##### 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, 2010
 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
    
    43-2004527(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    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




---



##### 



PART I  FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets as of March 31, 2010 (unaudited) and December 31, 2009
    
    
    1Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended March 31,
2010 and 2009
    
    
    2Unaudited Condensed Consolidated Statements of Stockholders Equity and Comprehensive Income
for the Three Months Ended March 31, 2010
    
    
    3Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31,
2010 and 2009
    
    
    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
    
    
    31Item 4. Controls and Procedures
    
    
    32PART II  OTHER INFORMATION
    
    
    32Item 1. Legal Proceedings
    
    
    32Item 1A. Risk Factors
    
    
    32Item 2. Unregistered Sales of Securities and Use of Proceeds
    
    
    32Item 3. Defaults Upon Senior Securities
    
    
    33Item 4. Reserved
    
    
    33Item 5. Other Information
    
    
    33Item 6. Exhibits
    
    
    33SIGNATURES
    
    
    34Amendment No. 1 to the Third Amended and Restated Limited Liability Agreement of DiscoverReady, LLC dated April 30, 2010Section 302 Certification of James P. DolanSection 302 Certification of Vicki J. DuncombSection 906 Certification of James P. DolanSection 906 Certification of Vicki J. Duncomb




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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 31,2010
    
    
    2009(unaudited)ASSETSCurrent assetsCash and cash equivalents
    
    $
    3,756
    
    
    $
    2,894Accounts receivable, including unbilled
services (net of allowances for doubtful
accounts of $1,294 and $1,113 as of March
31, 2010 and December 31, 2009,
respectively)
    
    
    63,148
    
    
    
    57,205Unbilled pass-through costs
    
    
    8,509
    
    
    
    13,087Prepaid expenses and other current assets
    
    
    3,087
    
    
    
    2,948Total current assets
    
    
    78,500
    
    
    
    76,134Investments
    
    
    14,807
    
    
    
    15,479Property and equipment, net
    
    
    15,498
    
    
    
    15,457Finite-life intangible assets, net
    
    
    191,145
    
    
    
    193,687Indefinite-lived intangible assets
    
    
    221,129
    
    
    
    222,580Other assets
    
    
    3,897
    
    
    
    4,953Total assets
    
    $
    524,976
    
    
    $
    528,290LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term debt
    
    $
    19,764
    
    
    $
    22,005Accounts payable
    
    
    12,550
    
    
    
    16,030Accrued pass-through liabilities
    
    
    25,234
    
    
    
    25,929Accrued compensation
    
    
    6,978
    
    
    
    4,384Accrued liabilities
    
    
    9,672
    
    
    
    5,371Due to sellers of acquired businesses
    
    
    4,790
    
    
    
    4,685Deferred revenue
    
    
    21,190
    
    
    
    18,797Total current liabilities
    
    
    100,178
    
    
    
    97,201Long-term debt, less current portion
    
    
    130,229
    
    
    
    137,960Deferred income taxes
    
    
    6,568
    
    
    
    8,160Other liabilities
    
    
    10,441
    
    
    
    9,506Total liabilities
    
    
    247,416
    
    
    
    252,827Redeemable noncontrolling interest
    
    
    21,538
    
    
    
    26,600Commitments and contingencies (Note 14)Stockholders equityCommon stock, $0.001 par value;
authorized: 70,000,000 shares;
outstanding: 30,314,992
and 30,326,437 shares as of March 31, 2010
and December 31, 2009, 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
    
    
    285,849
    
    
    
    287,210Accumulated deficit
    
    
    (29,220
    )
    
    
    (38,377
    )Other comprehensive loss (net of tax)
    
    
    (637
    )
    
    
    Total stockholders equity
    
    
    256,022
    
    
    
    248,863Total liabilities and stockholders equity
    
    $
    524,976
    
    
    $
    528,290
   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 31,2010
    
    
    2009RevenuesProfessional Services
    
    $
    56,026
    
    
    $
    42,032Business Information
    
    
    20,952
    
    
    
    21,904Total revenues
    
    
    76,978
    
    
    
    63,936Operating expensesDirect operating: Professional Services
    
    
    22,190
    
    
    
    15,458Direct operating: Business Information
    
    
    6,916
    
    
    
    7,450Selling, general and administrative
    
    
    25,188
    
    
    
    20,736Amortization
    
    
    3,993
    
    
    
    5,124Depreciation
    
    
    2,736
    
    
    
    2,123Total operating expenses
    
    
    61,023
    
    
    
    50,891Equity in earnings of affiliates
    
    
    1,428
    
    
    
    1,397Operating income
    
    
    17,383
    
    
    
    14,442Non-operating income (expense)Interest expense, net of interest income
    
    
    (1,736
    )
    
    
    (1,970
    )Non-cash interest income related to interest rate swaps
    
    
    363
    
    
    
    234Other income
    
    
    
    
    
    
    1,446Total non-operating expense
    
    
    (1,373
    )
    
    
    (290
    )Income before income taxes
    
    
    16,010
    
    
    
    14,152Income tax expense
    
    
    (5,990
    )
    
    
    (4,317
    )Net income
    
    
    10,020
    
    
    
    9,835Less: Net income attributable to redeemable noncontrolling interest
    
    
    (863
    )
    
    
    (1,188
    )Net income attributable to Dolan Media Company
    
    $
    9,157
    
    
    $
    8,647Earnings per share  basic and diluted:Net income attributable to Dolan Media Company
    
    $
    0.30
    
    
    $
    0.29Accretion of redeemable noncontrolling interest in NDeX
    
    
    
    
    
    
    (0.11
    )Net income attributable to Dolan Media Company common stockholders
    
    $
    0.30
    
    
    $
    0.18Weighted average shares outstanding:Basic
    
    
    30,106,932
    
    
    
    29,805,722Diluted
    
    
    30,194,842
    
    
    
    29,871,913
   2




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##### Table of Contents



Dolan Media Company
 
 Unaudited Condensed Consolidated Statements of Stockholders Equity and Comprehensive Income
(in thousands, except share data)
 OtherCommon Stock
    
    
    Additional
    
    
    Accumulated
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Paid-In Capital
    
    
    Deficit
    
    
    Loss
    
    
    TotalBalance (deficit) at December 31, 2008
    
    
    29,955,018
    
    
    $
    30
    
    
    $
    291,310
    
    
    $
    (69,190
    )
    
    $
    
    
    
    $
    222,150Net income attributable to Dolan Media Company
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,813
    
    
    
    
    
    
    
    30,813Accretion of redeemable noncontrolling interest
in NDeX
    
    
    
    
    
    
    
    
    
    
    (9,262
    )
    
    
    
    
    
    
    
    
    
    
    (9,262
    )Net income attributable to Dolan Media Company
common stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,551Issuance of common stock in connection with a
purchase of noncontrolling interest in NDeX
    
    
    248,000
    
    
    
    
    
    
    
    2,600
    
    
    
    
    
    
    
    
    
    
    
    2,600Issuance of common stock pursuant to the
exercise of stock options
    
    
    9,533
    
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    16Share-based compensation expense, including
issuance of restricted stock (shares are net of
forfeitures)
    
    
    113,886
    
    
    
    
    
    
    
    2,556
    
    
    
    
    
    
    
    
    
    
    
    2,556Other
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    
    
    
    
    
    
    
    
    (10
    )Balance (deficit) at December 31, 2009
    
    
    30,326,437
    
    
    $
    30
    
    
    $
    287,210
    
    
    $
    (38,377
    )
    
    $
    
    
    
    $
    248,863Net income attributable to Dolan Media Company
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,157
    
    
    
    
    
    
    
    9,157Accretion of redeemable noncontrolling interest
in NDeX
    
    
    
    
    
    
    
    
    
    
    (79
    )
    
    
    
    
    
    
    
    
    
    
    (79
    )Net income attributable to Dolan Media Company
common stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,078Unrealized loss on interest rate swap, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (637
    )
    
    
    (637
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,441Share-based compensation expense, including
issuance of restricted stock (shares are net of
forfeitures)
    
    
    (11,445
    )
    
    
    
    
    
    
    605
    
    
    
    
    
    
    
    
    
    
    
    605Accretion of redeemable noncontrolling interest
in DiscoverReady
    
    
    
    
    
    
    
    
    
    
    (1,887
    )
    
    
    
    
    
    
    
    
    
    
    (1,887
    )Balance (deficit) at March 31, 2010
    
    
    30,314,992
    
    
    $
    30
    
    
    $
    285,849
    
    
    $
    (29,220
    )
    
    $
    (637
    )
    
    $
    256,022
   3




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##### Table of Contents



Dolan Media Company
 
 Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
 Three Months EndedMarch 31,2010
    
    
    2009Cash flows from operating activitiesNet income
    
    $
    10,020
    
    
    $
    9,835Distributions received from The Detroit Legal News Publishing, LLC
    
    
    2,100
    
    
    
    1,400Distributions paid to holders of noncontrolling interest
    
    
    (624
    )
    
    
    (976
    )Non-cash operating activities:Amortization
    
    
    3,993
    
    
    
    5,124Depreciation
    
    
    2,736
    
    
    
    2,123Equity in earnings of affiliates
    
    
    (1,428
    )
    
    
    (1,397
    )Stock-based compensation expense
    
    
    606
    
    
    
    506Change in value of interest rate swap
    
    
    (369
    )
    
    
    (230
    )Amortization of debt issuance costs
    
    
    83
    
    
    
    62Non-cash fair value adjustment on earnout recorded in
connection with acquisition
    
    
    294
    
    
    
    Changes in operating assets and liabilities, net of effects of
business combinations:Accounts receivable and unbilled pass-through costs
    
    
    (1,365
    )
    
    
    (15,873
    )Prepaid expenses and other current assets
    
    
    (125
    )
    
    
    2,211Other assets
    
    
    36
    
    
    
    (6
    )Accounts payable and accrued liabilities
    
    
    2,735
    
    
    
    3,984Deferred revenue and other liabilities
    
    
    2,462
    
    
    
    1,739Net cash provided by operating activities
    
    
    21,154
    
    
    
    8,502Cash flows from investing activitiesAcquisitions and investments
    
    
    
    
    
    
    (25
    )Capital expenditures
    
    
    (1,884
    )
    
    
    (810
    )Net cash used in investing activities
    
    
    (1,884
    )
    
    
    (835
    )Cash flows from financing activitiesNet payments on senior revolving note
    
    
    (8,000
    )
    
    
    Payments on senior long-term debt
    
    
    (3,050
    )
    
    
    (2,250
    )Payments on unsecured notes payable
    
    
    (7,308
    )
    
    
    (1,750
    )Other
    
    
    (50
    )
    
    
    (2
    )Net cash used in financing activities
    
    
    (18,408
    )
    
    
    (4,002
    )Net increase in cash and cash equivalents
    
    
    862
    
    
    
    3,665Cash and cash equivalents at beginning of the period
    
    
    2,894
    
    
    
    2,456Cash and cash equivalents at end of the period
    
    $
    3,756
    
    
    $
    6,121
   4




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##### Table of Contents



Notes to Unaudited Condensed Consolidated Interim Financial Statements
 Note 1. Basis of Presentation
 Basis of Presentation
     Note 2. Basic and Diluted Income Per Share
   5




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##### Table of Contents



in thousands, except per share amounts
 Three MonthsEnded March 31,2010
    
    
    2009Net income attributable to Dolan Media Company
    
    $
    9,157
    
    
    $
    8,647Accretion of redeemable noncontrolling interest in NDeX, net of tax
    
    
    (79
    )
    
    
    (3,350
    )Net income attributable to Dolan Media Company common stockholders
    
    $
    9,078
    
    
    $
    5,297Basic:Weighted average common shares outstanding
    
    
    30,321
    
    
    
    29,953Weighted average common shares of unvested restricted stock
    
    
    (214
    )
    
    
    (147
    )Shares used in the computation of basic net income per share
    
    
    30,107
    
    
    
    29,806Net income attributable to Dolan Media Company common stockholders per share  basic
    
    $
    0.30
    
    
    $
    0.18Diluted:Shares used in the computation of basic net income per share
    
    
    30,107
    
    
    
    29,806Stock options and restricted stock
    
    
    88
    
    
    
    66Shares used in the computation of dilutive net income per share
    
    
    30,195
    
    
    
    29,872Net income attributable to Dolan Media Company common stockholders per share  diluted
    
    $
    0.30
    
    
    $
    0.18
  Note 3. Business Combinations
  2010 Equity Transactions:
 Acquisition of Noncontrolling Interest in NDeX
 Redemption of Noncontrolling Interest of Feiwell & Hannoy in NDeX
 2009 Acquisitions/Equity Transactions:
 Albertelli:
  6




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##### Table of Contents



DiscoverReady:
   Acquisition of Noncontrolling Interest in NDeX .
  7




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##### Table of Contents



Pro Forma Information: (in thousands, except per share data):
 Pro FormaThree Months EndedMarch 31, 2009Total revenues
    
    $
    70,578Net income attributable to Dolan Media Company
    
    
    9,750Net income attributable to Dolan Media Company per share:Basic
    
    $
    0.32Diluted
    
    $
    0.32Actual/Pro forma weighted average shares outstanding:Basic
    
    
    30,054Diluted
    
    
    30,120
 Note 4. Derivative Instruments
       8




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##### Table of Contents



Note 5. Fair Value of Financial Instruments
  Level 1
    
    Quoted prices in active markets for identical assets or liabilities.Level 2
    
    Quoted prices in active markets for similar assets or liabilities, or quoted
prices for identical or similar assets or liabilities in markets that are not active,
or inputs other than quoted prices that are observable or can be corroborated by
observable market data for the asset or liability.Level 3
    
    Unobservable inputs for the asset or liability that are supported by little
or no market activity. These fair values are determined using pricing models for which
the assumptions utilize managements estimates or market participant assumptions.
 Assets and Liabilities Measured at Fair Value on a Recurring Basis.
  (amounts in thousands)
 Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalInterest rate swaps
    
    $
    
    
    
    $
    2,154
    
    
    $
    
    
    
    $
    2,154Earnout liability recorded in connection
with the NDeX Florida operations acquired from the Albertelli sellers
    
    
    
    
    
    
    
    
    
    
    7,293
    
    
    
    7,293Redeemable noncontrolling interest in DiscoverReady
    
    
    
    
    
    
    
    
    
    
    8,985
    
    
    
    8,985Total
    
    $
    
    
    
    $
    2,154
    
    
    $
    16,278
    
    
    $
    18,432
 (amounts in thousands)
 Fair Value
    
    
    
    
    
    
    
    
    
    
    Fair ValueAdjustment
    
    
    
    
    
    
    
    
    
    
    AdjustmentIncluded in
    
    
    
    
    
    
    
    
    
    
    Included inNet Income
    
    
    
    
    
    
    
    
    
    
    AdditionalAttributable
    
    
    Minority
    
    
    
    
    
    
    Paid-inBalance at
    
    
    to Dolan
    
    
    Partners
    
    
    Distributions
    
    
    Capital and
    
    
    Balance atDecember 31,
    
    
    Media
    
    
    Share of
    
    
    to Minority
    
    
    Deferred
    
    
    March 31,2009
    
    
    Company
    
    
    Earnings
    
    
    Partners
    
    
    Taxes
    
    
    2010Earnout liability recorded in connection
with the NDeX Florida operations acquired from the Albertelli sellers
    
    $
    6,999
    
    
    $
    294
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    7,293Redeemable
noncontrolling
interest in
DiscoverReady
    
    
    5,902
    
    
    
    
    
    
    
    357
    
    
    
    (293
    )
    
    
    3,019
    
    
    
    8,985Total
    
    $
    12,901
    
    
    $
    294
    
    
    $
    357
    
    
    $
    (293
    )
    
    $
    3,019
    
    
    $
    16,278
  9




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##### Table of Contents



Non-Financial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis.
 Fair Value of Financial Instruments:
 Note 6. Investments
 The Detroit Legal News Publishing, LLC:
  (in thousands)
 As of March 31,
    
    
    As of December 31,2010
    
    
    2009Carrying value of investment
    
    $
    14,807
    
    
    $
    15,479Underlying finite-lived customer list, net of amortization
    
    
    8,544
    
    
    
    8,921
 Three Months EndedMarch 31,2010
    
    
    2009Equity in earnings of DLNP, net of amortization of customer list
    
    $
    1,428
    
    
    $
    1,397Distributions received
    
    
    2,100
    
    
    
    1,400Amortization expense
    
    
    377
    
    
    
    376
 Note 7. Intangible Assets
 Indefinite-Lived Intangible Assets:
 (in thousands)
 March 31,
    
    
    December 31,2010
    
    
    2009Mortgage Default Processing Services
    
    $
    131,709
    
    
    $
    131,709Litigation Support Services
    
    
    23,651
    
    
    
    25,102Business Information
    
    
    59,232
    
    
    
    59,232Total
    
    $
    214,592
    
    
    $
    216,043
  10




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##### Table of Contents



Finite-Life Intangible Assets:
 Note 8. Long-Term Debt, Capital Lease Obligation
 (in thousands)
 March 31,
    
    
    December 31,2010
    
    
    2009Senior secured debt (see below):Senior variable-rate term note, payable in quarterly
installments with a balloon payment due August 8,
2014
    
    $
    140,400
    
    
    $
    143,450Senior variable-rate revolving note due August 8, 2012
    
    
    
    
    
    
    8,000Total senior secured debt
    
    
    140,400
    
    
    
    151,450Unsecured notes payable
    
    
    9,142
    
    
    
    8,000Capital lease obligations
    
    
    451
    
    
    
    515149,993
    
    
    
    159,965Less current portion
    
    
    19,764
    
    
    
    22,005Long-term debt, less current portion
    
    $
    130,229
    
    
    $
    137,960
 Senior Secured Debt:
  Unsecured Notes Payable:
    11




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##### Table of Contents



Note 9. Common and Preferred Stock
  Note 10. Income Taxes
  Note 11. Major Customers and Related Parties
      12




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##### Table of Contents



Note 12. Reportable Segments
  in thousands
 Professional ServicesMortgageDefault
    
    
    Litigation
    
    
    BusinessProcessing
    
    
    Support
    
    
    Information
    
    
    Corporate
    
    
    Total(In thousands)Three Months Ended March 31,
2010Revenues
    
    $
    42,435
    
    
    $
    13,591
    
    
    $
    20,952
    
    
    $
    
    
    
    $
    76,978Direct operating expenses
    
    
    16,975
    
    
    
    5,215
    
    
    
    6,916
    
    
    
    
    
    
    
    29,106Selling, general and
administrative expenses
    
    
    10,289
    
    
    
    3,999
    
    
    
    8,856
    
    
    
    2,044
    
    
    
    25,188Amortization and depreciation
    
    
    4,442
    
    
    
    825
    
    
    
    1,288
    
    
    
    174
    
    
    
    6,729Equity in earnings of affiliates
    
    
    
    
    
    
    
    
    
    
    1,428
    
    
    
    
    
    
    
    1,428Operating income (loss)
    
    $
    10,729
    
    
    $
    3,552
    
    
    $
    5,320
    
    
    $
    (2,218
    )
    
    $
    17,383Three Months Ended March 31,
2009Revenues
    
    $
    38,315
    
    
    $
    3,717
    
    
    $
    21,904
    
    
    $
    
    
    
    $
    63,936Direct operating expenses
    
    
    14,609
    
    
    
    849
    
    
    
    7,450
    
    
    
    
    
    
    
    22,908Selling, general and
administrative expenses
    
    
    8,197
    
    
    
    1,828
    
    
    
    8,422
    
    
    
    2,289
    
    
    
    20,736Amortization and depreciation
    
    
    5,361
    
    
    
    320
    
    
    
    1,287
    
    
    
    279
    
    
    
    7,247Equity in earnings of affiliates
    
    
    
    
    
    
    
    
    
    
    1,397
    
    
    
    
    
    
    
    1,397Operating income (loss)
    
    $
    10,148
    
    
    $
    720
    
    
    $
    6,142
    
    
    $
    (2,568
    )
    
    $
    14,442
 Note 13. Share-Based Compensation
   Stock Options:
  13




---



##### Table of Contents



WeightedWeighted
    
    
    Weighted
    
    
    AverageAverage Grant
    
    
    Average
    
    
    RemainingNumber of
    
    
    Date Fair
    
    
    Exercise
    
    
    Contractual LifeShares
    
    
    Value
    
    
    Price
    
    
    (in years)Outstanding options at December 31, 2009
    
    
    1,629,760
    
    
    $
    4.73
    
    
    $
    13.81
    
    
    
    5.37Granted
    
    
    9,477
    
    
    
    4.71
    
    
    
    10.88
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Canceled or forfeited
    
    
    (29,139
    )
    
    
    5.07
    
    
    
    14.63
    
    
    
    Outstanding options at March 31, 2010
    
    
    1,610,098
    
    
    $
    4.72
    
    
    $
    13.78
    
    
    
    5.11Options exercisable at March 31, 2010
    
    
    572,908
    
    
    $
    4.18
    
    
    $
    12.72
    
    
    
    4.82
  Restricted Stock Grants:
 WeightedAverageNumber of
    
    
    Grant DateShares
    
    
    Fair ValueNonvested, December 31, 2009
    
    
    219,504
    
    
    $
    13.74Granted
    
    
    
    
    
    
    Vested
    
    
    
    
    
    
    Canceled or forfeited
    
    
    (11,445
    )
    
    $
    13.91Nonvested, March 31, 2010
    
    
    208,059
    
    
    $
    13.73
  Note 14. Contingencies and Commitments
 Litigation:
 Note 15. Subsequent Events
   14




---



##### 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;
    
    David A. Trott, the chairman and chief executive officer of NDeX, and
certain other employees of NDeX, who are also shareholders and
principal attorneys of our law firm customers, may under certain
circumstances have interests that differ from, or conflict with, our
interests;
    
    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 us by our
mortgage default processing service law firm customers, or loan
servicers and mortgage lenders we serve directly for properties
located in California, decreases or fails to increase, our operating
results and ability to execute our growth strategy could be adversely
affected;
    
    bills introduced and laws enacted, along with court orders, to
mitigate foreclosures in states where we do business (including
recently enacted legislation in Michigan, Indiana and Florida), the
Hope for Homeowners Act, the Emergency Economic Stabilization Act, the
Streamlined Modification Program, the Homeowner Affordability and
Stability Plan (including the Making Home Affordable Program), the
Protecting Tenants at Foreclosure Act 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 effect on, or 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 at DiscoverReady may be
adversely affected;
  15




---



##### 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 in our company or to manage
DiscoverReady or our growth; and (4) facing operational difficulties
in new markets or with new products and service offerings;
    
    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;
    
    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 this additional financing may not be available to us
on satisfactory terms or at all; and
    
    growing our business may place a strain on our management and internal
systems, processes and controls.
    Overview
   16




---



##### Table of Contents



Recent Developments
 Increase in our ownership in NDeX
     New Line of Business in Professional Services Division New Reportable Segment
   17




---



##### Table of Contents



Regulatory Environment
  Recent Acquisitions
  DiscoverReady:
 Albertelli:
  18




---



##### Table of Contents



Revenues
  
    
    72.8% from our Professional Services Division (55.1% from mortgage default processing
services and 17.7% from litigation support services); and
    
    27.2% from our Business Information Division.
 Professional Services.
 Mortgage Default Processing Services.
 Managements
Discussion and Analysis of Financial Condition and Results of Operations
   19




---



##### Table of Contents



Litigation Support Services.
   Business Information.
   20




---



##### 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, DiscoverReady, 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 file-specific data services and technology 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
  Redeemable Noncontrolling Interest
   21




---



##### Table of Contents



(in thousands)
 Three Months Ended March 31,2010 *
    
    
    2009Trott sellers
    
    $
    114
    
    
    $
    486Feiwell & Hannoy
    
    
    48
    
    
    
    109Sellers of Barrett-NDEx or their transferees (as a group)
    
    
    170
    
    
    
    381Total
    
    $
    332
    
    
    $
    976
 *
    
    We pay cash distributions in arrears, so the full amount set forth as paid to the Trott
sellers, as well as a portion of the amounts paid to Feiwell & Hannoy and the sellers of
Barrett-NDEx, for the three months ended March 31, 2010, reflect distributions related to 2009.    .
   22




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##### Table of Contents



Critical Accounting Policies and Estimates
 Critical Accounting Policies Managements Discussion and Analysis of Financial Condition and
Results of Operations
 RESULTS OF OPERATIONS
 in thousands, except per share data
 Three Months Ended March 31,% of
    
    
    
    
    
    
    % of2010
    
    
    Revenues
    
    
    2009
    
    
    RevenuesRevenues:Professional Services
    
    $
    56,026
    
    
    
    72.8
    %
    
    $
    42,032
    
    
    
    65.7
    %Business Information
    
    
    20,952
    
    
    
    27.2
    %
    
    
    21,904
    
    
    
    34.3
    %Total revenues
    
    
    76,978
    
    
    
    100.0
    %
    
    
    63,936
    
    
    
    100.0
    %Operating expenses:Professional Services
    
    
    41,745
    
    
    
    54.2
    %
    
    
    31,164
    
    
    
    48.7
    %Business Information
    
    
    17,060
    
    
    
    22.2
    %
    
    
    17,159
    
    
    
    26.8
    %Unallocated corporate operating expenses
    
    
    2,218
    
    
    
    2.9
    %
    
    
    2,568
    
    
    
    4.0
    %Total operating expenses
    
    
    61,023
    
    
    
    79.3
    %
    
    
    50,891
    
    
    
    79.6
    %Equity in earnings of affiliates
    
    
    1,428
    
    
    
    1.9
    %
    
    
    1,397
    
    
    
    2.2
    %Operating income
    
    
    17,383
    
    
    
    22.6
    %
    
    
    14,442
    
    
    
    22.6
    %Interest expense, net
    
    
    (1,736
    )
    
    
    (2.3
    )%
    
    
    (1,970
    )
    
    
    (3.1
    )%Non-cash interest income related to interest rate swaps
    
    
    363
    
    
    
    0.5
    %
    
    
    234
    
    
    
    0.4
    %Other income, net
    
    
    
    
    
    
    
    
    
    
    1,446
    
    
    
    2.3
    %Income before income taxes
    
    
    16,010
    
    
    
    20.8
    %
    
    
    14,152
    
    
    
    22.1
    %Income tax expense
    
    
    (5,990
    )
    
    
    (7.8
    )%
    
    
    (4,317
    )
    
    
    (6.8
    )%Net income
    
    
    10,020
    
    
    
    13.0
    %
    
    
    9,835
    
    
    
    15.4
    %Less: Net
income attributable to redeemable
noncontrolling interest
    
    
    (863
    )
    
    
    (1.1
    )%
    
    
    (1,188
    )
    
    
    (1.9
    )%Net income attributable to Dolan Media Company
    
    $
    9,157
    
    
    
    11.9
    %
    
    $
    8,647
    
    
    
    13.5
    %Net income attributable to Dolan Media Company per
share  basic and diluted
    
    $
    0.30
    
    
    
    
    
    
    $
    0.29Accretion of redeemable noncontrolling interest in NDeX
    
    
    
    
    
    
    
    
    
    
    (0.11
    )Net income attributable to Dolan Media Company common
stockholders per diluted share  basic and diluted
    
    $
    0.30
    
    
    
    
    
    
    $
    0.18Weighted average shares outstanding:Basic
    
    
    30,107
    
    
    
    
    
    
    
    29,806Diluted
    
    
    30,195
    
    
    
    
    
    
    
    29,872
  23




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##### Table of Contents



Three Months Ended March 31, 2010
Compared to Three Months Ended March 31, 2009
 Revenues
 Three Months Ended March 31,2010
    
    
    2009
    
    
    Increase($s in millions)Total revenues
    
    $
    77.0
    
    
    $
    63.9
    
    
    $
    13.0
    
    
    
    20.4
    %
   Operating Expenses
 Three Months Ended March 31,2010
    
    
    2009
    
    
    Increase (Decrease)($s in millions)Total operating expenses
    
    $
    61.0
    
    
    $
    50.9
    
    
    $
    10.1
    
    
    
    19.9
    %Direct operating expense
    
    
    29.1
    
    
    
    22.9
    
    
    
    6.2
    
    
    
    27.1
    %Selling, general and
administrative expenses
    
    
    25.2
    
    
    
    20.7
    
    
    
    4.5
    
    
    
    21.5
    %Depreciation expense
    
    
    2.7
    
    
    
    2.1
    
    
    
    0.6
    
    
    
    28.9
    %Amortization expense
    
    
    4.0
    
    
    
    5.1
    
    
    
    (1.1
    )
    
    
    (22.1
    )%
   24




---



##### Table of Contents



Direct Operating Expenses.
 Selling, General and Administrative Expenses.
 Depreciation and Amortization Expense.
 Interest Expense, Net
 Three Months Ended March 31,2010
    
    
    2009
    
    
    Increase (Decrease)($s in millions)Total interest expense, net
    
    $
    1.7
    
    
    $
    2.0
    
    
    $
    (0.2
    )
    
    
    (11.9
    )%Interest on bank credit facility
    
    
    0.9
    
    
    
    1.6
    
    
    
    (0.7
    )
    
    
    (43.3
    )%Cash interest expense on interest rate swaps
    
    
    0.7
    
    
    
    0.3
    
    
    
    0.4
    
    
    
    106.8
    %Amortization of deferred financing fees
    
    
    0.1
    
    
    
    0.1
    
    
    
    
    
    
    
    Other
    
    
    0.1
    
    
    
    
    
    
    
    0.1
    
    
    Not meaningful
  Non-Cash Interest Income Related to Interest Rate Swaps
 Three Months Ended March 31,2010
    
    
    2009
    
    
    Increase($s in millions)Non-cash interest income related to interest rate swaps
    
    $
    0.4
    
    
    $
    0.2
    
    
    $
    0.1
    
    
    
    55.1
    %
  Other Income, Net
 Three Months Ended March 31,2010
    
    
    2009
    
    
    Decrease($s in millions)Other income, net
    
    $
    
    
    
    $
    1.4
    
    
    $
    (1.4
    )
    
    Not meaningful
  25




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##### Table of Contents



Income Tax Expense
 Three Months Ended March 31,2010
    
    
    2009
    
    
    Increase($s in millions)Income tax expense
    
    $
    6.0
    
    
    $
    4.3
    
    
    $
    1.7
    
    
    
    38.8
    %
  Professional Services Division Results
 Revenues
 Three Months Ended March 31,2010
    
    
    2009
    
    
    Increase($s in millions)Total revenues
    
    $
    56.0
    
    
    $
    42.0
    
    
    $
    14.0
    
    
    
    33.3
    %Mortgage default processing services revenues
    
    
    42.4
    
    
    
    38.3
    
    
    
    4.1
    
    
    
    10.8
    %Litigation support services revenues
    
    
    13.6
    
    
    
    3.7
    
    
    
    9.9
    
    
    
    265.6
    %
    26




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##### Table of Contents



Operating Expenses  Mortgage Default Processing Services
 Three Months Ended March 31,2010
    
    
    2009
    
    
    Increase (Decrease)($s in millions)Total operating expenses
    
    $
    31.7
    
    
    $
    28.2
    
    
    $
    3.5
    
    
    
    12.6
    %Direct operating expense
    
    
    17.0
    
    
    
    14.6
    
    
    
    2.4
    
    
    
    16.2
    %Selling, general and administrative expenses
    
    
    10.3
    
    
    
    8.2
    
    
    
    2.1
    
    
    
    25.5
    %Depreciation expense
    
    
    1.9
    
    
    
    1.3
    
    
    
    0.6
    
    
    
    45.5
    %Amortization expense
    
    
    2.5
    
    
    
    4.0
    
    
    
    (1.5
    )
    
    
    (37.8
    )%
    Operating Expenses  Litigation Support Services
 Three Months Ended March 31,2010
    
    
    2009
    
    
    Increase($s in millions)Total operating expenses
    
    $
    10.0
    
    
    $
    3.0
    
    
    $
    7.0
    
    
    
    235.0
    %Direct operating expense
    
    
    5.2
    
    
    
    0.8
    
    
    
    4.4
    
    
    
    514.3
    %Selling, general and administrative
    
    
    4.0
    
    
    
    1.8
    
    
    
    2.2
    
    
    
    118.8
    %Depreciation expense
    
    
    0.1
    
    
    
    
    
    
    
    0.1
    
    
    
    267.6
    %Amortization expense
    
    
    0.7
    
    
    
    0.3
    
    
    
    0.4
    
    
    
    143.5
    %
   27




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##### Table of Contents



Business Information Division Results
 Revenues
 Three Months Ended March 31,2010
    
    
    2009
    
    
    Increase (Decrease)($s in millions)Total Business Information Division Revenues
    
    $
    21.0
    
    
    $
    21.9
    
    
    $
    (1.0
    )
    
    
    (4.3
    )%Display and classified advertising revenues
    
    
    5.5
    
    
    
    6.8
    
    
    
    (1.3
    )
    
    
    (19.2
    )%Public notice revenues
    
    
    11.8
    
    
    
    11.3
    
    
    
    0.5
    
    
    
    4.4
    %Circulation and other revenues
    
    
    3.7
    
    
    
    3.9
    
    
    
    (0.1
    )
    
    
    (3.6
    )%
     Operating Expenses
 Three Months Ended March 31,2010
    
    
    2009
    
    
    Increase (Decrease)($s in millions)Total operating expenses
    
    $
    17.1
    
    
    $
    17.2
    
    
    $
    (0.1
    )
    
    
    (0.6
    )%Direct operating expense
    
    
    6.9
    
    
    
    7.5
    
    
    
    (0.5
    )
    
    
    (7.2
    )%Selling, general and administrative expenses
    
    
    8.9
    
    
    
    8.4
    
    
    
    0.4
    
    
    
    5.2
    %Depreciation expense
    
    
    0.5
    
    
    
    0.5
    
    
    
    
    
    
    
    3.1
    %Amortization expense
    
    
    0.8
    
    
    
    0.8
    
    
    
    
    
    
    
    (1.7
    )%
   28




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##### Table of Contents



Off Balance Sheet Arrangements
  Liquidity and Capital Resources
  March 31,
    
    
    December 31,2010
    
    
    2009Cash and cash equivalents
    
    $
    3,756
    
    
    $
    2,894Working capital (deficit)
    
    
    (21,678
    )
    
    
    (21,067
    )Long-term debt, less current portion
    
    
    130,229
    
    
    
    137,960
 Three MonthsEnded March 31,2010
    
    
    2009Net cash provided by operating activities
    
    $
    21,154
    
    
    $
    8,502Net cash used in investing activities:Acquisitions and investments
    
    
    
    
    
    
    (25
    )Capital expenditures
    
    
    (1,884
    )
    
    
    (810
    )Net cash used by financing activities
    
    
    (18,408
    )
    
    
    (4,002
    )
 Cash Flows Provided by Operating Activities
  .
   March 31,
    
    
    December 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2009Allowance for doubtful accounts (in thousands)
    
    $
    1,294
    
    
    $
    1,113
    
    
    $
    1,263Allowance for doubtful accounts as a percentage of gross accounts receivable
    
    
    2.0
    %
    
    
    1.9
    %
    
    
    2.4
    %Day sales outstanding
    
    
    77.0
    
    
    
    68.5
    
    
    
    76.6
  29




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##### Table of Contents



Cash Flows Used in Investing Activities
  Cash Flows Used in Financing Activities
       30




---



##### Table of Contents



Credit Agreement.
  Future Needs
    
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
 .
   31




---



##### 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
  
 Item 2. Unregistered Sales of Securities and Use of Proceeds
   32




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##### Table of Contents



Item 3. Defaults Upon Senior Securities
  
 Item 4. Reserved
 
 Item 5. Other Information
  
 Item 6. Exhibits
 ExhibitNo.
    
    Title
    
    Method of Filing4
    
    
    Amendment No. 1 to Rights
Agreement dated as of March
17, 2010, between Dolan
Media Company and Mellon
Investor Services, LLC, as
Rights Agent
    
    Incorporated by reference to
Exhibit 4 to our current
report on Form 8-K filed
with the SEC on March 22,
2010.10.1
    
    
    Common Unit Purchase
Agreement by and between
David A. Trott, Ellen Coon,
Trustee of the Ellen Coon
Living Trust u/a/d 9/9/98,
Marcy J. Ford, Trustee of
the Marcy Ford Revocable
Trust u/a/d 7/12/04, William
D. Meagher, Trustee of the
William D. Meagher Trust
u/a/d 8/24/07, and Jeanne M.
Kivi, Trustee of the Jeanne
M. Kivi Trust u/a/d 8/24/07,
Dolan APC, LLC, Dolan Media
Company and Trott & Trott
P.C. dated January 4, 2010
    
    Incorporated by reference to
Exhibit 10.2 to our current
report on Form 8-K filed
with the SEC on January 5,
2010. The exhibits to the
Common Unit Purchase
Agreement have been omitted
pursuant to Item 601(b)(2)
of Regulation S-K. We have
agreed to furnish
supplementally to the SEC,
upon request, a copy of the
omitted exhibits.10.2
    
    
    Amendment No. 7 to the
Amended and Restated
Operating Agreement of
American Processing Company,
LLC dated January 4, 2010
    
    Incorporated by reference to
Exhibit 10.4 to our current
report on Form 8-K filed
with the SEC on January 5,
2010.10.3
    
    
    Amendment No. 8 to the
Amended and Restated
Operating Agreement of
American Processing Company,
LLC dated February 28, 2010
    
    Incorporated by reference to
Exhibit 10.37 to our annual
report on Form 10-K filed
with the SEC on March 8,
2010.10.4
    
    
    2007 Incentive Compensation
Plan (as amended and
restated in 2010)
    
    Incorporated by reference to
Exhibit 10.12 to our annual
report on Form 10-K filed
with the SEC on March 8,
2010.10.5
    
    
    Amendment No. 1 to the Third
Amendment and Restated
Limited Liability Company
Agreement of DiscoverReady,
LLC dated April 30, 2010
    
    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.
  33




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##### Table of Contents



SIGNATURES
  Dated: May 6, 2010
    DOLAN MEDIA COMPANYBy:
    /s/ James P. DolanJames P. DolanChairman, Chief Executive Officer and President
(Principal Executive Officer)Dated: May 6, 2010
    By:

/s/ Vicki J. DuncombVicki J. DuncombVice President and Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)  34




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##### Table of Contents



Exhibit Index
 ExhibitNo.
    
    Title
    
    Method of Filing10.5
    
    
    Amendment No. 1 to the Third Amended and
Restated Limited Liability Agreement of
DiscoverReady, LLC dated April 30, 2010
    
    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.
  35