Balance Sheet and Liquidity
As of September 30, 2013, the company held $2.8 million of cash and cash equivalents, compared to $15.6 million for the same period last year. During the third quarter of 2013, the company generated $6.5 million of cash from operating activities and had $5.8 million of free cash flow, which is defined as net cash provided by operating activities minus capital expenditures from continuing operations. Quarterly capital expenditures from continuing operations were $0.7 million. Days sales outstanding were 72.1 days for the third quarter of 2013, down from 75.4 days in the third quarter of last year.
Total debt outstanding at the end of the third quarter was $131.5 million, of which $106.8 million was under a term loan facility. Net debt was $128.7 million, down $33.8 million from the end of 2012 and a decrease of $45.9 million from a year ago. At September 30, 2013, the combined weighted-average interest rate on the company’s credit facilities was 5.8%. The leverage ratio at the end of the quarter was 4.2 times total debt to trailing twelve-month pro forma adjusted EBITDA, which is within the maximum of 5.0 times allowed under the senior debt covenants for that period.
Non-GAAP Financial MeasuresGenerally 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 noncontrolling interest;
- Cash earnings, defined as GAAP income from continuing operations adjusted for the impact of the following: noncontrolling 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 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 from continuing operations.
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