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

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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. Employer
of 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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

On August 5, 2009, there were 30,080,425 shares of the registrant’s common stock outstanding.

 

 

PART I — FINANCIAL INFORMATION			1
Item 1. Financial Statements			1
Condensed Consolidated Balance Sheets as of June 30, 2009 (unaudited) and December 31, 2008			1
Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2009 and 2008			2
Unaudited Condensed Consolidated Statements of Stockholders’ Equity as of June 30, 2009			3
Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2009 and 2008			4
Notes to Unaudited Condensed Consolidated Interim Financial Statements			5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			14
Item 3. Quantitative and Qualitative Disclosures about Market Risk			37
Item 4. Controls and Procedures			38
PART II — OTHER INFORMATION			38
Item 1. Legal Proceedings			38
Item 1A. Risk Factors			38
Item 2. Unregistered Sales of Securities and Use of Proceeds			39
Item 3. Defaults Upon Senior Securities			39
Item 4. Submission of Matters to a Vote of Security Holders			39
Item 5. Other Information			39
Item 6. Exhibits			40
SIGNATURES			41
Exhibit 10.1
Exhibit 10.2
Exhibit 10.3
Exhibit 10.4
Exhibit 10.8
Section 302 Certification of James P. Dolan
Section 302 Certification of Vicki J. Duncomb
Section 906 Certification of James P. Dolan
Section 906 Certification of Vicki J. Duncomb

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Dolan Media Company

		June 30,				December 31,
		2009				2008
		(unaudited)
ASSETS
Current assets
Cash and cash equivalents		$	16,048			$	2,456
Accounts receivable, including unbilled services (net of allowances for doubtful accounts of $964 and $1,398 as of June 30, 2009 and December 31, 2008, respectively)			51,827				38,776
Unbilled pass-through costs			12,684				7,164
Prepaid expenses and other current assets			2,299				4,881
Deferred income taxes			397				397
Total current assets			83,255				53,674
Investments			16,356				17,126
Property and equipment, net			18,861				21,438
Finite-life intangible assets, net			246,948				254,917
Goodwill			117,961				118,983
Other assets			4,510				5,166
Total assets		$	487,891			$	471,304
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt		$	11,900			$	12,048
Accounts payable			7,055				9,116
Accrued pass-through liabilities			25,073				21,598
Accrued compensation			6,848				7,673
Accrued liabilities			5,898				2,738
Due to sellers of acquired businesses			—				75
Deferred revenue			14,540				13,014
Total current liabilities			71,314				66,262
Long-term debt, less current portion			137,225				143,450
Deferred income taxes			13,505				18,266
Deferred revenue and other liabilities			4,696				5,136
Total liabilities			226,740				233,114
Redeemable noncontrolling interest			28,009				15,760
Commitments and contingencies (Note 13)
Stockholders’ equity
Common stock, $0.001 par value; authorized: 70,000,000 shares; outstanding: 30,081,017 and 29,955,018 shares as of June 30, 2009 and December 31, 2008, respectively			30				30
Preferred stock, $0.001 par value; authorized: 5,000,000 shares; designated: 5,000 shares of Series A Junior Participating Preferred Stock; no shares outstanding			—				—
Additional paid-in capital			285,169				291,310
Accumulated deficit			(52,057	)			(68,910	)
Total stockholders’ equity			233,142				222,430
Total liabilities and stockholders’ equity		$	487,891			$	471,304

See Notes to Unaudited Condensed Consolidated Interim Financial Statements

Dolan Media Company

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2009				2008				2009				2008
Revenues
Professional Services		$	44,294			$	18,129			$	86,326			$	36,869
Business Information			22,746				23,424				44,650				46,196
Total revenues			67,040				41,553				130,976				83,065
Operating expenses
Direct operating: Professional Services			15,682				6,436				31,140				12,747
Direct operating: Business Information			7,425				8,152				14,875				15,724
Selling, general and administrative			22,427				16,732				43,163				32,836
Amortization			4,171				2,318				9,295				4,536
Depreciation			2,351				1,190				4,474				2,291
Total operating expenses			52,056				34,828				102,947				68,134
Equity in earnings of The Detroit Legal News Publishing, LLC			1,333				1,469				2,730				3,026
Operating income			16,317				8,194				30,759				17,957
Non-operating income (expense)
Interest expense, net of interest income			(1,728	)			(1,464	)			(3,698	)			(2,760	)
Non-cash interest income related to interest rate swaps			296				1,177				530				22
Other income			—				10				1,446				21
Total non-operating expense			(1,432	)			(277	)			(1,722	)			(2,717	)
Income before income taxes			14,885				7,917				29,037				15,240
Income tax expense			(5,361	)			(3,027	)			(9,678	)			(5,786	)
Net income			9,524				4,890				19,359				9,454
Less: Net income attributable to the redeemable noncontrolling interest			(1,318	)			(493	)			(2,506	)			(1,050	)
Net income attributable to Dolan Media Company		$	8,206			$	4,397			$	16,853			$	8,404
Earnings per share — basic:
Net income attributable to Dolan Media Company		$	0.27			$	0.18			$	0.56			$	0.34
Accretion of redeemable noncontrolling interest, net of tax, in conjunction with adoption of SFAS No. 160			(0.13	)			—				(0.24	)			—
Net income attributable to Dolan Media Company common stockholders		$	0.14			$	0.18			$	0.32			$	0.34
Weighted average shares outstanding — basic			29,815,405				24,936,360				29,810,590				24,936,183
Earnings per share — diluted:
Net income attributable to Dolan Media Company		$	0.27			$	0.17			$	0.56			$	0.33
Accretion of redeemable noncontrolling interest, net of tax, in conjunction with adoption of SFAS No. 160			(0.13	)			—				(0.24	)			—
Net income attributable to Dolan Media Company common stockholders		$	0.14			$	0.17			$	0.32			$	0.33
Weighted average shares outstanding — diluted			29,917,495				25,307,422				29,896,194				25,246,279

See Notes to Unaudited Condensed Consolidated Interim Financial Statements

Dolan Media Company

										Additional
		Common Stock								Paid-In				Accumulated
		Shares				Amount				Capital				Deficit				Total
Balance (deficit) at December 31, 2007			25,088,718			$	25			$	212,364			$	(83,213	)		$	129,176
Net income			—				—				—				14,303				14,303
Private placement of common stock, net of offering costs			4,000,000				4				60,483				—				60,487
Issuance of common stock in a business acquisition			825,528				1				16,460				—				16,461
Issuance of common stock pursuant to the exercise of stock options under the 2007 incentive compensation plan			8,089				—				21				—				21
Stock-based compensation expense, including issuance of restricted stock (shares are net of forfeitures)			32,683				—				1,918				—				1,918
Tax benefit on stock options exercised			—				—				64				—				64
Balance (deficit) at December 31, 2008			29,955,018			$	30			$	291,310			$	(68,910	)		$	222,430
Net income attributable to Dolan Media Company			—				—				—				16,853				16,853
Accretion of redeemable noncontrolling interest, net of tax			—				—				(7,293	)			—				(7,293	)
Net income attributable to Dolan Media Company common stockholders			—				—				—				—				9,560
Issuance of common stock pursuant to the exercise of stock options under the 2007 incentive compensation plan			5,033				—				7				—				7
Stock-based compensation expense, including issuance of restricted stock (shares are net of forfeitures)			120,966				—				1,145				—				1,145
Balance (deficit) at June 30, 2009			30,081,017			$	30			$	285,169			$	(52,057	)		$	233,142

See Notes to Unaudited Condensed Consolidated Interim Financial Statements

Dolan Media Company

		Six Months Ended
		June 30,
		2009				2008
Cash flows from operating activities
Net income		$	19,359			$	9,454
Distributions received from The Detroit Legal News Publishing, LLC			3,500				3,500
Distributions paid to holders of noncontrolling interest			(2,311	)			(909	)
Non-cash operating activities:
Amortization			9,295				4,536
Depreciation			4,474				2,291
Equity in earnings of The Detroit Legal News Publishing, LLC			(2,730	)			(3,026	)
Stock-based compensation expense			1,145				792
Change in value of interest rate swap and accretion of interest on note payable			(525	)			81
Amortization of debt issuance costs			123				94
Change in accounting estimate related to self-insured medical reserve			—				(470	)
Changes in operating assets and liabilities, net of effects of business acquisitions:
Accounts receivable and unbilled pass-through costs			(18,571	)			(4,461	)
Prepaid expenses and other current assets			2,581				386
Other assets			18				17
Accounts payable and accrued liabilities			5,199				(2,910	)
Deferred revenue			1,444				199
Net cash provided by operating activities			23,001				9,574
Cash flows from investing activities
Acquisitions and investments			(1,426	)			(19,176	)
Pending acquisitions			—				(691	)
Capital expenditures			(1,613	)			(2,303	)
Net cash used in investing activities			(3,039	)			(22,170	)
Cash flows from financing activities
Net payments on senior revolving note			—				(9,000	)
Proceeds from borrowings or conversions on senior term notes			—				25,000
Payments on senior long-term debt			(4,625	)			(1,564	)
Capital contribution from holder of noncontrolling interest			—				1,179
Payment on unsecured note payable			(1,750	)			(1,750	)
Proceeds from stock option exercises			7				—
Other			(2	)			—
Net cash (used) provided by financing activities			(6,370	)			13,865
Net increase in cash and cash equivalents			13,592				1,269
Cash and cash equivalents at beginning of the period			2,456				1,346
Cash and cash equivalents at end of the period		$	16,048			$	2,615

See Notes to Unaudited Condensed Consolidated Interim Financial Statements

Notes to Unaudited Condensed Consolidated Interim Financial Statements

Note 1. Nature of Business and Significant Accounting Policies

Basis of Presentation: The condensed consolidated balance sheet as of December 31, 2008, which has been derived from audited financial statements, and the unaudited condensed consolidated interim financial statements of Dolan Media Company (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the instructions to the quarterly report on Form 10-Q and Rule 10-01 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to these rules and regulations. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes for the year ended December 31, 2008 included in the Company’s annual report on Form 10-K filed on March 12, 2009, with the Securities and Exchange Commission.

In the opinion of management, these unaudited condensed consolidated interim financial statements reflect all adjustments necessary for a fair presentation of the Company’s interim financial results. All such adjustments are of a normal and recurring nature. The results of operations for any interim period are not necessarily indicative of results for the full calendar year.

The accompanying unaudited condensed consolidated interim financial statements include the accounts of the Company, its wholly-owned subsidiaries and it majority ownership interest in American Processing Company, LLC (APC). The Company accounts for the percentage interest in APC that it does not own as noncontrolling interest. During the quarter, the Company began operating APC under the trade name National Default Exchange, or NDeX. Therefore, when the Company refers to NDeX in these notes, it means all of its mortgage default processing operations in Michigan, Indiana, Minnesota and at Barrett-NDEx (defined below), which serves the Texas, California and Georgia markets, all of which the Company formerly referred to as APC. When the Company refers to Barrett- NDEx in these notes, it means the entities that constitute the mortgage default processing operations serving the Texas, California and Georgia markets which NDeX acquired on September 2, 2008, as described in Note 3 “National Default Exchange L.P. and related entities.”

All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Derivative Instruments: Under the Company’s bank credit facility, it is required to enter into derivative financial instrument transactions, such as swaps or interest rate caps, in order to manage or reduce its exposure to risk from changes in interest rates. The Company uses interest rate swaps because it is exposed to market risks related to interest rates, with its exposure to changes in interest rates being limited to borrowings under its credit facility. The Company has not designated these interest rate swap agreements for hedge accounting treatment. As of June 30, 2009, the Company had swap arrangements that convert $40.0 million of its variable rate term loan into a fixed rate obligation. The Company does not enter into derivatives or other financial instrument transactions for speculative purposes. The interest rate swaps are valued using market interest rates, and are included in “deferred revenue and other liabilities” in its unaudited condensed consolidated balance sheet. As such, these derivative instruments are classified within level 2 under SFAS No. 157.

Fair Value of Financial Instruments: The carrying value of cash equivalents, accounts receivable, and accounts payable approximate fair value because of the short-term nature of these instruments. To estimate the fair value of debt issues that are not quoted on an exchange, the Company estimates an interest rate it would be required to pay if it had to refinance its debt. At June 30, 2009, the estimated fair value of debt was $137.1 million compared to a carrying value of $149.1 million. At June 30, 2008, the carrying value of variable-rate debt approximated fair value as the interest rate was not significantly different than the current market rate.

New Accounting Pronouncements: In December 2007, the FASB issued SFAS No. 141R, “Business Combinations,” (“SFAS No. 141R”) which changes how the Company accounts for business acquisitions. SFAS No. 141R requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction and establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed in a business combination. Certain provisions of this standard will, among other things, impact the determination of acquisition-date fair value of consideration paid in a business combination (including contingent consideration); exclude transaction costs from acquisition accounting; and change accounting practices for acquired contingencies, acquisition-related restructuring costs, in-process research and development, indemnification assets, and tax benefits. For the Company, SFAS No. 141R was effective beginning January 1, 2009. Accordingly, for acquisitions occurring after January 1, 2009, the Company is required to expense, in the period incurred, acquisition-related costs, rather than including such costs in the purchase price as it has historically done. The Company did not consummate any acquisitions or incur any significant transaction-related costs during the six months ended June 30, 2009.

In April 2009, the FASB issued FSP No. FAS 141(R)-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies” (“FSP FAS 141(R)-1”). FSP FAS 141(R)-1 amends and clarifies SFAS No. 141(R) to address application issues raised by preparers, auditors, and members of the legal profession on initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. For the Company, the FSP is effective for assets or liabilities arising from contingencies in business combinations for which the acquisition date is on or after January 1, 2009. The initial adoption of FSP FAS 141(R)-1 did not have an impact on the Company’s results of operations or cash flows for the six months ended June 30, 2009, but future acquisitions may be impacted by the provisions of this standard.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51,” (“SFAS No. 160”) which establishes new standards governing the accounting for and reporting of noncontrolling interests (NCIs) in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCIs (previously referred to as minority interests), in most cases, be treated as a separate component of equity, not as a liability; that increases and decreases in the parent’s ownership interest that leave control intact be treated as equity transactions, rather than as step acquisitions or dilution gains or losses; and that losses of a partially owned consolidated subsidiary be allocated to the NCI even when such allocation might result in a deficit balance. This standard also requires the Company to change certain presentation and disclosures in its financial statements. For the Company, SFAS No. 160 was effective beginning January 1, 2009. The Company’s noncontrolling interest consists of the 15.3% aggregate membership interests in its subsidiary, NDeX, held by APC Investments, LLC, Feiwell & Hannoy Professional Corporation and the sellers of Barrett-NDEx (defined in Note 3 below) or their affiliates (as a group). Under the NDeX operating agreement, each of the holders of the noncontrolling interests has the right, for a certain period of time, to require NDeX to repurchase all or any portion of the NDeX membership interests held by such holder. To the extent any holder timely exercises this right, the purchase price of such membership interest will be based on 6.25 times NDeX’s trailing twelve month earnings before interest, taxes, depreciation and amortization less the aggregate amount of any interest bearing indebtedness outstanding for NDeX as of the date the repurchase occurs. Because the NCIs have a redeemable feature outside of the control of the Company, the Company will continue to show these NCIs on the mezzanine section of the balance sheet between “Liabilities” and “Stockholders’ Equity,” rather than a separate component of equity. Also because of the redeemable nature of these NCIs, the Company is required to employ the provisions of EITF Topic D-98, which SFAS No. 160 amended, and adjust the NCIs to either the fair value or the redemption amount at each reporting period. The Company has chosen to record its NCIs at the redemption amount, with the adjustment recorded through “additional paid-in capital” rather than directly as a charge against earnings, and has therefore employed the two-class method as set forth in EITF 03-6 to calculate earnings per share based on net income attributable to its common stockholders. At June 30, 2009, the Company has recorded an adjustment of $7.3 million (net of tax) to record the redeemable noncontrolling interests to their redemption value. If SFAS No. 160 was effective at December 31, 2008, the carrying amount of the noncontrolling interests of $15.8 million would have been adjusted to reflect the redemption value of $16.8 million, resulting in a $0.6 million adjustment to additional paid-in capital (net of tax). The provisions of the standard have been applied to all NCIs prospectively, except for the presentation and disclosure requirements, which have been applied retrospectively to all periods presented.

In March 2008, the FASB issued Statement No. 161, “Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133” (“SFAS No. 161”). The Statement requires companies to provide enhanced disclosures regarding derivative instruments and hedging activities in order to better convey the purpose of derivative use in terms of the risks that such companies are intending to manage. Disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect a company’s financial position, financial performance, and cash flows are required. This Statement retains the same scope as SFAS No. 133 and was effective beginning January 1, 2009 for the Company. Accordingly, the Company has included the required disclosures in “Use of Derivative Instruments” above.

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP FAS 107-1 and APB 28-1”). FSP FAS 107-1 and APB 28-1 increases the frequency of certain fair value disclosures from annual to quarterly. Such disclosures include the fair value of all financial instruments within the scope of Statement of Financial Accounting Standards (“SFAS”) No. 107, “Disclosures about Fair Value of Financial Instruments,” as well as the methods and significant assumptions used to estimate fair value. FSP FAS 107-1 and APB 28-1 is effective for interim periods ending after June 15, 2009. Accordingly, the Company has included such disclosures in “Fair Value of Financial Instruments” above.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS No. 165”) , establishing principles and requirements for subsequent events. In particular, SFAS No. 165 sets forth the period after the balance sheet date during which management shall evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity shall recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity shall make about events or transactions that occurred after the balance sheet date. SFAS No. 165 is effective for interim periods ending after June 15, 2009. Accordingly, the Company has applied the provisions of this statement in the current reporting period. See Note 14 for information pertaining to subsequent events.

Note 2. Basic and Diluted Income Per Share

Basic per share amounts are computed, generally, by dividing net income by the weighted-average number of common shares outstanding. As described in the Company’s discussion of SFAS No. 160 in Note 1 above, the Company has employed the two-class method to calculate earnings per share based on net income attributable to its common stockholders. At June 30, 2009 and December 31, 2008, there were no shares of preferred stock issued and outstanding. Diluted per share amounts assume the conversion, exercise, or issuance of all potential common stock instruments (see Note 12 for information on stock options) unless their effect is anti-dilutive.

The following table computes basic and diluted net income per share (in thousands, except per share amounts):

		Three Months								Six Months
		Ended June 30,								Ended June 30,
		2009				2008				2009				2008
Net income attributable to Dolan Media Company		$	8,206			$	4,397			$	16,853			$	8,404
Accretion of redeemable noncontrolling interest, net of tax			(3,943	)			—				(7,293	)			—
Net income attributable to Dolan Media Company common stockholders		$	4,263			$	4,397			$	9,560			$	8,404
Basic:
Weighted average common shares outstanding			30,036				25,116				29,995				25,101
Weighted average common shares of unvested restricted stock			(221	)			(180	)			(184	)			(165	)
Shares used in the computation of basic net income per share			29,815				24,936				29,811				24,936
Net income attributable to Dolan Media Company common stockholders per share — basic		$	0.14			$	0.18			$	0.32			$	0.34
Diluted:
Shares used in the computation of basic net income per share			29,815				24,936				29,811				24,936
Stock options and restricted stock			102				371				85				310
Shares used in the computation of dilutive net income per share			29,917				25,307				29,896				25,246
Net income attributable to Dolan Media Company common stockholders per share — diluted		$	0.14			$	0.17			$	0.32			$	0.33

For the three months ended June 30, 2009 and 2008, options to purchase approximately 1.8 million and 0.2 million weighted shares of common stock, respectively, were excluded from the computation because their effect would have been anti-dilutive. For the six months ended June 30, 2009 and 2008, options to purchase approximately 1.9 million and 0.1 million weighted shares of common stock, respectively, were excluded from the computation because their effect would have been anti-dilutive.

Note 3. Acquisitions

The Company accounts for acquisitions consummated after January 1, 2009, under the acquisition method of accounting, in accordance with SFAS No. 141R. For acquisitions prior to that date, the Company accounted for such acquisitions in accordance with SFAS No. 141, “Business Combinations.” Management is responsible for determining the fair value of the assets acquired and liabilities assumed at the acquisition date. The fair values of the assets acquired and liabilities assumed represent management’s estimate of fair values. Management determines valuations through a combination of methods, which include internal rate of return calculations, discounted cash flow models, outside valuations and appraisals and market conditions. The Company did not consummate any acquisitions during the six months ended June 30, 2009. For acquisitions consummated in 2008, the Company has included the results of these acquisitions in the accompanying interim condensed consolidated statement of operations from the respective acquisition dates forward.

Wilford & Geske: On February 22, 2008, NDeX, a majority owned subsidiary of the Company, acquired the mortgage default processing services business of Wilford & Geske, a Minnesota law firm. Under the purchase agreement, NDeX was obligated to pay up to an additional $2.0 million in purchase price depending upon the adjusted EBITDA for this business during the twelve months ended March 31, 2009. In connection with the partial achievement of such performance target, NDeX paid an additional $1.3 million in purchase price to the sellers in the second quarter of 2009. The Company has allocated this amount to the long-term service agreement entered into with the law firm Wilford & Geske, which is being amortized over the remaining 14 years of the initial contract term.

National Default Exchange, L.P. and related entities: On September 2, 2008, NDeX acquired all of the outstanding equity interests in National Default Exchange Management, Inc., National Default Exchange Holdings, LP, THP/ NDEx AIV, Corp., and THP/ NDEx AIV, LP (all of such entities referred to collectively as “Barrett-NDEx”). The Company has engaged an independent third-party valuation firm to assist it in determining the estimated fair value of the identified intangibles. This valuation is not yet complete and, therefore, the allocation is preliminary. The Company made no changes to its purchase accounting of this acquisition during the second quarter. The Company may be obligated to pay the sellers of Barrett-NDEx up to an additional $13.0 million in cash based upon the adjusted EBITDA for Barrett-NDEx during the four calendar quarters following the closing of the acquisition. If the adjusted EBITDA for Barrett-NDEx equals or exceeds $28.0 million during such four calendar quarter period, the Company will pay the sellers the maximum $13.0 million earnout payment. However, the maximum earnout payment of $13.0 million will be reduced by $7.50 for each $1.00 that Barrett-NDEx’s adjusted EBITDA for such twelve month period is less than the $28.0 million target. Based upon the adjusted EBITDA for Barrett-NDEx for the first three calendar quarters following the close of acquisition, Barrett-NDEx appears to be on course to earn the maximum earnout payment of $13.0 million. The Company has not recorded a liability for this earnout as of June 30, 2009, and will record the liability during the third quarter when the adjusted EBITDA of Barrett-NDEx for the four calendar quarters ending September 30, 2009 is known and finalized, provided the earnout target has been met.

As a result of this acquisition, the Company recorded, as additional purchase price, a liability of $1.5 million for the estimated severance costs related to involuntary employee terminations resulting from the anticipated elimination of certain duplicative positions, which was expected to be paid out in cash within the twelve months following the acquisition. This liability was included as goodwill in the preliminary allocation of the purchase price in accordance with SFAS No. 141 and EITF Issue No. 95-3 “Recognition of Liabilities in Connection with a Purchase Business Combination.” In the second quarter of 2009, the Company eliminated 16 positions in connection with this plan for aggregate payments of approximately $453,000. Also in the second quarter, the Company completed its plan of restructuring and has determined that it will not be eliminating any additional positions under this restructuring plan. Accordingly, the Company reduced the liability to zero as a purchase price adjustment to goodwill.

Pro Forma Information (unaudited): Actual results of operations of the companies acquired in 2008 are included in the unaudited condensed consolidated interim financial statements from the dates of acquisition. The unaudited pro forma condensed consolidated statement of operations of the Company, set forth below, gives effect to the following acquisitions: (1) the mortgage default processing services business of Wilford & Geske acquired in February 2008, (2) the assets of Legal & Business Publishers, Inc. acquired in February 2008, (3) the assets of Midwest Law Printing Company, Inc. acquired in June 2008, and (4) the business of Barrett-NDEx acquired in September 2008, using the purchase method as if the acquisitions occurred on January 1, 2008. The Company did not include the acquisition of the assets of Minnesota Political Press, Inc. and Quadriga Communications, LLC because its impact on the Company’s financial statements would be immaterial. These amounts are not necessarily indicative of the consolidated results of operations for future years or actual results that would have been realized had the acquisitions occurred as of the beginning of each such year. There is no corresponding pro forma data shown for the three and six months ended June 30, 2009, as the Company has included each of the above acquisitions in its actual operating results for the full periods (in thousands, except per share data):

		Pro Forma
		Three Months				Six Months
		Ended				Ended June 30,
		June 30, 2008				2008
Total revenues		$	59,774			$	120,466
Net income attributable to Dolan Media Company common stockholders			4,716				9,139
Net income per share:
Basic		$	0.18			$	0.35
Diluted		$	0.18			$	0.36
Actual/Pro forma weighted average shares outstanding:
Basic			25,762				25,762
Diluted			25,513				25,658

Note 4. Investments

Investments consisted of the following at June 30, 2009 and December 31, 2008 (in thousands):

		Accounting		Percent				June 30,				December 31,
		Method		Ownership				2009				2008
The Detroit Legal News Publishing, LLC		Equity			35			$	15,456			$	16,226
GovDelivery, Inc.		Cost			15				900				900
Total								$	16,356			$	17,126

The Detroit Legal News Publishing, LLC: The Company owns a 35% membership interest of The Detroit Legal News Publishing, LLC, or DLNP. The Company accounts for this investment using the equity method. Under DLNP’s membership operating agreement, the Company receives quarterly distributions based on its ownership percentage.

The difference between the Company’s carrying value and its 35% share of the members’ equity of DLNP relates principally to an underlying customer list at DLNP that is being amortized over its estimated economic life through 2015.

The following table summarizes certain key information relative to the Company’s investment in DLNP as of June 30, 2009 and December 31 2008, and for the three and six months ended June 30, 2009 and 2008 (in thousands):

		As of June 30,				As of December 31,
		2009				2008
Carrying value of investment		$	15,456			$	16,226
Underlying finite-lived customer list, net of amortization			9,675				10,429

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2009				2008				2009				2008
Equity in earnings of DLNP, net of amortization of customer list		$	1,333			$	1,469			$	2,730			$	3,026
Distributions received			2,100				2,100				3,500				3,500
Amortization expense			377				377				753				754

DLNP publishes ten legal newspapers, along with one quarterly magazine, all located in southern Michigan. Summarized financial information for DLNP for the three and six months ended June 30, 2009 and 2008 is as follows (in thousands):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2009				2008				2009				2008
Revenues		$	11,534			$	12,031			$	23,483			$	24,436
Cost of revenues			4,669				4,797				9,438				9,539
Gross profit			6,865				7,234				14,045				14,897
Selling, general and administrative expenses*			1,600				1,934				3,326				3,232
Operating income*			5,265				5,300				10,719				10,846
Net income		$	4,886			$	5,273			$	9,953			$	10,800
Company’s 35% share of net income		$	1,710			$	1,846			$	3,483			$	3,780
Less amortization of intangible assets			377				377				753				754
Equity in earnings of DLNP, LLC		$	1,333			$	1,469			$	2,730			$	3,026

Note 5. Goodwill and Finite-life Intangible Assets

Goodwill: The carrying amount of goodwill by segment is as follows (in thousands):

		June 30, 2009				December 31, 2008
Professional Services		$	58,729			$	59,751
Business Information			59,232				59,232
Total		$	117,961			$	118,983

The change in goodwill in the Professional Services Division resulted from the reduction of a liability in the amount of $1.0 million to zero in connection with the plan of restructure related to the acquisition of Barrett-NDEx. See Note 2 for more information about this liability.

Finite-Life Intangible Assets: Total amortization expense for finite-life intangible assets for the three months ended June 30, 2009 and 2008 was approximately $4.2 million and $2.3 million, respectively, and for the six months ended June 30, 2009 and 2008 was approximately $9.3 million and $4.5 million, respectively. In the six months ended June 30, 2009, the Company recorded an additional $0.9 million of amortization expense to write off the non-compete agreement with Michael Barrett who died in January 2009. Please see Note 3 above for information pertaining to an additional amount of $1.3 million recorded to the service agreement intangible asset in the six months ended June 30, 2009 as a result of the additional purchase price NDeX paid to the sellers of the mortgage default processing services business of Wilford & Geske.

Note 6. Long-Term Debt, Capital Lease Obligation

A summary of long-term debt is as follows (in thousands):

		June 30,				December 31,
		2009				2008
Senior secured debt (see below):
Senior variable-rate term note, payable in quarterly installments with a balloon payment due August 8, 2014		$	149,125			$	153,750
Senior variable-rate revolving note due August 8, 2012			—				—
Total senior secured debt			149,125				153,750
Unsecured note payable			—				1,746
Capital lease obligations			—				2
			149,125				155,498
Less current portion			11,900				12,048
Long-term debt, less current portion		$	137,225			$	143,450

Senior Secured Debt: The Company and its consolidated subsidiaries have a credit agreement with U.S. Bank, NA and other syndicated lenders for a senior secured credit facility comprised of a term loan facility due and payable in quarterly installments with a final maturity date of August 8, 2014 and a revolving credit facility with a final maturity date of August 8, 2012. In accordance with the terms of this credit agreement, if at any time the outstanding principal balance of revolving loans under the revolving credit facility exceeds $25.0 million, such revolving loans will convert to an amortizing term loan, in the amount that the Company designates if it gives notice, due and payable in quarterly installments with a final maturity date of August 8, 2014.

At June 30, 2009, the Company had net unused available capacity of $40.0 million on its revolving credit facility, after taking into account the senior leverage ratio requirements under the credit facility, and outstanding debt of $149.1 million (all of which was under the term loan facility). At June 30, 2009, the weighted-average interest rate on the senior term note was 3.2%. The Company is subject to certain restrictions and covenant ratio requirements relating to its respective financing arrangements, all of which were satisfied as of June 30, 2009.

Unsecured Note Payable: During the six months ended June 30, 2009, NDeX made the final $1.75 million payment to Feiwell & Hannoy on a $3.5 million non-interest bearing promissory note NDeX issued in connection with the acquisition of the mortgage default processing services business of Feiwell & Hannoy in January 2007.

Note 7. Common and Preferred Stock

At June 30, 2009, the Company had 70,000,000 shares of common stock and 5,000,000 shares of preferred stock authorized and 30,081,017 shares of common stock and no shares of preferred stock outstanding. On January 29, 2009, the Company’s board of directors designated 5,000 shares of Series A Junior Participating Preferred Stock, which are issuable upon the exercise of rights as described in the Stockholder Rights Plan adopted by the Company on the same date. The rights to purchase 1/10,000 of a share of the Series A Junior Participating Preferred Stock were issued to the Company’s stockholders of record on February 9, 2009. All other authorized shares of preferred stock are undesignated.

Note 8. Income Taxes

The provision for income taxes is based upon estimated annual effective tax rates in the tax jurisdictions in which the Company operates. For the six months ended June 30, 2009 and 2008, the effective tax rate was 36.5% and 40.7%, respectively. The decrease in the Company’s effective income tax rate resulted primarily from the receipt of non-taxable life insurance proceeds paid upon the death of Michael Barrett, a senior officer of Barrett-NDEx, in January 2009. The tax impact of these non-taxable proceeds was treated as a discrete item and fully recognized in the first six months of 2009. At June 30, 2009, excluding the impact of this discrete item, the Company’s estimated annual effective tax rate for 2009 is 39.3%.

Note 9. Other Income

In the six months ended June 30, 2009, the Company recorded a net gain of $1.4 million on a company-owned life insurance policy on the life of Michael Barrett, a senior officer of Barrett-NDEx, who passed away in January 2009. This net gain includes a reduction for a $0.5 million contribution the Company made to Southern Methodist University Dedman School of Law from the life insurance proceeds, to establish a scholarship fund in Mr. Barrett’s name.

Note 10. Major Customers and Related Parties

In the six months ended June 30, 2009, NDeX and Trott & Trott, whose managing partner is NDeX chairman and chief executive officer David A. Trott, agreed to increase the fixed fee per file NDeX receives for each mortgage foreclosure, bankruptcy, eviction, litigation and other mortgage default file Trott & Trott refers to NDeX for processing under NDeX’s service agreement with Trott & Trott.

Note 11. Reportable Segments

The Company’s two reportable segments consist of its Professional Services Division and its Business Information Division. The Company determined its reportable segments based on the types of products sold and services performed. The Professional Services Division comprises two operating units providing support to the legal market, NDeX, which provides mortgage default processing services, and Counsel Press, LLC, which provides appellate services. Both of these operating units generate revenues through fee-based arrangements. The Business Information Division provides business information products through a variety of media, including court and commercial newspapers, weekly business journals and the Internet. The Business Information Division generates revenues from display and classified advertising, public notices, circulation (primarily consisting of subscriptions) and sales from commercial printing and database information. In addition, the Company reports and allocates certain administrative activities as part of corporate-level expenses.

The tables below reflect summarized financial information concerning the Company’s reportable segments for the three and six months ended June 30, 2009 and 2008 (in thousands):

		Professional				Business
		Services				Information				Corporate				Total
		(In thousands)
Three Months Ended June 30, 2009
Revenues		$	44,294			$	22,746			$	—			$	67,040
Direct operating expenses			15,682				7,425				—				23,107
Selling, general and administrative expenses			10,799				8,507				3,121				22,427
Amortization and depreciation			4,981				1,346				195				6,522
Equity in Earnings of DLNP, LLC			—				1,333				—				1,333
Operating income (loss)		$	12,832			$	6,801			$	(3,316	)		$	16,317
Three Months Ended June 30, 2008
Revenues		$	18,129			$	23,424			$	—			$	41,553
Direct operating expenses			6,436				8,152				—				14,588
Selling, general and administrative expenses			4,585				10,203				1,944				16,732
Amortization and depreciation			2,083				1,230				195				3,508
Equity in Earnings of DLNP, LLC			—				1,469				—				1,469
Operating income (loss)		$	5,025			$	5,308			$	(2,139	)		$	8,194

		Professional				Business
		Services				Information				Corporate				Total
		(In thousands)
Six Months Ended June 30, 2009
Revenues		$	86,326			$	44,650			$	—			$	130,976
Direct operating expenses			31,140				14,875				—				46,015
Selling, general and administrative expenses			20,824				16,929				5,410				43,163
Amortization and depreciation			10,662				2,633				474				13,769
Equity in Earnings of DLNP, LLC			—				2,730				—				2,730
Operating income (loss)		$	23,700			$	12,943			$	(5,884	)		$	30,759
Six Months Ended June 30, 2008
Revenues		$	36,869			$	46,196			$	—			$	83,065
Direct operating expenses			12,747				15,724				—				28,471
Selling, general and administrative expenses			9,242				19,825				3,769				32,836
Amortization and depreciation			4,065				2,388				374				6,827
Equity in Earnings of DLNP, LLC			—				3,026				—				3,026
Operating income (loss)		$	10,815			$	11,285			$	(4,143	)		$	17,957

Note 12. Share-Based Compensation

Total share-based compensation expense for the three months ended June 30, 2009 and 2008, was approximately $0.6 million and $0.4 million, respectively, before income taxes. Total share-based compensation expense for the six months ended June 30, 2009 and 2008, was approximately $1.1 million and $0.8 million, respectively, before income taxes.

The Company has reserved 2,700,000 shares of its common stock for issuance under its incentive compensation plan, of which there were 617,550 shares available for issuance under the plan as of June 30, 2009.

Stock Options: Share-based compensation expense related to grants of options for the three months ended June 30, 2009 and 2008, was approximately $0.4 million and $0.3 million, respectively, before income taxes and for the six months ended June 30, 2009 and 2008, was approximately $0.8 million and $0.6 million, respectively, before income taxes.

The following weighted average assumptions were used to estimate the fair value of stock options granted in 2009:

Dividend yield			0.0	%
Expected volatility			48.0	%
Risk free interest rate			2.0	%
Expected term of options		4.75 years
Weighted average grant date fair value		$	5.35

The following table represents stock option activity for the six months ended June 30, 2009:

						Weighted				Weighted				Weighted Average
		Number of				Average Grant				Average				Remaining
		Shares				Date Fair Value				Exercise Price				Contractual Life
Outstanding options at December 31, 2008			1,352,992			$	4.54			$	14.21			6.06 Yrs.
Granted			414,882				5.35				12.51				—
Exercised			(5,375	)			1.35				2.22				—
Canceled or forfeited			(18,725	)			4.96				14.35				—
Outstanding options at June 30, 2009			1,743,774			$	4.74			$	13.84			5.88 Yrs.
Options exercisable at June 30, 2009			380,216			$	4.10			$	12.54			5.75 Yrs.

At June 30, 2009, the aggregate intrinsic value of options outstanding was approximately $1.2 million, and the aggregate intrinsic value of options exercisable was approximately $0.8 million. At June 30, 2009, there was approximately $5.3 million of unrecognized compensation cost related to outstanding options, which is expected to be recognized over a weighted-average period of 3.0 years.

Restricted Stock Grants: The following table represents a summary of nonvested restricted stock activity for the six months ended June 30, 2009:

						Weighted
						Average
		Number				Grant Date
		of Shares				Fair Value
Nonvested, December 31, 2008			149,296			$	15.30
Granted			129,990				12.51
Vested			(11,941	)			16.51
Canceled or forfeited			(9,024	)			13.85
Nonvested, June 30, 2009			258,321			$	13.89

Share-based compensation expense related to grants of restricted stock for the three months ended June 30, 2009 and 2008 was approximately $0.2 million and $0.1 million, respectively, before income taxes and for the six months ended June 30, 2009 and 2008, was approximately $0.3 million and $0.2 million, respectively, before income taxes. Total unrecognized compensation expense for unvested restricted shares of common stock as of June 30, 2009, was approximately $2.7 million, which is expected to be recognized over a weighted-average period of 3.1 years.

Note 13. Contingencies and Commitments

Litigation: From time to time, the Company is subject to certain claims and lawsuits that have arisen in the ordinary course of its business. Although the outcome of such existing matters cannot presently be determined, it is management’s opinion that the ultimate resolution of such existing matters will not have a material adverse effect on the Company’s results of operations or financial position.

Note 14. Subsequent Events

The Company has evaluated subsequent events through the date of issuance of this report and there are no such events to report.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

We recommend that you read the following discussion and analysis in conjunction with our unaudited condensed consolidated interim financial statements and the related notes included in this report. This discussion and analysis contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. We have based these forward-looking statements on our current expectations and projections about our future results, performance, prospects and opportunities. Forward looking statements are statements such as those contained in projections, plans, objectives, estimates, statements of future economic performance, and assumptions relating to any of the foregoing. We have tried to identify forward-looking statements by using words such as “may,” “will,” “expect,” “anticipate,” “believe,” “intend,” “estimate,” “goal,” “continue,” and similar expressions or terminology. By their very nature, forward-looking statements are based on information currently available to us and are subject to a number of known and unknown risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. These risks, uncertainties and other factors include:

•

our business operates in highly competitive markets and depends upon the economies and the demographics of the legal, financial and real estate sectors in the markets we serve and changes in those sectors could have an adverse effect on our revenues, cash flows and profitability;

•

NDeX’s business revenues are very concentrated, as NDeX currently provides mortgage default processing services to six law firm customers, and if the number of case files referred to NDeX 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 NDeX’s law firm customers are employed by NDeX, some of whom, including David A. Trott, the chairman and chief executive officer of NDeX, also hold an indirect equity interest in NDeX. As a result, these key attorneys may, in certain circumstances, have interests that differ from or conflict with our interests;

•

government regulation of sub-prime, Alt-A and other residential mortgage products, including bills introduced in states where we do business, the Hope for Homeowners Act, the Emergency Economic Stabilization Act and Homeowner Affordability and Stability Plan, the Streamlined Modification Program, and voluntary foreclosure relief programs developed by lenders, loan servicers and the Hope Now Alliance, a consortium that includes loan servicers, may have an adverse affect on and restrict our mortgage default processing services and public notice operations;

•

we are dependent on our senior management team, especially James P. Dolan, our founder, chairman, president and chief executive officer; Scott J. Pollei, our executive vice president and chief operating officer; Mark W.C. Stodder, our executive vice president-business information; David A. Trott, chairman and chief executive officer, NDeX, and Vicki J. Duncomb, our vice president and chief financial officer;

•

we intend to continue to pursue acquisition opportunities, which we may not do successfully and which may subject us to considerable business and financial risks;

•

growing our business may place a strain on our management and internal systems, processes and controls;

•

we incurred additional indebtedness to close the acquisition of Barrett-NDEx and this additional debt consumed a significant portion of our ability to borrow and may limit our ability to pursue other acquisitions or growth strategies; and

•

the acquisition of Barrett-NDEx may expose us to particular business and financial risks that include, but are not limited to: (1) failing to integrate the operations, personnel and internal controls of Barrett-NDEx into NDeX or to manage Barrett-NDEx or our growth; and (2) facing operational difficulties in new markets or with new product and service offerings.

See “Risk Factors” in Item 1A of our annual report on Form 10-K filed on March 12, 2009, with the Securities Exchange Commission for a description of these and other risks, uncertainties and factors that could cause our actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements.

You should not place undue reliance on any forward-looking statements. Except as otherwise required by federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason after the date of this report.

In this quarterly report on Form 10-Q, unless the context requires otherwise, the terms “we,” “us,” and “our” refer to Dolan Media Company. During the second quarter, we began operating our majority-owned subsidiary, American Processing Company and its subsidiaries (collectively, “APC”), under the trade name, National Default Exchange or NDeX. Therefore, when we refer to “NDeX” in this quarterly report on Form 10-Q, we mean all of our mortgage default processing operations in Michigan, Indiana, Minnesota and at Barrett-NDEx (defined below), all of which we formerly referred to as “APC” When the we refer to “Barrett-NDEx” in this quarterly report on Form 10-Q, it means the mortgage default processing operations serving the Texas, California and Georgia markets that NDeX acquired from National Default Exchange Management, Inc., National Default Exchange Holdings, LP, THP/Barrett-NDEx AIV, Corp. and THP/Barrett-NDEx AIV, LP on September 2, 2008. The term “Barrett law firm” refers to Barrett, Daffin, Frappier, Turner & Engel, LLP and its affiliates.

Overview

We are a leading provider of necessary business information and professional services to legal, financial and real estate sectors in the United States. We serve our customers through two complementary operating segments: our Professional Services Division and our Business Information Division. Our Professional Services Division comprises two operating units, NDeX, which provides mortgage default processing services to six law firms and also directly to mortgage lenders and loan servicers on California foreclosure files, and Counsel Press, which provides appellate services to law firms and attorneys nationwide. Our Business Information Division currently publishes 64 print publications consisting of 14 paid daily publications, 30 paid non-daily publications and 20 non-paid non-daily publications. In addition, we provide business information electronically through our 45 on-line publication web sites, our 36 event and other non-publication web sites and our email notification systems.

Our total revenues increased $25.5 million, or 61.3%, from $41.6 for the three months ended June 30, 2008, to $67.0 million for the three months ended June 30, 2009, primarily as a result of our acquisition of Barrett-NDEx. For the six months ended June 30, 2009, our revenues increased $47.9 million, or 57.7% over the same prior year period, all of which resulted from businesses we acquired in 2008, including Barrett-NDEx. Our operating income nearly doubled from $8.2 million for the three months ended June 30, 2008 to $16.3 million for the three months ended June 30, 2009. On a year-to-date basis, our operating income has increased to $30.8 million, up 71.3%, or $12.8 million, from the same period in 2008. Acquisitions, primarily our acquisition of Barrett-NDEx in September 2008, accounted for the majority of the approximately 50.0% increase in our operating expenses for both the three and six month periods, while expense control in our Business Information division was offset by increased spending at NDeX, primarily as a result of file volume increases. Further, net income attributable to Dolan Media Company increased significantly to $8.2 million for the second quarter of 2009 from $4.4 million for the same period in 2008. Net income attributable to Dolan Media Company doubled, from $8.4 million for the six months ended June 30, 2008 to $16.9 million for the six months ended June 30, 2009.

Recent Developments

Regulatory Environment

Over the past year, federal, state and local governmental entities have proposed, and in some cases, enacted legislation or taken other action that may have an adverse impact on the number of mortgage defaults case files referred to NDeX for processing or the length of time it takes to process such files, and the number of foreclosure public notices placed in our Business Information products and DLNP (our minority investment) for publication. This enacted or proposed legislation includes the Hope for Homeowners Act of 2008, the Emergency Economic Stabilization Act, the Streamlined Modification Program, laws passed in both California and Maryland last year, and the Homeowner Affordability and Stability Plan, all of which are described in our annual report on Form 10-K filed with the SEC on March 12, 2009. Earlier this year, the California legislature passed legislation, which extends the redemption periods on new and pending foreclosures involving loans that certain criteria, including being owner-occupied when the loan became delinquent. Further, on April 28, 2009, President Obama announced new details for the “Making Home Affordable” program that is part of the Homeowner Affordability and Stability Plan, which provides, among other things, that servicers who participate in the second lien program will automatically reduce payments associated with a second lien mortgage when a borrower initiates a Home Affordable Modification on a first lien mortgage. In addition, beginning in July 2009, changes in the relevant state laws in Indiana and Michigan require loan servicers to comply with additional notice requirements. Specifically, the Indiana law requires loan servicers to send Indiana borrowers a pre-suit notice at least thirty days prior to filing a foreclosure action, which we expect could delay a foreclosure at least 30 days. The Michigan law requires loan servicers to send and publish a special notice to certain Michigan borrowers, which we expect could delay foreclosures for thirty to ninety days depending upon whether a borrower desires to meet with the loan servicers to arrange a modification of his or her loan.

In addition to enacted or proposed legislation, certain state and local governments have interpreted the Emergency Economic Stabilization Act as preempting state and local foreclosure requirements. Further, various lender and mortgage servicers have voluntarily focused their attention on loss mitigation, loan modification and similar efforts, including moratoria on certain foreclosure sales, in an attempt to reduce the number of mortgage defaults.

Adoption of Stockholder Rights Plan

On January 29, 2009, our board adopted a Stockholder Rights Plan, which is designed to protect our stockholders from potentially coercive takeover practices or takeover bids and to prevent an acquirer from gaining control of the company without offering a fair price to our stockholders. The plan is not intended to deter offers that are fair or otherwise in the best interests of our stockholders.

This plan is similar to plans that other public companies have adopted and our adoption of this plan was not prompted by any external actions. We have received no hostile communications or takeover approaches of any kind. We adopted the plan to give our board time to evaluate and respond to any unsolicited future attempts to acquire our company.

In connection with the adoption of this plan, our board declared a dividend of one junior participating preferred stock purchase right for each outstanding share of our common stock, payable to the stockholders of record on February 9, 2009. Stockholders may request a copy of this plan by writing to our corporate secretary at our principal offices, 222 South Ninth Street, Suite 2300, Minneapolis, MN 55402.

Recent Acquisitions

We have grown significantly since our predecessor company commenced operations in 1992, in large part due to acquisitions.

Our most recent acquisition occurred on September 2, 2008 when NDeX acquired all of the outstanding equity interests in Barrett-NDEx. NDeX acquired the equity interests of Barrett-NDEx for a total of $167.5 million in cash, of which $151.0 million was paid to or on behalf of the sellers of Barrett-NDEx, $15.0 million was placed in escrow to secure payment of indemnification claims and an additional $1.5 million was held back pending working capital adjustments. In addition to the cash payments, NDeX also issued to the sellers of Barrett-NDEx an aggregate 6.1% interest in NDeX, which had an estimated fair market value of approximately $11.6 million on July 28, 2008, the date the parties signed the equity purchase agreement. We also issued to the sellers of Barrett-NDEx 825,528 shares of our common stock. In addition to the payments and issuance of NDeX interests and common stock described above, we may be obligated to pay the sellers of Barrett-NDEx up to an additional $13.0 million in cash based upon the adjusted EBITDA for Barrett-NDEx during the four complete calendar quarters following the closing of the acquisition. If the adjusted EBITDA for Barrett-NDEx equals or exceeds $28.0 million during such

four-quarter period, we will pay the sellers the maximum $13.0 million earnout payment. However, the maximum earnout payment of $13.0 million will be reduced by $7.50 for each $1.00 that Barrett-NDEx’s adjusted EBITDA for such four-quarter period is less than the $28.0 million target. Based upon the adjusted EBITDA for Barrett-NDEx for the first three calendar quarters following the close of acquisition, Barrett-NDEx appears to be on course to earn the maximum earnout payment of $13.0 million. If this occurs, we would expect to make the earnout payment in the fourth quarter of 2009. We have not recorded a liability for this earnout as of June 30, 2009, and will record the liability during the third quarter when the adjusted EBITDA for Barrett-NDEx for the four calendar quarters ending September 30, 2009, is known and finalized, providing the earnout target has been met. The working capital target of $2.0 million as set forth in the equity purchase agreement was not met, as there was an actual working capital (deficit) of $(1.4) million. As a result, NDeX recovered the $3.4 million shortfall by having the sellers of Barrett-NDEx release the $1.5 million holdback payable to them and by taking receipt of $1.9 million out of the escrow in 2008.

As a result of this acquisition, we recorded, as additional purchase price, a liability of $1.5 million in estimated severance costs in connection with the elimination of certain duplicative positions, which we expected to pay out in cash within the twelve months following the close of the acquisition. In April 2009, we eliminated 16 positions in connection with this plan for aggregate payments of approximately $453,000. Also in the second quarter, the Company completed its plan of restructure and has determined that it will not be eliminating any additional positions under this restructuring plan. Accordingly, the Company reduced the liability to zero, as a purchase price adjustment to goodwill.

We have accounted for this acquisition under the purchase method of accounting using SFAS No. 141 and have included the operating results of this business in the Professional Services segment, in our unaudited condensed consolidated interim financial statements since the date of this acquisition. This allocation is still preliminary pending the finalization of the valuation of the intangibles associated with this acquisition.

Revenues

We derive revenues from two operating segments, our Professional Services Division and our Business Information Division. For the three and six months ended June 30, 2009, our total revenues were $67.0 million and $131.0 million, respectively, and the percentage of our total revenues attributed to each of our segments was as follows:

•

66.1% and 65.9%, respectively, from our Professional Services Division; and

•

33.9% and 34.1%, respectively, from our Business Information Division.

Professional Services. Our Professional Services Division generates revenues primarily by providing mortgage default processing and appellate services through fee-based arrangements. Through NDeX, we assist six law firms in processing foreclosure, bankruptcy, eviction and, to a lesser extent, litigation and other mortgage default processing case files for residential mortgages that are in default. We also provide these services directly to mortgage lenders and loan servicers for California foreclosure files. In addition, NDeX provides loan modification and loss mitigation support on mortgage default files to its customers, and, through Barrett-NDEx, related real estate title work primarily to the Barrett law firm. We refer to revenues that NDeX derives from these sources collectively as “mortgage default processing service revenues.” Shareholders and/or principal attorneys of our law firm customers, including David A. Trott, chairman and chief executive officer of NDeX, are executive management employees of NDeX.

For the three and six months ended June 30, 2009, we serviced approximately 93,100 and 184,200 mortgage default case files, respectively, of which approximately 59,400 and 114,100, respectively, were processed by businesses we acquired in 2008. Our mortgage default processing service revenues accounted for 61.0% and 60.5%, respectively, of our total revenues and 92.4% and 91.8%, respectively, of our Professional Services Division’s revenues during the three and six months ended June 30, 2009. We recognize mortgage default processing service revenues on a ratable basis over the period during which the services are provided, the calculation of which requires management to make estimates. We consolidate the operations, including revenues, of NDeX and record an adjustment for noncontrolling interest for the percentage of earnings that we do not own. See “Noncontrolling Interest” below for a description of the impact of these noncontrolling interests in NDeX on our operating results.

NDeX’s revenues are primarily driven by the number of residential mortgage defaults in each of the states in which we do business as well as how many of the files we handle that actually result in evictions, bankruptcies and/or litigation. Our services agreement with Trott & Trott contemplates the review and possible revision of the fees for services we provide every two years beginning on or before January 1, 2008. Under the Feiwell & Hannoy and Wilford & Geske services agreements, the fixed fee per file increases on an annual basis through 2012 and 2013, respectively, to account for inflation as measured by the consumer price index. We and such customers will review and possibly revise the fee schedule for future years. Our services agreement with the Barrett law firm allows us to amend the fees the Barrett law firm pays to us on a quarterly basis during 2009 and on an annual basis beginning in 2010 upon notice to the Barrett law firm. However, if the Barrett law firm files a timely notice of objection to the proposed amended fees, we and the Barrett law firm have agreed to negotiate amended fees that are agreeable to both parties or retain the existing fees. If we are unable to negotiate fixed fee increases under these agreements that at least take into account the increases in costs associated with providing mortgage default processing services, our operating and net margins could be adversely affected. During the six months ended June 30, 2009, we revised our fee arrangements with Trott & Trott, Feiwell & Hannoy, and Wilford & Geske.

Through Counsel Press, we assist law firms and attorneys throughout the United States in organizing, preparing and filing appellate briefs, records and appendices, in paper and electronic format, that comply with the applicable rules of the U.S. Supreme Court, any of the 13 federal courts of appeals and any state appellate court or appellate division. For the three and six months ended June 30, 2009, our appellate service revenues accounted for 5.0% and 5.4%, respectively, of our total revenues and 7.6% and 8.2%, respectively, of our Professional Services Division’s revenues. For the three and six months ended June 30, 2009, we provided appellate services to attorneys in connection with approximately 2,100 and 4,300 appellate filings, respectively, in federal and state courts. We recognize appellate service revenues as the services are provided, which is when our final appellate product is filed with the court.

Business Information. Our Business Information Division generates revenues primarily from display and classified advertising, public notices and subscriptions. We sell commercial advertising consisting of display and classified advertising in all of our print products and on most of our web sites. We include within our display and classified advertising revenue those revenues generated by sponsorships, advertising and ticket sales generated by our local events. Our display and classified advertising revenues accounted for 10.2% and 10.4%, respectively, of our total revenues and 30.1% and 30.6%, respectively, of our Business Information Division’s revenues for the three and six months ended June 30, 2009. We recognize display and classified advertising revenues upon publication of an advertisement in one of our publications or on one of our web sites. Advertising revenues are driven primarily by the volume, price and mix of advertisements published as well as how many local events are held.

We publish 305 different types of public notices in our court and commercial newspapers, including foreclosure notices, probate notices, notices of fictitious business names, limited liability company and other entity notices, unclaimed property notices, notices of governmental hearings and trustee sale notices. Our public notice revenues accounted for 18.2% and 17.9%, respectively, of our total revenues and 53.6% and 52.6%, respectively, of our Business Information Division’s revenues for the three and six months ended June 30, 2009. We recognize public notice revenues upon placement of a public notice in one of our court and commercial newspapers. Public notice revenues are driven by the volume and mix of public notices published, which are affected by the number of residential mortgage foreclosures in the 14 markets where we are qualified to publish public notices and the rules governing publication of public notices in such states. In six of the states in which we publish public notices, the price for public notices is statutorily regulated, with market forces determining the pricing for the remaining states.

We sell our business information products primarily through subscriptions. For the three and six months ended June 30, 2009, our circulation revenues, which consist of subscriptions and single-copy sales, accounted for 5.0% and 5.1%, respectively, of our total revenues and 14.7% and 15.0%, respectively, of our Business Information Division’s revenues. We recognize subscription revenues ratably over the subscription periods, which range from three months to multiple years, with the average subscription period being twelve months. Deferred revenue includes payment for subscriptions collected in advance that we expect to recognize in future periods. Circulation revenues are driven by the number of copies sold and the subscription rates charged to customers.

Operating Expenses

Our operating expenses consist of the following:

•

Direct operating expenses, which consist primarily of the cost of compensation and employee benefits for the processing staff at NDeX and Counsel Press and our editorial personnel in our Business Information Division, production and distribution expenses, such as compensation (including stock-based compensation expense) and employee benefits for personnel involved in the production and distribution of our business information products, the cost of newsprint and delivery of our business information products, and packaging and data service fees in connection with our California foreclosure files;

•

Selling, general and administrative expenses, which consist primarily of the cost of compensation (including stock-based compensation expense) and employee benefits for our sales, human resources, accounting and information technology personnel, publishers and other members of management, rent, other sales and marketing related expenses and other office-related payments;

•

Depreciation expense, which represents the cost of fixed assets and software allocated over the estimated useful lives of these assets, with such useful lives ranging from two to thirty years; and

•

Amortization expense, which represents the cost of finite-lived intangibles acquired through business combinations allocated over the estimated useful lives of these intangibles, with such useful lives ranging from one to thirty years.

Total operating expenses as a percentage of revenues depends upon our mix of business from Professional Services, which is our higher margin revenue, and Business Information. This mix may shift between fiscal periods.

Equity in Earnings of The Detroit Legal News Publishing

We own 35.0% of the membership interests in The Detroit Legal News Publishing, LLC (DLNP), the publisher of The Detroit Legal News and ten other publications. We account for our investment in DLNP using the equity method. Our percentage share of DLNP’s earnings was $1.3 million and $1.5 million for the three months ended June 30, 2009 and 2008, respectively, which we recognized as operating income. This is net of amortization of $0.4 million for both periods. For the six months ended June 30, 2009 and 2008, our percentage share of DLNP’s earnings was $2.7 million and $3.0 million, respectively. This is net of amortization of $0.8 million for both periods. NDeX handles all public notices required to be published in connection with files it services for Trott & Trott pursuant to our services agreement with Trott & Trott and places a significant amount of these notices in The Detroit Legal News. Trott & Trott pays DLNP for these public notices. See “Liquidity and Capital Resources — Cash Flow Provided by Operating Activities” below for information regarding distributions paid to us by DLNP.

Noncontrolling Interest

Noncontrolling interest for the six months ended June 30, 2009 consisted of an aggregate 15.3% minority interest in NDeX held by APC Investments, LLC (7.6%), Feiwell & Hannoy (1.7%) and the sellers of Barrett-NDEx (as a group) (6.1%). APC Investments, LLC is a limited liability company owned by the shareholders of Trott & Trott, including NDeX chairman and chief executive officer David A. Trott and NDeX’s two executive vice presidents in Michigan.

Under the terms of the NDeX operating agreement, each month, we are required to distribute NDeX’s earnings before interest, taxes, depreciation and amortization less debt service with respect to any interest-bearing indebtedness of NDeX, capital expenditures and working capital reserves to NDeX’s members on the basis of common equity interest owned. We paid the following distributions in the three and six months ended June 30, 2009 and 2008:

		Three Months ended June 30,								Six Months ended June 30,
		(In thousands)								(In thousands)
		2009				2008				2009				2008
APC Investments		$	662			$	437			$	1,148			$	737
Feiwell & Hannoy			148				98				257				172
Sellers of Barrett-NDEx (as a group)*			525				—				906				—
Total		$	1,335			$	535			$	2,311			$	909

In addition, APC Investments and Feiwell & Hannoy each have the right, for a period of six months following August 7, 2009, to require NDeX to repurchase all or any portion of the NDeX membership interests held by APC Investments or Feiwell & Hannoy, as the case may be. The sellers of Barrett-NDEx, each as members of NDeX, also have the right, for a period of six months following September 2, 2012, to require NDeX to repurchase all or any portion of the NDeX membership interests held by such seller of Barrett-NDEx. To the extent any minority member of NDeX timely exercises this right, the purchase price of such membership interest will be based on 6.25 times NDeX’s trailing twelve month earnings before interest, taxes, depreciation and amortization less the aggregate amount of any interest bearing indebtedness outstanding for NDeX as of the date the repurchase occurs. The aggregate purchase price would be payable by NDeX in the form of a three-year unsecured note bearing interest at a rate equal to prime plus 2.0%. We do not know if APC Investments and/or Feiwell & Hannoy will exercise their respective put right when it becomes exercisable on August 7, 2009. For illustration purposes only and assuming that APC Investments and Feiwell & Hannoy’s put rights were exercisable on June 30, 2009, and they were exercised, NDeX would have been obligated to pay APC Investments and Feiwell & Hannoy $16.8 million in the aggregate as described above.

As of January 1, 2009, as a result of the adoption of SFAS No. 160 and application of EITF Topic D-98, we are required to book the noncontrolling interests to their redemption amount at each reporting period. As a result, at June 30, 2009, we booked an adjustment in the amount of $12.1 million ($7.3 million net of taxes) to additional paid-in capital. Please see our condensed consolidated statements of stockholders’ equity (deficit), as well as Note 1 to our unaudited condensed consolidated interim financial statements included in this report on Form 10-Q for further information regarding SFAS No. 160 and its implications to our financial statements.

Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States and the discussion of our financial condition and results of operations is based on these financial statements. The preparation of these financial statements requires management to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities.

We continually evaluate the policies and estimates we use to prepare our condensed consolidated financial statements. In general, management’s estimates and assumptions are based on historical experience, information provided by third-party professionals and assumptions that management believes to be reasonable under the facts and circumstances at the time these estimates and assumptions are made. Because of the uncertainty inherent in these matters, actual results could differ significantly from the estimates, assumptions and judgments we use in applying these critical accounting policies.

We believe the critical accounting policies that require the most significant assumptions and judgments in the preparation of our unaudited condensed consolidated financial statements include: purchase accounting; revenue recognition in connection with mortgage default processing services; impairment of goodwill, other intangible assets and other long-lived assets; share-based compensation expense; capitalization of developed software for internal and external use; income tax accounting; and allowances for doubtful accounts. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” in Item 7 in our annual report on Form 10-K for the year ended December 31, 2008, which we filed with the SEC on March 12, 2009, and is available at the SEC’s web site at www.sec.gov, for a discussion (in addition to that provided below) as to how we apply these policies.

Goodwill, Other Intangible Assets and Other Long-Lived Assets

We determine the estimated economic lives and related amortization expense for our intangible assets. To the extent actual useful lives are less than our previously estimated lives, we will increase our amortization expense. If the unamortized balance were deemed to be unrecoverable, we would recognize an impairment charge to the extent necessary to reduce the unamortized balance to the amount of expected future discounted cash flows, with the amount of such impairment charged to operations in the current period. We estimate useful lives of our intangible assets by reference to current and projected dynamics in the business information and mortgage default processing service industries and anticipated competitor actions. The amount of net income for the six months ended June 30, 2009 would have been approximately $0.9 million higher if the actual useful lives of our finite-lived intangible assets were 10% longer than the estimates and approximately $1.0 million lower if the actual useful lives of our finite-lived intangible assets were 10% shorter than the estimates.

We assess our goodwill and finite life intangible assets for impairment on an annual basis using a November 30 measurement date. We will conduct interim impairment assessments when circumstances and events indicate that we will not be able to recover the carrying value of the assets. These events include, but are not limited to, any strategic decisions we may make in response to economic or competitive conditions affecting our reporting units and the effect of the economic and regulatory environment on our business. We continue to evaluate whether circumstances and events have changed, thereby requiring us to conduct an interim test of our goodwill and other finite-lived assets. In particular, if we continue to see an uncertain political and regulatory environment regarding mortgage foreclosures, the tight credit markets, and the volatility of our stock price with any resulting decline in our market capitalization, along with other uncertainties, an interim impairment test of our goodwill and other finite-lived assets may be triggered. This could result in a future material goodwill impairment charge, which could materially adversely impact our operation results for the period in which such charge is recorded.

Share-based Compensation Expense

In accordance with SFAS No. 123(R), we estimate the fair value of share-based awards using the Black-Scholes option pricing model at the grant date, with compensation expense recognized as the requisite service is rendered. We have reserved 2,700,000 shares of our common stock for issuance under our incentive compensation plan, of which 617,550 shares were available for issuance under the plan as of June 30, 2009. We grant both stock options and restricted stock under our incentive compensation plan.

During the six months ended June 30, 2009, we granted stock options exercisable for 414,882 shares of common stock at an exercise price equal to $12.51. The following weighted average assumptions were used in the Black-Scholes option pricing model to estimate the fair value of the stock options we granted during 2009:

		2009
Dividend yield			0.0	%
Expected volatility			48.0	%
Risk free interest rate			2.0	%
Expected term of options		4.75 years
Weighted average grant date fair value		$	5.35

All options granted in 2009 are non-qualified options that vest in four equal annual installments commencing on the first anniversary of the grant date and expire seven years after the grant date.

Our share-based compensation expense for all options for the three months ended June 30, 2009 and 2008 was approximately $440,000 ($24,000 of which is included in direct operating expenses and $416,000 of which is included in selling, general and administrative expenses) and $287,000 ($12,000 of which is included in direct operating expenses and $275,000 of which is included in selling, general and administrative expenses), respectively, before income taxes. For the six months ended June 30, 2009 and 2008, our share-based compensation expense for all granted options was approximately $796,000 ($41,000 of which is included in direct operating expenses and $755,000 of which is included in selling, general and administrative expenses) and $553,000 ($20,000 of which is included in direct operating expenses and $533,000 of which is included in selling, general and administrative expenses), respectively, before income taxes. As of June 30, 2009, our estimated aggregate unrecognized share-based compensation expense for all unvested stock options was $5.3 million, which we expect to recognize over a weighted-average period of approximately 3.0 years.

During the six months ended June 30, 2008, we granted 129,990 shares of restricted stock to management employees. All of these restricted shares vest in four equal annual installments commencing on the first anniversary of the grant date. The share-based expense for restricted stock awards is determined based on the market price of our stock on the date of grant applied to the total number of shares that are anticipated to fully vest. Compensation expense is amortized over the vesting period.

Our share-based compensation expense for all restricted shares for the three months ended June 30, 2009 and 2008 was approximately $199,000 ($55,000 of which is included in direct operating expenses and $144,000 of which is included in selling, general and administrative expenses) and $106,000 ($20,000 of which is included in direct operating expenses and $86,000 of which is included in selling, general and administrative expenses), respectively, before income taxes. For the six months ended June 30, 2009 and 2008, our share-based compensation expense for all restricted shares was approximately $350,000 ($110,000 of which is included in direct operating expenses and $240,000 of which is included in selling, general and administrative expenses) and $239,000 ($74,000 of which is included in direct operating expenses and $165,000 of which is included in selling, general and administrative expenses), respectively, before income taxes. As of June 30, 2009, our estimated aggregate unrecognized share-based compensation expense for all unvested restricted shares was $2.7 million, which we expect to recognize over a weighted-average period of approximately 3.1 years.

Income Taxes

Our effective income tax rate in the first six months of 2009 was 36.5% compared to 40.7% in the first six months of 2008. The decrease in our effective income tax rate resulted primarily from the receipt of non-taxable life insurance proceeds paid upon the death of Michael Barrett, a senior officer of Barrett-NDEx, in January 2009. The tax impact of these non-taxable proceeds was treated as a discrete item and fully recognized in the first six months of 2009. At June 30, 2009, excluding the impact of this discrete item, we estimate an annual effective tax rate for 2009 of 39.3%.

Accounts Receivable Allowances

We extend credit to our advertisers, public notice publishers, commercial printing customers and professional service customers based upon an evaluation of each customer’s financial condition, and collateral is generally not required. We establish allowances for doubtful accounts based on estimates of losses related to customer receivable balances. Specifically, we use prior credit losses as a percentage of credit sales, the aging of accounts receivable and specific identification of potential losses to establish reserves for credit losses on accounts receivable. We believe that no significant concentration of credit risk exists with respect to our Business Information Division. We had a significant concentration of credit risk with respect to our Professional Services Division as of June 30, 2009, because the amount due from the Barrett law firm was $12.5 million, or 24.1% of our consolidated net accounts receivable balance, the amount due from Trott & Trott was $7.4 million, or 14.2% of our consolidated net accounts receivable balance, and the amount due from Feiwell & Hannoy was $5.0 million, or 9.6% of our consolidated net accounts receivable balance. However, to date, we have not experienced any problems with respect to collecting payment from our law firm customers, each of whom are required to remit all amounts due to NDeX with respect to files serviced by NDeX in accordance with the time periods to which we have agreed.

We consider accounting for our allowance for doubtful accounts critical to both of our operating segments because of the significance of accounts receivable to our current assets and operating cash flows. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances might be required, which could have a material effect on our financial statements. See “Liquidity and Capital Resources” below for information regarding our receivables, allowance for doubtful accounts and day sales outstanding.

New Accounting Pronouncements

Please see Note 1 to our unaudited condensed consolidated interim financial statements included in this report on Form 10-Q as well as Note 1 to our audited condensed consolidated financial statements included in our annual report on Form 10-K filed with the SEC on March 12, 2009, for information about new accounting pronouncements affecting us.

RESULTS OF OPERATIONS

The following table sets forth selected operating results, including as a percentage of total revenues, for the periods indicated below (in thousands, except per share data):

		Three Months Ended June 30,
						% of								% of
		2009				Revenues				2008				Revenues
Revenues:
Professional Services		$	44,294				66.1	%		$	18,129				43.6	%
Business Information			22,746				33.9	%			23,424				56.4	%
Total revenues			67,040				100.0	%			41,553				100.0	%
Operating expenses:
Professional Services			31,462				46.9	%			13,104				31.5	%
Business Information			17,278				25.8	%			19,585				47.1	%
Unallocated corporate operating expenses			3,316				4.9	%			2,139				5.1	%
Total operating expenses			52,056				77.6	%			34,828				83.8	%
Equity in earnings of The Detroit Legal News Publishing, LLC, net of amortization			1,333				2.0	%			1,469				3.5	%
Operating income			16,317				24.3	%			8,194				19.7	%
Interest expense, net			(1,728	)			(2.6	)%			(1,464	)			(3.5	)%
Non-cash interest income related to interest rate swaps			296				0.4	%			1,177				2.8	%
Other income, net			—				—				10				0.0	%
Income before income taxes			14,885				22.2	%			7,917				19.1	%
Income tax expense			(5,361	)			(8.0	)%			(3,027	)			(7.3	)%
Net income before noncontrolling interest			9,524				14.2	%			4,890				11.8	%
Less: Net income attributable to the redeemable noncontrolling interest			(1,318	)			(2.0	)%			(493	)			(1.2	)%
Net income attributable to Dolan Media Company		$	8,206				12.2	%		$	4,397				10.6	%
Net income attributable to Dolan Media Company per diluted share		$	0.27							$	0.17
Accretion of redeemable noncontrolling interest, net of tax in conjunction with adoption of SFAS No. 160			(0.13	)							—
Net income attributable to Dolan Media Company common stockholders per diluted share		$	0.14							$	0.17
Weighted average diluted shares outstanding			29,917								25,307

		Six Months Ended June 30,
						% of								% of
		2009				Revenues				2008				Revenues
Revenues:
Professional Services		$	86,326				65.9	%		$	36,869				44.4	%
Business Information			44,650				34.1	%			46,196				55.6	%
Total revenues			130,976				100.0	%			83,065				100.0	%
Operating expenses:
Professional Services			62,626				47.8	%			26,054				31.4	%
Business Information			34,437				26.3	%			37,937				45.7	%
Unallocated corporate operating expenses			5,884				4.5	%			4,143				5.0	%
Total operating expenses			102,947				78.6	%			68,134				82.0	%
Equity in earnings of The Detroit Legal News Publishing, LLC, net of amortization			2,730				2.1	%			3,026				3.6	%
Operating income			30,759				23.5	%			17,957				21.6	%
Interest expense, net			(3,698	)			(2.8	)%			(2,760	)			(3.3	)%
Non-cash interest income related to interest rate swaps			530				0.4	%			22				0.0	%
Other income, net			1,446				1.1	%			21				0.0	%
Income before income taxes			29,037				22.2	%			15,240				18.3	%
Income tax expense			(9,678	)			(7.4	)%			(5,786	)			(7.0	)%
Net income before noncontrolling interest			19,359				14.8	%			9,454				11.4	%
Less: Net income attributable to the redeemable noncontrolling interest			(2,506	)			(1.9	)%			(1,050	)			(1.3	)%
Net income attributable to Dolan Media Company		$	16,853				12.9	%		$	8,404				10.1	%
Net income attributable to Dolan Media Company perdiluted share		$	0.56							$	0.33
Accretion of redeemable noncontrolling interest, net of tax in conjunction with adoption of SFAS No. 160			(0.24	)							—
Net income attributable to Dolan Media Company common stockholders per diluted share		$	0.32							$	0.33
Weighted average diluted shares outstanding			29,896								25,246