##### 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: June 30, 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
    
    43-2004527(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    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 June 30, 2008 (unaudited) and December 31, 2007
    
    
    1Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended
June 30, 2008 and 2007
    
    
    2Condensed
Consolidated Statements of Stockholders Equity (Deficit) as of
June 30, 2008 (unaudited)
    
    
    3Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30,
2008 and 2007
    
    
    4Notes to Unaudited Condensed Consolidated Interim Financial Statements
    
    
    5Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    19Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    49Item 4T. Controls and Procedures
    
    
    50PART II  OTHER INFORMATION
    
    
    50Item 1. Legal Proceedings
    
    
    50Item 1A. Risk Factors
    
    
    50Item 2. Unregistered Sales of Securities and Use of Proceeds
    
    
    52Item 3. Defaults Upon Senior Securities
    
    
    52Item 4. Submission of Matters to a Vote of Security Holders
    
    
    53Item 5. Other Information
    
    
    53Item 6. Exhibits
    
    
    53SIGNATURES
    
    
    54Section 302 CertificationSection 302 CertificationSection 906 CertificationSection 906 Certification




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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)
 June 30,
    
    
    December 31,2008
    
    
    2007(unaudited)ASSETSCurrent assetsCash and cash equivalents
    
    $
    2,615
    
    
    $
    1,346Accounts receivable, including unbilled
services (net of allowances for doubtful
accounts of $1,377 and $1,283 as of June 30,
2008 and December 31, 2007, respectively)
    
    
    25,150
    
    
    
    20,689Prepaid expenses and other current assets
    
    
    2,214
    
    
    
    2,649Deferred income taxes
    
    
    259
    
    
    
    259Total current assets
    
    
    30,238
    
    
    
    24,943Investments
    
    
    18,005
    
    
    
    18,479Property and equipment, net
    
    
    13,209
    
    
    
    13,066Finite-life intangible assets, net
    
    
    100,843
    
    
    
    88,946Goodwill
    
    
    81,543
    
    
    
    79,044Other assets
    
    
    2,454
    
    
    
    1,889Total assets
    
    $
    246,292
    
    
    $
    226,367LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term debt
    
    $
    6,526
    
    
    $
    4,749Accounts payable
    
    
    4,731
    
    
    
    6,068Accrued compensation
    
    
    3,620
    
    
    
    4,677Accrued liabilities
    
    
    1,728
    
    
    
    2,922Due to sellers of acquired businesses
    
    
    525
    
    
    
    600Deferred revenue
    
    
    11,632
    
    
    
    11,387Total current liabilities
    
    
    28,762
    
    
    
    30,403Long-term debt, less current portion
    
    
    67,312
    
    
    
    56,301Deferred income taxes
    
    
    4,393
    
    
    
    4,393Deferred revenue and other liabilities
    
    
    3,929
    
    
    
    3,890Total liabilities
    
    
    104,396
    
    
    
    94,987Minority interest in consolidated subsidiary
(redemption value of $16,020 as of June 30,
2008)
    
    
    3,524
    
    
    
    2,204Commitments and contingencies (Note 12)Stockholders equityCommon stock, $0.001 par
value; authorized: 70,000,000
shares; outstanding: 25,131,282
and 25,088,718 shares as of June 30, 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
    
    
    213,156
    
    
    
    212,364Accumulated deficit
    
    
    (74,809
    )
    
    
    (83,213
    )Total stockholders equity
    
    
    138,372
    
    
    
    129,176Total liabilities and stockholders equity
    
    $
    246,292
    
    
    $
    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 Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007RevenuesBusiness Information
    
    $
    23,424
    
    
    $
    21,588
    
    
    $
    46,196
    
    
    $
    41,068Professional Services
    
    
    18,129
    
    
    
    15,467
    
    
    
    36,869
    
    
    
    31,682Total revenues
    
    
    41,553
    
    
    
    37,055
    
    
    
    83,065
    
    
    
    72,750Operating expensesDirect operating: Business Information
    
    
    8,152
    
    
    
    7,060
    
    
    
    15,724
    
    
    
    13,879Direct operating: Professional Services
    
    
    6,436
    
    
    
    5,273
    
    
    
    12,747
    
    
    
    10,898Selling, general and administrative
    
    
    16,732
    
    
    
    15,660
    
    
    
    32,836
    
    
    
    28,988Amortization
    
    
    2,318
    
    
    
    1,871
    
    
    
    4,536
    
    
    
    3,714Depreciation
    
    
    1,190
    
    
    
    889
    
    
    
    2,291
    
    
    
    1,645Total operating expenses
    
    
    34,828
    
    
    
    30,753
    
    
    
    68,134
    
    
    
    59,124Equity in earnings of The Detroit Legal News
Publishing, LLC
    
    
    1,469
    
    
    
    1,330
    
    
    
    3,026
    
    
    
    2,245Operating income
    
    
    8,194
    
    
    
    7,632
    
    
    
    17,957
    
    
    
    15,871Non-operating expenseNon-cash interest expense related to
redeemable preferred stock
    
    
    
    
    
    
    (26,318
    )
    
    
    
    
    
    
    (56,260
    )Interest expense, net of interest income
    
    
    (287
    )
    
    
    (1,393
    )
    
    
    (2,738
    )
    
    
    (3,428
    )Other income (expense)
    
    
    10
    
    
    
    (5
    )
    
    
    21
    
    
    
    (13
    )Total non-operating expense
    
    
    (277
    )
    
    
    (27,716
    )
    
    
    (2,717
    )
    
    
    (59,701
    )Income (loss) before income taxes and
minority interest
    
    
    7,917
    
    
    
    (20,084
    )
    
    
    15,240
    
    
    
    (43,830
    )Income tax expense
    
    
    (3,027
    )
    
    
    (967
    )
    
    
    (5,786
    )
    
    
    (4,107
    )Minority interest in net income of subsidiary
    
    
    (493
    )
    
    
    (807
    )
    
    
    (1,050
    )
    
    
    (1,707
    )Net income (loss)
    
    $
    4,397
    
    
    $
    (21,858
    )
    
    $
    8,404
    
    
    $
    (49,644
    )Net income (loss) per share:Basic
    
    $
    0.18
    
    
    $
    (2.34
    )
    
    $
    0.34
    
    
    $
    (5.32
    )Diluted
    
    $
    0.17
    
    
    $
    (2.34
    )
    
    $
    0.33
    
    
    $
    (5.32
    )Weighted average shares outstanding:Basic
    
    
    24,936,360
    
    
    
    9,324,000
    
    
    
    24,936,183
    
    
    
    9,324,000Diluted
    
    
    25,307,422
    
    
    
    9,324,000
    
    
    
    25,246,279
    
    
    
    9,324,000
  2




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##### Table of Contents



Dolan Media Company
 
 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, including
issuance of restricted stock (shares are net
of forfeitures)
    
    
    171,563
    
    
    
    
    
    
    
    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
    
    
    
    
    
    
    
    137,266Other
    
    
    
    
    
    
    8
    
    
    
    (8
    )
    
    
    
    
    
    
    Balance (deficit) at December 31, 2007
    
    
    25,088,718
    
    
    $
    25
    
    
    $
    212,364
    
    
    $
    (83,213
    )
    
    $
    129,176Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,404
    
    
    
    8,404Stock-based compensation expense, including
issuance of restricted stock (shares are net
of forfeitures)
    
    
    42,564
    
    
    
    
    
    
    
    792
    
    
    
    
    
    
    
    792Balance (deficit) at June 30, 2008 (unaudited)
    
    
    25,131,282
    
    
    $
    25
    
    
    $
    213,156
    
    
    $
    (74,809
    )
    
    $
    138,372
  3




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##### Table of Contents



Dolan Media Company
 
 Unaudited Condensed Consolidated Statements of Cash Flows
 (in thousands)
 Six Months EndedJune 30,2008
    
    
    2007Cash flows from operating activitiesNet income (loss)
    
    $
    8,404
    
    
    $
    (49,644
    )Distributions received from The Detroit Legal News Publishing, LLC
    
    
    3,500
    
    
    
    2,800Minority interest distributions paid
    
    
    (909
    )
    
    
    (1,102
    )Non-cash operating activities:Amortization
    
    
    4,536
    
    
    
    3,714Depreciation
    
    
    2,291
    
    
    
    1,645Equity in earnings of The Detroit Legal News Publishing, LLC
    
    
    (3,026
    )
    
    
    (2,245
    )Minority interest
    
    
    1,050
    
    
    
    1,707Stock-based compensation expense
    
    
    792
    
    
    
    21Change in value of interest rate swap and accretion of interest on
note payable
    
    
    81
    
    
    
    (207
    )Non-cash interest related to redeemable preferred stock
    
    
    
    
    
    
    56,327Amortization of debt issuance costs
    
    
    94
    
    
    
    79Change in accounting estimate related to self-insured medical reserve
    
    
    (470
    )
    
    
    Changes in operating assets and liabilities, net of effects of
business acquisitions:Accounts receivable
    
    
    (4,461
    )
    
    
    (2,422
    )Prepaid expenses and other current assets
    
    
    386
    
    
    
    (324
    )Other assets
    
    
    17
    
    
    
    (996
    )Accounts payable and accrued liabilities
    
    
    (2,910
    )
    
    
    4,075Deferred revenue
    
    
    199
    
    
    
    (739
    )Net cash provided by operating activities
    
    
    9,574
    
    
    
    12,689Cash flows from investing activitiesAcquisitions and investments
    
    
    (19,176
    )
    
    
    (17,335
    )Pending acquisitions
    
    
    (691
    )
    
    
    Capital expenditures
    
    
    (2,303
    )
    
    
    (4,210
    )Net cash used in investing activities
    
    
    (22,170
    )
    
    
    (21,545
    )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
    
    
    (1,564
    )
    
    
    (3,700
    )Capital contribution from minority partner
    
    
    1,179
    
    
    
    Payment on unsecured note payable
    
    
    (1,750
    )
    
    
    Payments of offering costs
    
    
    
    
    
    
    (537
    )Payments of deferred financing costs
    
    
    
    
    
    
    (42
    )Other
    
    
    
    
    
    
    (28
    )Net cash provided by financing activities
    
    
    13,865
    
    
    
    9,693Net increase in cash and cash equivalents
    
    
    1,269
    
    
    
    837Cash and cash equivalents at beginning of the period
    
    
    1,346
    
    
    
    786Cash and cash equivalents at end of the period
    
    $
    2,615
    
    
    $
    1,623
  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
     The Meaning
of Present Fairly in Conformity with Generally Accepted Accounting Principles
 Note 2. Basic and Diluted Income (Loss) Per Share
  7




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##### Table of Contents



Dolan Media Company
Notes to Unaudited Condensed Consolidated Interim Financial Statements
  in thousands,
except per share amounts
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income (loss)
    
    $
    4,397
    
    
    $
    (21,858
    )
    
    $
    8,404
    
    
    $
    (49,644
    )Basic:Weighted average common shares outstanding
    
    
    25,116
    
    
    
    9,324
    
    
    
    25,101
    
    
    
    9,324Weighted average common shares of unvested restricted stock
    
    
    (180
    )
    
    
    
    
    
    
    (165
    )
    
    
    Shares used in the computation of basic net income (loss)
per share
    
    
    24,936
    
    
    
    9,324
    
    
    
    24,936
    
    
    
    9,324Net income (loss) per share  basic
    
    $
    0.18
    
    
    $
    (2.34
    )
    
    $
    0.34
    
    
    $
    (5.32
    )Diluted:Shares used in the computation of basic net income (loss)
per share
    
    
    24,936
    
    
    
    9,324
    
    
    
    24,936
    
    
    
    9,324Stock options
    
    
    371
    
    
    
    
    
    
    
    310
    
    
    
    Shares used in the computation of dilutive net income
(loss) per share
    
    
    25,307
    
    
    
    9,324
    
    
    
    25,246
    
    
    
    9,324Net income (loss) per share  diluted
    
    $
    0.17
    
    
    $
    (2.34
    )
    
    $
    0.33
    
    
    $
    (5.32
    )
  Note 3. Acquisitions
  Legal and Business Publishers, Inc. The Mecklenburg Times
 8




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##### Table of Contents



Dolan Media Company
Notes to Unaudited Condensed Consolidated Interim Financial Statements
  Wilford & Geske
   Minnesota Political Press: Politics in
Minnesota
 Midwest Law Printing Co., Inc.:
 in thousands
 9




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##### Table of Contents



Dolan Media Company
Notes to Unaudited Condensed Consolidated Interim Financial Statements
 MidwestLegal and
    
    
    
    
    
    
    MN
    
    
    LawBusiness
    
    
    Wilford &
    
    
    Political
    
    
    PrintingPublishers
    
    
    Geske
    
    
    Press
    
    
    Co., Inc.
    
    
    TotalAssets acquired and liabilities assumed at their fair values:Working capital
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    25
    
    
    $
    25Property and equipment
    
    
    50
    
    
    
    122
    
    
    
    
    
    
    
    
    
    
    
    172APC long-term service contract
    
    
    
    
    
    
    11,664
    
    
    
    
    
    
    
    
    
    
    
    11,664Other finite-life intangible assets
    
    
    3,282
    
    
    
    
    
    
    
    334
    
    
    
    650
    
    
    
    4,266Goodwill
    
    
    
    
    
    
    1,899
    
    
    
    
    
    
    
    
    
    
    
    1,899Total consideration, including direct expenses
    
    $
    3,332
    
    
    $
    13,685
    
    
    $
    334
    
    
    $
    675
    
    
    $
    18,026
 Pro Forma Information (unaudited):
 Pro FormaThree Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Total revenues
    
    $
    41,735
    
    
    $
    39,083
    
    
    $
    84,388
    
    
    $
    77,732Net income (loss)
    
    
    4,412
    
    
    
    (21,439
    )
    
    
    8,544
    
    
    
    (48,700
    )Net income (loss) per share:Basic
    
    $
    0.18
    
    
    $
    (2.30
    )
    
    $
    0.34
    
    
    $
    (5.22
    )Diluted
    
    $
    0.17
    
    
    $
    (2.30
    )
    
    $
    0.34
    
    
    $
    (5.22
    )Pro forma weighted average shares outstanding:Basic
    
    
    24,936
    
    
    
    9,324
    
    
    
    24,936
    
    
    
    9,324Diluted
    
    
    25,307
    
    
    
    9,324
    
    
    
    25,246
    
    
    
    9,324
 Note 4. Investments
 (in thousands)
 Accounting
    
    
    Percent
    
    
    June 30,
    
    
    December 31,Method
    
    
    Ownership
    
    
    2008
    
    
    2007The Detroit Legal News Publishing, LLC
    
    Equity
    
    
    35
    
    
    $
    17,105
    
    
    $
    17,579GovDelivery, Inc.
    
    Cost
    
    
    15
    
    
    
    900
    
    
    
    900Total
    
    
    
    
    
    
    
    
    
    $
    18,005
    
    
    $
    18,479
 The Detroit Legal News Publishing, LLC:
  10




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Dolan Media Company
Notes to Unaudited Condensed Consolidated Interim Financial Statements
 (in thousands)
 As of June 30,
    
    As of December 31,2008
    
    2007Carrying value of investment
    
    $
    17,105
    
    
    $
    17,579Underlying finite-lived customer list, net of amortization
    
    
    11,183
    
    
    
    11,937
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2008
    
    2007
    
    2008
    
    2007Equity in
earnings of DLNP, net of
amortization of
customer list
    
    $
    1,469
    
    
    $
    1,330
    
    
    $
    3,026
    
    
    $
    2,245Distributions received
    
    
    2,100
    
    
    
    1,400
    
    
    
    3,500
    
    
    
    2,800Amortization expense
    
    
    377
    
    
    
    358
    
    
    
    754
    
    
    
    718
 (in thousands)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues
    
    $
    12,031
    
    
    $
    10,019
    
    
    $
    24,436
    
    
    $
    19,089Cost of revenues
    
    
    4,797
    
    
    
    3,649
    
    
    
    9,539
    
    
    
    7,512Gross profit
    
    
    7,234
    
    
    
    6,370
    
    
    
    14,897
    
    
    
    11,577Selling, general and administrative expenses
    
    
    1,934
    
    
    
    1,531
    
    
    
    4,051
    
    
    
    3,099Operating income
    
    
    5,300
    
    
    
    4,839
    
    
    
    10,846
    
    
    
    8,478Net income
    
    $
    5,273
    
    
    $
    4,823
    
    
    $
    10,800
    
    
    $
    8,465Companys 35% share of net income
    
    $
    1,846
    
    
    $
    1,688
    
    
    $
    3,780
    
    
    $
    2,963Less amortization of intangible assets
    
    
    377
    
    
    
    358
    
    
    
    754
    
    
    
    718Equity in earnings of DLNP, LLC
    
    $
    1,469
    
    
    $
    1,330
    
    
    $
    3,026
    
    
    $
    2,245
 GovDelivery, Inc.:
 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)
    
    
    
    
    
    
    1,899
    
    
    
    1,899Balance as of June 30, 2008
    
    $
    59,232
    
    
    $
    22,311
    
    
    $
    81,543
 
 *
    
    Represents additional cash payment paid to Venture Publications, Inc. in connection with the
acquired assets achieving certain revenue targets set forth in the asset purchase agreement. This
has been accounted for as additional purchase price. 11




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##### Table of Contents



Dolan Media Company
Notes to Unaudited Condensed Consolidated Interim Financial Statements
 Finite-Life Intangible Assets:
 Note 6. Long-Term Debt, Capital Lease Obligation
 (in
thousands)
 June 30,
    
    
    December 31,2008
    
    
    2007Senior secured debt (see below):Senior variable-rate term note, payable in
quarterly installments with a balloon payment
due August 8, 2014
    
    $
    72,188
    
    
    $
    48,750Senior variable-rate revolving note
    
    
    
    
    
    
    9,000Total senior secured debt
    
    
    72,188
    
    
    
    57,750Unsecured note payable
    
    
    1,644
    
    
    
    3,290Capital lease obligations
    
    
    6
    
    
    
    1073,838
    
    
    
    61,050Less current portion
    
    
    6,526
    
    
    
    4,749Long-term debt, less current portion
    
    $
    67,312
    
    
    $
    56,301
 Senior Secured Debt:
  Unsecured Note Payable :
 Note 7. Common and Preferred Stock
   12




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Dolan Media Company
Notes to Unaudited Condensed Consolidated Interim Financial Statements
  Note 8. Income Taxes
    Note 9. Major Customers and Related Parties
   13




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##### Table of Contents



Dolan Media Company
Notes to Unaudited Condensed Consolidated Interim Financial Statements
    Note 10. Reportable Segments
  in thousands
 Three Months Ended June 30, 2008Business
    
    
    ProfessionalInformation
    
    
    Services
    
    
    Corporate
    
    
    TotalRevenues
    
    $
    23,424
    
    
    $
    18,129
    
    
    $
    
    
    
    $
    41,553Direct operating expenses
    
    
    8,152
    
    
    
    6,436
    
    
    
    
    
    
    
    14,588Selling, general and administrative expenses
    
    
    10,203
    
    
    
    4,585
    
    
    
    1,944
    
    
    
    16,732Amortization and depreciation
    
    
    1,230
    
    
    
    2,083
    
    
    
    195
    
    
    
    3,508Equity in Earnings of DLNP, LLC
    
    
    1,469
    
    
    
    
    
    
    
    
    
    
    
    1,469Operating income (loss)
    
    $
    5,308
    
    
    $
    5,025
    
    
    $
    (2,139
    )
    
    $
    8,194
 Three Months Ended June 30, 2007Business
    
    
    ProfessionalInformation
    
    
    Services
    
    
    Corporate
    
    
    TotalRevenues
    
    $
    21,588
    
    
    $
    15,467
    
    
    $
    
    
    
    $
    37,055Direct operating expenses
    
    
    7,060
    
    
    
    5,273
    
    
    
    
    
    
    
    12,333Selling, general and administrative expenses
    
    
    8,712
    
    
    
    4,323
    
    
    
    2,625
    
    
    
    15,660Amortization and depreciation
    
    
    1,097
    
    
    
    1,545
    
    
    
    118
    
    
    
    2,760Equity in Earnings of DLNP, LLC
    
    
    1,330
    
    
    
    
    
    
    
    
    
    
    
    1,330Operating income (loss)
    
    $
    6,049
    
    
    $
    4,326
    
    
    $
    (2,743
    )
    
    $
    7,632
 Six Months Ended June 30, 2008Business
    
    
    ProfessionalInformation
    
    
    Services
    
    
    Corporate
    
    
    TotalRevenues
    
    $
    46,196
    
    
    $
    36,869
    
    
    $
    
    
    
    $
    83,065Direct operating expenses
    
    
    15,724
    
    
    
    12,747
    
    
    
    
    
    
    
    28,471Selling, general and administrative expenses
    
    
    19,825
    
    
    
    9,242
    
    
    
    3,769
    
    
    
    32,836Amortization and depreciation
    
    
    2,388
    
    
    
    4,065
    
    
    
    374
    
    
    
    6,827Equity in Earnings of DLNP, LLC
    
    
    3,026
    
    
    
    
    
    
    
    
    
    
    
    3,026Operating income (loss)
    
    $
    11,285
    
    
    $
    10,815
    
    
    $
    (4,143
    )
    
    $
    17,957
 14




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Dolan Media Company
Notes to Unaudited Condensed Consolidated Interim Financial Statements
 Six Months Ended June 30, 2007Business
    
    
    ProfessionalInformation
    
    
    Services
    
    
    Corporate
    
    
    TotalRevenues
    
    $
    41,068
    
    
    $
    31,682
    
    
    $
    
    
    
    $
    72,750Direct operating expenses
    
    
    13,879
    
    
    
    10,898
    
    
    
    
    
    
    
    24,777Selling, general and administrative expenses
    
    
    16,752
    
    
    
    8,386
    
    
    
    3,850
    
    
    
    28,988Amortization and depreciation
    
    
    2,140
    
    
    
    2,989
    
    
    
    230
    
    
    
    5,359Equity in Earnings of DLNP, LLC
    
    
    2,245
    
    
    
    
    
    
    
    
    
    
    
    2,245Operating income (loss)
    
    $
    10,542
    
    
    $
    9,409
    
    
    $
    (4,080
    )
    
    $
    15,871
 Note 11. Share-Based Compensation
   Stock Options:
  Dividend yield
    
    
    0.0
    %Expected volatility
    
    
    28.0
    %Risk free interest rate
    
    
    3.0
    %Expected term of options
    


4.75 yearsWeighted average grant date fair value
    
    $
    4.89
 15




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Dolan Media Company
Notes to Unaudited Condensed Consolidated Interim Financial Statements
  Weighted
    
    Weighted
    
    Weighted AverageNumber of
    
    Average Grant
    
    Average
    
    RemainingShares
    
    Date Fair Value
    
    Exercise Price
    
    Contractual LifeOutstanding options at December 31, 2007
    
    
    992,667
    
    
    $
    4.34
    
    
    $
    13.03
    
    
    6.87 Yrs.Granted
    
    
    419,056
    
    
    
    4.89
    
    
    
    16.52
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Canceled or forfeited
    
    
    (51,516
    )
    
    
    4.75
    
    
    
    14.64
    
    
    
    Outstanding options at June 30, 2008
    
    
    1,360,207
    
    
    $
    4.49
    
    
    $
    14.04
    
    
    6.54 Yrs.Options exercisable at June 30, 2008
    
    
    63,000
    
    
    $
    1.35
    
    
    $
    2.22
    
    
    8.29 Yrs.
  Restricted Stock Grants:
 WeightedAverageNumber
    
    Grant Dateof Shares
    
    Fair ValueNonvested, December 31, 2007
    
    
    152,789
    
    
    $
    14.68Granted
    
    
    54,139
    
    
    
    16.52Vested
    
    
    (603
    )
    
    
    15.05Canceled or forfeited
    
    
    (11,575
    )
    
    
    15.03Nonvested, June 30, 2008
    
    
    194,750
    
    
    $
    15.17
  Note 12. Contingencies and Commitments
  Note 13. Subsequent Events
 Equity Purchase Agreement-NDEx Acquisition :
  16




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Dolan Media Company
Notes to Unaudited Condensed Consolidated Interim Financial Statements
       Securities Purchase Agreement-Private Placement:
    17




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Dolan Media Company
Notes to Unaudited Condensed Consolidated Interim Financial Statements
  First Amendment to Second Amended and Restated Credit Agreement:
 Shares outstanding:
 18




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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 adversely affect our
circulation revenues to the extent we are not able to sufficiently increase 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;
    
    regulation of sub-prime, Alt-A and other residential mortgage products, including bills
introduced in states where APC does business and the Housing and Economic Recovery Act of
2008, and voluntary foreclosure relief programs developed by the Hope Now Alliance, a
consortium that includes loan servicers, may have an adverse effect on or restrict our
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 complete or
integrate successfully into our business and which may subject us to considerable business
and financial risks;
 19




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##### Table of Contents




    
    growing our business may place a strain on our management and internal systems,
processes and controls;
    
    we may not be able to close the acquisition of NDEx on a timely basis or at all;
    
    we will be required to incur additional indebtedness to close the acquisition of NDEx
and this additional debt will consume a significant portion of our ability to borrow and
may limit our ability to pursue other acquisitions or growth strategies;
    
    as we expect to do for the acquisition of NDEx, we may be required to incur additional
indebtedness or raise additional capital to fund acquisitions; and
    
    the acquisition of NDEx 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 NDEx into APC or to manage NDEx or our growth; and (4) facing operational
difficulties in new markets or with new product and service offerings.
   Overview
  Recent Developments
 Pending Acquisition of Outstanding Equity Interests of NDEx.
  20




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21




---



##### Table of Contents



Private Placement
     Amendment to Credit Facility
  Outstanding Shares after Private Placement and NDEx
  Changes in our Ownership in APC
  22




---



##### Table of Contents



Initial Public Offering
    Recent Acquisitions
  Business Information
 The Mecklenburg Times The Mecklenburg Times
 23




---



##### Table of Contents



Professional Services
    Revenues
  
    
    56.4% and 55.6%, respectively, from our Business Information Division; and
    
    43.6% and 44.4%, respectively, from our Professional Services Division.
 Business Information.
 24




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##### Table of Contents



Professional Services.
  25




---



##### 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;
 26




---



##### Table of Contents




    
    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 one 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
  
    
    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 June 30, 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 June 30, 2008.
    27




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##### Table of Contents



Three Months ended June 30,
    
    
    Six Months ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007APC Investments*
    
    $
    436,797
    
    
    $
    509,832
    
    
    $
    736,760
    
    
    $
    919,505Feiwell & Hannoy
    
    
    98,415
    
    
    
    126,439
    
    
    
    172,146
    
    
    
    182,993Total
    
    $
    535,212
    
    
    $
    636,271
    
    
    $
    908,906
    
    
    $
    1,102,498
 
 *
    
    Trott & Trott prior to February 1, 2008  Critical Accounting Policies
    Purchase Accounting
 The Mecklenberg Times
 28




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##### Table of Contents



Valuation of Our Company Equity Securities
 .
    Goodwill, Other Intangible Assets and Other Long-Lived Assets
  Share-Based Compensation Expense
   29




---



##### Table of Contents



2008Dividend yield
    
    
    0.0
    %Expected volatility
    
    
    28.0
    %Risk free interest rate
    
    
    3.0
    %Expected term of options
    
    4.75 yearsWeighted average grant date fair value
    
    $
    4.89
      Income Taxes
   30




---



##### Table of Contents



Accounts Receivable Allowances
   New Accounting Pronouncements
  Non-GAAP Financial Measures
  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;
 after
 
    
    minority interest distributions paid.
 31




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Managements Use of Adjusted EBITDA
     32




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##### Table of Contents



in thousands
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income (loss)
    
    $
    4,397
    
    
    $
    (21,858
    )
    
    $
    8,404
    
    
    $
    (49,644
    )Non-cash interest expense related to
redeemable preferred stock
    
    
    
    
    
    
    26,318
    
    
    
    
    
    
    
    56,260Interest expense, net
    
    
    287
    
    
    
    1,393
    
    
    
    2,738
    
    
    
    3,428Income tax expense
    
    
    3,027
    
    
    
    967
    
    
    
    5,786
    
    
    
    4,107Amortization of intangibles
    
    
    2,318
    
    
    
    1,871
    
    
    
    4,536
    
    
    
    3,714Depreciation expense
    
    
    1,190
    
    
    
    889
    
    
    
    2,291
    
    
    
    1,645Amortization of DLNP intangible
    
    
    377
    
    
    
    358
    
    
    
    754
    
    
    
    718Non-cash compensation expense
    
    
    393
    
    
    
    11
    
    
    
    792
    
    
    
    21Minority interest in net income of subsidiary
    
    
    493
    
    
    
    807
    
    
    
    1,050
    
    
    
    1,707Cash distributions to minority interest
    
    
    (535
    )
    
    
    (636
    )
    
    
    (909
    )
    
    
    (1,102
    )Adjusted EBITDA
    
    $
    11,947
    
    
    $
    10,120
    
    
    $
    25,442
    
    
    $
    20,854
 Cash Earnings and Cash Earnings per Diluted Share
 before
 
    
    non-cash interest expense related to redeemable preferred stock;
    
    non-cash interest income related to the change in fair value of interest rate swaps;
    
    amortization expense; and
    
    an adjustment to income tax expense related to the
reconciling items above at a 41% tax rate.
  Managements Use of Cash Earnings and Cash Earnings Per Diluted Share
    33




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##### Table of Contents



in thousands, except share and per share data
 Three Months Ended
    
    
    Six Months EndedJune
30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income (loss)
    
    $
    4,397
    
    
    $
    (21,858
    )
    
    $
    8,404
    
    
    $
    (49,644
    )Non-cash interest expense related to
redeemable preferred stock
    
    
    
    
    
    
    26,318
    
    
    
    
    
    
    
    56,260Non-cash interest income related to the
change in fair value of interest rate
swaps
    
    
    (1,177
    )
    
    
    (561
    )
    
    
    (22
    )
    
    
    (387
    )Amortization of intangibles
    
    
    2,318
    
    
    
    1,871
    
    
    
    4,536
    
    
    
    3,714Amortization of DLNP intangible
    
    
    377
    
    
    
    358
    
    
    
    754
    
    
    
    718Adjustment to income tax expense related
to reconciling items at a 41% tax rate
    
    
    (622
    )
    
    
    (1,942
    )
    
    
    (2,160
    )
    
    
    (1,948
    )Cash earnings
    
    $
    5,293
    
    
    $
    4,186
    
    
    $
    11,512
    
    
    $
    8,713Net income (loss) per diluted share (GAAP)
    
    $
    0.17
    
    
    $
    (2.34
    )
    
    $
    0.33
    
    
    $
    (5.32
    )Cash earnings per diluted share
    
    $
    0.21
    
    
    $
    0.45
    
    
    $
    0.46
    
    
    $
    0.93Weighted average diluted shares outstanding
    
    
    25,307,422
    
    
    
    9,324,000
    
    
    
    25,246,279
    
    
    
    9,324,000
 34




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##### Table of Contents



RESULTS OF OPERATIONS
 in thousands, except
per share data
 Three Months Ended June 30,% of
    
    
    
    
    
    
    % of2008
    
    
    Revenues
    
    
    2007
    
    
    RevenuesRevenues:Business Information
    
    $
    23,424
    
    
    
    56.4
    %
    
    $
    21,588
    
    
    
    58.3
    %Professional Services
    
    
    18,129
    
    
    
    43.6
    %
    
    
    15,467
    
    
    
    41.7
    %Total revenues
    
    
    41,553
    
    
    
    100.0
    %
    
    
    37,055
    
    
    
    100.0
    %Operating expenses:Business Information
    
    
    19,585
    
    
    
    47.1
    %
    
    
    16,869
    
    
    
    45.5
    %Professional Services
    
    
    13,104
    
    
    
    31.5
    %
    
    
    11,141
    
    
    
    30.1
    %Unallocated corporate operating expenses
    
    
    2,139
    
    
    
    5.1
    %
    
    
    2,743
    
    
    
    7.4
    %Total operating expenses
    
    
    34,828
    
    
    
    83.8
    %
    
    
    30,753
    
    
    
    83.0
    %Equity in earnings of The Detroit Legal
News Publishing, LLC, net of amortization
    
    
    1,469
    
    
    
    3.5
    %
    
    
    1,330
    
    
    
    3.6
    %Operating income
    
    
    8,194
    
    
    
    19.7
    %
    
    
    7,632
    
    
    
    20.6
    %Non-cash interest expense related to
redeemable preferred stock
    
    
    
    
    
    
    0.0
    %
    
    
    (26,318
    )
    
    
    (71.0
    )%Interest expense, net
    
    
    (287
    )
    
    
    (0.7
    )%
    
    
    (1,393
    )
    
    
    (3.8
    )%Other income (expense), net
    
    
    10
    
    
    
    0.0
    %
    
    
    (5
    )
    
    
    0.0
    %Income (loss) before income taxes
    
    
    7,917
    
    
    
    19.1
    %
    
    
    (20,084
    )
    
    
    (54.2
    )%Income tax expense
    
    
    (3,027
    )
    
    
    (7.3
    )%
    
    
    (967
    )
    
    
    (2.6
    )%Minority interest
    
    
    (493
    )
    
    
    (1.2
    )%
    
    
    (807
    )
    
    
    (2.2
    )%Net income (loss)
    
    $
    4,397
    
    
    
    10.6
    %
    
    $
    (21,858
    )
    
    
    (59.0
    )%Adjusted EBITDA
    
    $
    11,947
    
    
    
    28.8
    %
    
    $
    10,120
    
    
    
    27.3
    %Net income (loss) per diluted share (GAAP)
    
    $
    0.17
    
    
    
    
    
    
    $
    (2.34
    )Cash earnings per diluted share
    
    $
    0.21
    
    
    
    
    
    
    $
    0.45
 Six Months Ended June 30,% of
    
    
    
    
    
    
    % of2008
    
    
    Revenues
    
    
    2007
    
    
    RevenuesRevenues:Business Information
    
    $
    46,196
    
    
    
    55.6
    %
    
    $
    41,068
    
    
    
    56.5
    %Professional Services
    
    
    36,869
    
    
    
    44.4
    %
    
    
    31,682
    
    
    
    43.5
    %Total revenues
    
    
    83,065
    
    
    
    100.0
    %
    
    
    72,750
    
    
    
    100.0
    %Operating expenses:Business Information
    
    
    37,937
    
    
    
    45.7
    %
    
    
    32,771
    
    
    
    45.0
    %Professional Services
    
    
    26,054
    
    
    
    31.4
    %
    
    
    22,273
    
    
    
    30.6
    %Unallocated corporate operating expenses
    
    
    4,143
    
    
    
    5.0
    %
    
    
    4,080
    
    
    
    5.6
    %Total operating expenses
    
    
    68,134
    
    
    
    82.0
    %
    
    
    59,124
    
    
    
    81.3
    %Equity in earnings of The Detroit Legal
News Publishing, LLC, net of amortization
    
    
    3,026
    
    
    
    3.6
    %
    
    
    2,245
    
    
    
    3.1
    %Operating income
    
    
    17,957
    
    
    
    21.6
    %
    
    
    15,871
    
    
    
    21.8
    %Non-cash interest expense related to
redeemable preferred stock
    
    
    
    
    
    
    0.0
    %
    
    
    (56,260
    )
    
    
    (77.3
    )%Interest expense, net
    
    
    (2,738
    )
    
    
    (3.3
    )%
    
    
    (3,428
    )
    
    
    (4.7
    )%Other income (expense), net
    
    
    21
    
    
    
    0.0
    %
    
    
    (13
    )
    
    
    0.0
    %Income (loss) before income taxes
    
    
    15,240
    
    
    
    18.3
    %
    
    
    (43,830
    )
    
    
    (60.2
    )%Income tax expense
    
    
    (5,786
    )
    
    
    (7.0
    )%
    
    
    (4,107
    )
    
    
    (5.6
    )%Minority interest
    
    
    (1,050
    )
    
    
    (1.3
    )%
    
    
    (1,707
    )
    
    
    (2.3
    )%Net income (loss)
    
    $
    8,404
    
    
    
    10.1
    %
    
    $
    (49,644
    )
    
    
    (68.2
    )%Adjusted EBITDA
    
    $
    25,442
    
    
    
    30.6
    %
    
    $
    20,854
    
    
    
    28.7
    %Net income (loss) per diluted share (GAAP)
    
    $
    0.33
    
    
    
    
    
    
    $
    (5.32
    )Cash earnings per diluted share
    
    $
    0.46
    
    
    
    
    
    
    $
    0.93
 35




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##### Table of Contents



Three Months Ended June 30, 2008
Compared to Three Months Ended June 30, 2007
 Revenues
 Three Months Ended June 30,2008
    
    2007
    
    Increase($s in millions)Total revenues
    
    $
    41.6
    
    
    $
    37.1
    
    
    $
    4.5
    
    
    
    12.1
    %
  
    
    $1.9 million of revenues from businesses we acquired on or after April 1, 2007, which we
refer to as acquired businesses. These revenues consisted of: (1) $0.6 million in revenues
from the assets of Legal and Business Publishers, Inc. (including The Mecklenburg Times)
acquired on February 13, 2008; and (2) $1.4 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.
    
    $2.6 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 April
1, 2007, which we refer to as existing businesses; (2) customer lists, goodwill or other
finite-life intangibles we purchased on or after April 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.
  Operating Expenses
 Three Months Ended June 30,2008
    
    2007
    
    Increase($s in millions)Total operating expenses
    
    $
    34.8
    
    
    $
    30.8
    
    
    $
    4.1
    
    
    
    13.3
    %Direct operating expense
    
    
    14.6
    
    
    
    12.3
    
    
    
    2.3
    
    
    
    18.3
    %Selling, general and administrative expenses
    
    
    16.7
    
    
    
    15.7
    
    
    
    1.1
    
    
    
    6.8
    %Depreciation expense
    
    
    1.2
    
    
    
    0.9
    
    
    
    0.3
    
    
    
    33.9
    %Amortization expense
    
    
    2.3
    
    
    
    1.9
    
    
    
    0.4
    
    
    
    23.9
    %
  36




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Direct Operating Expenses.
 Selling, General and Administrative Expenses.
 Depreciation and Amortization Expense.
 Adjusted EBITDA
 Three Months Ended June 30,2008
    
    2007
    
    Increase($s in millions)Adjusted EBITDA
    
    $
    11.9
    
    
    $
    10.1
    
    
    $
    1.8
    
    
    
    18.1
    %Adjusted EBITDA margin
    
    
    28.8
    %
    
    
    27.3
    %
    
    
    1.4
    %
    
    
    5.3
    %
  Cash Earnings and Cash Earnings per Diluted Share
 Three Months Ended June 30,2008
    
    2007
    
    Increase (decrease)Cash earnings (in millions)
    
    $
    5.3
    
    
    $
    4.2
    
    
    $
    1.1
    
    
    
    26.4
    %Cash earning per diluted share
    
    $
    0.21
    
    
    $
    0.45
    
    
    $
    (0.24
    )
    
    
    (53.4
    %)
  37




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Non-Cash Interest Expense Related to Redeemable Preferred Stock
 Three Months Ended June 30,2008
    
    2007
    
    Decrease($s in millions)Non-cash
interest redeemable
preferred stock
    
    $
    
    
    
    $
    26.3
    
    
    $
    (26.3
    )
    
    
    (100
    )%
  Interest Expense, Net
 Three Months Ended June 30,2008
    
    2007
    
    Decrease($s in millions)Interest expense, net
    
    $
    0.3
    
    
    $
    1.4
    
    
    $
    (1.1
    )
    
    
    (79.4
    )%
  Income Tax Expense
 Three Months Ended June 30,2008
    
    2007
    
    Increase($s in millions)Income tax expense
    
    $
    3.0
    
    
    $
    1.0
    
    
    $
    2.1
    
    
    
    213.0
    %
  38




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##### Table of Contents



Business Information Division Results
 Revenues
 Three Months Ended June 30,2008
    
    2007
    
    Increase (decrease)($s in millions)Total Business Information Division Revenues
    
    $
    23.4
    
    
    $
    21.6
    
    
    $
    1.8
    
    
    
    8.5
    %Display and classified advertising revenues
    
    
    8.8
    
    
    
    9.7
    
    
    
    (1.0
    )
    
    
    (9.9
    )%Public notice revenues
    
    
    10.6
    
    
    
    7.7
    
    
    
    2.9
    
    
    
    36.9
    %Circulation revenues
    
    
    3.6
    
    
    
    3.4
    
    
    
    0.3
    
    
    
    8.3
    %Other revenues
    
    
    0.4
    
    
    
    0.8
    
    
    
    (0.3
    )
    
    
    (44.2
    )%
  The Mecklenburg Times
 The Daily Record
 Operating Expenses
 Three Months Ended June 30,2008
    
    2007
    
    Increase (decrease)($s in millions)Total operating expenses
    
    $
    19.6
    
    
    $
    16.9
    
    
    $
    2.7
    
    
    
    16.1
    %Direct operating expense
    
    
    8.2
    
    
    
    7.1
    
    
    
    1.1
    
    
    
    15.5
    %Selling, general and administrative expenses
    
    
    10.2
    
    
    
    8.7
    
    
    
    1.5
    
    
    
    17.1
    %Depreciation expense
    
    
    0.5
    
    
    
    0.3
    
    
    
    0.1
    
    
    
    40.7
    %Amortization expense
    
    
    0.8
    
    
    
    0.8
    
    
    
    0.0
    
    
    
    (0.3
    )%
  39




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##### Table of Contents



Professional Services Division Results
 Revenues
 Three Months Ended June 30,2008
    
    2007
    
    Increase (decrease)($s in millions)Total Professional Services Division revenues
    
    $
    18.1
    
    
    $
    15.5
    
    
    $
    2.7
    
    
    
    17.2
    %Mortgage default processing service revenues
    
    
    14.8
    
    
    
    12.0
    
    
    
    2.8
    
    
    
    23.1
    %Appellate services revenues
    
    
    3.3
    
    
    
    3.4
    
    
    
    (0.1
    )
    
    
    (3.6
    )%
   Operating Expenses
 Three Months Ended June 30,2008
    
    2007
    
    Increase($s in millions)Total operating expenses
    
    $
    13.1
    
    
    $
    11.1
    
    
    $
    2.0
    
    
    
    17.6
    %Direct operating expense
    
    
    6.4
    
    
    
    5.3
    
    
    
    1.2
    
    
    
    22.1
    %Selling, general and
administrative expenses
    
    
    4.6
    
    
    
    4.3
    
    
    
    0.3
    
    
    
    6.1
    %Depreciation expense
    
    
    0.5
    
    
    
    0.4
    
    
    
    0.1
    
    
    
    20.3
    %Amortization expense
    
    
    1.6
    
    
    
    1.1
    
    
    
    0.4
    
    
    
    40.6
    %
   40




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##### Table of Contents



Six Months Ended June 30, 2008
Compared to Six Months Ended June 30, 2007
 Revenues
 Six Months Ended June 30,2008
    
    2007
    
    Increase($s in millions)Total revenues
    
    $
    83.1
    
    
    $
    72.8
    
    
    $
    10.3
    
    
    
    14.2
    %
  
    
    $3.5 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) $0.7 million in
revenues from the assets of Venture Publications (including the Mississippi Business
Journal) acquired on March 30, 2007; (2) $0.9 million in revenues from the assets of Legal
and Business Publishers (including The Mecklenburg Times) acquired on February 13, 2008; and
(3) $2.0 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.
    
    $6.8 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.
  Operating Expenses
 Six Months Ended June 30,2008
    
    2007
    
    Increase($s in millions)Total operating expenses
    
    $
    68.1
    
    
    $
    59.1
    
    
    $
    9.0
    
    
    
    15.2
    %Direct operating expense
    
    
    28.5
    
    
    
    24.8
    
    
    
    3.7
    
    
    
    14.9
    %Selling, general and administrative expenses
    
    
    32.8
    
    
    
    29.0
    
    
    
    3.8
    
    
    
    13.3
    %Depreciation expense
    
    
    2.3
    
    
    
    1.6
    
    
    
    0.6
    
    
    
    39.3
    %Amortization expense
    
    
    4.5
    
    
    
    3.7
    
    
    
    0.8
    
    
    
    22.1
    %
 .
 41




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##### Table of Contents



Direct Operating Expenses.
 Selling, General and Administrative Expenses.
 Depreciation and Amortization Expense.
 Adjusted EBITDA
 Six Months Ended June 30,2008
    
    2007
    
    Increase($s in millions)Adjusted EBITDA
    
    $
    25.4
    
    
    $
    20.9
    
    
    $
    4.6
    
    
    
    22.0
    %Adjusted EBITDA margin
    
    
    30.6
    %
    
    
    28.7
    %
    
    
    2.0
    %
    
    
    6.9
    %
  Cash Earnings and Cash Earnings per Diluted Share
 Six Months Ended June 30,2008
    
    2007
    

Increase (decrease)Cash earnings (in millions)
    
    $
    11.5
    
    
    $
    8.7
    
    
    $
    2.8
    
    
    
    32.1
    %Cash earnings per diluted share
    
    $
    0.46
    
    
    $
    0.93
    
    
    $
    (0.48
    )
    
    
    (51.2
    %)
  42




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##### Table of Contents



Non-Cash Interest Expense Related to Redeemable Preferred Stock
 Six Months Ended June 30,2008
    
    2007
    
    Decrease($s  in millions)Non-cash interest
expense related to
redeemable
preferred stock
    
    $
    
    
    
    $
    56.3
    
    
    $
    (56.3
    )
    
    
    (100
    %)
  Interest Expense, Net
 Six Months Ended June 30,2008
    
    2007
    
    Decrease($s  in millions)Interest expense, net
    
    $
    2.7
    
    
    $
    3.4
    
    
    $
    (0.7
    )
    
    
    (20.1
    )%
  Income Tax Expense
 Six Months Ended June 30,2008
    
    2007
    
    Increase($s  in millions)Income tax expense
    
    $
    5.8
    
    
    $
    4.1
    
    
    $
    1.7
    
    
    
    40.9
    %
  
 Business Information Division Results
 Revenues
 Six Months Ended June 30,2008
    
    2007
    
    Increase (decrease)($s  in millions)Total Business Information Division Revenues
    
    $
    46.2
    
    
    $
    41.1
    
    
    $
    5.1
    
    
    
    12.5
    %Display and classified advertising revenues
    
    
    16.9
    
    
    
    17.3
    
    
    
    (0.4
    )
    
    
    (2.1
    )%Public notice revenues
    
    
    21.2
    
    
    
    15.3
    
    
    
    5.9
    
    
    
    38.7
    %Circulation revenues
    
    
    7.1
    
    
    
    7.0
    
    
    
    0.1
    
    
    
    1.4
    %Other revenues
    
    
    1.0
    
    
    
    1.5
    
    
    
    (0.5
    )
    
    
    (35.3
    )%
  43




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The Mecklenburg Times
 The Daily Record
 Operating Expenses
 Six Months Ended June 30,2008
    
    2007
    
    Increase($s in millions)Total operating expenses
    
    $
    37.9
    
    
    $
    32.8
    
    
    $
    5.2
    
    
    
    15.8
    %Direct operating expense
    
    
    15.7
    
    
    
    13.9
    
    
    
    1.8
    
    
    
    13.3
    %Selling, general and administrative expenses
    
    
    19.8
    
    
    
    16.8
    
    
    
    3.1
    
    
    
    18.3
    %Depreciation expense
    
    
    0.9
    
    
    
    0.6
    
    
    
    0.2
    
    
    
    38.5
    %Amortization expense
    
    
    1.5
    
    
    
    1.5
    
    
    
    0.0
    
    
    
    0.2
    %
  Professional Services Division Results
 Revenues
 Six Months Ended June 30,2008
    
    2007
    
    Increase (decrease)($s in millions)Total Professional Services Division revenues
    
    $
    36.9
    
    
    $
    31.7
    
    
    $
    5.2
    
    
    
    16.4
    %Mortgage default processing service revenues
    
    
    29.9
    
    
    
    24.2
    
    
    
    5.7
    
    
    
    23.5
    %Appellate services revenues
    
    
    7.0
    
    
    
    7.5
    
    
    
    (0.5
    )
    
    
    (6.6
    )%
  44




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##### Table of Contents



Operating Expenses
 Six Months Ended June 30,2008
    
    2007
    
    Increase($s in millions)Total operating expenses
    
    $
    26.1
    
    
    $
    22.3
    
    
    $
    3.8
    
    
    
    17.0
    %Direct operating expense
    
    
    12.7
    
    
    
    10.9
    
    
    
    1.8
    
    
    
    17.0
    %Selling, general and
administrative expenses
    
    
    9.2
    
    
    
    8.4
    
    
    
    0.9
    
    
    
    10.2
    %Depreciation expense
    
    
    1.0
    
    
    
    0.8
    
    
    
    0.3
    
    
    
    33.0
    %Amortization expense
    
    
    3.0
    
    
    
    2.2
    
    
    
    0.8
    
    
    
    37.1
    %
   Off Balance Sheet Arrangements
  Liquidity and Capital Resources
  June 30,
    
    December 31,2008
    
    2007Cash and cash equivalents
    
    $
    2,615
    
    
    $
    1,346Working capital (deficit)
    
    
    1,476
    
    
    
    (5,460
    )Long-term debt, less current portion
    
    
    67,312
    
    
    
    56,301
 45




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##### Table of Contents



Six MonthsEnded June 30,2008
    
    2007Net cash provided by operating activities
    
    $
    9,574
    
    
    $
    12,689Net cash used in investing activities:
    
    
    (22,170
    )
    
    
    (21,545
    )Acquisitions and investments
    
    
    (19,176
    )
    
    
    (17,335
    )Capital expenditures
    
    
    (2,303
    )
    
    
    (4,210
    )Net cash provided by financing activities
    
    
    13,865
    
    
    
    9,693
 Cash Flows Provided by Operating Activities
     June 30, 2008
    
    December 31, 2007Allowance for doubtful accounts as a percentage of gross accounts receivable
    
    
    5.2
    %
    
    
    5.8
    %Day sales outstanding
    
    
    60.3
    
    
    
    54.6
   Cash Flows Used by Investing Activities
  46




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##### Table of Contents



Cash Flows Provided by Financing Activities
   Credit Agreement.
  47




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##### Table of Contents



The Mecklenburg Times
   .
   
    
    incurring indebtedness (including guarantee obligations) or liens;
    
    entering into mergers, consolidations, liquidations or dissolutions;
    
    selling assets;
    
    entering into certain acquisition transactions;
 48




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##### Table of Contents




    
    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
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
 .
 Accounting for Derivative Instruments and Hedging Activities
 49




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##### Table of Contents



Item 4T. 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
  Regulation of sub-prime, Alt-A and other residential mortgage products, including bills introduced
in states where APC does business and the Housing and Economic Recovery Act of 2008, and voluntary
foreclosure relief
 50




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##### Table of Contents



programs developed by the Hope Now Alliance, a consortium that includes loan servicers, may have an
adverse effect on or restrict our operations.
 .
  We intend to continue to pursue acquisition opportunities, which we may not do successfully and may
subject us to considerable business and financial risks.
  51




---



##### Table of Contents




    
    diverting managements time, attention and resources from managing our business;
    
    incurring additional indebtedness and assuming liabilities;
    
    incurring significant additional capital expenditures and operating expenses to
improve, coordinate or integrate managerial, operational, financial and
administrative systems;
    
    experiencing an adverse impact on our earnings from non-recurring acquisition-related
charges or the write-off or amortization of acquired goodwill and other intangible assets;
    
    failing to integrate the operations and personnel of the acquired businesses;
    
    facing operational difficulties in new markets or with new product or service offerings; and
    
    failing to retain key personnel and customers of the acquired businesses, including
subscribers and advertisers for acquired publications and clients of the law firm customers
served by acquired mortgage default processing businesses.
  
 Item 2. Unregistered Sales of Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  52




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##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders
  For
    
    
    21,362,916Against
    
    
    3,583Abstain
    
    
    136Broker Non-Votes
    
    
    
  
 Item 5. Other Information
  
 Item 6. Exhibits
 Exhibit Index
 ExhibitNo
    
    Title
    
    Method of Filing2.1*
    
    Equity Purchase Agreement among the
Company, APC and the Sellers named therein
dated July 28, 2008
    
    Incorporated by
reference to
Exhibit 2.1 of our
current report on
Form 8-K filed with
the SEC on July 28,
200810.1
    
    Securities Purchase Agreement among the
Company and the Purchasers named therein
dated July 28, 2008
    
    Incorporated by
reference to
Exhibit 10.1 of our
current report on
Form 8-K filed with
the SEC on July 28,
200810.2
    
    First Amendment to Second Amended and
Restated Credit Agreement with the Company,
its consolidated subsidiaries and a
syndicate of lenders dated July 28, 2008
    
    Incorporated by
reference to
Exhibit 10.2 of our
current report on
Form 8-K filed with
the SEC on July 28,
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
 
 *
    
    The schedules to the Equity Purchase Agreement have been omitted pursuant to Item 601(b)(2) of
Regulation S-K. We agree to furnish supplementally to the SEC, upon request, a copy of the omitted
schedules. 53




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##### Table of Contents



SIGNATURES
  DOLAN MEDIA COMPANYDated: August 11, 2008By: /s/ James P. DolanJames P. Dolan
Chairman, Chief Executive Officer and President
(Principal Executive Officer)Dated: August 11, 2008By:
/s/ Scott J. PolleiScott J. Pollei
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)Dated: August 11, 2008By:
/s/ Vicki J. DuncombVicki J. Duncomb
Vice President, Finance
(Principal Accounting Officer)
 54




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##### Table of Contents



Exhibit Index
 Exhibit No
    
    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
 55