##### 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, 2011
 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
 The Dolan 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
 o þ




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##### 



PART I  FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets as of March 31, 2011, (unaudited) and December 31, 2010
    
    
    1Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended
March 31, 2011, and 2010
    
    
    2Unaudited Condensed Consolidated Statements of Stockholders Equity and Comprehensive Income
for the Three Months Ended March 31, 2011
    
    
    3Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2011, and 2010
    
    
    4Notes to Unaudited Condensed Consolidated Interim Financial Statements
    
    
    5Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    27Item 4. Controls and Procedures
    
    
    27PART II  OTHER INFORMATION
    
    
    28Item 1. Legal Proceedings
    
    
    28Item 1A. Risk Factors
    
    
    28Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    28Item 3. Defaults Upon Senior Securities
    
    
    28Item 4. Reserved
    
    
    28Item 5. Other Information
    
    
    28Item 6. Exhibits
    
    
    28SIGNATURES
    
    
    29Section 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
 The Dolan Company
 
 Condensed Consolidated Balance Sheets
 (in thousands, except share data)
 March 31,
    
    
    December 31,2011
    
    
    2010(unaudited)ASSETSCurrent assetsCash and cash equivalents
    
    $
    2,724
    
    
    $
    4,862Accounts receivable, including unbilled services (net of allowances for doubtful accounts
of $1,415 and $1,578 as of March 31, 2011, and December 31, 2010, respectively)
    
    
    64,901
    
    
    
    59,801Unbilled pass-through costs
    
    
    6,018
    
    
    
    7,140Prepaid expenses and other current assets
    
    
    3,949
    
    
    
    4,186Income tax receivable
    
    
    2,119
    
    
    
    4,183Total current assets
    
    
    79,711
    
    
    
    80,172Investments
    
    
    13,157
    
    
    
    13,808Property and equipment, net
    
    
    17,649
    
    
    
    17,333Finite-life intangible assets, net
    
    
    190,347
    
    
    
    195,959Indefinite-lived intangible assets
    
    
    226,418
    
    
    
    225,373Other assets
    
    
    2,920
    
    
    
    3,143Total assets
    
    $
    530,202
    
    
    $
    535,788LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term debt
    
    $
    8,783
    
    
    $
    7,578Accounts payable
    
    
    14,870
    
    
    
    15,589Accrued pass-through liabilities
    
    
    14,331
    
    
    
    18,271Accrued compensation
    
    
    7,634
    
    
    
    5,409Accrued liabilities
    
    
    4,814
    
    
    
    5,537Due to sellers of acquired businesses
    
    
    5,732
    
    
    
    3,943Deferred revenue
    
    
    21,837
    
    
    
    21,689Total current liabilities
    
    
    78,001
    
    
    
    78,016Long-term debt, less current portion
    
    
    124,665
    
    
    
    131,568Deferred income taxes
    
    
    8,381
    
    
    
    7,794Other liabilities
    
    
    11,174
    
    
    
    12,972Total liabilities
    
    
    222,221
    
    
    
    230,350Redeemable noncontrolling interest
    
    
    25,564
    
    
    
    26,580Commitments and contingencies (Note 14)Stockholders equityCommon stock, $0.001 par value; authorized: 70,000,000 shares;
outstanding: 30,370,410 and 30,511,408 shares as of March 31, 2011,
and December 31, 2010, 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
    
    
    
    
    
    
    Other comprehensive loss (net of tax)
    
    
    (1,097
    )
    
    
    (1,298
    )Additional paid-in capital
    
    
    286,031
    
    
    
    286,148Accumulated deficit
    
    
    (2,547
    )
    
    
    (6,022
    )Total stockholders equity
    
    
    282,417
    
    
    
    278,858Total liabilities and stockholders equity
    
    $
    530,202
    
    
    $
    535,788
   1




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##### Table of Contents



The Dolan Company
 
 Unaudited Condensed Consolidated Statements of Operations
 (in thousands, except share and per share data)
 Three Months EndedMarch 31,2011
    
    
    2010RevenuesProfessional Services
    
    $
    51,957
    
    
    $
    56,026Business Information
    
    
    20,591
    
    
    
    20,952Total revenues
    
    
    72,548
    
    
    
    76,978Operating expensesDirect operating: Professional Services
    
    
    23,502
    
    
    
    22,190Direct operating: Business Information
    
    
    8,338
    
    
    
    6,916Selling, general and administrative
    
    
    27,774
    
    
    
    25,188Amortization
    
    
    4,523
    
    
    
    3,993Depreciation
    
    
    1,934
    
    
    
    2,736Total operating expenses
    
    
    66,071
    
    
    
    61,023Equity in earnings of affiliates
    
    
    748
    
    
    
    1,428Operating income
    
    
    7,225
    
    
    
    17,383Non-operating income (expense)Interest expense, net of interest income
    
    
    (1,608
    )
    
    
    (1,736
    )Non-cash interest income related to
interest rate swaps
    
    
    286
    
    
    
    363Total non-operating expense
    
    
    (1,322
    )
    
    
    (1,373
    )Income before income taxes
    
    
    5,903
    
    
    
    16,010Income tax expense
    
    
    (2,209
    )
    
    
    (5,990
    )Net income
    
    
    3,694
    
    
    
    10,020Less: Net income attributable to redeemable
noncontrolling interest
    
    
    (219
    )
    
    
    (863
    )Net income attributable to
The Dolan Company
    
    $
    3,475
    
    
    $
    9,157Earnings per share  basic:Net income attributable to
The Dolan Company
    
    $
    0.12
    
    
    $
    0.30Decrease in redeemable noncontrolling
interest in NDeX
    
    
    0.03
    
    
    
    Net income attributable to The Dolan
Company common stockholders
    
    $
    0.15
    
    
    $
    0.30Weighted average shares outstanding  basic
    
    
    30,128,944
    
    
    
    30,106,932Earnings per share  diluted:Net income attributable to
The Dolan Company
    
    $
    0.11
    
    
    $
    0.30Decrease in redeemable noncontrolling
interest in NDeX
    
    
    0.03
    
    
    
    Net income attributable to The Dolan
Company common stockholders
    
    $
    0.14
    
    
    $
    0.30Weighted average shares outstanding  diluted
    
    
    30,364,917
    
    
    
    30,194,842
   2




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##### Table of Contents



The Dolan Company
 
 Unaudited Condensed Consolidated Statements of Stockholders Equity and Comprehensive Income
 (in thousands, except share data)
 Additional
    
    
    
    
    
    OtherCommon Stock
    
    
    Paid-In
    
    
    Accumulated
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Loss
    
    
    TotalBalance (deficit) at December 31, 2009
    
    
    30,326,437
    
    
    $
    30
    
    
    $
    287,210
    
    
    $
    (38,377
    )
    
    $
    
    
    
    $
    248,863Net income attributable to
The Dolan Company
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,355
    
    
    
    
    
    
    
    32,355Decrease in redeemable
noncontrolling interest in NDeX
    
    
    
    
    
    
    
    
    
    
    217
    
    
    
    
    
    
    
    
    
    
    
    217Net income attributable to The Dolan
Company common stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,572Unrealized loss on interest rate swap,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,298
    )
    
    
    (1,298
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,274Issuance of common stock pursuant
to the exercise of stock options
    
    
    13,848
    
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    26Share-based compensation expense,
including issuance of restricted
stock (shares are net of forfeitures)
    
    
    171,123
    
    
    
    
    
    
    
    3,242
    
    
    
    
    
    
    
    
    
    
    
    3,242Increase in redeemable noncontrolling
interest in DiscoverReady, net of tax
    
    
    
    
    
    
    
    
    
    
    (4,560
    )
    
    
    
    
    
    
    
    
    
    
    (4,560
    )Other
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    13Balance (deficit) at December 31, 2010
    
    
    30,511,408
    
    
    $
    30
    
    
    $
    286,148
    
    
    $
    (6,022
    )
    
    $
    (1,298
    )
    
    $
    278,858Net income attributable to
The Dolan Company
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,475
    
    
    
    
    
    
    
    3,475Decrease in redeemable
noncontrolling interest in NDeX
    
    
    
    
    
    
    
    
    
    
    964
    
    
    
    
    
    
    
    
    
    
    
    964Net income attributable to The Dolan
Company common stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,439Unrealized gain on interest rate swap,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    201
    
    
    
    201Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,640Share-based compensation expense,
including issuance of restricted
stock (shares are net of forfeitures)
    
    
    (3,498
    )
    
    
    
    
    
    
    838
    
    
    
    
    
    
    
    
    
    
    
    838Repurchase of common stock
    
    
    (137,500
    )
    
    
    
    
    
    
    (1,691
    )
    
    
    
    
    
    
    
    
    
    
    (1,691
    )Increase in redeemable noncontrolling
interest in DiscoverReady
    
    
    
    
    
    
    
    
    
    
    (228
    )
    
    
    
    
    
    
    
    
    
    
    (228
    )Balance (deficit) at March 31, 2011
    
    
    30,370,410
    
    
    $
    30
    
    
    $
    286,031
    
    
    $
    (2,547
    )
    
    $
    (1,097
    )
    
    $
    282,417
   3




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##### Table of Contents



The Dolan Company
 
 Unaudited Condensed Consolidated Statements of Cash Flows
 (in thousands)
 Three Months EndedMarch 31,2011
    
    
    2010Cash flows from operating activitiesNet income
    
    $
    3,694
    
    
    $
    10,020Distributions received from The Detroit Legal News
Publishing, LLC
    
    
    1,400
    
    
    
    2,100Distributions paid to holders of noncontrolling interests
    
    
    (36
    )
    
    
    (624
    )Non-cash operating activities:Amortization
    
    
    4,523
    
    
    
    3,993Depreciation
    
    
    1,934
    
    
    
    2,736Equity in earnings of affiliates
    
    
    (748
    )
    
    
    (1,428
    )Stock-based compensation expense
    
    
    838
    
    
    
    606Change in value of interest rate swap
    
    
    (286
    )
    
    
    (363
    )Amortization of debt issuance costs
    
    
    88
    
    
    
    83Non-cash fair value adjustment on earnouts recorded in connection with acquisitions
    
    
    329
    
    
    
    294Changes in operating assets and liabilities, net of effects of
business combinations:Accounts receivable and unbilled pass-through costs
    
    
    (3,933
    )
    
    
    (1,365
    )Prepaid expenses and other current assets
    
    
    2,359
    
    
    
    (125
    )Other assets
    
    
    34
    
    
    
    36Accounts payable and accrued liabilities
    
    
    (3,123
    )
    
    
    2,735Deferred revenue and other liabilities
    
    
    505
    
    
    
    2,456Net cash provided by operating activities
    
    
    7,578
    
    
    
    21,154Cash flows from investing activitiesAcquisitions and investments
    
    
    (85
    )
    
    
    Capital expenditures
    
    
    (2,247
    )
    
    
    (1,884
    )Net cash used in investing activities
    
    
    (2,332
    )
    
    
    (1,884
    )Cash flows from financing activitiesNet payments on senior revolving note
    
    
    (3,800
    )
    
    
    (8,000
    )Payments on senior long-term debt
    
    
    (1,250
    )
    
    
    (3,050
    )Payments on unsecured notes payable
    
    
    (590
    )
    
    
    (7,308
    )Payments for repurchase of common stock
    
    
    (1,691
    )
    
    
    Other
    
    
    (53
    )
    
    
    (50
    )Net cash used in financing activities
    
    
    (7,384
    )
    
    
    (18,408
    )Net change in cash and cash equivalents
    
    
    (2,138
    )
    
    
    862Cash and cash equivalents at beginning of the period
    
    
    4,862
    
    
    
    2,894Cash and cash equivalents at end of the period
    
    $
    2,724
    
    
    $
    3,756
   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
   Three Months EndedMarch 31,2011
    
    
    2010Net income attributable to The Dolan Company
    
    $
    3,475
    
    
    $
    9,157(Increase) decrease in redeemable noncontrolling
interest in NDeX, net of tax
    
    
    964
    
    
    
    (79
    )Net income attributable to The Dolan Company
common stockholders
    
    $
    4,439
    
    
    $
    9,078Basic:Weighted average common shares outstanding
    
    
    30,455
    
    
    
    30,321Weighted average common shares of unvested
restricted stock
    
    
    (326
    )
    
    
    (214
    )Shares used in the computation of basic net
income per share
    
    
    30,129
    
    
    
    30,107Net income attributable to The Dolan Company
common stockholders per share  basic
    
    $
    0.15
    
    
    $
    0.30
  5




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##### Table of Contents



Three Months EndedMarch 31,2011
    
    
    2010Diluted:Shares used in the computation of basic net
income per share
    
    
    30,129
    
    
    
    30,107Stock options and restricted stock
    
    
    236
    
    
    
    88Shares used in the computation of dilutive net
income per share
    
    
    30,365
    
    
    
    30,195Net income attributable to The Dolan Company
common stockholders per share  diluted
    
    $
    0.14
    
    
    $
    0.30
  Note 3. Business Combinations
  2010 Acquisition:
 Acquisition of DataStream Content Solutions, LLC
     6




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##### Table of Contents



Pro Forma Information: (in thousands, except per share data):
 Pro FormaThree Months EndedMarch 31, 2010Total revenues
    
    $
    79,386Net income attributable to The Dolan Company
    
    
    9,114Net income attributable to The Dolan Company per share:Basic
    
    $
    0.30Diluted
    
    $
    0.30Actual/Pro forma weighted average shares outstanding:Basic
    
    
    30,129Diluted
    
    
    30,365
 Note 4. Derivative Instruments
      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.
  7




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##### Table of Contents



Assets and Liabilities Measured at Fair Value on a Recurring Basis.
   Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalInterest rate swaps
    
    $
    
    
    
    $
    1,789
    
    
    $
    
    
    
    $
    1,789Earnout liability recorded in connection with the NDeX
Florida operations
acquired from the
Albertelli sellers
    
    
    
    
    
    
    
    
    
    
    5,258
    
    
    
    5,258Earnout liability recorded in connection with the
DataStream acquisition
    
    
    
    
    
    
    
    
    
    
    3,312
    
    
    
    3,312Redeemable noncontrolling interest in DiscoverReady
    
    
    
    
    
    
    
    
    
    
    14,160
    
    
    
    14,160Total
    
    $
    
    
    
    $
    1,789
    
    
    $
    22,730
    
    
    $
    24,519
  Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalInterest rate swaps
    
    $
    
    
    
    $
    2,400
    
    
    $
    
    
    
    $
    2,400Earnout liability recorded in connection with the NDeX
Florida operations
acquired from the
Albertelli sellers
    
    
    
    
    
    
    
    
    
    
    5,069
    
    
    
    5,069Earnout liability recorded in connection with the
DataStream acquisition
    
    
    
    
    
    
    
    
    
    
    3,171
    
    
    
    3,171Redeemable noncontrolling interest in DiscoverReady
    
    
    
    
    
    
    
    
    
    
    13,652
    
    
    
    13,652Total
    
    $
    
    
    
    $
    2,400
    
    
    $
    21,892
    
    
    $
    24,292
  Fair Value
    
    
    
    
    
    
    Fair ValueAdjustment
    
    
    
    
    
    
    AdjustmentIncluded in Net
    
    
    
    
    
    
    Included inIncome
    
    
    Minority
    
    
    AdditionalAttributable to
    
    
    Partners
    
    
    Paid-in Capital
    
    
    Balance atBalance at
    
    
    The Dolan
    
    
    Share of
    
    
    and Deferred
    
    
    March 31,December 31, 2010
    
    
    Company
    
    
    Earnings
    
    
    Taxes
    
    
    2011Earnout liability recorded in
connection with the NDeX
Florida operations acquired
from the Albertelli sellers
    
    $
    5,069
    
    
    $
    189
    
    
    $
    
    
    
    $
    
    
    
    $
    5,258Earnout liability recorded in
connection with the
DataStream Acquisition
    
    
    3,171
    
    
    
    141
    
    
    
    
    
    
    
    
    
    
    
    3,312Redeemable noncontrolling
interest in DiscoverReady
    
    
    13,652
    
    
    
    
    
    
    
    137
    
    
    
    371
    
    
    
    14,160Total
    
    $
    21,892
    
    
    $
    330
    
    
    $
    137
    
    
    $
    371
    
    
    $
    22,730
  8




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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
  Accounting
    
    Percent
    
    
    March 31,
    
    
    December 31,Method
    
    Ownership
    
    
    2011
    
    
    2010The Detroit Legal News Publishing, LLC
    
    Equity
    
    
    35
    
    
    $
    12,512
    
    
    $
    13,154Other
    
    Equity
    
    
    19.5
    
    
    
    645
    
    
    
    654Total
    
    
    
    
    
    
    
    $
    13,157
    
    
    $
    13,808
  Three Months EndedMarch 31,2011
    
    
    2010The Detroit Legal News Publishing, LLC
    
    $
    757
    
    
    $
    1,428Other
    
    
    (9
    )
    
    
    Total
    
    $
    748
    
    
    $
    1,428
 The Detroit Legal News Publishing, LLC:
  (in thousands)
 As of March 31,
    
    
    As of December 31,2011
    
    
    2010Carrying value of investment
    
    $
    12,512
    
    
    $
    13,154Underlying finite-lived customer
list, net of amortization
    
    
    7,036
    
    
    
    7,413
  9




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##### Table of Contents



Three Months EndedMarch 31,2011
    
    
    2010Equity in earnings of DLNP, net of amortization
of customer list
    
    $
    757
    
    
    $
    1,428Distributions received
    
    
    1,400
    
    
    
    2,100Amortization expense
    
    
    377
    
    
    
    377
 Note 7. Intangible Assets
 Indefinite-Lived Intangible Assets:
  March 31,
    
    
    December 31,2011
    
    
    2010GoodwillMortgage Default Processing Services
    
    $
    131,709
    
    
    $
    131,709Litigation Support Services
    
    
    23,651
    
    
    
    23,651Business Information
    
    
    62,844
    
    
    
    61,833Total goodwill
    
    
    218,204
    
    
    
    217,193TradenamesMortgage Default Processing Services
    
    
    6,537
    
    
    
    6,537Business Information
    
    
    1,677
    
    
    
    1,643Total tradenames
    
    
    8,214
    
    
    
    8,180Total indefinite-lived intangbile assets
    
    $
    226,418
    
    
    $
    225,373
  Finite-Life Intangible Assets:
 Note 8. Long-Term Debt, Capital Lease Obligation
  March 31,
    
    
    December 31,2011
    
    
    2010Senior secured debt (see below):Senior variable-rate term note, payable in
quarterly installments with a balloon
    
    $
    48,750
    
    
    $
    50,000Senior variable-rate revolving note
    
    
    80,200
    
    
    
    84,000Total senior secured debt
    
    
    128,950
    
    
    
    134,000Unsecured notes payable
    
    
    4,296
    
    
    
    4,886Capital lease obligations
    
    
    202
    
    
    
    260133,448
    
    
    
    139,146Less current portion
    
    
    8,783
    
    
    
    7,578Long-term debt, less current portion
    
    $
    124,665
    
    
    $
    131,568
 Senior Secured Debt:
  10




---



##### Table of Contents



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




---



##### Table of Contents



Professional ServicesMortgageDefault
    
    
    Litigation
    
    
    BusinessProcessing
    
    
    Support
    
    
    Information
    
    
    Corporate
    
    
    TotalThree Months Ended March 31, 2011Revenues
    
    $
    37,856
    
    
    $
    14,101
    
    
    $
    20,591
    
    
    $
    
    
    
    $
    72,548Direct operating expenses
    
    
    17,676
    
    
    
    5,826
    
    
    
    8,338
    
    
    
    
    
    
    
    31,840Selling, general and
administrative expenses
    
    
    10,331
    
    
    
    4,997
    
    
    
    10,340
    
    
    
    2,106
    
    
    
    27,774Amortization and depreciation
    
    
    3,543
    
    
    
    944
    
    
    
    1,798
    
    
    
    172
    
    
    
    6,457Equity in earnings of affiliates
    
    
    
    
    
    
    
    
    
    
    748
    
    
    
    
    
    
    
    748Operating income (loss)
    
    $
    6,306
    
    
    $
    2,334
    
    
    $
    863
    
    
    $
    (2,278
    )
    
    $
    7,225Three 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
    )
    
    $
    17,383
 Note 13. Share-Based Compensation
   Stock Options:
  WeightedWeighted
    
    
    Weighted
    
    
    AverageAverage Grant
    
    
    Average
    
    
    RemainingNumber
    
    
    Date Fair
    
    
    Exercise
    
    
    Contractualof Shares
    
    
    Value
    
    
    Price
    
    
    Life (in years)Outstanding options at December 31, 2010
    
    
    1,945,770
    
    
    $
    4.83
    
    
    $
    13.50
    
    
    
    4.82Granted
    
    
    5,836
    
    
    
    5.39
    
    
    
    12.74
    
    
    
    Canceled or forfeited
    
    
    (41,967
    )
    
    
    5.04
    
    
    
    13.84
    
    
    
    Outstanding options at March 31, 2011
    
    
    1,909,639
    
    
    $
    4.83
    
    
    $
    13.49
    
    
    
    4.57Options exercisable at March 31, 2011
    
    
    862,230
    
    
    $
    4.53
    
    
    $
    13.60
    
    
    
    3.92
   12




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##### Table of Contents



Restricted Stock Grants:
 Weighted AverageNumber of Shares
    
    
    Grant Date Fair ValueNonvested, December 31, 2010
    
    
    324,906
    
    
    $
    12.62Granted
    
    
    3,204
    
    
    
    12.74Canceled or forfeited
    
    
    (6,702
    )
    
    $
    12.90Nonvested, March 31, 2011
    
    
    321,408
    
    
    $
    12.61
  Note 14. Contingencies and Commitments
 Litigation:
  13




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
   Forward-Looking Statements
  
    
    our businesses operate in highly competitive markets and depend on the economies and
demographics of the legal, financial and real estate markets we serve, and changes in those
sectors could have an adverse effect on our revenues, cash flows, and profitability;
    
    growing our business may place a strain on our management and internal systems,
processes and controls, may result in operating inefficiencies, and may negatively impact
our operating margins;
    
    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 or
require us to raise additional capital or incur additional indebtedness;
    
    we depend on our senior management team and other key leaders of our business segments,
and the operation and growth of our business may be negatively impacted if we lose any of
their services;
    
    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 mortgage
default files 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 to mitigate foreclosures, voluntary relief programs
and voluntary halts or moratoria by servicers or lenders, as well as governmental
investigations, enforcement actions, litigation and court orders, may have an adverse
affect on our mortgage default processing services and public notice operations;
    
    revenues of our subsidiary NDeX and our subsidiary DiscoverReady are each very
concentrated among a few customers, thus the loss of business from these customers and a
failure to attract new customers could adversely affect our operating results; and
    
    certain key personnel of our subsidiary 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.
   14




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##### Table of Contents



Overview
   Recent Developments
 Stock Buy-Back Plan
  Regulatory Environment
      15




---



##### Table of Contents



Recent Acquisitions
  DataStream Content Solutions, LLC:
 Federal News Service, Inc.
 Revenues
  
    
    72% and 73%, respectively, from our Professional Services Division (52% and 55%,
respectively, from mortgage default processing services and 19% and 18%, respectively, from
litigation support services); and
    
    28% and 27%, respectively, from our Business Information Division.
 Professional Services.
 Mortgage Default Processing Services.
 Professional
Services Division Results, Managements Discussion and Analysis of Financial
Condition and Results of Operations
  16




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##### Table of Contents



Managements Discussion and Analysis of Financial Condition and Results of
OperationsRevenues
  Litigation Support Services.
   Business Information.
    17




---



##### 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-life intangible assets 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
  (in thousands)
 Three Months Ended March 31,2011
    
    
    2010Trott sellers
    
    $
    
    
    
    $
    114Feiwell & Hannoy
    
    
    
    
    
    
    48Sellers of Barrett-NDEx or
their transferees
(as a group)
    
    
    36
    
    
    
    170Total
    
    $
    36
    
    
    $
    332
  18




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##### Table of Contents



Critical Accounting Policies and Estimates
 Managements Discussion and Analysis of Financial Condition and Results of Operations
  19




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##### Table of Contents



RESULTS OF OPERATIONS
 in thousands, except per share data
 Three Months Ended March 31,% of
    
    
    
    
    
    
    % of2011
    
    
    Revenues
    
    
    2010
    
    
    RevenuesRevenues:Professional Services
    
    $
    51,957
    
    
    
    71.6
    %
    
    $
    56,026
    
    
    
    72.8
    %Business Information
    
    
    20,591
    
    
    
    28.4
    %
    
    
    20,952
    
    
    
    27.2
    %Total revenues
    
    
    72,548
    
    
    
    100.0
    %
    
    
    76,978
    
    
    
    100.0
    %Professional Services
    
    
    43,317
    
    
    
    59.7
    %
    
    
    41,745
    
    
    
    54.2
    %Business Information
    
    
    20,476
    
    
    
    28.2
    %
    
    
    17,060
    
    
    
    22.2
    %Unallocated corporate operating expenses
    
    
    2,278
    
    
    
    3.1
    %
    
    
    2,218
    
    
    
    2.9
    %Total operating expenses
    
    
    66,071
    
    
    
    91.1
    %
    
    
    61,023
    
    
    
    79.3
    %Equity in earnings of affiliates
    
    
    748
    
    
    
    1.0
    %
    
    
    1,428
    
    
    
    1.9
    %Operating income
    
    
    7,225
    
    
    
    10.0
    %
    
    
    17,383
    
    
    
    22.6
    %Interest expense, net
    
    
    (1,608
    )
    
    
    (2.2
    )%
    
    
    (1,736
    )
    
    
    (2.3
    )%Non-cash interest income related to interest
rate swaps
    
    
    286
    
    
    
    0.4
    %
    
    
    363
    
    
    
    0.5
    %Income before income taxes
    
    
    5,903
    
    
    
    8.1
    %
    
    
    16,010
    
    
    
    20.8
    %Income tax expense
    
    
    (2,209
    )
    
    
    (3.0
    )%
    
    
    (5,990
    )
    
    
    (7.8
    )%Net income
    
    
    3,694
    
    
    
    5.1
    %
    
    
    10,020
    
    
    
    13.0
    %Less: Net income attributable to redeemable
noncontrolling interest
    
    
    (219
    )
    
    
    (0.3
    )%
    
    
    (863
    )
    
    
    (1.1
    )%Net income attributable to The Dolan Company
    
    $
    3,475
    
    
    
    4.8
    %
    
    $
    9,157
    
    
    
    11.9
    %Net income attributable to The Dolan Company
per share  basic
    
    $
    0.12
    
    
    
    
    
    
    $
    0.30Decrease in redeemable noncontrolling
interest in NDeX
    
    
    0.03
    
    
    
    
    
    
    
    Net income attributable to The Dolan Company
common stockholders per diluted share 
basic
    
    $
    0.15
    
    
    
    
    
    
    $
    0.30Weighted average shares outstanding  basic
    
    
    30,129
    
    
    
    
    
    
    
    30,107Net income attributable to The Dolan Company
per share  diluted
    
    $
    0.11
    
    
    
    
    
    
    $
    0.30Decrease in redeemable noncontrolling
interest in NDeX
    
    
    0.03
    
    
    
    
    
    
    
    Net income attributable to The Dolan Company
common stockholders per diluted share 
diluted
    
    $
    0.14
    
    
    
    
    
    
    $
    0.30Weighted average shares outstanding  diluted
    
    
    30,365
    
    
    
    
    
    
    
    30,195
  20




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##### Table of Contents



Three Months Ended March 31, 2011
Compared to Three Months Ended March 31, 2010
 Revenues
 Three Months Ended March 31,2011
    
    
    2010
    
    
    Decrease(in millions)Total revenues
    
    $
    72.5
    
    
    $
    77.0
    
    
    $
    (4.4
    )
    
    
    (5.8
    )%
   Operating Expenses
 Three Months Ended March 31,2011
    
    
    2010
    
    
    Increase (Decrease)(in millions)Total operating expenses
    
    $
    66.1
    
    
    $
    61.0
    
    
    $
    5.0
    
    
    
    8.3
    %Direct operating expenses
    
    
    31.8
    
    
    
    29.1
    
    
    
    2.7
    
    
    
    9.4
    %Selling, general and administrative expenses
    
    
    27.8
    
    
    
    25.2
    
    
    
    2.6
    
    
    
    10.3
    %Depreciation expense
    
    
    1.9
    
    
    
    2.7
    
    
    
    (0.8
    )
    
    
    (29.3
    )%Amortization expense
    
    
    4.5
    
    
    
    4.0
    
    
    
    0.5
    
    
    
    13.3
    %
  Direct Operating Expenses.
 Selling, General and Administrative Expenses.
 Depreciation and Amortization Expense.
  21




---



##### Table of Contents



Interest Expense, Net
 Three Months Ended March 31,2011
    
    
    2010
    
    
    Increase (Decrease)(in millions)Total interest expense, net
    
    $
    1.6
    
    
    $
    1.7
    
    
    $
    (0.1
    )
    
    
    (7.4
    )%Interest on bank credit facility
    
    
    0.9
    
    
    
    0.9
    
    
    
    
    
    
    
    (1.9
    )%Cash interest expense on interest rate swaps
    
    
    0.6
    
    
    
    0.7
    
    
    
    (0.1
    )
    
    
    (16.3
    )%Amortization of deferred financing fees
    
    
    0.1
    
    
    
    0.1
    
    
    
    
    
    
    
    6.4
    %Other
    
    
    
    
    
    
    0.1
    
    
    
    (0.1
    )
    
    
    (16.2
    )%
  Non-Cash Interest Income Related to Interest Rate Swaps
 Three Months Ended March 31,2011
    
    
    2010
    
    
    Decrease(in millions)Non-cash interest income related to interest rate swaps
    
    $
    0.3
    
    
    $
    0.4
    
    
    $
    (0.1
    )
    
    
    (21.2
    )%
  Income Tax Expense
 Three Months Ended March 31,2011
    
    
    2010
    
    
    Decrease(in millions)Income tax expense
    
    $
    2.2
    
    
    $
    6.0
    
    
    $
    (3.8
    )
    
    
    (63.1
    )%Effective tax rate
    
    
    37.4
    %
    
    
    37.4
    %
  Professional Services Division Results
 Revenues
 Three Months Ended March 31,2011
    
    
    2010
    
    
    Increase (Decrease)(in millions)Total revenues
    
    $
    52.0
    
    
    $
    56.0
    
    
    $
    (4.1
    )
    
    
    (7.3
    )%Mortgage default processing services
    
    
    37.9
    
    
    
    42.4
    
    
    
    (4.6
    )
    
    
    (10.8
    )%Litigation support services revenues
    
    
    14.1
    
    
    
    13.6
    
    
    
    0.5
    
    
    
    3.8
    %
   22




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##### Table of Contents



Operating ExpensesMortgage Default Processing Services
 Three Months Ended March 31,2011
    
    
    2010
    
    
    Increase (Decrease)(in millions)Total operating expenses
    
    $
    31.5
    
    
    $
    31.7
    
    
    $
    (0.2
    )
    
    
    (0.5
    )%Direct operating expenses
    
    
    17.7
    
    
    
    17.0
    
    
    
    0.7
    
    
    
    4.1
    %Selling, general and administrative expenses
    
    
    10.3
    
    
    
    10.3
    
    
    
    
    
    
    
    0.4
    %Depreciation expense
    
    
    1.0
    
    
    
    1.9
    
    
    
    (0.9
    )
    
    
    (46.6
    )%Amortization expense
    
    
    2.5
    
    
    
    2.5
    
    
    
    
    
    
    
    
    %
    Operating ExpensesLitigation Support Services
 Three Months Ended March 31,2011
    
    
    2010
    
    
    Increase(in millions)Total operating expenses
    
    $
    11.8
    
    
    $
    10.0
    
    
    $
    1.7
    
    
    
    17.2
    %Direct operating expenses
    
    
    5.8
    
    
    
    5.2
    
    
    
    0.6
    
    
    
    11.7
    %Selling, general and administrative expenses
    
    
    5.0
    
    
    
    4.0
    
    
    
    1.0
    
    
    
    25.0
    %Depreciation expense
    
    
    0.2
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    69.9
    %Amortization expense
    
    
    0.7
    
    
    
    0.7
    
    
    
    
    
    
    
    3.5
    %
  23




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##### Table of Contents



Business Information Division Results
 Revenues
 Three Months Ended March 31,2011
    
    
    2010
    
    
    Increase (Derease)(in millions)Total Business Information Revenues
    
    $
    20.6
    
    
    $
    21.0
    
    
    $
    (0.4
    )
    
    
    (1.7
    )%Display and classified advertising revenues
    
    
    5.8
    
    
    
    5.5
    
    
    
    0.3
    
    
    
    5.2
    %Public notice revenues
    
    
    8.8
    
    
    
    11.8
    
    
    
    (3.0
    )
    
    
    (25.6
    )%Subscription based and other revenues
    
    
    6.0
    
    
    
    3.7
    
    
    
    2.4
    
    
    
    64.5
    %
  Operating Expenses
 Three Months Ended March 31,2011
    
    
    2010
    
    
    Increase(in millions)Total operating expenses
    
    $
    20.5
    
    
    $
    17.1
    
    
    $
    3.4
    
    
    
    20.0
    %Direct operating expenses
    
    
    8.3
    
    
    
    6.9
    
    
    
    1.4
    
    
    
    20.6
    %Selling, general and administrative expenses
    
    
    10.3
    
    
    
    8.9
    
    
    
    1.5
    
    
    
    16.8
    %Depreciation expense
    
    
    0.5
    
    
    
    0.5
    
    
    
    
    
    
    
    
    %Amortization expense
    
    
    1.3
    
    
    
    0.8
    
    
    
    0.5
    
    
    
    63.7
    %
   Off Balance Sheet Arrangements
   24




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##### Table of Contents



Liquidity and Capital Resources
  March 31,
    
    
    December 31,2011
    
    
    2010Cash and cash equivalents
    
    $
    2,724
    
    
    $
    4,862Working Capital
    
    
    1,710
    
    
    
    2,156Long-term debt, less current portion
    
    
    124,665
    
    
    
    131,568
 Three Months Ended March 31,2011
    
    
    2010Net cash provided by operating activities
    
    $
    7,578
    
    
    $
    21,154Net cash used in investing activities:Acquisitions and investments
    
    
    (85
    )
    
    
    Capital expenditures
    
    
    (2,247
    )
    
    
    (1,884
    )Net cash used in financing activities
    
    
    (7,384
    )
    
    
    (18,408
    )
 Cash Flows Provided by Operating Activities
    March 31,
    
    
    December 31,
    
    
    March 31,2011
    
    
    2010
    
    
    2010Allowance for doubtful accounts (in thousands)
    
    $
    1,415
    
    
    $
    1,578
    
    
    $
    1,294Allowance for doubtful accounts as a percentage of
gross accounts receivable
    
    
    2.2
    %
    
    
    2.6
    %
    
    
    2.0
    %Days sales outstanding
    
    
    84.2
    
    
    
    73.5
    
    
    
    77.0
     25




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##### Table of Contents



Cash Flows Used in Investing Activities
  Cash Flows Used in Financing Activities
   Credit Agreement.
   Future Needs
     26




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk
      
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
   27




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 Issuer Purchases of Equity Securities (1)
 Total Number of Shares
    
    
    Maximum Number ofPurchased as Part of
    
    
    Shares that May Yet BeTotal Number of
    
    
    Average
    
    
    Publicly Announced
    
    
    Repurchased Under thePeriod
    

Shares Purchased
    
    

Price
Paidper Share
    
    

Plansor Programs
    
    

Plans
or ProgramsJanuary 1, 2011 through January 31, 2011
    
    
    February 1, 2011 through February 28, 2011
    
    
    25,000
    
    
    $
    12.56
    
    
    
    25,000
    
    
    
    1,975,000March 1, 2011 through March 31, 2011
    
    
    112,500
    
    
    $
    12.20
    
    
    
    112,500
    
    
    
    1,862,500137,500
    
    
    $
    12.27
    
    
    
    137,500
    
    
    
    1,862,500
 (1)
    
    In December 2010, our Board of Directors approved a common stock repurchase program that
allows us to purchase up to 2,000,000 shares of our common stock at market prices at the
discretion of management at any time through December 31, 2013. 
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Reserved
 
 Item 5. Other Information
  
 Item 6. Exhibits
 Exhibit No
    
    Title
    
    Method of Filing31.1
    
    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.
  28




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##### Table of Contents



SIGNATURES
  THE DOLAN COMPANYDated: May 10, 2011By:
    
    /s/ James P. DolanJames P. DolanChairman, Chief Executive Officer and President(Principal Executive Officer)Dated: May 10, 2011By:
    
    /s/ Vicki J. DuncombVicki J. DuncombVice President and Chief Financial Officer(Principal Financial Officer and Principal Accounting Officer)
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##### Table of Contents



Exhibit Index
 Exhibit No
    
    Title
    
    Method of Filing31.1
    
    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.
  30