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

The Dolan Company

Delaware (State or other jurisdiction of incorporation or organization)		43-2004527 (I.R.S. Employer 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 July 30, 2010, there were 30,493,086 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, 2010 (unaudited) and December 31, 2009			1
Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2010 and 2009			2
Unaudited Condensed Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the Six Months Ended June 30, 2010			3
Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2010 and 2009			4
Notes to Unaudited Condensed Consolidated Interim Financial Statements			5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			17
Item 3. Quantitative and Qualitative Disclosures about Market Risk			39
Item 4. Controls and Procedures			40
PART II — OTHER INFORMATION			40
Item 1. Legal Proceedings			40
Item 1A. Risk Factors			40
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			40
Item 3. Defaults Upon Senior Securities			40
Item 4. Reserved			41
Item 5. Other Information			41
Item 6. Exhibits			41
SIGNATURES			42
Exhibit 10.2
Exhibit 10.3
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

The Dolan Company

		June 30,				December 31,
		2010				2009
		(unaudited)
ASSETS
Current assets
Cash and cash equivalents		$	6,942			$	2,894
Accounts receivable, including unbilled services (net of allowances for doubtful accounts of $1,282 and $1,113 as of June 30, 2010 and December 31, 2009, respectively)			63,247				57,205
Unbilled pass-through costs			9,079				13,087
Prepaid expenses and other current assets			2,923				2,948
Total current assets			82,191				76,134
Investments			14,491				15,479
Property and equipment, net			15,124				15,457
Finite-life intangible assets, net			187,247				193,687
Indefinite-lived intangible assets			221,129				222,580
Other assets			2,892				4,953
Total assets		$	523,074			$	528,290
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt		$	19,063			$	22,005
Accounts payable			13,751				16,030
Accrued pass-through liabilities			24,124				25,929
Accrued compensation			8,457				4,384
Accrued liabilities			4,759				5,371
Due to sellers of acquired businesses			4,970				4,685
Deferred revenue			19,253				18,797
Total current liabilities			94,377				97,201
Long-term debt, less current portion			125,421				137,960
Deferred income taxes			6,097				8,160
Other liabilities			10,435				9,506
Total liabilities			236,330				252,827
Redeemable noncontrolling interest			22,077				26,600
Commitments and contingencies (Note 14)
Stockholders’ equity
Common stock, $0.001 par value; authorized: 70,000,000 shares; outstanding: 30,495,904 and 30,326,437 shares as of June 30, 2010 and December 31, 2009, 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			—				—
Other comprehensive loss (net of tax)			(1,253	)			—
Additional paid-in capital			286,478				287,210
Accumulated deficit			(20,588	)			(38,377	)
Total stockholders’ equity			264,667				248,863
Total liabilities and stockholders’ equity		$	523,074			$	528,290

See Notes to Unaudited Condensed Consolidated Interim Financial Statements

The Dolan Company

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2010				2009				2010				2009
Revenues
Professional Services		$	56,454			$	44,294			$	112,480			$	86,326
Business Information			22,755				22,746				43,707				44,650
Total revenues			79,209				67,040				156,187				130,976
Operating expenses
Direct operating: Professional Services			23,861				15,682				46,051				31,140
Direct operating: Business Information			7,624				7,425				14,540				14,875
Selling, general and administrative			25,639				22,427				50,827				43,163
Amortization			3,973				4,171				7,966				9,295
Depreciation			2,723				2,351				5,459				4,474
Total operating expenses			63,820				52,056				124,843				102,947
Equity in earnings of affiliates			1,084				1,333				2,512				2,730
Operating income			16,473				16,317				33,856				30,759
Non-operating income (expense)
Interest expense, net of interest income			(1,614	)			(1,728	)			(3,350	)			(3,698	)
Non-cash interest income related to interest rate swaps			302				296				665				530
Other income			—				—				—				1,446
Total non-operating expense			(1,312	)			(1,432	)			(2,685	)			(1,722	)
Income before income taxes			15,161				14,885				31,171				29,037
Income tax expense			(5,673	)			(5,361	)			(11,663	)			(9,678	)
Net income			9,488				9,524				19,508				19,359
Less: Net income attributable to redeemable noncontrolling interest			(856	)			(1,318	)			(1,719	)			(2,506	)
Net income attributable to The Dolan Company		$	8,632			$	8,206			$	17,789			$	16,853
Earnings per share — basic and diluted:
Net income attributable to The Dolan Company		$	0.29			$	0.27			$	0.59			$	0.56
(Increase) decrease in redeemable noncontrolling interest in NDeX			0.04				(0.13	)			0.04				(0.24	)
Net income attributable to The Dolan Company common stockholders		$	0.33			$	0.14			$	0.63			$	0.32
Weighted average shares outstanding:
Basic			30,136,567				29,815,405				30,121,831				29,810,590
Diluted			30,240,004				29,917,495				30,217,885				29,896,194

See Notes to Unaudited Condensed Consolidated Interim Financial Statements

The Dolan Company

																		Other
		Common Stock								Additional				Accumulated				Comprehensive
		Shares				Amount				Paid-In Capital				Deficit				Loss				Total
Balance (deficit) at December 31, 2008			29,955,018			$	30			$	291,310			$	(69,190	)		$	—			$	222,150
Net income attributable to The Dolan Company			—				—				—				30,813				—				30,813
(Increase) decrease in redeemable noncontrolling interest in NDeX			—				—				(9,262	)			—				—				(9,262	)
Net income attributable to The Dolan Company common stockholders			—				—				—				—				—				21,551
Issuance of common stock in connection with a purchase of noncontrolling interest in NDeX			248,000				—				2,600				—				—				2,600
Issuance of common stock pursuant to the exercise of stock options			9,533				—				16				—				—				16
Share-based compensation expense, including issuance of restricted stock (shares are net of forfeitures)			113,886				—				2,556				—				—				2,556
Other			—				—				(10	)			—				—				(10	)
Balance (deficit) at December 31, 2009			30,326,437			$	30			$	287,210			$	(38,377	)		$	—			$	248,863
Net income attributable to The Dolan Company			—				—				—				17,789				—				17,789
(Increase) decrease in redeemable noncontrolling interest in NDeX			—				—				1,094				—				—				1,094
Net income attributable to The Dolan Company common stockholders			—				—				—				—				—				18,883
Unrealized loss on interest rate swap, net of tax			—				—				—				—				(1,253	)			(1,253	)
Total comprehensive income																							17,630
Share-based compensation expense, including issuance of restricted stock (shares are net of forfeitures)			158,039				—				1,358				—				—				1,358
Issuance of common stock pursuant to the exercise of stock options			11,428				—				20				—				—				20
(Increase) in redeemable noncontrolling interest in DiscoverReady			—				—				(3,204	)			—				—				(3,204	)
Balance (deficit) at June 30, 2010			30,495,904			$	30			$	286,478			$	(20,588	)		$	(1,253	)		$	264,667

See Notes to Unaudited Condensed Consolidated Interim Financial Statements

The Dolan Company

		Six Months Ended
		June 30,
		2010				2009
Cash flows from operating activities
Net income		$	19,508			$	19,359
Distributions received from The Detroit Legal News Publishing, LLC			3,500				3,500
Distributions paid to holders of noncontrolling interest			(1,061	)			(2,311	)
Non-cash operating activities:
Amortization			7,966				9,295
Depreciation			5,459				4,474
Equity in earnings of affiliates			(2,512	)			(2,730	)
Stock-based compensation expense			1,358				1,145
Change in value of interest rate swap			(665	)			(525	)
Amortization of debt issuance costs			164				123
Non-cash fair value adjustment on earnout recorded in connection with acquisition			588				—
Changes in operating assets and liabilities, net of effects of business combinations in 2009:
Accounts receivable and unbilled pass-through costs			(2,033	)			(18,571	)
Prepaid expenses and other current assets			55				2,581
Other assets			18				18
Accounts payable and accrued liabilities			(605	)			5,199
Deferred revenue and other liabilities			(370	)			1,444
Net cash provided by operating activities			31,370				23,001
Cash flows from investing activities
Acquisitions and investments			(115	)			(1,426	)
Capital expenditures			(3,326	)			(1,613	)
Net cash used in investing activities			(3,441	)			(3,039	)
Cash flows from financing activities
Net payments on senior revolving note			(8,000	)			—
Payments on senior long-term debt			(6,225	)			(4,625	)
Payments on unsecured notes payable			(9,576	)			(1,750	)
Proceeds from stock option exercises			20				7
Other			(100	)			(2	)
Net cash used in financing activities			(23,881	)			(6,370	)
Net increase in cash and cash equivalents			4,048				13,592
Cash and cash equivalents at beginning of the period			2,894				2,456
Cash and cash equivalents at end of the period		$	6,942			$	16,048

See Notes to Unaudited Condensed Consolidated Interim Financial Statements

Notes to Unaudited Condensed Consolidated Interim Financial Statements

Note 1. Basis of Presentation

Basis of Presentation: The condensed consolidated balance sheet as of December 31, 2009, which has been derived from audited financial statements, and the unaudited condensed consolidated interim financial statements of The Dolan 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 interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes for the year ended December 31, 2009, included in the Company’s annual report on Form 10-K filed on March 8, 2010, with the Securities and Exchange Commission (SEC). Effective May 26, 2010, the Company changed its name from Dolan Media Company to The Dolan Company.

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 its majority ownership interests in American Processing Company, LLC d/b/a NDeX (NDeX) and DiscoverReady LLC (DiscoverReady). The Company accounts for the percentage interests in NDeX and DiscoverReady that it does not own as noncontrolling interest.

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

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. The term “Albertelli sellers” means James E. Albertelli, P.A., The Albertelli Firm, P.C., Albertelli Title, Inc. and James E. Albertelli, as a group. The term “Trott sellers” means David A. Trott, Ellen Coon, Trustee of the Ellen Coon Living Trust u/a/d 9/9/98, Marcy J. Ford, Trustee of the Marcy Ford Revocable Trust u/a/d 7/12/04, William D. Meagher, Trustee of the William D. Meagher Trust u/a/d 8/24/07, and Jeanne M. Kivi, Trustee of the Jeanne M. Kivi Trust u/a/d 8/24/07, as a group.

Note 2. Basic and Diluted Income Per Share

Basic per share amounts are computed, generally, by dividing net income attributable to The Dolan Company by the weighted-average number of common shares outstanding. The Company has employed the two-class method to calculate earnings per share, as it relates to the redeemable noncontrolling interest in NDeX, based on net income attributable to its common stockholders. At June 30, 2010 and December 31, 2009, 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 13 for information on stock options) unless their effect is anti-dilutive, thereby reducing the loss per share or increasing the income per share.

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

		Three Months								Six Months
		Ended June 30,								Ended June 30,
		2010				2009				2010				2009
Net income attributable to The Dolan Company		$	8,632			$	8,206			$	17,789			$	16,853
(Increase) decrease in redeemable noncontrolling interest in NDeX, net of tax			1,173				(3,943	)			1,094				(7,293	)
Net income attributable to The Dolan Company common stockholders		$	9,805			$	4,263			$	18,833			$	9,560
Basic:
Weighted average common shares outstanding			30,431				30,036				30,377				29,995
Weighted average common shares of unvested restricted stock			(294	)			(221	)			(255	)			(184	)
Shares used in the computation of basic net income per share			30,137				29,815				30,122				29,811
Net income attributable to The Dolan Company common stockholders per share — basic		$	0.33			$	0.14			$	0.63			$	0.32
Diluted:
Shares used in the computation of basic net income per share			30,137				29,815				30,122				29,811
Stock options and restricted stock			103				102				96				85
Shares used in the computation of dilutive net income per share			30,240				29,917				30,218				29,896
Net income attributable to The Dolan Company common stockholders per share — diluted		$	0.33			$	0.14			$	0.63			$	0.32

For the three months ended June 30, 2010 and 2009, options to purchase approximately 1.6 million and 1.8 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, 2010 and 2009, options to purchase approximately 1.6 million and 1.9 million weighted shares of common stock, respectively, were excluded from the computation because their effect would have been anti-dilutive.

Note 3. 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 results of the business combinations are included in the accompanying consolidated statement of operations from the respective transaction dates forward.

2010 Equity Transactions:

Acquisition of Noncontrolling Interest in NDeX: On January 4, 2010, the Company, along with its wholly-owned subsidiary, Dolan APC, LLC, entered into a common unit purchase agreement with the Trott sellers, including one of the Company’s executive officers, David A. Trott, under the terms of which the Trott sellers sold their remaining aggregate 2.4% ownership interest in NDeX, for an aggregate $5.0 million. The Company paid $1.0 million of the aggregate purchase price during the second quarter of 2010, will pay $1.0 million on July 1, 2010, and will pay the remaining $3.0 million in 29 equal monthly installments, beginning August 1, 2010. Interest accrues on any portion of the $3.0 million principal amount remaining at a rate of 4.25% per annum. The Company accounted for this acquisition as an equity transaction by reducing redeemable noncontrolling interest on the Company’s balance sheet by $5.0 million. No deal costs were incurred with respect to this transaction.

Redemption of Noncontrolling Interest of Feiwell & Hannoy in NDeX: On February 28, 2010, NDeX redeemed a 1.7% ownership interest in NDeX from Feiwell & Hannoy, which exercised its put right pursuant to the NDeX operating agreement. NDeX redeemed these common units for $3.5 million, which is payable to Feiwell & Hannoy over a period of three years, in equal quarterly installments, beginning on March 1, 2010, with interest accruing at a rate of 5.25% per annum. The Company accounted for this acquisition as an equity transaction by reducing redeemable noncontrolling interest on the Company’s balance sheet by $3.5 million. No deal costs were incurred with respect to this transaction.

2009 Acquisitions/Equity Transactions:

Albertelli: On October 1, 2009, NDeX acquired the mortgage default processing services and certain title assets of the Albertelli sellers for a total maximum cash purchase price of $19.0 million as follows: $7.0 million paid at closing, an additional $1.0 million held back for one year to secure the Albertelli sellers’ obligations under the asset purchase agreement, an additional $2.0 million in equal installments of $1.0 million to be paid on each of October 1, 2010 and 2011, respectively, and earnouts payable of up to an additional $9.0 million in three annual installments of up to $3.0 million each. The amount of these three annual earnout payments is based upon the adjusted EBITDA for the acquired mortgage default processing services and related title business during the twelve calendar months ending on each of September 30, 2010, 2011, and 2012. Subsequent to June 30, 2010, in anticipation of the achievement of the adjusted EBITDA target for the twelve calendar months ending on September 30, 2010, and in connection with mutually agreed amendments to certain of the agreements entered into in connection with the Albertelli acquisition, the Company agreed to pay the full $3.0 million on October 1, 2010, for the first of the three annual earnout payments.

In connection with this acquisition, the Company determined that the earnouts of $9.0 million, in the aggregate, were likely to be achieved and has therefore included the present value of these payments in its determination of fair value. The Company has determined that this liability is a level 3 fair value measurement within the Financial Accounting Standards Board’s (FASB) fair value hierarchy, and such liability is adjusted to fair value at each reporting date, with the adjustment reflected in selling, general and administrative expenses. See Note 5 for information pertaining to changes in the fair value of this liability during the three and six months ended June 30, 2010.

The $16.7 million fair value purchase price was allocated as follows: $0.2 million to fixed assets; $14.3 million to the long-term service agreement to be amortized over 20 years, representing the initial term of the services agreement entered into with one of the Albertelli sellers and the expected life over which cash flows will be provided; and $2.2 million to goodwill.

DiscoverReady: On November 2, 2009, the Company acquired an 85% equity interest in DiscoverReady. The Company paid the sellers $28.9 million in cash at closing and placed an additional $3.0 million in escrow.

Management determined the fair value of the acquired business and related redeemable noncontrolling interest through a business valuation done by an independent third-party valuation firm. The total fair value of $37.5 million was estimated using a discounted cash flow analysis (income approach) using an internal rate of return of 23.6% for this acquisition. The fair value was allocated as follows: $2.4 million to net working capital/capital lease liability; $1.1 million to fixed assets; $1.3 million to non-compete agreements, to be amortized over four years; $1.6 million to trademarks and domain names, to be amortized over ten years; $5.9 million to trade names, to be amortized over 15 years; $9.3 million to customer lists (preliminary allocation at December 31, 2009 was $7.9 million), to be amortized over ten to 12 years; and $15.8 million to goodwill (preliminary allocation at December 31, 2009 was $17.3 million). The December 31, 2009 balance sheet and statement of operations were not retroactively adjusted for this measurement period adjustment as the amount of the change was not material to the 2009 financial statements.

The Company records on its balance sheet an adjustment for that portion of DiscoverReady which it does not own as redeemable noncontrolling interest (NCI), which is adjusted to fair value at each balance sheet date using a market approach. The Company has determined that this redeemable NCI is a level 3 fair value measurement within the FASB’s fair value hierarchy. See Note 5 for information pertaining to changes in the fair value of this noncontrolling interest during the three and six months ended June 30, 2010.

Acquisition of Noncontrolling Interest in NDeX. On December 31, 2009, the Company entered into a common unit purchase agreement with the Trott sellers, including one of the Company’s executive officers, David A. Trott, under the terms of which the Trott sellers sold an aggregate 5.1% membership interest in NDeX to the Company, for a purchase price of $10.6 million, consisting of $8.0 million paid to the Trott sellers during the six months ended June 30, 2010, and 248,000 shares of the Company’s common stock with a fair market value of $2.6 million. The Company accounted for this acquisition as an equity transaction by reducing redeemable noncontrolling interest on the Company’s balance sheet by $10.6 million.

Pro Forma Information: Actual results of operations reflecting the equity interests and assets acquired in 2010 and 2009 are included in the unaudited condensed consolidated interim financial statements from the dates of the applicable business combination. The unaudited pro forma condensed consolidated statement of operations of the Company, set forth below, gives effect to the following transactions as if they occurred on January 1, 2009: (1) the mortgage default processing services and certain title assets of Albertelli acquired in October, 2009, (2) the 85% equity interest in DiscoverReady acquired in November, 2009 (which increased to 85.3% in the second quarter of 2010; see Note 5 for further information), (3) the 5.1% interest in NDeX acquired in December, 2009, (4) the 2.4% interest in NDeX acquired in January, 2010, and (5) the 1.7% interest in NDeX acquired from Feiwell & Hannoy in February, 2010. The Feiwell & Hannoy transaction had a de minimis effect on 2010 results and therefore there is no pro forma adjustment for the three and six months ended June 30, 2010, as the aforementioned transactions are included in the actual operating results for the full period. 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 business combinations occurred as of the beginning of each such year (in thousands, except per share data):

		Pro Forma
		Three Months Ended				Six Months Ended
		June 30, 2009				June 30, 2009
Total revenues		$	75,245			$	145,823
Net income attributable to The Dolan Company			10,009				19,758
Net income attributable to The Dolan Company per share:
Basic		$	0.33			$	0.66
Diluted		$	0.33			$	0.66
Actual/Pro forma weighted average shares outstanding:
Basic			30,063,405				30,058,592
Diluted			30,165,495				30,144,194

Note 4. Derivative Instruments

On January 4, 2010, the Company entered into an interest rate swap agreement to manage the risk associated with a portion of its floating-rate long-term debt, and to replace and expand that portion of the current swap agreement that matured on February 22, 2010. The Company does not utilize derivative instruments for speculative purposes. The interest rate swap involves the exchange of fixed-rate and variable-rate payments without the exchange of the underlying notional amount on which the interest payments are calculated. The notional amount of the new swap agreement is $50 million through December 31, 2012, $35 million from December 31, 2012 through December 31, 2013, and $25 million from December 31, 2013 through June 30, 2014. The Company has designated this swap as a cash flow hedge and has determined that it qualifies for hedge accounting treatment. Changes in fair value of the cash flow hedge are recorded in other comprehensive loss (net of tax) until income or loss from the cash flows of the hedged item is realized.

As of June 30, 2010, the Company had $1.3 million in other comprehensive loss related to unrealized losses (net of tax) on the cash flow hedge. There was no other comprehensive loss as of December 31, 2009. Unrealized gains and losses are reflected in net income attributable to The Dolan Company when the related cash flows or hedged transactions occur and offset the related performance of the hedged item.

This cash flow hedge was highly effective for the three and six months ended June 30, 2010. The Company does not expect to reclassify any amounts from other comprehensive income to net income attributable to The Dolan Company during 2010. The occurrence of these related cash flows and hedged transaction remains probable.

The Company had liabilities of $2.8 million and $1.5 million resulting from interest rate swaps at June 30, 2010 and December 31, 2009, respectively, which are included in accrued liabilities or other liabilities on the balance sheet, depending upon the timing of the expiration of the swap agreement. As of June 30, 2010, the aggregate notional amount of the swap agreements was $75 million, of which $25 million will mature on March 31, 2011, and the balance of the $50 million notional swap will mature on various dates through June 30, 2014, as discussed above. The swap agreement maturing on March 31, 2011, does not qualify for hedge accounting. Total floating-rate borrowings not offset by the swap agreements at June 30, 2010, totaled $62.2 million.

By their nature, derivative instruments are subject to market risk. Derivative instruments are also subject to credit risk associated with counterparties to the derivative contracts. Credit risk associated with derivatives is measured based on the replacement cost should the counterparty with a contract in a gain position to the Company fail to perform under the terms of the contract. The Company does not anticipate nonperformance by the counterparty.

Note 5. Fair Value of Financial Instruments

The Company’s financial assets and liabilities are measured at fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company classifies the inputs used to measure fair value into the following hierarchy:

Level 1

Quoted prices in active markets for identical assets or liabilities.

Level 2

Quoted prices in active markets for similar assets or liabilities, or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable or can be corroborated by observable market data for the asset or liability.

Level 3

Unobservable inputs for the asset or liability that are supported by little or no market activity. These fair values are determined using pricing models for which the assumptions utilize management’s estimates or market participant assumptions.

Assets and Liabilities Measured at Fair Value on a Recurring Basis. The fair value hierarchy requires the use of observable market data when available. In instances where inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.

The fair value of interest rate swaps is determined by the respective counterparties based on interest rate changes. Interest rate swaps are valued based on observable interest rate yield curves for similar instruments. The fair value of the earnout liability recorded in connection with the NDeX Florida operations acquired from the Albertelli sellers is determined by management based on projected financial performance and an estimated discount rate. The fair value of the redeemable noncontrolling interest in DiscoverReady is determined by management using a market approach.

The following table summarizes the balances of liabilities measured at fair value on a recurring basis as of June 30, 2010 (in thousands):

		Level 1				Level 2				Level 3				Total
Interest rate swaps		$	—			$	2,848			$	—			$	2,848
Earnout liability recorded in connection with the NDeX Florida operations acquired from the Albertelli sellers			—				—				7,587				7,587
Redeemable noncontrolling interest in DiscoverReady			—				—				11,319				11,319
Total		$	—			$	2,848			$	18,906			$	21,754

The following table summarizes the changes in fair value for all liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended June 30, 2010 (in thousands):

																		Fair Value
						Fair Value												Adjustment
						Adjustment												Included in
						Included in												Additional
						Net Income				Minority				Distributions				Paid-in
		Balance at				Attributable				Partners’				to Minority				Capital and				Balance at
		March 31,				to The Dolan				Share of				Partners /				Deferred				June 30,
		2010				Company				Earnings				Redemptions				Taxes				2010
Earnout liability recorded in connection with the NDeX Florida operations acquired from the Albertelli sellers		$	7,293			$	294			$	—			$	—			$	—			$	7,587
Redeemable noncontrolling interest in DiscoverReady			8,985				—				537				(349	)			2,146				11,319
Total		$	16,278			$	294			$	537			$	(349	)		$	2,146			$	18,906

The following table summarizes the changes in fair value for all liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six months ended June 30, 2010 (in thousands):

																		Fair Value
						Fair Value												Adjustment
						Adjustment												Included in
						Included in												Additional
						Net Income				Minority				Distributions				Paid-in
		Balance at				Attributable				Partners’				to Minority				Capital and				Balance at
		December 31,				to The Dolan				Share of				Partners /				Deferred				June 30,
		2009				Company				Earnings				Redemptions				Taxes				2010
Earnout liability recorded in connection with the NDeX Florida operations acquired from the Albertelli sellers		$	6,999			$	588			$	—			$	—			$	—			$	7,587
Redeemable noncontrolling interest in DiscoverReady			5,902				—				894				(642	)			5,165				11,319
Total		$	12,901			$	588			$	894			$	(642	)		$	5,165			$	18,906

In accordance with the terms of the DiscoverReady operating agreement, the Company repurchased a 0.3% equity interest in DiscoverReady from DR Holdco in connection with the expiration of the employment agreement of DiscoverReady’s former chief financial officer in April 2010. The Company paid $0.1 million for this equity interest in DiscoverReady, which is included in Distributions to Minority Partners/Redemptions in the tables above along with $0.2 million in distributions to minority partners.

Non-Financial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis. Certain assets and liabilities are measured at fair value on a nonrecurring basis and are subject to fair value adjustments in certain circumstances (e.g., when there is evidence of impairment). No such fair value adjustments were required during the quarter.

Fair Value of Financial Instruments: The carrying value of cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value because of the short-term nature of these instruments. The carrying value of the Company’s debt is the remaining amount due to its debtors under borrowing arrangements. To estimate the fair value of its variable-rate 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, 2010, the estimated fair value of variable-rate debt under the Company’s senior credit facility was $121.4 million compared to a carrying value of $137.2 million.

Note 6. Investments

The Detroit Legal News Publishing, LLC: The Company owns a 35% membership interest in The Detroit Legal News Publishing, LLC, or DLNP. DLNP publishes ten legal newspapers, along with one quarterly magazine, all located in southern Michigan. 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 relating to the Company’s investment in DLNP as of June 30, 2010 and December 31, 2009, and for the three and six months ended June 30, 2010 and 2009 (in thousands):

		As of June 30,				As of December 31,
		2010				2009
Carrying value of investment		$	14,491			$	15,479
Underlying finite-lived customer list, net of amortization			8,167				8,921

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2010				2009				2010				2009
Equity in earnings of DLNP, net of amortization of customer list		$	1,084			$	1,333			$	2,512			$	2,730
Distributions received			1,400				2,100				3,500				3,500
Amortization expense			377				377				754				753

Note 7. Intangible Assets

Indefinite-Lived Intangible Assets: Indefinite-lived intangible assets consist of trade names and goodwill. The Company has determined that these assets have an indefinite life and therefore will not be amortized. As of June 30, 2010 and December 31, 2009, the trade names balance was $6.5 million. The Company reviews indefinite-lived intangible assets annually on November 30 for impairment.

The following table represents the goodwill balances by segment as of June 30, 2010 and December 31, 2009 (in thousands):

		June 30,				December 31,
		2010				2009
Mortgage Default Processing Services		$	131,709			$	131,709
Litigation Support Services			23,651				25,102
Business Information			59,232				59,232
Total		$	214,592			$	216,043

The change in goodwill in the Litigation Support Services segment resulted from the completion of the determination of fair value related to the DiscoverReady acquisition during the first quarter of 2010. See Note 3 for further information about this valuation.

Finite-Life Intangible Assets: Total amortization expense for finite-lived intangible assets for the three months ended June 30, 2010 and 2009, was approximately $4.0 million and $4.2 million, respectively, and for the six months ended June 30, 2010 and 2009, was approximately $8.0 million and $9.3 million, respectively. During 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, a senior officer of Barrett-NDEx, who died in January 2009.

Note 8. Long-Term Debt, Capital Lease Obligation

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

		June 30,				December 31,
		2010				2009
Senior secured debt (see below):
Senior variable-rate term note, payable in quarterly installments with a balloon payment due August 8, 2014		$	137,225			$	143,450
Senior variable-rate revolving note due August 8, 2012			—				8,000
Total senior secured debt			137,225				151,450
Unsecured notes payable			6,875				8,000
Capital lease obligations			384				515
			144,484				159,965
Less current portion			19,063				22,005
Long-term debt, less current portion		$	125,421			$	137,960

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, 2010, the Company had net unused available capacity of approximately $40 million on its revolving credit facility, after taking into account the senior leverage ratio requirements under the credit facility, and outstanding debt of $137.2 million (all of which was under the term loan facility). At June 30, 2010, the weighted-average interest rate on the senior term note was 2.5%. The Company is subject to certain restrictions and covenant ratio requirements relating to its financing arrangement, all of which were satisfied as of June 30, 2010.

Unsecured Notes Payable: Under the terms of common unit purchase agreements with the Trott sellers dated December 31, 2009 and January 4, 2010, the Company agreed to pay an aggregate $13.0 million in installments for the purchase of an aggregate 7.6% ownership interest in NDeX. Of this amount, $9.0 million was paid during the six months ended June 30, 2010, $1.0 million is due and payable on July 1, 2010, and the remaining $3.0 million is payable in 29 equal monthly installments at an interest rate of 4.25% per annum beginning on August 1, 2010. The aggregate balance on these notes at June 30, 2010 was $4.0 million.

Under the terms of a redemption agreement with Feiwell & Hannoy, the Company agreed to pay $3.5 million in installments for the redemption of a 1.7% ownership interest in NDeX from Feiwell & Hannoy. The $3.5 million note is payable in 12 quarterly installments beginning on March 1, 2010, with interest accruing at a rate of 5.25% per annum. During the six months ended June 30, 2010, the Company paid $0.6 million on this note. The balance on this note at June 30, 2010 was $2.9 million.

See Note 3 for further information related to these three transactions.

Note 9. Common and Preferred Stock

At June 30, 2010, the Company had 70,000,000 shares of common stock and 5,000,000 shares of preferred stock authorized and 30,495,904 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 10. Income Taxes

The provision for income taxes for the six months ended June 30, 2010 and 2009 was $11.6 million and $9.7 million, respectively, or 37.4% and 33.3% of income before income taxes, respectively. The provision for income taxes during the six months ended June 30, 2010 and 2009 is comprised of federal, state and local taxes. The primary difference between the Company’s effective tax rate and the statutory federal rate is state income taxes. This difference is partially offset by earnings of the Company’s noncontrolling interests, which are not subject to federal income tax. In addition, second quarter 2009 tax expense reflects the impact of $1.9 million of non-taxable life insurance proceeds received 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 in the first quarter of 2009.

Note 11. Major Customers and Related Parties

NDeX has eight law firm customers and, of those customers, Trott & Trott and the Barrett law firm (both related parties) comprised 13.2% and 21.5%, respectively, of the Company’s total revenues for the three months ended June 30, 2010, and 13.6% and 23.5%, respectively, of the Company’s total revenues for the six months ended June 30, 2010. The Company’s top two customers in the litigation support services segment, both of whom are in the financial services industry, together accounted for 13.8% and 12.2%, respectively, of the Company’s total revenues for the three and six months ended June 30, 2010.

NDeX has entered long-term services agreements with its law firm customers, including Trott & Trott and the Barrett law firm, that provide for the exclusive referral of mortgage default and other files for processing. In early 2010, NDeX and Trott & Trott agreed to increase the fixed fee per file NDeX receives for each mortgage foreclosure, bankruptcy, eviction, litigation and other mortgage default files Trott & Trott refers to NDeX for processing under NDeX’s service agreement with Trott & Trott.

David A. Trott, chairman and chief executive officer of NDeX, is also the managing attorney and majority shareholder of Trott & Trott, and, at January 1, 2010, owned a 1.7% interest in NDeX. The Company acquired that interest as part of a common unit purchase transaction with the Trott sellers. Under the terms of the common unit purchase agreement, Mr. Trott sold the Company 23,560 common units in NDeX, representing his 1.7% interest, for a total aggregate purchase price of $3.4 million, exclusive of interest, during the first quarter of 2010. As part of a separate common unit purchase agreement entered into with the Trott sellers on December 31, 2009, Mr. Trott sold the Company 168,644 common units in NDeX, representing his 12.2% interest. The Company made an aggregate $6.1 million in payments in connection with these transactions to Mr. Trott during the six months ended June 30, 2010. See Note 3 for more information about these transactions.

Also, during the first quarter of 2010, NDeX redeemed the 1.7% ownership interest which was held by Feiwell & Hannoy, an NDeX customer, for a total redemption price of $3.5 million. This redemption occurred in accordance with the terms and conditions of the NDeX operating agreement. See Note 3 for more information about this transaction.

During the second quarter of 2010, the Company repurchased a 0.3% equity interest in DiscoverReady from DR Holdco for $0.1 million in connection with the expiration of the employment agreement of DiscoverReady’s former chief financial officer. See Note 5 for more information on this transaction.

Note 12. Reportable Segments

The Company has two operating divisions: Professional Services and Business Information and three reportable segments: (1) Mortgage Default Processing Services; (2) Litigation Support Services; and (3) Business Information. The Mortgage Default Processing Services and Litigation Support Services segments are part of the Professional Services Division as these segments provide professional services supporting, primarily, attorneys and/or their clients. The Business Information segment constitutes the Business Information Division. The Company determined its reportable segments based on the types of products sold and services performed. The Mortgage Default Processing Services segment generates revenue from NDeX, which provides mortgage default processing and related services to its law firm customers and also directly to loan servicers and mortgage lenders for real estate located in California. The Litigation Support Services segment generates revenue by providing discovery management and document review services through DiscoverReady and appellate services through Counsel Press, LLC. Both of these operating segments generate revenues through fee-based arrangements. The Business Information segment provides business information products through a variety of media, including court and commercial newspapers, weekly business journals and the Internet. The Business Information segment generates revenues primarily from display and classified advertising (including events), public notices, and circulation and other (primarily consisting of subscriptions).

The tables below reflect summarized financial information concerning the Company’s reportable segments for the three and six months ended June 30, 2010 and 2009 (in thousands):

		Professional Services
		Mortgage
		Default				Litigation				Business
		Processing				Support				Information				Corporate				Total
Three Months Ended June 30, 2010
Revenues		$	39,706			$	16,748			$	22,755			$	—			$	79,209
Direct operating expenses			16,830				7,031				7,624				—				31,485
Selling, general and administrative expenses			9,514				4,420				9,398				2,307				25,639
Amortization and depreciation			4,435				858				1,231				172				6,696
Equity in earnings of affiliates			—				—				1,084				—				1,084
Operating income (loss)		$	8,927			$	4,439			$	5,586			$	(2,479	)		$	16,473
Three Months Ended June 30, 2009
Revenues		$	40,927			$	3,367			$	22,746			$	—			$	67,040
Direct operating expenses			14,876				806				7,425				—				23,107
Selling, general and administrative expenses			8,990				1,809				8,507				3,121				22,427
Amortization and depreciation			4,659				322				1,346				195				6,522
Equity in earnings of affiliates			—				—				1,333				—				1,333
Operating income (loss)		$	12,402			$	430			$	6,801			$	(3,316	)		$	16,317

		Professional Services
		Mortgage
		Default				Litigation				Business
		Processing				Support				Information				Corporate				Total
Six Months Ended June 30, 2010
Revenues		$	82,141			$	30,339			$	43,707			$	—			$	156,187
Direct operating expenses			33,805				12,246				14,540				—				60,591
Selling, general and administrative expenses			19,803				8,419				18,254				4,351				50,827
Amortization and depreciation			8,877				1,683				2,519				346				13,425
Equity in earnings of affiliates			—				—				2,512				—				2,512
Operating income (loss)		$	19,656			$	7,991			$	10,906			$	(4,697	)		$	33,856
Six Months Ended June 30, 2009
Revenues		$	79,242			$	7,084			$	44,650			$	—			$	130,976
Direct operating expenses			29,485				1,655				14,875				—				46,015
Selling, general and administrative expenses			17,187				3,637				16,929				5,410				43,163
Amortization and depreciation			10,020				642				2,633				474				13,769
Equity in earnings of affiliates			—				—				2,730				—				2,730
Operating income (loss)		$	22,550			$	1,150			$	12,943			$	(5,884	)		$	30,759

Note 13. Share-Based Compensation

Total share-based compensation expense for the three months ended June 30, 2010 and 2009, was approximately $0.8 million and $0.6 million, respectively, before income taxes. Total share-based compensation expense for the six months ended June 30, 2010 and 2009, was approximately $1.4 million and $1.1 million, respectively, before income taxes.

In May 2010, the Company amended and restated its 2007 Incentive Compensation Plan, increasing the number of shares reserved for issuance from 2.7 million shares to 4.8 million shares. Of the 4.8 million shares reserved for issuance under this plan, there were 2.3 million shares available for issuance as of June 30, 2010.

Stock Options: Share-based compensation expense related to grants of options for the three months ended June 30, 2010 and 2009, was approximately $0.5 million and $0.4 million, respectively, before income taxes and for the six months ended June 30, 2010 and 2009, was approximately $0.9 million and $0.8 million, respectively, before income taxes.

The following weighted average assumptions were used to estimate the fair value of stock options granted in 2010:

Dividend yield			0.0	%
Expected volatility			47.0	%
Risk free interest rate			2.06	%
Expected term of options		4.75 years
Weighted average grant date fair value		$	5.15

The following table represents stock option activity for the six months ended June 30, 2010:

														Weighted
						Weighted				Weighted				Average
						Average Grant				Average				Remaining
		Number of				Date Fair				Exercise				Contractual Life
		Shares				Value				Price				(in years)
Outstanding options at December 31, 2009			1,629,760			$	4.73			$	13.81				5.37
Granted			435,618				5.14				12.20				—
Exercised			(12,000	)			1.35				2.22				—
Canceled or forfeited			(79,546	)			5.11				14.74				—
Outstanding options at June 30, 2010			1,973,832			$	4.83			$	13.49				5.30
Options exercisable at June 30, 2010			726,004			$	4.45			$	13.26				4.78

At June 30, 2010, the aggregate intrinsic value of options outstanding and options exercisable was approximately $0.9 million. At June 30, 2010, there was approximately $5.1 million of unrecognized compensation cost related to outstanding options, which is expected to be recognized over a weighted-average period of 2.8 years.

Restricted Stock Grants: The following table represents a summary of nonvested restricted stock activity for the six months ended June 30, 2010:

						Weighted
						Average
		Number of				Grant Date
		Shares				Fair Value
Nonvested, December 31, 2009			219,504			$	13.74
Granted			184,925				12.23
Vested			(38,587	)			13.55
Canceled or forfeited			(26,886	)		$	13.83
Nonvested, June 30, 2010			338,956			$	12.93

Share-based compensation expense related to grants of restricted stock for the three months ended June 30, 2010 and 2009, was approximately $0.3 million and $0.2 million, respectively, before income taxes and for the six months ended June 30, 2010 and 2009, was approximately $0.5 million and $0.3 million, respectively, before income taxes. Total unrecognized compensation expense for unvested restricted shares of common stock as of June 30, 2010, was approximately $3.7 million, which is expected to be recognized over a weighted-average period of 3.2 years.

Note 14. 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.

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;

•

David A. Trott, the chairman and chief executive officer of NDeX, and certain other employees of NDeX, who are also shareholders and principal attorneys of our law firm customers, may under certain circumstances have interests that differ from, or conflict with, our interests;

•

NDeX’s business revenues are very concentrated, as NDeX currently provides mortgage default processing services to eight law firm customers, and if the number of case files referred to us by our mortgage default processing service law firm customers, or loan servicers and mortgage lenders we serve directly for properties located in California, decreases or fails to increase, our operating results and ability to execute our growth strategy could be adversely affected;

•

bills introduced and laws enacted, along with court orders, to mitigate foreclosures in states where we do business (including recently enacted legislation in Michigan, Indiana and Florida), the Hope for Homeowners Act, the Emergency Economic Stabilization Act, the Streamlined Modification Program, the Homeowner Affordability and Stability Plan (including the Making Home Affordable Program, the Home Affordable Modification Program (HAMP), and the Home Affordable Foreclosure Alternatives Program (HAFA)), the Protecting Tenants at Foreclosure Act and voluntary foreclosure relief programs developed by lenders, loan servicers and the Hope Now Alliance (a consortium that includes loan servicers), may have an adverse effect on, or restrict, our mortgage default processing services and public notice operations;

•

we have owned and operated DiscoverReady LLC (DiscoverReady) since November 2, 2009, and we are highly dependent on the skills and knowledge of the individuals serving as chief executive officer and president of DiscoverReady, as none of our executive officers have managed or operated a discovery management and document review services company prior to this acquisition;

•

DiscoverReady’s business revenues are very concentrated among a few customers and if these customers choose to manage their discovery with their own staff or by engaging another provider and if we are unable to develop new customer relationships, our operating results and the ability to execute our growth strategy at DiscoverReady may be adversely affected;

•

the acquisition of DiscoverReady may expose us to particular business and financial risks that include, but are not limited to: (1) diverting management’s time, attention and resources from managing the business; (2) incurring significant additional capital expenditures and operating expenses to improve, coordinate or integrate managerial, operational, financial and administrative systems; (3) failing to integrate the operations, personnel and internal controls of DiscoverReady in our company or to manage DiscoverReady or our growth; and (4) facing operational difficulties in new markets or with new products and service offerings;

•

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

•

we intend to continue to pursue acquisition opportunities, which we may not do successfully and which may subject us to considerable business and financial risk, and we may be required to incur additional indebtedness or raise additional capital to fund these acquisitions and this additional financing may not be available to us on satisfactory terms or at all; and

•

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

See “Risk Factors” in Item 1A of our annual report on Form 10-K for the year ended December 31, 2009, filed on March 8, 2010, with the SEC 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 The Dolan Company and its consolidated subsidiaries. When we refer to “National Default Exchange” or “NDeX” in this report, we mean all of our mortgage default processing operations in Michigan, Indiana and Minnesota and at Barrett-NDEx (collectively referred to as the “existing NDeX business”), as well as the Florida mortgage default and related title operations acquired from the Albertelli sellers in October 2009. When we refer to “Barrett-NDEx” in this report, it means the entities that constitute the mortgage default processing operations serving the Texas, California and Georgia markets that NDeX acquired on September 2, 2008. The term “Barrett law firm” refers to Barrett, Daffin, Frappier, Turner & Engel, LLP and its two law firm affiliates. When we refer to the “Albertelli sellers” in this report, it means James E. Albertelli, P.A., The Albertelli Firm, P.C., Albertelli Title, Inc. and James E. Albertelli, as a group. We also refer to James E. Albertelli, P.A. and The Albertelli Firm, P.C., together, as the “Albertelli law firm.” The term “Trott sellers” in this report means David A. Trott, Ellen Coon, Trustee of the Ellen Coon Living Trust u/a/d 9/9/98, Marcy J. Ford, Trustee of the Marcy Ford Revocable Trust u/a/d 7/12/04, William D. Meagher, Trustee of the William D. Meagher Trust u/a/d 8/24/07, and Jeanne M. Kivi, Trustee of the Jeanne M. Kivi Trust u/a/d 8/24/07, as a group.

Overview

Effective May 26, 2010, we changed our name from Dolan Media Company to The Dolan Company. We are a leading provider of necessary professional services and business information to legal, financial and real estate sectors in the United States. We serve our customers through two complementary operating divisions: our Professional Services Division and our Business Information Division. Our Professional Services Division comprises two reporting segments: mortgage default processing services and litigation support services. Through our subsidiary, NDeX, we provide mortgage default processing services to eight law firm customers located in Florida, Georgia, Indiana, Michigan, Minnesota, and Texas, as well as directly to mortgage lenders and loan servicers on residential real estate located in California. Our subsidiaries DiscoverReady and Counsel Press comprise our litigation support services reporting segment. DiscoverReady, which we acquired on November 2, 2009, represents a new line of business for us. DiscoverReady provides outsourced discovery management and document review services to major United States companies and their counsel. Counsel Press provides appellate services to law firms and attorneys nationwide. Our Business Information Division publishes business journals, court and commercial media and other highly focused information products and services, operates web sites and produces events for targeted professional audiences in 21 geographic markets across the United States. Our information is delivered through a variety of methods, including more than 60 print publications and more than 80 web sites.

Our total revenues increased $12.2 million, or 18.2%, from $67.0 million for the three months ended June 30, 2009, to $79.2 million for the three months ended June 30, 2010, primarily as a result of increased revenues in our litigation support services segment. The revenue growth was driven by our new DiscoverReady business which we acquired in November 2009. These operations generated $13.3 million in revenues during the three months ended June 30, 2010 (for this period in 2009, under previous ownership and thus not reflected in our operating results for the three months ended June 30, 2009, these operations generated $6.0 million in revenues). Our new NDeX operations in Florida and the DiscoverReady acquisition in the fourth quarter of 2009, together accounted for the majority of the 22.6% increase in our operating expenses for the three month period. Further, net income attributable to The Dolan Company increased to $8.6 million for the second quarter of 2010 from $8.2 million for the same period in 2009. Net income attributable to The Dolan Company increased from $16.9 million for the six months ended June 30, 2009, to $17.8 million for the six months ended June 30, 2010.

Recent Developments

Increase in our ownership in NDeX

On December 31, 2009, and January 4, 2010, we, along with our wholly-owned subsidiary, Dolan APC, LLC, entered into two separate common unit purchase agreements with the Trott sellers, under the terms of which the Trott sellers sold an aggregate 7.6% ownership interest in NDeX to us, for an aggregate purchase price of $15.6 million, consisting of $13.0 million payable to the Trott sellers as discussed below, and 248,000 shares of our common stock with a fair market value of $2.6 million.

Of the $13.0 million cash due to the Trott sellers, we have paid $10.0 million through the date of this quarterly report on Form 10-Q. We will pay the remaining $3.0 million to the Trott sellers in 29 equal monthly installments beginning in August 2010, with interest accruing on the unpaid principal balance at a rate of 4.25% per annum. We also issued, as partial payment for the ownership interest, an aggregate 248,000 shares to the Trott sellers on December 31, 2009. We filed a registration statement covering the resale of these shares on March 18, 2010, which was declared effective by the SEC on April 9, 2010.

On February 28, 2010, NDeX redeemed 23,560 common units, representing a 1.7% interest in NDeX, from Feiwell & Hannoy, in connection with Feiwell & Hannoy’s exercise of its put right as set forth in the NDeX operating agreement. NDeX redeemed these common units for $3.5 million, which was determined pursuant to the formula set forth in NDeX’s operating agreement. The redemption price is payable to Feiwell & Hannoy over a period of three years, in equal quarterly installments, beginning on March 1, 2010, with interest accruing at a rate of 5.25% per annum, beginning on March 2, 2010. Feiwell & Hannoy is a law firm customer of NDeX.

After the closing of the transactions described above, our ownership interest in NDeX increased from 84.7% to 93.8%.

New Line of Business in Professional Services Division/New Reportable Segment

On November 2, 2009, we entered a new line of business in our Professional Services Division with the acquisition of an 85.0% interest in DiscoverReady (as described in “Recent Acquisitions” below). DiscoverReady is a leading provider of outsourced discovery management and document review services to major United States companies and their counsel. DiscoverReady is headquartered in New York City with an office in Charlotte, North Carolina.

Discovery is the process by which parties use the legal system to obtain relevant information, primarily in litigation and regulatory matters. This process can be expensive and time-consuming for companies, depending upon the volume of emails, electronic files and paper documents a company must review to respond to a document request. DiscoverReady assists these companies and their counsel in document reviews and helps manage the discovery process. DiscoverReady also provides related technology management services.

None of our key employees or executive officers has any previous experience in operating a discovery management and document review services company. In connection with the acquisition, we entered into three-year employment agreements with DiscoverReady co-founders James K. Wagner, Jr. and Steven R. Harber to continue to serve as DiscoverReady’s chief executive officer and president, respectively, as well as other key employees of DiscoverReady, and will rely on them to assist our executive officers in operating this business. Through their subsidiary DR Holdco LLC, Messrs. Wagner and Harber, along with other employees of DiscoverReady, indirectly own the remaining 14.7% equity interest in DiscoverReady. See “Recent Acquisitions — DiscoverReady” below for a discussion of a transaction in the second quarter of 2010 that resulted in a reduction in DR Holdco’s equity interest in DiscoverReady from 15.0% to 14.7%.

DiscoverReady is part of our Professional Services Division and litigation support services segment. Our litigation support services segment is a new reportable segment, established in the fourth quarter of 2009, that includes the operations of DiscoverReady and Counsel Press (which was previously part of our professional services segment with NDeX). The operations of NDeX are now called our mortgage default processing services segment. Both our mortgage default processing services and litigation support services segments are part of our Professional Services Division.

Regulatory Environment

New federal government directives concerning certain aspects of the Home Affordable Modification Program (HAMP) became effective in June 2010. Among other things, the supplemental directives include clarification of the requirement to solicit all borrowers whose first mortgage loans are potentially eligible for HAMP, a prohibition against referral to foreclosure until either a borrower has been determined to be ineligible for HAMP or reasonable solicitation efforts have failed, and a requirement that a servicer provide a certification to the foreclosure attorney or trustee stating that a borrower is not HAMP-eligible before a foreclosure sale may be conducted. While the full effects of these new directives are still uncertain, it is expected they could delay the referral of files to our law firm customers, or in the case of foreclosures on properties located in California, delay the referral of files directly to us for processing. In addition, the supplemental directives may add processing time for the foreclosure files between the referral to the attorney or trustee and the foreclosure sale.

On July 1, 2010, a foreclosure mediation bill took effect in Baltimore, Maryland. This bill requires the opportunity for court mediation for every owner-occupied residential foreclosure within 60 days of an owner’s request. This bill may result in a slowdown of foreclosure notices in Baltimore for some period during the latter part of 2010, but we currently do not expect this bill to have a material effect on operations.

For further discussion on legislation and regulatory activity impacting or potentially impacting our business, please see “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recent Developments—Regulatory Environment” in our annual report on Form 10-K for the year ended December 31, 2009, filed with the SEC on March 8, 2010.

Recent Acquisitions

We have grown significantly since our predecessor company commenced operations in 1992, in large part due to acquisitions, such as the following:

DiscoverReady: On November 2, 2009, we acquired an 85% equity interest in DiscoverReady. We paid the sellers $28.9 million in cash at closing and placed an additional $3.0 million in escrow pursuant to the terms of an escrow agreement to secure the sellers’ obligations under the purchase agreement (including payment of any indemnification claims and working capital and capital lease liability adjustments). After closing, DR Holdco LLC held a 15% noncontrolling interest in DiscoverReady. The individual sellers of DiscoverReady, along with other DiscoverReady employees, own all the equity interests of DR Holdco. In accordance with the terms of the DiscoverReady operating agreement, we repurchased a 0.3% equity interest in DiscoverReady from DR Holdco in connection with the expiration of the employment agreement of the former CFO of DiscoverReady in April 2010. We paid $0.1 million for this equity interest in DiscoverReady, increasing our total equity interest to 85.3%, and decreasing the noncontrolling interest to 14.7%.

Albertelli: On October 1, 2009, NDeX acquired the mortgage default processing services and related title business of the Albertelli sellers. NDeX paid $7.0 million in cash at closing, held back an additional $1.0 million to secure the Albertelli sellers’ obligations under the asset purchase agreement (including payment of any indemnification claims and working capital adjustments) and will pay an additional $2.0 million in equal installments of $1.0 million on each of October 1, 2010 and 2011, respectively. NDeX also entered into a 20-year services agreement with James E. Albertelli, P.A. (one of the Albertelli sellers), which provides for the exclusive referral of residential mortgage default and related files from that law firm to NDeX for processing in Florida.

In connection with the Albertelli acquisition, NDeX became obligated to pay the Albertelli sellers up to an additional $9.0 million in three annual installments of up to $3.0 million each. The amount of these annual cash payments is based upon the adjusted EBITDA for the acquired mortgage default processing services and related title business during the twelve calendar months ending on each of September 30, 2010, 2011, and 2012. In anticipation of the achievement of the adjusted EBITDA target for the twelve calendar months ending on September 30, 2010, and in connection with mutually agreed amendments to certain of the agreements entered into in connection with the Albertelli acquisition, the Company has agreed to pay the full $3.0 million on October 1, 2010, for the first of the three annual earnout payments.

Revenues

We derive revenues from two operating divisions, our Professional Services Division and our Business Information Division, operating as three reportable segments: (1) mortgage default processing services; (2) litigation support services; and (3) business information. For the three and six months ended June 30, 2010, our total revenues were $79.2 million and $156.2 million, respectively, and the percentage of our total revenues attributed to each of our divisions and segments was as follows:

•

71.3% and 72.0%, respectively, from our Professional Services Division (50.1% and 52.6%, respectively, from mortgage default processing services and 21.2% and 19.4%, respectively, from litigation support services); and

•

28.7% and 28.0%, respectively, from our Business Information Division.

Professional Services. Our Professional Services Division generates revenues primarily by providing mortgage default processing, outsourced discovery management and document review, and appellate services through fee-based arrangements. We further break down our Professional Services Division into two reportable segments, mortgage default processing services and litigation support services.

Mortgage Default Processing Services. Through NDeX, we assist eight 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 foreclosure processing services directly to mortgage lenders and loan servicers for properties located in California. In addition, NDeX provides loan modification and loss mitigation support on mortgage default files to its customers and related real estate title work primarily to the Barrett and Albertelli law firms. 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, 2010, we received for processing approximately 86,600 and 182,300 mortgage default case files, respectively, of which approximately 7,000 and 15,400, respectively, were received for processing by our new NDeX operations in Florida which we acquired from the Albertelli sellers in October 2009 (compared to approximately 3,800 and 6,600 files, respectively, during the three and six month periods ended June 30, 2009, when these operations were under previous ownership). Our mortgage default processing service revenues accounted for 50.1% and 52.6%, respectively, of our total revenues and 70.3% and 73.0%, respectively, of our Professional Services Division revenues during the three and six months ended June 30, 2010. Trott & Trott and the Barrett law firm comprised 26.3% and 42.9%, respectively, of our total mortgage default processing services revenues during the three months ended June 30, 2010 and 25.9% and 44.7%, respectively, of our total mortgage default processing services revenues during the six months ended June 30, 2010. We recognize mortgage default processing service revenues on a proportional basis over the period during which the services are provided, the calculation of which requires management to make estimates. For more information regarding how we recognize revenue, please see “Critical Accounting Policies and Estimates — Revenue Recognition” in Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations in our annual report on Form 10-K for the year ended December 31, 2009, filed with the SEC on March 8, 2010.

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 the type of files we process (e.g., foreclosures, evictions, bankruptcies or litigation) because each has a different pricing structure. Although the services agreements with our law firm customers contemplate the review and possible revision of the fees for the services we provide, price increases have not historically affected our mortgage default processing revenues materially. In some cases, our services agreements adjust the fee paid to us for the files we process on an annual basis pursuant to an agreed-upon consumer price index. In other cases, our services agreements require us to agree with our law firm customer regarding the terms and amount of any fee increase. 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. You should refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Revenues” in our annual report on Form 10-K for the year ended December 31, 2009, filed with the SEC on March 8, 2010 for more information about the conditions when the fixed fee per file we charge our law firm customers may change.

Litigation Support Services. Our litigation support services segment generates revenues by providing discovery management and document review services through DiscoverReady and appellate services through Counsel Press. For the three and six months ended June 30, 2010, our litigation support services revenues accounted for 21.1% and 19.4%, respectively, of our total revenues and 29.7% and 27.0%, respectively, of our Professional Services Division revenues. We recognize litigation support services revenues during the month in which the services are provided. In the case of Counsel Press, this is when our final appellate product is filed with the court.

DiscoverReady provides its services to major United States companies and their counsel and assists them in document reviews and helping them manage the discovery process. Discovery is the process by which parties use the legal system to obtain relevant information, primarily in litigation and regulatory matters. This process can be expensive and time-consuming for companies depending upon the volume of emails, electronic files and paper documents a company must review to respond to a document request. DiscoverReady also provides related technology management services. DiscoverReady bills its customers primarily based upon the number of documents reviewed and the amount of data or other information it processes in connection with those reviews. Accordingly, our discovery management and document review services revenues are largely determined by the volume of data we review. Our discovery management and document review services revenues accounted for 16.8% and 14.7%, respectively, of our total revenues, 79.4% and 75.9%, respectively, of our litigation support services segment revenues, and 23.6% and 20.5%, respectively, of our total Professional Services Division revenues for the three and six months ended June 30, 2010. During both the three and six months ended June 30, 2010, DiscoverReady’s top two customers, both of whom are in the financial services industry, accounted for more than 82%, in the aggregate, of DiscoverReady’s total revenues. During the first two quarters of 2010, we worked on and completed several large matters for these customers that involved reviewing large volumes of data.

Counsel Press assists law firms and attorneys throughout the United States in organizing, preparing and filing appellate briefs, records and appendices, in paper and electronic formats, 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. Counsel Press charges its customers primarily on a per-page basis based on the final appellate product that is filed with the court clerk. Accordingly, our appellate service revenues are largely determined by the volume of appellate cases we handle and the number of pages in the appellate cases we file. For the three and six months ended June 30, 2010, our appellate services revenues accounted for 4.4% and 4.7%, respectively, of our total revenues, 20.6% and 24.1%, respectively, of our litigation support services revenues, and 6.1% and 6.5%, respectively, of our total Professional Services Division revenues.

Business Information. Our Business Information Division generates revenues primarily from display and classified advertising, public notice 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 8.9% and 8.0%, respectively, of our total revenues and 31.0% and 28.7%, respectively, of our Business Information Division revenues for the three and six months ended June 30, 2010. 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 more than 300 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 business entity notices, unclaimed property notices, notices of governmental hearings and trustee sale notices. Our public notice revenues accounted for 15.3% and 15.3%, respectively, of our total revenues and 53.2% and 54.6%, respectively, of our Business Information Division revenues for the three and six months ended June 30, 2010. 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 can be affected by the number of residential mortgage foreclosures in the markets where we are qualified to publish public notices and the rules governing publication of public notices in such states. In many 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, 2010, our circulation and other revenues, which consist primarily of subscriptions and single-copy sales, accounted for 4.6% and 4.7%, respectively, of our total revenues and 15.8% and 16.9%, respectively, of our Business Information Division 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 and other revenues are driven primarily 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, DiscoverReady, and Counsel Press and our editorial personnel in our Business Information Division, production and distribution expenses, such as compensation (including stock-based compensation expense) and employee benefits for personnel involved in the production and distribution of our business information products, the cost of newsprint and delivery of our business information products, and file-specific data services and technology fees in connection with our California foreclosure files;

•

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

•

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

•

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

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 continue to shift between fiscal periods as Professional Services revenues continue to grow at a faster pace than Business Information revenues.

Equity in Earnings of Affiliates

We own 35.0% of the membership interests in DLNP, the publisher of The Detroit Legal News and ten other publications. We account for our investment in DLNP using the equity method. For the three months ended June 30, 2010 and 2009, our percentage share of DLNP’s earnings was $1.1 million and $1.3 million, respectively, which we recognized as operating income. This is net of amortization of $0.4 million for each period. For the six months ended June 30, 2010 and 2009, our percentage share of DLNP’s earnings was $2.5 million and $2.7 million, respectively, which we recognized as operating income. This is net of amortization of $0.8 million for each period. 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.

Redeemable Noncontrolling Interest

Redeemable noncontrolling interest at June 30, 2010 consisted of a 6.2% noncontrolling interest in NDeX held by the sellers of Barrett-NDEx or their transferees (as a group) and a 14.7% noncontrolling interest in DiscoverReady held by DR Holdco LLC. During the first quarter of 2010, the noncontrolling interest in NDeX decreased to 6.2% as a result of our acquisition of the 2.4% interest in NDeX held by the Trott sellers and the redemption of the 1.7% interest held by Feiwell & Hannoy. See “Recent Developments—Increase in our Ownership in NDeX” above, for information regarding these two transactions. Additionally, during the second quarter of 2010, the noncontrolling interest in DiscoverReady decreased to 14.7% as a result of our repurchase of 0.3% of the equity interest in DiscoverReady from DR Holdco. This repurchase was in connection with the expiration of the employment agreement of the former CFO of DiscoverReady in April 2010. See “Recent Acquisitions—DiscoverReady” above for information pertaining to this transaction.

Under the terms of the NDeX operating agreement, each month we are required to distribute the excess of NDeX’s earnings before interest, 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 during the three and six months ended June 30, 2010 and 2009 (in thousands):

		Three Months ended June 30,								Six Months ended June 30,
		2010				2009				2010 *				2009
Trott sellers		$	—			$	662			$	114			$	1,148
Feiwell & Hannoy			—				148				48				257
Sellers of Barrett-NDEx or their transferees (as a group)			202				525				371				906
Total		$	202			$	1,335			$	533			$	2,311

We expect that cash distributions paid to the holders of our noncontrolling interests in NDeX will continue to decrease during 2010, when compared to 2009, because noncontrolling interest in NDeX has decreased from 15.3% (for most of 2009), to 6.2% at June 30, 2010.

There is no similar distribution obligation under the DiscoverReady limited liability company agreement; however, we are obligated to make quarterly distributions to pay tax liabilities to DR Holdco, the minority member of DiscoverReady. During the three and six months ended June 30, 2010, we made such distributions of $0.2 million and $0.5 million, respectively, to DR Holdco.

The sellers of Barrett-NDEx, each as members of NDeX, have the right, for a period of six months following September 2, 2012, to require NDeX to repurchase all or any portion of their respective membership interest in 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%.

Under the terms of the DiscoverReady limited liability company agreement, DR Holdco has the right, for a period of ninety days following November 2, 2012, to require DiscoverReady to repurchase all or any portion of its equity interest in DiscoverReady. To the extent that DR Holdco timely exercises this right, the purchase price of such equity interest will be based on the fair market value of such interest. During that same period, we also have the right to require DR Holdco to sell its entire equity interest in DiscoverReady to us. If we timely exercise our right, we would pay DR Holdco an amount based on the fair market value of the equity interest. These rights may be exercised earlier under the following circumstances: An individual seller of DiscoverReady may require DiscoverReady to repurchase the portion of DR Holdco’s interest in DiscoverReady that he beneficially owns if he is terminated without cause or quits for good reason prior to the expiration of his employment agreement. If we terminate any individual seller of DiscoverReady for cause or if such seller quits without good reason, we can require DR Holdco to sell to us the portion of its interest in DiscoverReady that reflects such seller’s beneficial interest in us. The purchase price for that portion of the equity interest repurchased or sold if these rights are exercised is based on the interest’s fair market value. With respect to the former CFO of DiscoverReady, in April 2010, we repurchased that portion of DR Holdco’s interest in DiscoverReady which he beneficially owned, upon the expiration of his employment agreement. As a result, our ownership interest in DiscoverReady increased to 85.3%, and the noncontrolling interest in DiscoverReady was reduced to 14.7%.

DiscoverReady will engage an independent third-party valuation firm to assist it in determining the fair market value of the equity interest being repurchased by DiscoverReady or sold to us if any of the above-described rights are exercised. The purchase price for any equity interests repurchased or sold pursuant to these rights, if exercised, will be paid in cash to the extent allowed by the terms of our then-existing credit agreement, or pursuant to a three- year unsecured promissory note, bearing interest at a rate equal to prime plus 1.0%.

We are required to record the redeemable noncontrolling interests (NCI) in NDeX and DiscoverReady to their redemption amounts at each reporting period. The NDeX NCI is adjusted to the estimated redemption amount at each reporting period based on the formula as discussed above. The DiscoverReady NCI is adjusted to fair value each period using a market approach. During the three and six months ended June 30, 2010, the adjustments recorded to the NCI for NDeX were $(1.9) million ($1.2 million net of tax) and $(1.8) million ($1.1 million net of tax), respectively, and the adjustments recorded to the NCI for DiscoverReady were $2.1 million ($1.3 million net of tax) and $5.2 million ($3.2 million net of tax). Please see our unaudited condensed consolidated statements of stockholders’ equity and comprehensive income, 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 accounting for noncontrolling interests and its implications to our financial statements.

Critical Accounting Policies and Estimates

We describe our accounting policies in Note 1 of the Notes to Consolidated Financial Statements included in our annual report on Form 10-K for the year ended December 31, 2009, filed with the SEC on March 8, 2010. Further, we discuss our critical accounting estimates in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our annual report on Form 10-K for the year ended December 31, 2009. There has been no significant change in our critical accounting policies or critical accounting estimates since the end of 2009.

RESULTS OF OPERATIONS

The following tables set 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
		2010				Revenues				2009				Revenues
Revenues:
Professional Services		$	56,454				71.3	%		$	44,294				66.1	%
Business Information			22,755				28.7	%			22,746				33.9	%
Total revenues			79,209				100	%			67,040				100.0	%
Operating expenses:
Professional Services			43,090				54.4	%			31,462				46.9	%
Business Information			18,251				23.0	%			17,278				25.8	%
Unallocated corporate operating expenses			2,479				3.1	%			3,316				4.9	%
Total operating expenses			63,820				80.6	%			52,056				77.6	%
Equity in earnings of affiliates			1,084				1.4	%			1,333				2.0	%
Operating income			16,473				20.8	%			16,317				24.3	%
Interest expense, net			(1,614	)			(2.0	)%			(1,728	)			(2.6	)%
Non-cash interest income related to interest rate swaps			302				0.4	%			296				0.4	%
Income before income taxes			15,161				19.1	%			14,885				22.2	%
Income tax expense			(5,673	)			(7.2	)%			(5,361	)			(8.0	)%
Net income			9,488				12.0	%			9,524				14.2	%
Less: Net income attributable to redeemable noncontrolling interest			(856	)			(1.1	)%			(1,318	)			(2.0	)%
Net income attributable to The Dolan Company		$	8,632				10.9	%		$	8,206				12.2	%
Net income attributable to The Dolan Company per share — basic and diluted		$	0.29							$	0.27
(Increase) decrease in redeemable noncontrolling interest in NDeX			0.04								(0.13	)
Net income attributable to The Dolan Company common stockholders per diluted share — basic and diluted		$	0.33							$	0.14
Weighted average shares outstanding:
Basic			30,137								29,815
Diluted			30,240								29,917