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The Dolan Company Reports Third Quarter 2012 Results



  The Dolan Company Reports Third Quarter 2012 Results

  * Third quarter revenues decreased 3.0% year-over-year to $68.1 million
  * Net loss attributable to The Dolan Company was ($103.5) million, or
    ($2.98) per diluted share. Excluding impairment and other one-time
    charges, net income was $1.6 million, or $0.05 per diluted share (See
    “Third Quarter 2012 financial results” below for one-time charges)

  * Cash earnings were $4.2 million, or $0.14 per diluted share (See “Non-GAAP
    Financial Measures” below)
  * Adjusted EBITDA was $12.6 million (See “Non-GAAP Financial Measures”
    below)
  * Company revises guidance for 2012

Business Wire

MINNEAPOLIS -- November 02, 2012

The Dolan Company (NYSE: DM), a leading provider of professional services and
business information to legal, financial and real estate sectors in the United
States, today announced financial results for the three months ended September
30, 2012.

“Third quarter operating trends were mixed, as we saw record e-discovery
revenue and steady performance from our business information segment, but
challenging volumes in our foreclosure processing business,” said James P.
Dolan, chairman, chief executive officer and president. "As we anticipated,
our e-discovery business rebounded from the second quarter, with a broad base
of new matters being processed from both new and existing clients. In our
default processing business, we saw a continuation of suppressed referrals as
political considerations weigh on the industry, and regulatory standards get
implemented.”

“After the end of the quarter, we successfully amended our bank agreement,
which gives us greater flexibility going forward. Furthermore, we restructured
our NDeX Florida operations, which improves our profitability while
maintaining the opportunity for us to expand in the Florida market,” Dolan
added.

“Litigation Support Services, led by our e-discovery business, had its best
quarter ever. Litigation Support revenue grew by 11%, including 13% growth in
our e-discovery business. However, this revenue growth doesn’t tell the whole
story, since our record e-discovery revenue this quarter compares against the
previously record-setting third quarter last year. Sequentially, revenue from
the e-discovery business grew by 77% from the second quarter of 2012, showing
a marked improvement from the depressed levels experienced during the first
half of the year. Importantly, new clients accounted for more than 25% of the
quarter’s Litigation Support revenue, while some of our traditionally larger
clients generated strong revenues as well. We remain optimistic about the
growth potential of our e-discovery business and are encouraged that the
DiscoverReady team’s hard work to expand our client base is producing such
remarkable results,” Dolan said.

“Our Business Information segment remained steady and tracked to our
expectations,” Dolan said. “The public notice advertising business showed
modest growth once again. This segment continues to be a consistent cash flow
generator.”

“In the third quarter, revenues at our National Default Exchange, or NDeX,
declined by 16% compared to last year. Previously, we expressed a cautious
view regarding our third quarter results given political considerations and
the uncertainty about how large mortgage servicers would react to new OCC
guidelines. The political uncertainty continues, and some major servicers have
begun implementing newly required procedures that begin with a mandatory
borrower notification period at the very beginning of the process for new
foreclosures. This further slows an already stretched-out process. We remain
cautious about volumes in our foreclosure-processing business heading into the
fourth quarter. However, we have negotiated a double-digit price increase with
the majority of our law firm partners, which should start to have an impact in
2013. Further, we believe there may be future opportunities to license our
NDeX technology and infrastructure on a recurring fee basis in both new and
existing markets,” Dolan said.

“Due to the previously announced restructuring of our NDeX Florida operations,
in the third quarter we took a non-cash pre-tax charge of $20.2 million on
these operations. Accordingly, the financial impact of our NDeX Florida
operations is no longer included in our results since it is now a discontinued
operation,” Dolan added.

Full Year 2012 Guidance

Based on third quarter results and the outlook for the remainder of 2012, the
company is revising its full-year financial guidance as follows:

                                   
                                    2012 Financial Guidance
                                    (dollars in millions, except per share
                                    numbers)
                                     
Total revenues                      $253 – $256
Adjusted EBITDA                     $42 – $44
Cash earnings per diluted share     $0.46 - $0.50
                                     

This guidance presumes the following: 1) continued file volume pressure for
the default mortgage processing business; 2) interest expense of $9.2-$9.4
million; 3) tax rate of 40%-41%; and 4) fully diluted shares outstanding of
30.4 million.

This guidance also presumes no acquisitions for the remainder of 2012, and it
assumes that there will be no additional material effect on results of
operations from foreclosure-related government legislation, programs,
investigations, litigation, or settlements, or from lender-based programs or
halts. These include, but are not limited to, legislation, programs, and other
matters detailed in “Regulatory Environment” and “Risk Factors” in the
company’s SEC reports, including its Annual Report on Form 10-K for the year
ended December 30, 2011, and Form 10-Q for the quarter ended September 30,
2012.

Third Quarter 2012

Financial results for the three months ended September 30, 2012, and 2011 are
as follows:

                                                                 
Dollars in thousands,         Three Months      Three Months      Year-over-
except per share data
                              Ended             Ended             Year %
                              September 30,     September 30,     Change
                              2012              2011
                              (unaudited)       (unaudited)
Total revenues                $  68,060         $    70,198       (3.0     ) %
Professional Services            49,778              51,383       (3.1     ) %
Division revenues
Business Information             18,282              18,815       (2.8     ) %
Division revenues
Operating (loss) ^(1)            (145,079 )          7,660        (1,994.0 ) %
income
Net (loss) income
attributable to The Dolan        (103,504 )          3,089        (3,450.7 ) %
Company
Impairment and other             105,058             -
one-time charges ^(2)
Adjusted EBITDA ^*               12,617              15,905       (20.7    ) %
Loss (income) from
continuing operations
attributable
to The Dolan Company per      $  (2.98    )     $    0.10         (3,080.0 ) %
diluted share
Cash earnings ^*                 4,164               7,037        (40.8    ) %
Cash earnings per diluted     $  0.14           $    0.23         (39.1    ) %
share ^*
                                                                            

* Please refer to the “Non-GAAP Financial Measures” below for a reconciliation
of these non-GAAP financial measures to GAAP and why the company believes
these are important measures of its performance.

(1) 2012 includes impairment of long-lived assets, and goodwill and fair value
adjustments on earnout liabilities in the amount of $150.0 million
(2) 2012 includes impairment of long-lived assets and goodwill, fair value
adjustments on earnout liabilities, and other one-time charges related to
NDeX’s Florida operations, net of the effects of noncontrolling interest and
tax

Professional Services Division Results

The Professional Services Division provides specialized processing services to
the legal profession through its subsidiaries, NDeX, Counsel Press, and
DiscoverReady. National Default Exchange, or NDeX, is a leading provider
of mortgage default processing services in the United States. Together,
Counsel Press and DiscoverReady comprise the company’s litigation support
services segment. Counsel Press is the largest provider of appellate services
in the United States, and DiscoverReady provides outsourced discovery
management, including document review and data hosting and processing
services, to major corporations and law firms.

Note that all financial information and file counts related to NDeX do not
include Florida in any of the periods presented due to the restructuring of
the NDeX Florida operations in October of 2012, and its classification as a
discontinued operation.

Division revenues for the third quarter were $49.8 million, a decline of 3.1%
from $51.4 million in the third quarter of 2011. The decline was the result of
lower NDeX file volume, offset by strength in the e-discovery business.

NDeX received 51,000 mortgage default files for processing during the third
quarter and generated $22.8 million in revenues. This compares to 69,400 files
received for processing and $27.1 million in revenues in the third quarter of
2011. The total number of default files received in the second quarter
decreased by 32% from last year.

Litigation Support contributed $27.0 million in revenues during the third
quarter of 2012, an increase of 11.2%, with the e-discovery business growing
13.0% compared to the third quarter of 2011.

Direct operating expenses within the Professional Services Division were flat
as lower volumes and headcount reductions at NDeX were offset by the growth in
operating expenses at DiscoverReady resulting from increased sales. Selling,
general and administrative expenses increased 3.1% on a year-over-year basis
to $16.2 million. Once again, a modest decrease in expenses at NDeX was offset
by the additional expense associated with the increased sales force and
investments in DiscoverReady. Excluding the impact of fair value adjustments
and impairment charges, total Professional Services Division operating
expenses as a percentage of division revenues was 88.6% for the quarter, up
from 85.4% in the third quarter of 2011. The increase in operating expense was
the result of negative operating leverage due to the revenue declines at NDeX,
substantially offset by stronger revenue at DiscoverReady.

Business Information Division Results

The Business Information segment provides products, data and certain services
through subscription-based products and a variety of media, including court
and commercial media, weekly business journals and the Internet. Our Business
Information segment operates specialized information services covering
legislative and regulatory activities and provides transcription and media
monitoring services.

Business Information Division revenues for the third quarter of 2012 were
$18.3 million, a 2.8% decrease from $18.8 million in the third quarter of
2011. The decline in revenue reflected lower Public Affairs Intelligence Group
(PAIG) revenue, offset by modestly higher public notice revenue. This is the
second consecutive quarter of year-over-year public notice revenue growth.

Total operating expenses within the Business Information Division were $16.5
million during the third quarter of 2012, down 3.8% from last year. The
reduction in expenses reflected the continued cost control efforts of the
Business Information management team. For the third quarter of 2012, direct
operating expenses decreased 4.5% to $6.9 million while selling, general and
administrative expenses for the division declined by 3.0% to $8.1 million.

Balance Sheet and Liquidity

As of September 30, 2012, the company held $15.6 million of cash and cash
equivalents, compared to $0.8 million at the end of 2011. During the third
quarter of 2012, the company used $2.9 million of cash from operating
activities and generated $5.4 million of free cash flow, which is defined as
net cash provided by operating activities minus capital expenditures.
Quarterly capital expenditures were $2.5 million. Days sales outstanding were
94 for the third quarter of 2012, which was up from 86 days at the end of 2011
and 84 days at the end of the second quarter of 2012.

Total debt outstanding at the end of the second quarter was $190.2 million, of
which $141.3 million was under a term loan facility. This amount reflects the
conversion of $100 million from a revolver to term debt in the recent
amendment. Net debt was $174.6 million, down $1.0 million from the end of
2011. At September 30, 2012, the combined weighted-average interest rate on
the company’s credit facilities was 3.8%. The leverage ratio at the end of the
quarter was 3.8 times total debt to trailing twelve month pro forma adjusted
EBITDA, up from 3.3 times as of June 30, 2012, but within the maximum of 4.5
times allowed under the senior debt covenants, as amended on October 5, 2012.

Non-GAAP Financial Measures

Generally Accepted Accounting Principles (GAAP) is the term used to refer to
the standard framework of guidelines for financial accounting in the United
States. GAAP includes the standards, conventions, and rules accountants follow
in recording and summarizing transactions, and in the preparation of financial
statements. In addition to reporting financial results in accordance with
GAAP, The Dolan Company reports the following non-GAAP measures:

  * Adjusted EBITDA, defined as GAAP income from continuing operations
    adjusted for the impact of the following: net interest expense resulting
    from the company’s net cash or borrowing position, which includes non-cash
    interest income or expense related to the changes in fair value of
    interest rate swaps; income tax expense; non-cash expenses, including
    depreciation and amortization, charges for stock options and restricted
    stock the company has granted, and fair value adjustments on earnouts
    recorded in connection with acquisitions; non-recurring items of income or
    expense, if applicable, including impairments of long-lived assets; and
    distributions paid to holders of non-controlling interest;
  * Cash earnings, defined as GAAP income from continuing operations adjusted
    for the impact of the following: non-controlling interests; non-cash
    expenses, including non-cash interest income or expense related to the
    changes in the fair value of interest rate swaps, charges for stock
    options and restricted stock granted, fair value adjustments on earnouts
    recorded in connection with acquisitions, and amortization; certain
    non-recurring items of income or expense, including impairments of
    long-lived assets and goodwill; and an adjustment to income tax expense
    related to the above reconciling items at the appropriate then-in-effect
    tax rate;
  * Cash earnings per diluted share, defined as cash earnings divided by the
    number of weighted average diluted shares outstanding; and
  * Free cash flow, defined as net cash provided by operating activities minus
    capital expenditures.

The Dolan Company provides these measures because it believes that they are
helpful to investors in comparing year-over-year performance in light of
certain non-recurring charges, and to better understand its operating
performance and profitability, competitive position and future prospects.
Non-GAAP measures should be considered in conjunction with the GAAP financial
presentation and should not be considered in isolation or as a substitute for
GAAP net income attributable to The Dolan Company. In addition, it should be
noted that the company’s calculations of adjusted EBITDA, cash earnings, cash
earnings per diluted share, and free cash flow may not be comparable to the
calculations of such measures by other companies.

Following is a reconciliation of income from continuing operations to adjusted
EBITDA (in thousands):

 
                                                   Three Months Ended
                                                   September 30,
                                                   2012             2011
(Loss) income from continuing operations           $ (100,243 )     $ 3,383
                                                                     
Interest expense, net                              2,195            1,744
Income tax expense                                 (47,031    )     2,426
Amortization of intangibles                        4,607            4,726
Depreciation expense                               1,820            1,991
Impairment of long-lived assets and goodwill       151,614          -
Amortization of Detroit Legal News Publishing      377              377
intangible
Non-cash compensation expense                      933              1,003
Non-cash fair value adjustments on earnout
liabilities
recorded in connection with acquisitions           (1,655     )     239
Non-recurring income                               -                107
Net distributions to holders of                    -                (91      )
non-controlling interest
                                                                              
Adjusted EBITDA                                    $ 12,617         $ 15,905  
 

Following is a reconciliation of income from continuing operations to cash
earnings and cash earnings per diluted share (in thousands, except per share
data):

                                                      
                                                       Three Months Ended
                                                       September 30,
                                                       2012            2011
(Loss) income from continuing operations               $ (100,243)     $ 3,383
                                                                        
Non-controlling interests                              9,946           (217)
Non-cash compensation expense                          933             1,003
Non-cash fair value adjustments on earnout
liabilities
recorded in connection with acquisitions               (1,655)         239
Amortization of intangibles                            4,607           4,726
Impairment of long-lived assets and goodwill           151,614
Amortization of Detroit Legal News Publishing          377             377
intangible
Non-recurring income                                   -               107
Adjustment to income tax expense related to
reconciling items at effective tax rate                (61,415)        (2,581)
Cash earnings                                          $ 4,164         $ 7,037
                                                                        
                                                                          
Income from continuing operations attributable to
The Dolan Company per diluted share (GAAP)             $ (2.98)        $ 0.10
Cash earnings per diluted share                        $ 0.14          $ 0.23
                                                                        
Weighted average diluted shares outstanding            30,327          30,208
                                                                        

Conference Call

The company has scheduled a conference call for today at 11:00 a.m. U.S.
Eastern Time (10:00 a.m. U.S. Central Time). The dial-in number is (888)
517-2513, and the passcode is 681 4229#. The call will be hosted by James P.
Dolan, chairman, chief executive officer and president, and will include Scott
J. Pollei, executive vice president and chief operating officer, and Vicki J.
Duncomb, vice president and chief financial officer. It will be broadcast live
over the Internet and will be accessible through the investor relations
section of the company’s Web site at www.thedolancompany.com. Interested
parties should access the webcast approximately 10 to 15 minutes before the
scheduled start time to register and download any necessary software needed to
listen to the call. Prior to the conference call start, a slide presentation
highlighting points discussed in the conference call will be available through
the investor relations section of the company’s Web site at
www.thedolancompany.com. The webcast and slide presentation will be archived
online and will be available at the investor relations section of the
company’s Web site for a period of 21 days after the call. In addition, the
company’s SEC Form 10-Q is available via its Web site at
www.thedolancompany.com.

Statement Regarding Forward Looking Information

This release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Statements that are not
historical or current facts are forward-looking statements. Such
forward-looking statements include statements related to the company’s
“guidance” as well as statements using words such as “anticipate,” “expect,”
“believe,” “view,” “continue,” “to come,” “will,” “should,” “may,”
“optimistic,” “estimate,” “assume,” “pursue,” “outlook,” “goal,” “milestone”
and similar expressions. Forward-looking statements are subject to risks,
uncertainties and other factors that could cause the 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, but are not limited to, the
following: our businesses operate in highly competitive markets and depend on
the economies and demographics of the legal, financial and real estate markets
we serve and changes in those sectors could have an adverse effect on our
revenues, cash flows, and profitability; if the number of files referred to us
by our mortgage default processing service law firm customers (or loan
servicers and mortgage lenders we serve directly in California) decreases or
fails to increase, or if one or more of our law firm customers fails to pay us
for our mortgage default processing services, our operating results and
ability to execute our growth strategy could be adversely affected; bills
introduced and laws enacted to mitigate foreclosures, voluntary relief
programs and halts by servicers or lenders, as well as governmental
investigations, enforcement actions, litigation, court orders and settlements
may have an adverse effect on our mortgage default processing services and
public notice operations; our efforts to grow our business may place a strain
on our management and internal systems, processes and controls, may result in
operating inefficiencies, and may negatively impact our operating margins; we
intend to continue to pursue acquisition opportunities, which we may not do
successfully and which may subject us to considerable business and financial
risk or require us to raise additional capital or incur additional
indebtedness; a failure to comply with covenants under our debt instruments
could result in acceleration of debt or an inability to access availability
under our credit facility; we depend on our senior management team and other
key leaders of our business segments and our operation and growth may be
negatively impacted if we lose any of their services; revenues of our
subsidiaries NDeX and DiscoverReady have been concentrated among a few
customers, thus the loss of business from our top customers and a failure to
attract new customers could adversely affect our operating results; certain
key personnel of our subsidiary NDeX, who are also shareholders and principal
attorneys of our law firm customers, may at times have interests that differ
from or conflict with our interests; and the other risk factors described
under “Risk Factors” in Item 1A of our annual report on Form 10-K for the year
ended December 31, 2011, filed with the SEC on March 9, 2012. We undertake no
obligation to update any forward-looking statements in light of new
information or future events.

 
The Dolan Company
Condensed Consolidated Balance Sheets
(in thousands, except share data)
                                                September 30,     December 31,
                                                2012              2011
ASSETS                                          (unaudited)
Current assets
Cash and cash equivalents                       $  15,586         $  752
Accounts receivable, including unbilled
services (net of allowances for doubtful
accounts
of $1,637 and $1,416 as of September 30,           66,337            72,117
2012, and December 31, 2011, respectively)
Unbilled pass-through costs                        4,249             4,317
Prepaid expenses and other current assets          4,380             3,976
Income tax receivable                              7,961             1,968
Assets held for sale                               370               257      
Total current assets                               98,883            83,387
Accounts receivable, long-term                     -                 2,500
Investments                                        11,074            11,901
Property and equipment, net                        17,436            19,263
Finite-lived intangible assets, net                166,486           212,950
Goodwill and indefinite-lived intangible           151,329           283,039
assets
Deferred income taxes                              25,408            -
Other assets                                       2,456             2,563    
Total assets                                    $  473,072        $  615,603  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt               $  15,766         $  7,667
Accounts payable                                   17,784            18,760
Accrued pass-through liabilities                   8,940             8,820
Accrued compensation                               8,710             5,188
Accrued liabilities                                5,570             5,588
Due to sellers of acquired businesses              5,124             20,403
Deferred revenue                                   14,141            20,290   
Total current liabilities                          76,035            86,716
Long-term debt, less current portion               174,466           168,724
Deferred income taxes                              -                 20,739
Due to sellers of acquired businesses              -                 12,687
Other liabilities                                  6,605             7,319    
Total liabilities                                  257,106           296,185  
                                                                      
Redeemable non-controlling interest                5,494             12,726   
Commitments and contingencies
Stockholders’ equity
Common stock, $0.001 par value; authorized:
70,000,000 shares;
outstanding: 30,985,090 and 30,576,597
shares as of September 30, 2012,
and December 31, 2011, respectively                31                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               (1,082   )        (1,285  )
Additional paid-in capital                         303,238           294,476
Retained earnings (accumulated deficit)            (84,946  )        13,471   
Total The Dolan Company stockholders'              217,241           306,692
equity
Noncontrolling interest                            (6,769   )        —        
Total stockholders’ equity                         210,472           306,692  
Total liabilities and stockholders’ equity      $  473,072        $  615,603  
                                                                      

 
The Dolan Company
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share data)
                                                                   
                   Three Months Ended              Nine Months Ended
                   September 30,                   September 30,
                   2012             2011           2012             2011
Revenues
Professional       $ 49,778         $ 51,383       $ 134,818        $ 142,539
Services
Business             18,282           18,815         56,552           58,582   
Information
Total revenues       68,060           70,198         191,370          201,121  
Operating
expenses
Direct
operating:           23,000           23,075         63,943           65,000
Professional
Services
Direct
operating:           6,931            7,260          21,383           22,858
Business
Information
Selling,
general and          27,218           25,630         78,968           76,323
administrative
Amortization         4,607            4,726          14,178           13,185
Depreciation         1,820            1,991          5,634            5,560
Fair value and
other
adjustments on       (1,655   )       239            (12,127  )       219
earnout
liabilities
Impairment of
long-lived           151,614          -              151,614          -        
assets and
goodwill
Total
operating            213,535          62,921         323,593          183,145
expenses
Equity in
earnings of          396              383            1,420            1,572    
affiliates
Operating            (145,079 )       7,660          (130,803 )       19,548   
(loss) income
Non-operating
income
(expense)
Interest
expense, net         (2,195   )       (1,744 )       (6,252   )       (4,717  )
of interest
income
Non-cash
interest
income related       -                -              -                286
to interest
rate swaps
Other
(expense)            -                (107   )       -                287      
income
Total
non-operating        (2,195   )       (1,851 )       (6,252   )       (4,144  )
expense
(Loss) income
from
continuing           (147,274 )       5,809          (137,055 )       15,404
operations
before income
taxes
Income tax
benefit              47,031           (2,426 )       42,686           (6,226  )
(expense)
(Loss) income
from                 (100,243 )       3,383          (94,369  )       9,178
continuing
operations
Discontinued
operations,          (13,207  )       (77    )       (13,714  )       562      
net of tax
Net (loss)           (113,450 )       3,306          (108,083 )       9,740
income
Less: Net loss
(income)
attributable         9,946            (217   )       9,666            (604    )
to
noncontrolling
interests
Net (loss)
income
attributable       $ (103,504 )     $ 3,089        $ (98,417  )     $ 9,136    
to The Dolan
Company
                                                                       
                                                                       
Earnings
(loss) per
share – basic
and diluted:
(Loss) income
from
continuing
operations
attributable
to The Dolan
Company            $ (2.98    )     $ 0.10         $ (2.80    )     $ 0.28
Discontinued
operations
attributable         (0.43    )       -              (0.45    )       0.02     
to The Dolan
Company
Net (loss)
income
attributable         (3.41    )       0.10           (3.25    )       0.30
to The Dolan
Company
Decrease in
redeemable
noncontrolling       -                0.09           -                0.17     
interest in
NDeX
Net (loss)
income
attributable       $ (3.41    )     $ 0.19         $ (3.25    )     $ 0.47     
to The Dolan
Company common
stockholders
                                                                       
Weighted
average shares       30,327           30,142         30,260           30,126   
outstanding -
basic
Weighted
average shares       30,327           30,208         30,260           30,219   
outstanding -
diluted
                                                                       

 
The Dolan Company
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
                                                   
                     Three Months Ended             Nine Months Ended
                     September 30,                  September 30,
                     2012             2011          2012             2011
Cash flows from
operating
activities
Net (loss)           $ (113,450 )     $ 3,306       $ (108,083 )     $ 9,740
income
Loss (income)
from                   13,207           77            13,714           (562  )
discontinued
operations
(Loss) income
from continuing        (100,243 )       3,383         (94,369  )       9,178
operations
Distributions
received from
The Detroit          784              1,400         2,247            3,500
Legal News
Publishing, LLC
Distributions
paid to holders
of                   —                (91     )     —                (566    )
non-controlling
interests
Gain on sale of      —                —             —                (394    )
investment
Non-cash
operating
activities:
Amortization         4,607            4,726         14,178           13,185
Depreciation         1,820            1,991         5,634            5,560
Impairment of
long-lived           151,614          —             151.614          —
assets and
goodwill
Equity in
earnings of          (396       )     (383    )     (1,420     )     (1,572  )
affiliates
Stock-based
compensation         931              1,001         2,833            3,026
expense
Deferred income
taxes and income     (49,625    )     258           (45,912    )     286
tax receivable
Change in value
of interest rate     —                —             —                (286    )
swap
Amortization of
debt issuance        114              94            327              280
costs
Non-cash fair
value adjustment
on earnouts          (1,540     )     242           (11,493    )     222
recorded in
connection with
acquisitions
Changes in
operating assets
and liabilities:
Accounts
receivable and
unbilled             (13,509    )     (2,723  )     (5,850     )     (2,361  )
pass-through
costs
Prepaid expenses
and other            (450       )     786           814              3,995
current assets
Other assets         62               105           93               105
Accounts payable
and accrued          2,647            420           2,744            (5,287  )
liabilities
Deferred revenue
and other            1,431            315           1,204            (1,531  )
liabilities
Cash (used in)
provided by
operating            (1,753     )     11,524        22,644           27,340
activities –
continuing
operations
Cash used in
operating
activities –         (1,141     )     (1,851  )     (1,498     )     (3,851  )
discontinued
operations
Net cash (used
in) provided by      (2,894     )     9,673         21,146           23,489   
operating
activities
                                                                      
Cash flows from
investing
activities
Acquisitions and     —                (61,994 )     (145       )     (67,065 )
investments
Capital              (2,459     )     (1,788  )     (5,017     )     (5,318  )
expenditures
Escrow payment
received on sale     —                77            —                471      
of investment
Cash used in
investing
activities –         (2,459     )     (63,705 )     (5,162     )     (71,912 )
continuing
operations
Cash provided by
(used in)
investing            233              (469    )     143              (850    )
activities –
discontinued
operations
Net cash used in
investing            (2,226     )     (64,174 )     (5,019     )     (72,762 )
activities
                                                                      
Cash flows from
financing
activities
Net borrowings
on senior            21,500           55,300        19,300           54,000
revolving note
Payments on
senior long-term     (1,250     )     (1,250  )     (3,750     )     (3,750  )
debt
Payments on
unsecured notes      (632       )     (609    )     (1,879     )     (1,802  )
payable
Payments on          (67        )     (130    )     (250       )     (231    )
capital leases
Net payments of
deferred
acquisition          (1         )     —             (14,401    )     —
costs and
earnouts
Payments for
repurchase of        —                —             —                (1,691  )
common stock
Payments of
deferred             —                —             (313       )     —        
financing costs
Net cash
provided by
(used in)            19,550           53,311        (1,293     )     46,526   
financing
activities
                                                                      
Net change in
cash and cash        14,430           (1,190  )     14,834           (2,747  )
equivalents
Cash and cash
equivalents at       1,156            3,305         752              4,862    
beginning of the
period
Cash and cash
equivalents at       $ 15,586         $ 2,115       $ 15,586         $ 2,115  
end of the
period
                                                                              

Contact:

The Dolan Company
Robert J. Evans, 612-317-9430
Director of Investor Relations
Bob.evans@thedolancompany.com
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