    
    16.3
    %Direct operating expense
    
    
    6.3
    
    
    
    5.6
    
    
    
    0.7
    
    
    
    12.2
    %Selling, general and
administrative expenses
    
    
    4.7
    
    
    
    4.1
    
    
    
    0.6
    
    
    
    14.6
    %Depreciation expense
    
    
    0.5
    
    
    
    0.3
    
    
    
    0.2
    
    
    
    49.4
    %Amortization expense
    
    
    1.5
    
    
    
    1.1
    
    
    
    0.4
    
    
    
    33.5
    %
   Off Balance Sheet Arrangements
  Liquidity and Capital Resources
  March 31,
    
    December 31,2008
    
    2007Cash and cash equivalents
    
    $
    1,037
    
    
    $
    1,346Working capital deficit
    
    
    (2,031
    )
    
    
    (5,460
    )Long-term debt, less current portion
    
    
    68,625
    
    
    
    56,301
 Three MonthsEnded March 31,2008
    
    2007Net cash provided by operating activities
    
    $
    3,752
    
    
    $
    7,172Net cash used in investing activities:
    
    
    (18,864
    )
    
    
    (18,634
    )Acquisitions and investments
    
    
    (17,422
    )
    
    
    (17,288
    )Capital expenditures
    
    
    (1,442
    )
    
    
    (1,346
    )Net cash provided by financing activities
    
    
    14,803
    
    
    
    12,082
 32




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##### Table of Contents



Cash Flows Provided by Operating Activities
     March 31, 2008
    
    December 31, 2007Allowance for doubtful accounts as a percentage of gross accounts receivable
    
    
    4.2
    %
    
    
    5.8
    %Day sales outstanding
    
    
    63.4
    
    
    
    54.6
   Cash Flows Used by Investing Activities
 $
  33




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##### Table of Contents



Cash Flows Provided by Financing Activities
   Credit Agreement.
 The Mecklenburg Times $
  34




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##### Table of Contents




    
    incurring indebtedness (including guarantee obligations) or liens;
    
    entering into mergers, consolidations, liquidations or dissolutions;
    
    selling assets;
    
    entering into certain acquisition transactions;
    
    forming or entering into partnerships and joint ventures;
    
    entering into negative pledge agreements;
    
    paying dividends, redeeming or repurchasing shares or making other payments in respect of
capital stock;
    
    entering into transactions with affiliates;
    
    making investments;
    
    entering into sale and leaseback transactions; and
    
    changing our line of business.
  Future Needs
  35




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##### Table of Contents



Item 3.  Quantitative and Qualitative Disclosures about Market Risk
 .
 Accounting for Derivative Instruments and Hedging Activities
   
 Item 4T.  Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  36




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1.  Legal Proceedings
  
 Item 1A. Risk Factors
  Changes in court practices or procedures may affect the
filing and service requirements for appellate case
filings or may reduce or eliminate the amount of appellate case filings, either of which could
adversely affect Counsel Presss revenues, profitability and growth opportunities
or adversely restrict its operations.
   
 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
    37




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##### Table of Contents



Item 6.  Exhibits
 ExhibitNo
    
    Title
    
    Method of Filing10.1
    
    Asset Purchase Agreement between American
Processing Company, LLC and Wilford &
Geske, Professional Association
    
    Incorporated by
reference to
Exhibit 10.1 of our
current report on
Form 8-K filed with
the SEC on
February 25, 200810.2
    
    Services Agreement between American
Processing Company, LLC and Wilford & Geske
Professional Association
    
    Incorporated by
reference to
Exhibit 10.2 of our
current report on
Form 8-K filed with
the SEC on
February 25, 2008.
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 Act10.3
    
    Amendment No. 3 to Amended and Restated
Operating Agreement of American Processing
Company, LLC
    
    Incorporated by
reference to
Exhibit 10.3 of our
current report on
Form 8-K filed with
the SEC on
February 25, 200831.1
    
    Section 302 Certification of James P. Dolan
    
    Filed herewith31.2
    
    Section 302 Certification of Scott J. Pollei
    
    Filed herewith32.1
    
    Section 906 Certification of James P. Dolan
    
    Furnished herewith32.2
    
    Section 906 Certification of Scott J. Pollei
    
    Furnished herewith
 38




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##### Table of Contents



SIGNATURES
  DOLAN MEDIA COMPANYDated: May 8, 2008
    By:
    /s/ James P. DolanJames P. DolanChairman, Chief Executive Officer and President
(Principal Executive Officer)Dated: May 8, 2008
    By:
    /s/ Scott J. PolleiScott J. PolleiExecutive Vice President and Chief Financial Officer
(Principal Financial Officer)Dated: May 8, 2008
    By:
    /s/ Vicki J. DuncombVicki J. DuncombVice President, Finance
(Principal Accounting Officer) 39




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##### Table of Contents



Exhibit Index
 ExhibitNo
    
    Title
    
    Method of Filing31.1
    
    Section 302 Certification of James P. Dolan
    
    Filed herewith31.2
    
    Section 302 Certification of Scott J. Pollei
    
    Filed herewith32.1
    
    Section 906 Certification of James P. Dolan
    
    Furnished herewith32.2
    
    Section 906 Certification of Scott J. Pollei
    
    Furnished herewith
 40