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TheStreet Open House

The Dolan Company Reports Fourth Quarter And Year-End 2012 Results

Stock quotes in this article: DM

The following is a reconciliation of net income attributable to The Dolan Company to adjusted EBITDA (in thousands):

       
Three Months Ended Year Ended
December 31, December 31,
2012    

2011

2012     2011
(Loss) income from continuing operations $ (2,496 ) $ 12,279 $ (96,865 ) $ 21,457
 
Interest expense, net 3,693 1,886 9,945 6,317
Income tax (benefit) expense (2,762 ) 6,867 (45,448 ) 13,093
Amortization of intangibles 4,273 5,020 18,451 18,206
Depreciation expense 1,977 2,090 7,611 7,650
Impairment of long-lived assets 1,179 151,614 1,179
Amortization of Detroit Legal News Publishing intangible 377 377 1,508 1,508
Non-cash compensation expense 889 816 3,723 3,843
Non-cash fair value adjustment on earnout recorded in connection with acquisition (16,490 ) (11,607 ) (16,271 )
Non-recurring income (520 ) (287 )
Net distributions to holders of non-controlling interest     77   (643 )
 
Adjusted EBITDA

$

5,951

 

$

14,024

 

$

38,489

 

$

56,052

 
 

The following is a reconciliation of net income attributable to The Dolan Company to cash earnings and cash earnings per diluted share (in thousands, except share and per share data):

       
Three Months Ended Year Ended
December 31, December 31,
2012     2011 2012     2011
Income from continuing operations $ (2,496 ) $ 12,279

$

(96,865 )

$

21,457
 
Noncontrolling interest (15 ) (1,230 ) 9,651 (1,833 )
Non-cash interest income related to the change in fair value of interest rate swaps (286 )
Non-cash compensation expense 889 816 3,723 3,843
Non-cash fair value adjustment on earnout liability (16,490 ) (11,607 ) (16,271 )
Amortization of intangibles 4,273 5,020 18,451 18,206
Impairment of long-lived assets 1,179 151,614 1,179
Amortization of Detroit Legal News Publishing intangible 377 377 1,508 1,508
Non-recurring income (520 ) (287 )
Adjustment to income tax expense related to reconciling items at effective tax rate

(1,778

)

3,321

 

(63,851

)

(3,031

)

Cash earnings $ 1,250   $ 5,272  

$

12,104  

$

24,485  
 
(Loss) income from continuing operations attributable to The Dolan Company per diluted share (GAAP)

$

(0.08

)

$

0.37

 

$

(2.88

)

$

0.65

 
Cash earnings per diluted share $ 0.04   $ 0.17   $ 0.40   $ 0.81  
 
Weighted average diluted shares outstanding 30,327,346 30,233,455 30,276,627 30,223,319
 

Conference Call

The company has scheduled a conference call for Friday, March 8th, at 8:30 a.m. U.S. Eastern Standard Time (7:30 a.m. U.S. Central Standard Time). The dial-in number is (888) 517-2513, passcode 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 fourth quarter and year-end 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-K is available via its Web site at www.thedolancompany.com, or investors can request a hard copy of the 10-K free of charge upon request.

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,” “convinced,” “continue,” “to come,” “will,” “may,” “estimate,” “assume,” “pursue,” “outlook,” “look,” “optimistic,” “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: our ability to fund our ongoing operations, repay our indebtedness, fund capital expenditures and make acquisitions; our ability to comply with covenants in our debt instruments; our ability to obtain waivers from our lenders of any failure to comply with covenants in our debt instruments or of events of default; our ability to amend our debt instruments in the future; the possibility that we may have to record significant charges to earnings as a result of impairment of our intangible assets; our ability to retain key personnel; the adverse resolution of a future lawsuit or claim against us; the failure or disruption of our proprietary case management software systems, our document hosting, processing, conversion and review systems, or our website and online networks; the possibility that the number of mortgage default files referred to us may decrease or fail to increase; the risk that our customers or their clients fail to timely pay us for our services, or at all; the effect of existing and future legislation, government investigations, litigation, court orders, settlements and client slow-downs on our mortgage default processing services and public notice operations; our ability to retain key customers and develop new customer relationships in our litigation support services segment and our mortgage default processing business; certain key personnel of our subsidiary NDeX are also shareholders and principal attorneys of our law firm customers and may at times have interests that differ from or conflict with our interests; the effect of changes in the economies and demographics of the markets that we serve; our ability to accurately value, successfully complete and successfully integrate acquisitions; 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, 2012, which we expect to file with the SEC on March 8, 2013. We undertake no obligation to update any forward-looking statements in light of new information or future events.

 
THE DOLAN COMPANY
CONSOLIDATED BALANCE SHEETS
 
    December 31,
2012     2011
ASSETS (in thousands, except share data)
Current assets    
Cash and cash equivalents $ 3,509 $ 752

Accounts receivable, including unbilled services (net of allowances for doubtful accounts of $1,809 and $1,416 as of December 31, 2012, and 2011, respectively)

60,300 72,117
Unbilled pass-through costs 4,668 4,317
Prepaid expenses and other current assets 3,271 3,976
Income tax receivable 10,823 1,968
Assets held for sale   257  

Total current assets

82,571 83,387
Accounts receivable, long term 2,500
Investments 10,069 11,901
Property and equipment, net 18,091 19,263
Finite-lived intangible assets, net 162,212 212,950
Goodwill and indefinite-lived intangible assets 151,329 283,039
Deferred income taxes 23,358
Other assets   1,910     2,563  
Total assets $ 449,540   $ 615,603  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt $ 15,162 $ 7,667
Accounts payable 20,860 18,760
Accrued pass-through liabilities 10,617 8,820
Accrued compensation 7,941 5,188
Accrued liabilities 5,283 5,588
Due to sellers of acquired businesses 5,017 20,403
Deferred revenue   13,278     20,290  

Total current liabilities

78,158 86,716
Long-term debt, less current portion 150,881 168,724
Deferred income taxes 20,739
Due to sellers of acquired businesses 12,687
Other liabilities   7,240     7,319  
Total liabilities   236,279     296,185  
 
Redeemable noncontrolling interest   7,283     12,726  
Commitments and contingencies (Note 18)
Stockholders’ equity

Common stock, $0.001 par value; authorized: 70,000,000 shares; outstanding: 30,955,321 and 30,576,597 shares as of December 31, 2012 and 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;

Other comprehensive loss (net of tax)

(867 ) (1,285 )
Additional paid-in capital 301,956 294,476
(Accumulated deficit) retained earnings   (88,285 )   13,471  
Total The Dolan Company stockholders’ equity   212,835     306,692  
Noncontrolling interest (6,857 )

Total stockholders' equity   205,978     306,692  
Total liabilities and stockholders’ equity $ 449,540   $ 615,603  
 
 
The Dolan Company
Condensed Consolidated Statements of Operations
(in thousands, except share and per share data)
       
Three Months Ended Year Ended
December 31, December 31,
2012     2011 2012     2011
(unaudited)    
Revenues    
Professional Services $ 44,782 $ 47,580 $ 179,600 $ 190,119
Business Information 18,159   19,911   74,711   78,493  
Total revenues 62,941 67,491 254,311 268,612
Operating expenses
Direct operating: Professional Services 25,753 22,478 89,696 87,477
Direct operating: Business Information 7,144 7,154 28,527 30,012
Selling, general and administrative 25,467 25,574 104,435 101,897
Amortization 4,273 5,020 18,451 18,206
Depreciation 1,977 2,090 7,611 7,650
Fair value and other adjustments on earnout liabilities (16,490 ) (12,127 ) (16,271 )
Impairment of long-lived assets and goodwill   1,179   151,614   1,179  
Total operating expenses 64,614 47,005 388,207 230,150
Equity in earnings of affiliates 108   546   1,528   2,118  
Operating (loss) income (1,565 ) 21,032 (132,368 ) 40,580
Non-operating income (expense)
Interest expense, net of interest income (3,693 ) (1,886 ) (9,945 ) (6,603 )
Non-cash interest income related to interest rate swaps 286
Other income       287  
Total non-operating expense (3,693 ) (1,886 ) (9,945 ) (6,030 )
(Loss) income from continuing operations before income taxes (5,258 ) 19,146 (142,313 ) 34,550
Income tax benefit (expense) 2,762   (6,867 ) 45,448   (13,093 )
(Loss) income from continuing operations (2,496 ) 12,279 (96,865 ) 21,457
Discontinued operations, net of tax (828 ) (692 ) (14,542 ) (131 )
Net (loss) income (3,324 ) 11,587 (111,407 ) 21,326
Less: Net loss (income) attributable to noncontrolling interests (15 ) (1,230 ) 9,651   (1,833 )
Net (loss) income attributable to The Dolan Company $ (3,339 ) $ 10,357   $ (101,756 ) $ 19,493  
 
 
 
(Loss) earnings per share – basic and diluted:
(Loss) income from continuing operations attributable to The Dolan Company $ (0.08 ) $ 0.37 $ (2.88 ) $ 0.65
 
Weighted average shares outstanding:
Basic 30,327,346 30,170,704 30,276,627 30,141,488
Diluted 30,327,346 30,233,455 30,276,627 30,223,319
 
 
The Dolan Company
Condensed Consolidated Statements of Cash Flows
(in thousands)
       
Three Months Ended Year Ended
December 31, December 31,
2012     2011 2012     2011
(unaudited)
Cash flows from operating activities
Net (loss) income $ (3,324 ) $ 11,587 $ (111,407 ) $ 21,326
Loss from discontinued operations   828     692     14,542     131  
(Loss) income from continuing operations (2,496 ) 12,279 (96,865 ) 21,457
Distributions received from The Detroit Legal News Publishing, LLC 1,113 525 3,360 4,025
Distributions paid to holders of noncontrolling interests (77 ) (643 )
Gain on sale of investment (394 )
Non-cash operating activities:
Amortization 4,273 5,020 18,451 18,206
Depreciation 1,977 2,090 7,611 7,650
Impairment of long-lived assets and goodwill 1,179 151,614 1,179
Equity in earnings of affiliates (108 ) (546 ) (1,528 ) (2,118 )
Stock-based compensation expense 889 817 3,722 3,843
Deferred income taxes 2,699 8,662 (43,213 ) 8,948
Change in value of interest rate swaps (286 )
Amortization of debt issuance costs 833 92 1,160 372
Non-cash fair value adjustment on earnouts recorded in connection with acquisitions

(16,490 ) (11,492 ) (16,271 )
Changes in operating assets and liabilities, net of effects of business combinations:
Accounts receivable and unbilled pass-through costs 5,645 7,330 (206 ) 4,971
Prepaid expenses and other current assets (156 ) (1,028 ) 658 2,967
Other assets 607 47 700 152
Accounts payable and accrued liabilities 4,944 (4,772 ) 7,688 (10,059 )
Deferred revenue and other liabilities (2,773 ) 3,303   (1,569 ) 1,772  
Cash provided by operating activities – continuing operations 17,447 18,431 40,091 45,771
Cash used in operating activities – discontinued operations (1,882 ) (618 ) (3,380 ) (4,469 )
Net cash provided by operating activities 15,565   17,813   36,711   41,302  
 
Cash flows from investing activities
Acquisitions and investments (2,304 ) (145 ) (69,369 )
Capital expenditures (2,506 ) (1,638 ) (7,523 ) (6,956 )
Proceeds on sale of investment, including escrow payments received 394
Other       77  
Cash used in investing activities – continuing operations (2,506 ) (3,942 ) (7,668 ) (75,854 )
Cash provided by (used in) investing activities – discontinued operations 149   (73 ) 292   (923 )
Net cash used in investing activities (2,357 ) (4,015 ) (7,376 ) (76,777 )
 
Cash flows from financing activities
Net (payments) borrowing on senior revolving note (19,800 ) (9,300 ) (500 ) 44,700
Payments on senior long-term debt (3,750 ) (1,250 ) (7,500 ) (5,000 )
Payments of deferred acquisition costs and earnouts (136 ) (20 ) (14,537 ) (20 )
Payments on unsecured notes payable (591 ) (614 ) (2,470 ) (2,416 )
Payments for repurchases of common stock (1,691 )
Payments of deferred financing costs (960 ) (1,273 )
Other (48 ) (153 ) (298 ) (384 )
Cash (used in) provided by investing activities – continuing operations (25,285 ) (11,337 ) (26,578 ) 35,189
Cash used in investing activities – discontinued operations   (3,824 )   (3,824 )
Net cash (used in) provided by financing activities (25,285 ) (15,161 ) (26,578 ) 31,365  
 
Net change in cash and cash equivalents (12,077 ) (1,363 ) 2,757 (4,110 )
Cash and cash equivalents at beginning of the period 15,586   2,115   752   4,862  
Cash and cash equivalents at end of the period $ 3,509   $ 752  

$

3,509  

$

752  
 




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