S-1/A 1 c14177a1sv1za.htm AMENDMENT TO REGISTRATION STATEMENT sv1za
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As filed with the Securities and Exchange Commission on June 7, 2007
Registration No. 333-142372
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
 
AMENDMENT
NO. 1
TO
Form S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
 
 
 
 
DOLAN MEDIA COMPANY
(Exact name of registrant as specified in its charter)
 
         
DELAWARE   2711   43-2004527
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)
 
 
 
 
706 Second Avenue South, Suite 1200, Minneapolis, Minnesota 55402, (612) 317-9420
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
 
 
 
 
JAMES P. DOLAN
Chairman, President and Chief Executive Officer
Dolan Media Company
706 Second Avenue South, Suite 1200
Minneapolis, Minnesota 55402
(612) 317-9420
(Name, address, including zip code, and telephone number, including area code, of agent for service)
 
 
 
 
Copies to:
     
WALTER E. WEINBERG
ADAM R. KLEIN
Katten Muchin Rosenman LLP
525 W. Monroe Street
Chicago, Illinois 60661
(312) 902-5200
  ROBERT S. RISOLEO
Sullivan & Cromwell LLP
1701 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
(202) 956-7500
 
 
 
 
Approximate date of commencement of proposed sale to the public:  As soon as practicable after the effective date of this registration statement.
 
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box:  o
 
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of earlier effective registration statement for the same offering:  o
 
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  o
 
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  o
 
 
 
 
CALCULATION OF REGISTRATION FEE
 
             
Title of Each Class of
    Proposed Maximum
    Amount of
Securities to be Registered     Aggregate Offering Price(1)     Registration Fee
Common Stock, $0.001 par value
    $150,000,000     $4,605(2)
             
 
(1) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(o) of Regulation C under the Securities Act of 1933 and includes shares of our common stock expected to be sold by selling stockholders.
 
(2) Previously paid.
 
 
 
 
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.
 


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The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where of offer or sale is not permitted.
 
Subject to Completion. Dated June 7, 2007
PROSPECTUS
 
           Shares
 
(DOLAN MEDIA LOGO)
Common Stock
 
 
 
 
This is an initial public offering of shares of common stock of Dolan Media Company.
 
We are offering           shares of common stock and the selling stockholders identified in this prospectus are offering an additional           shares of common stock. We will not receive any of the proceeds from the sale of shares being sold by the selling stockholders.
 
We expect that the initial public offering price per share will be between $      and $     . Prior to this offering, there has been no public market for our common stock. We have applied to list our common stock on The New York Stock Exchange under the symbol “DM.”
 
 
 
 
See “Risk Factors” beginning on page 12 to read about factors you should carefully consider before buying shares of our common stock.
 
 
 
 
                 
    Per Share   Total
 
Initial public offering price
  $               $            
Underwriting discounts and commissions
  $       $    
Proceeds, before expenses, to Dolan Media Company
  $       $    
Proceeds, before expenses, to the selling stockholders
  $       $  
 
To the extent that the underwriters sell more than         shares of common stock, the underwriters have the option to purchase up to an additional         shares from the selling stockholders at the initial public offering price less underwriting discounts and commissions.
 
 
 
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense.
 
 
 
 
The underwriters expect to deliver the shares against payment in New York, New York, on          , 2007.
 
 
 
 
Goldman, Sachs & Co. Merrill Lynch & Co.
 
Piper Jaffray Craig-Hallum Capital Group LLC


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(DOLAN MEDIA COMPANY COVER)


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(DOLAN MEDIA COMPANY)


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(DOLAN MEDIA COMPANY COVER)


 

 
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  F-1
 Amended and REstated Employment Agreement
 Employment Agreement
 Employment Agreement
 Services Agreement
 Services Agreement
 Amended and Restated Operating Agreement
 Amended and Restated Registration Rights Agreement
 Consent of McGladrey & Pullen, LLP
 Consent of Judelson, Giordano & Siegel, P.C.
 
 
This prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities offered hereby in any jurisdiction where, or to any person to whom, it is unlawful to make such offer or solicitation. The information contained in this prospectus speaks only as of the date of this prospectus unless the information specifically indicates that another date applies. No dealer, salesperson or other person has been authorized to give any information or to make any representations other than those contained in this prospectus in connection with the offer contained herein and, if given or made, such information or representations must not be relied upon as having been authorized by us. Neither the delivery of this prospectus nor any sales made hereunder shall under any circumstances create an implication that there has been no change in our affairs since the date hereof.
 
This prospectus includes market size, market share and industry data that we have obtained from internal company surveys, market research, publicly available information and various industry publications. The third-party sources from which we have obtained information generally state that the information contained therein has been obtained from sources believed to be reliable. While we believe this information is accurate, we have not independently verified any of the data from third-party sources nor the methodology, processes or assumptions used by these third-party sources. Therefore, you should not place undue reliance on such information. Similarly, internal company surveys, industry forecasts and market research, which we believe to be reliable based upon management’s knowledge of the industry, have not been verified by any independent sources. Our internal company surveys are based on data we have collected over the past several years.


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PROSPECTUS SUMMARY
 
This summary highlights selected information more fully described elsewhere in this prospectus. This summary does not contain all of the information that you should consider before investing in our common stock. You should read the entire prospectus carefully, including “Risk Factors,” “Cautionary Note Regarding Forward-Looking Statements,” our consolidated financial statements and the accompanying notes, the financial statements of certain acquired businesses and our pro forma financial information appearing elsewhere in this prospectus, before making an investment decision. In this prospectus, unless the context requires otherwise, the terms the “Company,” “we,” “us” and “our” refer to Dolan Media Company and its consolidated subsidiaries. When we refer in this prospectus to pro forma information, we mean that pro forma adjustments have been made to our historical operating results for 2006 to give effect to our acquisition of an 81.0% interest in American Processing Company LLC, or APC, on March 14, 2006, and APC’s subsequent acquisition of the mortgage default processing service business of Feiwell & Hannoy, P.C. on January 9, 2007, as if they had been completed on January 1, 2006.
 
Our Company
 
We are a leading provider of mission critical business information and professional services to the legal, financial and real estate sectors in the United States. We provide companies and professionals in the markets we serve with access to timely, relevant and dependable information and services that enable them to operate effectively in highly competitive and time sensitive business environments. We serve our customers through two complementary operating divisions: Business Information and Professional Services.
 
Our Business Information Division publishes business journals, court and commercial newspapers and other publications, operates web sites and conducts a broad range of events for targeted audiences in each of the 20 markets that we serve in the United States. These activities put us at the center of local and regional business communities that rely upon our proprietary content. Based on our 2006 revenues, we believe we are the third largest business journal publisher and second largest court and commercial publisher in the United States. Based on volume of published public notices, we also believe we are one of the largest carriers of public notices in the United States. We currently publish 60 print publications consisting of 14 paid daily publications, 29 paid non-daily publications and 17 non-paid non-daily publications. Our paid publications and non-paid and controlled publications had approximately 75,500 and 167,400 subscribers, respectively, as of March 31, 2007. We use our business publishing franchises as platforms to provide a broadening array of local business information products to our customers in each of our targeted markets. In addition to our print publications, we utilize various media channels, such as online, mobile, live events and audio/video, to deliver business information to our customers. For example, we provide business information electronically through our 42 on-line publication web sites, which had approximately 261,900 unique users in March 2007; our 11 non-publication web sites, which had approximately 50,300 unique users in March 2007; and our email notification systems, which had approximately 52,700 subscribers as of March 31, 2007. In addition, we produce events, including professional education seminars and award programs, that attracted approximately 16,000 attendees and 330 paying sponsors in 2006.
 
Our Professional Services Division comprises two operating units, APC and Counsel Press, LLC, that provide services that enable law firms and attorneys to process residential mortgage defaults and court appeals in a timely and efficient manner. These professional services significantly decrease the amount of time our customers spend on administrative and supervisory matters, which allows them to focus on their core competency of providing effective legal services to their clients. APC, one of the leading providers of mortgage default processing services in the United States, is the dominant provider of such services in Indiana and Michigan, which had the second and third highest residential mortgage foreclosure rates, respectively, in 2006, based on information from the Mortgage Bankers Association, or MBA, a national association representing the real estate finance industry. APC uses its proprietary case management software system to assist in the efficient and timely processing of a large number of foreclosure, bankruptcy, eviction and, to a lesser extent, litigation case files for residential mortgage defaults in Michigan and is working diligently to customize this system for use in Indiana and other states. We serviced approximately 29,900 mortgage default case files relating to 273 mortgage loan lenders and servicers that are clients of our law firm customers in Michigan and Indiana during the first quarter of 2007. Counsel Press is the largest appellate service provider


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nationwide, providing appellate services to attorneys in connection with approximately 8,300 and 2,200 appellate filings in federal and state courts in 2006 and the first quarter of 2007, respectively. Counsel Press uses its proprietary document conversion system to assist law firms and attorneys in organizing, printing and filing appellate briefs, records and appendices that comply with the applicable rules of the U.S. Supreme Court, any of the 13 federal circuit courts or any state appellate court or appellate division.
 
Our business model has multiple diversified revenue streams that allow us to generate revenues and cash flow throughout all phases of the business cycle. This balanced business model produces stability for us by mitigating the effects of economic fluctuations. Our Business Information Division generates revenues primarily from display and classified advertising, public notices and subscriptions, and our Professional Services Division generates revenues by providing mortgage default processing and appellate services primarily through fee-based arrangements. In 2006, we generated total revenues of $111.6 million, adjusted EBITDA of $28.8 million, operating income of $21.7 million, cash flow from operations of $18.3 million and a net loss of $(20.3) million. See “Summary Historical and Pro Forma Consolidated Financial Data” for a description of how we calculate adjusted EBITDA and why we think it is an important measurement of our performance. On a pro forma basis in 2006, we generated total revenues of $127.7 million, adjusted EBITDA of $31.7 million, operating income of $23.2 million and a net loss of $(20.9) million. In the first quarter of 2007, we generated total revenues of $35.7 million, adjusted EBITDA of $10.7 million, operating income of $8.2 million, cash flow from operations of $7.2 million and a net loss of $(27.8) million. Since 2004, our net loss has been attributable to our non-cash interest expense related to redeemable preferred stock. We will not incur this expense after consummation of this offering because we will use a portion of our net proceeds from this offering to redeem our preferred stock.
 
Our History
 
We are a holding company that conducts all of our operating activities through various subsidiaries. Our predecessor company (also named Dolan Media Company) was formed in 1992 by James P. Dolan, our Chairman, President and Chief Executive Officer, and Cherry Tree Ventures IV. Our current company was incorporated in Delaware in March 2003 in connection with a restructuring whereby our predecessor company spun off its business information and other businesses to us and sold its national public records unit to a wholly-owned subsidiary of Reed Elsevier Inc. We have a successful history of growth through acquisitions. Since 1992, our Business Information Division has completed 38 acquisitions. In addition, we formed and have built our Professional Services Division through five acquisitions since 2005.
 
Our Strengths
 
We intend to build on our position as a leading provider of essential business information and professional services to companies and professionals in the legal, financial and real estate sectors. We believe the following strengths will allow us to maintain a competitive advantage in the markets we serve:
 
Proprietary, Mission Critical and Customizable Information and Services.  We provide necessary business information and professional services on a timely basis to our customers in a format tailored to meet the needs and demands of their businesses. These proprietary offerings are critical to our customers because they rely on our business information and professional services to inform their operating strategies and decision making, develop business and practice opportunities and support key processes. We believe the high renewal rates for our business information products, which in the aggregate were 81% in 2006, as well as the high retention rate of the clients of our mortgage default processing customers and high retention rate of our appellate services customers, are indicative of the significant degree to which our customers and their clients rely on our businesses.
 
Dominant Market Positions.  We believe we are the largest provider of business information targeted to the legal, financial and real estate sectors in each of our 20 markets. We are also one of the leading providers of mortgage default processing services in the United States, including the dominant provider of such services in Michigan and Indiana, and are the largest national provider of appellate services. The value and relevance of our business information products and professional services have created sustained customer loyalty and recognized brands in our markets. As a result, we have become a key business partner with our customers.


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Superior Value Proposition for Our Customers.  Our business information customers derive significant benefit from our dedicated efforts to provide timely, relevant, proprietary and customized content created by employees that have experience and expertise in the industries we serve. This approach has enabled our business information products to achieve high renewal rates, which we believe are greatly valued by local advertisers. In addition, the clients of APC’s two law firm customers, Trott & Trott, P.C. in Michigan and Feiwell & Hannoy, P.C. in Indiana, realize significant value from APC’s ability to assist them in efficiently processing large amounts of data associated with each mortgage default case file. These services enable our law firm customers to quickly address residential mortgage loans that are in default, which allows the law firms’ clients to mitigate their losses. Further, our appellate service customers benefit greatly from Counsel Press’ comprehensive knowledge of the procedurally intensive requirements of, and close relationships forged with, the appellate courts.
 
Diversified Business Model.  Our balanced business model provides diversification by industry sector, product and service offering, customer base and geographic market. This diversification provides us with the opportunity to drive revenue growth and increase operating margins over time. In addition, this diversification creates stability for our business as a whole by allowing us to generate revenues and cash flow through all phases of the business cycle and provides us with the opportunity and flexibility to capitalize on growth opportunities.
 
Successful Track Record of Acquiring and Integrating New Businesses.  We have demonstrated a strategic and disciplined approach to acquiring and integrating businesses. In addition, we have established a proven track record of improving the revenue growth, operating margins and cash flow of our acquired businesses due to our disciplined management approach that emphasizes a commitment to high quality, relevant local content, consistent operating policies and standards and centralized back office operations. Since our predecessor’s inception in 1992, we have completed 38 acquisitions in our Business Information Division and five acquisitions in our Professional Services Division.
 
Experienced Leadership.  The top 24 members of our senior management team, consisting of our executive officers and unit managers, have an average of more than 17 years of relevant industry experience, and each of our top three executives has been with us for more than a decade. We benefit from our managers’ comprehensive understanding of our products and services, success in identifying and integrating acquisitions, extensive knowledge of our target communities and markets and strong relationships with current and potential business partners and customers.
 
Our Strategy
 
We intend to further enhance our leading market positions by executing the following strategies:
 
Leverage Our Portfolio of Complementary Businesses.  We believe our portfolio of complementary businesses and our prominent brand recognition among our customers will allow us to continue to realize significant synergistic benefits and expand, enhance and cross-sell the products and services we offer. Further, we continuously seek new opportunities to leverage our complementary businesses to increase our revenues and cash flows and maximize the impact of our cost saving measures.
 
Enhance Organic Growth.  We seek to leverage our leading market positions by continuing to develop proprietary content and valuable services that can be delivered to our customers through a variety of media distribution channels. We believe this will allow us to strengthen and extend our customer relationships and provide additional revenue generating opportunities. In addition, we intend to take advantage of new business opportunities and to expand the markets we serve by regularly identifying and evaluating additional demand for our products and services outside of our existing geographic market reach.
 
Continue to Pursue a Disciplined Acquisition Strategy in Existing and New Markets.  We will continue to identify and evaluate potential acquisitions that will allow us to increase our business information product and professional service offerings, expand our customer base and enter new geographic markets. We intend to pursue acquisitions that we can efficiently integrate into our organization and that we expect to be accretive to our cash flow from operations.


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Realize Benefits of Centralization and Scale to Increase Cash Flows and Operating Profit Margins.  Because we typically acquire stand-alone businesses that lack the benefits of scale, we are able to realize significant efficiencies from centralizing our accounting, circulation, advertising production and appellate and default processing systems and will seek to obtain additional operational efficiencies through further consolidation of other management, information and back office operations. We expect our centralization initiative and other infrastructure investments will allow us to accelerate the realization of cost synergies and increase our operating profit margins and cash flows in the future.
 
Risks Relating to Our Business and Strategy
 
While we believe focusing on the key areas set forth above will provide us with opportunities to reach our goals, there are a number of risks and uncertainties that may limit our ability to achieve these goals and execute the strategies summarized above, including the following:
 
  •  our Business Information Division depends on the economies and the demographics of the legal, financial and real estate sectors in the markets we serve;
 
  •  a decrease in paid subscriptions to our print publications, which occurred between 2005 and 2006, primarily due to the termination of discounted subscription programs, could adversely affect our circulation revenues to the extent we are not able to continue increasing our subscription rates and our advertising and display revenues to the extent advertisers begin placing fewer advertisements with us due to decreased readership;
 
  •  APC’s business revenues are very concentrated, as APC currently provides mortgage default processing services to only two customers, Trott & Trott and Feiwell & Hannoy;
 
  •  the key attorneys at each of APC’s two law firm customers are employed by, and hold an indirect equity interest in, APC, and therefore may, in certain circumstances, have interests that differ from or conflict with our interests;
 
  •  we are dependent on our senior management team, especially James P. Dolan, our founder, Chairman, President and Chief Executive Officer; and
 
  •  growing our business may place a strain on our management and internal systems, processes and controls.
 
For more information about these and other risks and uncertainties related to our business and an investment in our common stock, see “Risk Factors” beginning on page 12. You should consider carefully all of these risks before making an investment in our common stock.
 
Our Industries
 
Business Information
 
We believe the business information industry in the United States is highly fragmented and that, based on data we have collected over several years, there are more than 250 local business journals and more than 350 court and commercial newspapers nationwide, which generated approximately $1.4 billion in revenues in 2006. Mainstream media outlets, such as television, radio, metropolitan and national newspapers and the Internet, generally provide broad-based information to a geographically dispersed or demographically diverse audience. In contrast, we and other providers of targeted business information deliver content that is tailored to the business communities of particular local and regional markets and typically not readily obtainable elsewhere.
 
As a publisher of court and commercial newspapers, we carry public notices in 12 of the 20 markets we serve. Public notices are legally required announcements that inform citizens about government or government-related activities affecting communities. The laws governing public notices vary by jurisdiction, but all jurisdictions require that public notices be published in qualifying local newspapers. The legal requirements relating to the publication of public notices serve as barriers to entry to new and existing publications that desire to carry public notices. We estimate that the total spending on public notices in business publications in the United States was in excess of $500 million in 2006.


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Professional Services
 
We believe that attorneys and law firms seek to satisfy their clients and manage costs by increasingly focusing their efforts on the practice of law while outsourcing non-core functions.
 
Mortgage Default Processing Services
 
The outsourced mortgage default processing services market is highly fragmented, and we estimate that it consists primarily of back-office operations of approximately 350 local and regional law firms throughout the United States. We believe that residential mortgage delinquencies and defaults are increasing primarily as a result of the increased issuance of subprime loans and popularity of non-traditional loan structures. Further compounding these trends are increases in mortgage interest rates from recent lows and the slowing of demand in the residential real estate market in many regions of the United States, which makes it more difficult for borrowers in distress to sell their homes. The increased volume of delinquencies and defaults has created additional demand for default processing services and has served as a growth catalyst for the mortgage default processing services market. We believe that increasing case volumes and rising client expectations provide an opportunity for default processors that provide efficient, effective and timely services to law firms.
 
APC provides mortgage default processing services for Trott & Trott, a law firm in Michigan, and Feiwell & Hannoy, a law firm in Indiana. We believe that the number of residential mortgage foreclosures in the east north central region of the United States, which in addition to Michigan and Indiana also includes Illinois, Ohio and Wisconsin, presents a particularly attractive opportunity for providers of mortgage default processing services. The average foreclosure rate in this region, as a percentage of loans serviced, for the fourth quarter of 2006 was 2.38% as compared to the national average of 1.19%.
 
Appellate Services
 
The market for appellate consulting and printing services is highly fragmented, and we estimate that it includes a large number of local and regional printers across the country. The appellate services market has experienced consistent growth of demand for consulting and printing services, and we believe that this trend will continue for the foreseeable future. Federal appeals often are more sophisticated, more complicated and more voluminous than appeals in state courts, and thus we believe that federal appeals present more attractive business prospects for Counsel Press. For the twelve months ended March 31, 2006, the 13 circuits of the U.S. Court of Appeals accepted 71,988 cases according to the Administrative Office of the U.S. Courts, or AOC. The National Center for State Courts in a 2005 survey reported that appellate filings in all state courts totaled just over 280,000 cases in 2004 and, with modest variations, had been at about that volume since 1995.
 
Redemption of Preferred Stock
 
Upon consummation of this offering, we will redeem all outstanding shares of our series A preferred stock and the shares of series A preferred stock and series B preferred stock issued upon conversion of our series C preferred stock. In connection with the redemption:
 
  •  all outstanding shares of our series C preferred stock will convert into shares of our series A preferred stock and series B preferred stock and a total of           shares of our common stock upon consummation of this offering;
 
  •  we will use approximately $      of our net proceeds from this offering to redeem all outstanding shares of our series A preferred stock (including shares issued upon conversion of all outstanding shares of our series C preferred stock) upon consummation of this offering; and
 
  •  we will use approximately $      of our net proceeds from this offering to redeem all shares of our series B preferred stock, all of which will be issued upon conversion of all outstanding shares of our series C preferred stock upon consummation of this offering.
 
Several of our executive officers and current or recent members of our board of directors, their immediate family members and affiliated entities, some of which are selling stockholders, hold shares of our series A preferred stock and series C preferred stock. These individuals, entities and funds own approximately 90% of our series A preferred stock and 99% of our series C preferred stock and will receive an aggregate of $      and           shares of our common stock upon consummation of the redemption. See “Use of Proceeds,” “Certain Relationships and Related Transactions,” “Principal and Selling Stockholders” and “Description of Capital Stock” for further information regarding the matters discussed above.


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Corporate Information
 
Our principal executive offices are located at 706 Second Avenue South, Suite 1200, Minneapolis, Minnesota 55402. Our telephone number is (612) 317-9420. Our Internet address is www.dolanmedia.com. Information on our web site does not constitute part of this prospectus.
 
The Offering
 
Common stock offered by us in this offering            shares.
 
Common stock offered by the selling stockholders in this offering            shares.
 
  Total            shares.
 
Common stock to be outstanding after this offering            shares.
 
Over-allotment option            shares to be offered by the selling stockholders.
 
Use of proceeds We intend to use our net proceeds from this offering as follows: (1) approximately $      to redeem all outstanding shares of our series A preferred stock and series B preferred stock (in each case, including shares issued upon conversion of our series C preferred stock upon consummation of this offering), (2) approximately $      to repay outstanding indebtedness under our bank credit facility and (3) the remainder for general corporate purposes, including for acquisitions and working capital. See “Use of Proceeds.”
 
Proposed New York Stock Exchange symbol “DM”
 
Risk factors Please read the section entitled “Risk Factors” beginning on page 12 for a discussion of some of the factors you should carefully consider before deciding to invest in shares of our common stock.
 
The number of shares of common stock outstanding after this offering is based on the number of shares outstanding as of the date of this prospectus. Unless otherwise indicated, this number and the information presented in this prospectus:
 
  •  exclude (1)           shares of common stock issuable upon the exercise of outstanding stock options, with an exercise price of $      per share, issued under our incentive compensation plan, (2)           shares of common stock issuable upon the exercise of stock options, with an exercise price equal to the initial public offering price, that we intend to issue on the date of this prospectus under our incentive compensation plan to our executive officers, management employees and non-employee directors, (3)           shares of common stock reserved for issuance in connection with future grants of equity under our incentive compensation plan and (4)           shares of common stock reserved for issuance under our employee stock purchase plan;
 
  •  reflect the issuance of           restricted shares of common stock that we intend to issue on the date of this prospectus to our employees under our incentive compensation plan;
 
  •  reflect a           common stock split, which we intend to effect upon the consummation of this offering;
 
  •  assume that the underwriters do not exercise their over-allotment option, which entitles the underwriters to purchase up to     additional shares of our common stock from the selling stockholders;


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  •  reflect the conversion of all outstanding shares of our series C preferred stock (including all accrued and unpaid dividends as of the redemption date, which we have assumed is the date hereof) into shares of our series A preferred stock and series B preferred stock and an aggregate of      shares of our common stock, which will occur upon consummation of this offering;
 
  •  reflect the redemption of all outstanding shares of our series A preferred stock (including all accrued and unpaid dividends as of the redemption date, which we have assumed is the date hereof) and series B preferred stock upon consummation of this offering (in each case, including shares issued upon conversion of our series C preferred stock); and
 
  •  assume an initial public offering price of $      per share, the mid-point of the range set forth on the cover of this prospectus.


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Summary Historical and Unaudited Pro Forma Consolidated Financial Data
 
The following table presents our summary consolidated financial data for the periods and as of the dates presented below. We derived the historical financial data for the fiscal years ended December 31, 2004, 2005 and 2006, from our audited consolidated financial statements that are included in this prospectus. The 2006 financial data has been restated as discussed in Note 16 to our audited consolidated financial statements that are included in this prospectus. We derived the historical financial data for the three months ended March 31, 2006 and 2007, and the historical financial data as of March 31, 2007, from our unaudited consolidated financial statements that are included in this prospectus. Our unaudited summary consolidated financial data as of March 31, 2007 and for the three months ended March 31, 2006 and 2007 have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of our management, reflect all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of this data in all material respects.
 
The pro forma financial data for the year ended December 31, 2006, gives effect to our acquisition of an 81.0% interest in APC on March 14, 2006, and APC’s subsequent acquisition of the mortgage default processing service business of Feiwell & Hannoy on January 9, 2007, as if each had occurred on January 1, 2006. Because the results of Feiwell & Hannoy since January 9, 2007, are already included in our statement of operations for the three months ended March 31, 2007, pro forma adjustments to our operating results for the first quarter of 2007 to give effect to the Feiwell & Hannoy acquisition as if it had occurred on January 1, 2007, would not be significant (it would increase our total revenues by $280,000 and reduce our net loss by $34,000). Therefore, we have not provided pro forma financial data for the three months ended March 31, 2007. The pro forma as adjusted financial data for the year ended December 31, 2006, gives effect to the APC and Feiwell & Hannoy acquisitions and, along with the as adjusted financial data for the three months ended March 31, 2007, reflects (1) the conversion of all outstanding shares of our series C preferred stock into           shares of common stock,           shares of series A preferred stock and           shares of series B preferred stock upon consummation of this offering; (2) our redemption of all outstanding shares of our series A preferred stock and series B preferred stock (in each case, including shares issued upon conversion of our series C preferred stock) with a portion of our net proceeds from this offering; (3) our repayment of approximately $     of outstanding indebtedness under our bank credit facility with a portion of our net proceeds from this offering; (4) the issuance of           restricted shares of common stock on the date of this prospectus; and (5) an increase of           and           weighted average shares outstanding as of December 31, 2006, and March 31, 2007, respectively, related to the issuance of shares of our common stock that would have been issued by us in this offering at an assumed initial public offering price of $           per share (the mid-point of the range set forth on the cover of this prospectus), less estimated underwriting discounts and commissions and estimated offering expenses payable by us, in order to redeem all outstanding shares of preferred stock and repay approximately $           of outstanding indebtedness under our bank credit facility.
 
The as adjusted consolidated balance sheet data as of March 31, 2007, reflects (1) the receipt by us of the net proceeds from the sale of           shares of common stock at an assumed initial public offering price of $      per share (the mid-point of the range set forth on the cover of this prospectus) after deducting the estimated underwriting discounts and commissions and the estimated offering expenses payable by us, (2) the conversion of all outstanding shares of series C preferred stock into           shares of series A preferred stock,           shares of series B preferred stock and           shares of common stock and (3) our application of a portion of our net proceeds from this offering to redeem all outstanding shares of series A and series B preferred stock (in each case, including shares issued upon conversion of our series C preferred stock) and to repay approximately $           of outstanding indebtedness under our bank credit facility.
 
The pro forma consolidated financial data presented below is based upon available information and assumptions that we believe are reasonable; however, we can provide no assurance that the assumptions used in the preparation of the pro forma consolidated financial data are correct. The pro forma financial data is for illustrative and informational purposes only and is not intended to represent or be indicative of what our results of operations would have been if our acquisition of an 81.0% interest in APC or APC’s acquisition of


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the mortgage default processing service business of Feiwell & Hannoy had occurred on January 1, 2006. The pro forma financial data also should not be considered representative of our future results of operations.
 
You should read the following information along with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our consolidated financial statements and the accompanying notes, the financial statements of certain acquired businesses and our pro forma financial information, which are included elsewhere in this prospectus.
 
                                                                 
    Years Ended December 31,     Three Months Ended March 31,  
    2004     2005     2006     2006     2006     2006     2007     2007  
                (Restated)
    (Pro Forma)     (Pro Forma
                   
                (Actual)           as Adjusted)                    
                      (Unaudited)           (Actual)     (As Adjusted)  
                                        (Unaudited)        
    (Dollars in thousands, except per share data)  
 
Consolidated Statement of Operations Data:
                                                               
Business information revenues
  $ 51,689     $ 66,726     $ 73,831     $ 73,831     $             $ 17,913     $ 19,480     $         
Professional services revenues
          11,133       37,812       53,839               4,801       16,215          
                                                                 
Total revenues
    51,689       77,859       111,643       127,670               22,714       35,695          
                                                                 
Total operating expenses
    (47,642 )     (69,546 )     (92,711 )     (107,162 )             (19,214 )     (28,371 )        
Equity in earnings of Detroit Legal News Publishing, LLC (DLNP), net of amortization
          287       2,736       2,736               461       915          
                                                                 
Operating income
    4,047       8,600       21,668       23,244               3,961       8,239          
Non-cash interest expense related to redeemable preferred stock(1)
    (2,805 )     (9,998 )     (28,455 )     (28,455 )             (2,938 )     (29,942 )        
Interest expense, net
    (1,147 )     (1,874 )     (6,433 )     (8,478 )             (1,476 )     (2,035 )        
Other expense, net
                (202 )     (202 )             (10 )     (8 )        
                                                                 
Income (loss) from continuing operations before income taxes and minority interest
    95       (3,272 )     (13,422 )     (13,891 )             (463 )     (23,746 )        
Income tax (expense) benefit
    (889 )     (2,436 )     (4,974 )     (4,607 )             200       (3,140 )        
Minority interest in net income of subsidiary(2)
                (1,913 )     (2,407 )             (126 )     (900 )        
                                                                 
Income (loss) from continuing operations(3)
  $ (794 )   $ (5,708 )   $ (20,309 )   $ (20,905 )   $       $ (389 )   $ (27,786 )        
                                                                 
Income (loss) from continuing operations per share(3)(4)
                                                               
Basic
                  $       $       $               $       $    
Diluted
                  $       $       $               $       $    
Weighted average shares outstanding(4)
                                                               
Basic
                                                               
Diluted
                                                               
Non-GAAP Data:
                                                               
Adjusted EBITDA (unaudited)(5)
  $ 6,875     $ 13,353     $ 28,776     $ 31,672     $       $ 5,845     $ 10,734          
Adjusted EBITDA margin (unaudited)(5)
    13.3 %     17.2 %     25.8 %     24.8 %     %     25.7 %     30.1 %        
 


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    As of March 31, 2007  
    Actual     As Adjusted  
    (Unaudited)
 
    (In thousands)  
 
Consolidated Balance Sheet Data:
               
Cash and cash equivalents
  $ 1,406     $             
Total working capital (deficit)
    (12,348 )        
Total assets
    211,061          
Long-term debt, less current portion
    85,527          
Redeemable preferred stock
    138,303          
Total liabilities and minority interest
    267,712          
Total stockholders’ equity (deficit)
    (56,651 )        
 
(1) Consists of accrued but unpaid dividends on our series A preferred stock and series C preferred stock and the change in fair value of the shares of our series C preferred stock, with each share of our series C preferred stock being convertible into (1) one share of our series B preferred stock and (2) a number of shares of our series A preferred stock and our common stock. The conversion of our series C preferred stock and redemption of our preferred stock upon consummation of this offering will eliminate the non-cash interest expense we record for the change in fair value of our series C preferred stock.
 
(2) Consists of the 19.0% membership interest in APC held by Trott & Trott as of December 31, 2006 and the 18.1% and 4.5% membership interest in APC held by Trott & Trott and Feiwell & Hannoy, respectively, as of March 31, 2007. Under the terms of the APC operating agreement, each month we are required to pay distributions to each of Trott & Trott and Feiwell & Hannoy in an amount equal to its percentage share of APC’s earnings before interest, taxes, depreciation and amortization less any debt service, capital expenditures and working capital. Feiwell & Hannoy received its 4.5% membership interest in APC on January 9, 2007, in connection with APC’s acquisition of its mortgage default processing service business.
 
(3) Excludes loss from discontinued operations, net of income tax benefit, of $483 and $1,762 in 2004 and 2005, respectively, due to the sale of our telemarketing operations in September 2005.
 
(4) Basic per share amounts are computed, generally, by dividing net income (loss) by the weighted-average number of common shares outstanding. We believe that the series C preferred stock is a participating security because the holders of the convertible preferred stock participate in any dividends paid on our common stock on an as if converted basis. Consequently, the two-class method of income allocation is used in determining net income (loss), except during periods of net losses. Under this method, net income (loss) is allocated on a pro rata basis to the common stock and series C preferred stock to the extent that each class may share in income for the period had it been distributed. Diluted per share amounts assume the conversion, exercise, or issuance of all potential common stock instruments (see Note 13 to our consolidated financial statements included in this prospectus for information on stock options) unless their effect is anti-dilutive, thereby reducing the loss per share or increasing the income per share.
 
(5) The adjusted EBITDA measure presented consists of income (loss) from continuing operations (1) before (a) non-cash interest expense related to redeemable preferred stock; (b) net interest expense; (c) income tax expense; (d) depreciation and amortization; (e) non-cash compensation expense; and (f) minority interest in net income of subsidiary; and (2) after minority interest distributions paid. Adjusted EBITDA margin is the ratio of adjusted EBITDA to total revenues. We are providing adjusted EBITDA, a non-GAAP financial measure, along with GAAP measures, as a measure of profitability because adjusted EBITDA helps us evaluate and compare our performance on a consistent basis for different periods of time by removing from our operating results the impact of the non-cash interest expense arising from the common stock conversion option in our series C preferred stock (which will have no impact on our financial performance after the consummation of this offering due to the redemption or conversion of all of our outstanding shares of preferred stock), as well as the impact of our net cash or borrowing position, operating in different tax jurisdictions and the accounting methods used to compute depreciation and amortization, which impact has been significant and fluctuated from time to time due to the variety of acquisitions that we have completed since our inception. Adjusted EBITDA also excludes non-cash compensation expense because this is a non-cash charge for stock options that we have granted. We exclude this non-cash expense from adjusted EBITDA because we believe any amount we are required to record as share-based compensation expense contains subjective assumptions over which our management has no control, such as share price and volatility. As a result, we do not believe that the inclusion of non-cash compensation expense in our adjusted EBITDA allows for a meaningful evaluation of our performance. In addition, as companies are permitted to use different methods to calculate share-based compensation, we believe including this expense inhibits comparability of our performance with other companies that may have chosen calculation methods different from ours in their determination of non-cash compensation expense. In contrast, we believe that excluding non-cash compensation expense allows for increased comparability within our industry, as other public companies in our industry have similarly elected to exclude non-cash compensation expense from their adjusted EBITDA calculations. We also adjust EBITDA for minority interest in net income of subsidiary and cash distributions paid to minority members of APC because we believe this provides more timely and relevant information with respect to our financial performance. We exclude amounts with respect to minority interest in net income of subsidiary because this is a non-cash adjustment that does not reflect amounts actually paid to APC’s minority members because (1) distributions for any month are actually paid by APC in the following month and (2) it does not include adjustments for APC’s debt or capital expenditures, which are both included in the calculation of amounts actually paid to APC’s minority members. We instead include the amount of these cash distributions in adjusted EBITDA because they include these adjustments and reflect amounts actually paid by APC, thus allowing for a more accurate determination of our performance and ongoing obligations. Due to the foregoing, we believe that adjusted EBITDA is meaningful information about our business operations that investors should consider along with our GAAP financial information. We use adjusted EBITDA for planning purposes, including the preparation of internal annual operating budgets, and to measure our operating performance and the effectiveness of our operating strategies. We also use a variation of adjusted EBITDA in monitoring our compliance

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with certain financial covenants in our credit agreement and are using adjusted EBITDA to determine performance-based short-term incentive payments for our executive officers.
 
Adjusted EBITDA is a non-GAAP measure that has limitations because it does not include all items of income and expense that impact our operations. This non-GAAP financial measure is not prepared in accordance with, and should not be considered an alternative to, measurements required by GAAP, such as operating income, net income (loss), net income (loss) per share, cash flow from continuing operating activities or any other measure of performance or liquidity derived in accordance with GAAP. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measures. In addition, it should be noted that companies calculate adjusted EBITDA differently and, therefore, adjusted EBITDA as presented for us may not be comparable to the calculations of adjusted EBITDA reported by other companies.
 
The following is a reconciliation of our income (loss) from continuing operations to adjusted EBITDA (dollars in thousands):
 
                                                                 
    Years Ended December 31,     Three Months Ended March 31,  
    2004     2005     2006     2006     2006     2006     2007     2007  
                (Restated)
    (Pro Forma)     (Pro Forma
          (Actual)     (As Adjusted)  
                (Actual)           As Adjusted)                    
                      (Unaudited)        
                            (Unaudited)  
 
                                                                 
Income (loss) from continuing operations
  $ (794 )   $ (5,708 )   $ (20,309 )   $ (20,905 )           $ (389 )   $ (27,786 )   $        
Non-cash compensation expense
                52       52                     10          
Non-cash interest expense related to redeemable preferred stock
    2,805       9,998       28,455       28,455               2,938       29,942          
Interest expense, net
    1,147       1,874       6,433       8,478               1,476       2,035          
Income tax expense (benefit)
    889       2,436       4,974       4,607               (200 )     3,140          
Depreciation expense
    1,278       1,591       2,442       2,785               461       755          
Amortization of intangibles
    1,550       3,162       5,156       6,627               971       1,844          
Amortization of DLNP intangible
                1,503       1,503               462       360          
Minority interest in net income of subsidiary
                1,913       2,407               126       900          
Cash distributions to minority interest
                (1,843 )     (2,337 )                   (466 )        
                                                                 
Adjusted EBITDA
  $ 6,875     $ 13,353     $ 28,776     $ 31,672     $             $ 5,845     $ 10,734     $  
                                                                 


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RISK FACTORS
 
Investing in our common stock involves a high degree of risk. You should carefully consider the following risks as well as the other information contained in this prospectus, including our consolidated financial statements and the notes to those statements, before investing in shares of our common stock. If any of the following events actually occur or risks actually materialize, our business, financial condition, results of operations or cash flow could be materially adversely affected. In that event, the trading price of our common stock could decline and you may lose all or part of your investment.
 
Risks Relating to Our Business Information Division
 
We depend on the economies and the demographics of our targeted sectors in the local and regional markets that we serve, and changes in those factors could have an adverse impact on our revenues, cash flows and profitability.
 
Our advertising revenues and, to a lesser extent, circulation revenues depend upon a variety of factors specific to the legal, financial and real estate sectors of the 20 markets that our Business Information Division serves. These factors include, among others, the size and demographic characteristics of the population, including the number of companies and professionals in our targeted business sectors, and local economic conditions affecting these sectors. For example, if the local economy or targeted business sector in a market we serve experiences a downturn, display and classified advertising, which constituted 36.3%, 28.4% and 21.1% of our total revenues in 2005, 2006 and the first quarter of 2007, respectively, generally decreases for our business information products that target such market or sector. Further, if the local economy in a market we serve experiences growth, public notices, which constituted 26.8%, 22.4% and 21.2% of our total revenues in 2005, 2006 and the first quarter of 2007, respectively, may decrease as a result of fewer foreclosure proceedings requiring the posting of public notices. If the level of advertising in our business information products or public notices in our court and commercial newspapers were to decrease, our revenues, cash flows and profitability could be adversely affected.
 
A change in the laws governing public notice requirements may reduce or eliminate the amount of public notices required to be published in print or adversely change the eligibility requirements for publishing public notices, which could adversely affect our revenues, profitability and growth opportunities.
 
In various states, legislatures have considered proposals that would eliminate or reduce the number of public notices required by statute. In addition, some state legislatures have proposed that state and local governments publish notices themselves online. The impetus for the passage of such laws may increase as online alternatives to print sources of information become increasingly familiar and more generally accepted. Some states have also proposed, enacted or interpreted laws to alter the frequency with which public notices are required to be published, reduce the amount of information required to be disclosed in public notices or change the requirements for publications to be eligible to publish public notices. For example, a court in Idaho has recently ruled that Idaho’s public notice statute requires public notices to be published only in the newspaper with the largest circulation in a jurisdiction, which, if upheld, will negatively affect our ability to continue publishing the small amount of public notices that we have historically published in our Idaho Business Review. Any changes in laws that materially reduce the amount or frequency of public notices required to be published in print or that adversely change the eligibility requirements for publishing public notices in states where we publish or intend to publish court and commercial newspapers would adversely affect our public notice revenues and could adversely affect our ability to differentiate our business information products, which could have an adverse impact on our revenues, profitability and growth opportunities.
 
If we are unable to compete effectively with other companies in the local media industry, our revenues and profitability may decline.
 
We compete for display and classified advertising and circulation with at least one metropolitan daily newspaper in all of the markets we serve and one local business journal in many of the markets we serve.


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Display and classified advertising constituted 42.3%, 43.0% and 38.7% of our Business Information Division’s revenues in 2005, 2006 and the first quarter of 2007, respectively, and paid circulation constituted 20.8%, 18.4% and 18.7% of our Business Information Division’s revenues in 2005, 2006 and the first quarter of 2007, respectively. Generally, we compete for these forms of advertising and circulation on the basis of how efficiently and effectively we can reach an advertiser’s target audience and the quality and tailored nature of our proprietary content. If the number of subscriptions to our paid publications were to decrease, our circulation revenues would decline to the extent we are not able to continue increasing our subscription rates. For example, subscriptions to our paid publications and circulation revenues decreased between 2005 and 2006 primarily due to the loss of subscribers to our paid publications, such as Lawyers USA, for which we terminated discounted subscription programs. A continued decrease in our subscribers might also make it more difficult for us to attract and retain advertisers due to reduced readership. Our local and regional competitors vary from market to market and many of our competitors for advertising revenues are larger and have greater financial and distribution resources than we do. In the future, we may be required to spend more money, or to reduce our advertising or subscription rates, to attract and retain advertisers and subscribers. We may also experience a decline of circulation or print advertising revenue due to alternative media, such as the Internet. For example, as the use of the Internet has increased, we have lost some classified advertising to online advertising businesses and some subscribers to our free Internet sites that contain abbreviated versions of our publications. If we are not able to compete effectively for advertising expenditures and paid circulation, our revenues and profitability may be adversely affected.
 
Our business and reputation could suffer if third-party providers of printing and delivery services that we rely upon fail to perform satisfactorily.
 
We outsource a significant amount of our printing to third-party printing companies. As a result, we are unable to ensure directly that the final printed product is of a quality acceptable to our subscribers. Moreover, if these third-party printers do not perform their services satisfactorily or if they decide not to continue to provide these services to us on commercially reasonable terms, our ability to provide timely and dependable business information products could be adversely affected. In addition, we could face increased costs or delays if we must identify and retain other third-party printers.
 
Most of our print publications are delivered to our subscribers by the U.S. Postal Service. We have experienced, and may continue to experience, delays in the delivery of our print publications by the U.S. Postal Service. To the extent we try to avoid these delays by using third-party carriers other than the U.S. Postal Service to deliver our print products, we will incur increased operating costs. In addition, timely delivery of our publications is extremely important to many of our advertisers, public notice publishers and subscribers. Any delays in delivery of our print publications to our subscribers could negatively affect our reputation, cause us to lose advertisers, public notice publishers and subscribers and limit our ability to attract new advertisers, public notice publishers and subscribers.
 
If our Maryland operations are not as successful in the future, our operating results could be adversely affected.
 
We derived 13.6% and 11.9% of our Business Information Division’s revenues in 2006 and the first quarter of 2007, respectively, from the business information products that we target to the Maryland market. Specifically, one of our paid publications, The Daily Record in Maryland, accounted for over 10% of our Business Information Division’s revenues in 2006 and the first quarter of 2007. Therefore, our operating results could be adversely affected if our Business Information operations in the Maryland market are not successful in the future, whether as a result of a loss of subscribers to our paid publications (in particular, The Daily Record) that serve the Maryland market, a decrease in public notices or advertisements placed in these publications or a decrease in productivity at our Baltimore, Maryland printing facility. Productivity at our printing facility could be adversely affected by a number of factors, including damage to the facility because of an accident, natural disaster or similar event, any mechanical failure with respect to the equipment at the facility or a work stoppage at the facility in connection with a disagreement with the labor union that represents approximately 24% of the employees at the facility.


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A key component of our operating income and operating cash flows has been, and may continue to be, our minority equity investment in a Michigan publishing company.
 
We own 35.0% of the membership interests in Detroit Legal News Publishing, LLC, or DLNP, the publisher of Detroit Legal News and seven other publications in Michigan. We account for our investment in DLNP using the equity method, and our share of DLNP’s net income, net of amortization expense of $1.5 million and $360,000, was $2.7 million and $915,000, or 12.6% and 11.1% of our total operating income, in 2006 and the first quarter of 2007, respectively. In addition, we received an aggregate of $3.5 million and $1.4 million of distributions from DLNP, or 19.1% and 19.5% of our net cash provided by operating activities, in 2006 and the first quarter of 2007, respectively. If DLNP’s operations, which we have limited rights to influence, are not as successful in the future, our operating income and cash flows may be adversely affected. For example, a decrease in residential mortgage foreclosures in Michigan would adversely affect DLNP’s public notice revenue, which could decrease the net income of DLNP in which we share.
 
Risks Relating to Our Professional Services Division
 
We have owned and operated the businesses within our Professional Services Division for only a short period of time.
 
Our Professional Services Division consists of APC, our mortgage default processing service business in which we acquired an 81.0% interest in March 2006 and that acquired the mortgage default processing service business of Feiwell & Hannoy in January 2007, and Counsel Press, our appellate services business that we acquired in January 2005. Prior to our acquisition of these businesses, our executive officers, with the exception of David A. Trott, President of APC, had not managed or operated a mortgage default processing or an appellate services business. David Trott, in addition to being President of APC, is also managing attorney of Trott & Trott, and accordingly does not devote his full time and effort to APC. If our executive officers cannot effectively manage and operate these businesses, our Professional Services Division’s operating results and prospects may be adversely affected and we may not be able to execute our growth strategy with respect to this division.
 
David A. Trott, the President of APC, by virtue of his being the majority shareholder and managing attorney of the law firm of Trott & Trott and having other relationships with DLNP and APC, and Michael J. Feiwell and Douglas J. Hannoy, employees of APC, by virtue of their being the sole shareholders and principal attorneys of the law firm of Feiwell & Hannoy, may under certain circumstances have interests that differ from or conflict with our interests.
 
David A. Trott, the President of APC, is the majority shareholder in and managing attorney of the law firm of Trott & Trott, one of APC’s two customers. Trott & Trott also owns 18.1% of APC. In addition, Michael J. Feiwell and Douglas J. Hannoy, are the sole shareholders and the principal attorneys in the law firm of Feiwell & Hannoy, APC’s other customer and an owner 4.5% of APC, are also employees of APC. Therefore, Messrs. Trott, Feiwell and Hannoy may experience conflicts of interest in the execution of their duties on behalf of us. These conflicts may not be resolved in a manner favorable to us. For example, they may be precluded by their ethical obligations or may otherwise be reluctant to take actions on behalf of us that are in our best interests, but are not or may not be in the best interests of their law firms or their clients. Further, as licensed attorneys, Messrs. Trott, Feiwell or Hannoy may be obligated to take actions on behalf of his law firm or its clients that are not in our best interests. In addition, Mr. Trott has other direct and indirect relationships with DLNP and APC that could cause similar conflicts. See “Certain Relationships and Related Transactions — David A. Trott” for a description of these relationships.
 
If the number of case files referred to us by our two current mortgage default processing service customers decreases or fails to increase, our operating results and ability to execute our growth strategy could be adversely affected.
 
Trott & Trott and Feiwell & Hannoy are currently the only customers of APC, our mortgage default processing services business, which constituted 75.6% and 74.8% of our Professional Services Division’s


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revenues in 2006 on a pro forma basis and in the first quarter of 2007, respectively, and 31.9% and 34.0% of our total revenues in 2006 on a pro forma basis and in the first quarter of 2007, respectively. We are paid different fixed fees for each foreclosure, bankruptcy, eviction and litigation case file referred by these two firms to us for the provision of processing services. Therefore, the success of our mortgage default processing services business is tied to the number of these case files that Trott & Trott and Feiwell & Hannoy receive from their mortgage lending and mortgage loan servicing firm clients. Our operating results and ability to execute our growth strategy could be adversely affected if either Trott & Trott or Feiwell & Hannoy lose business from these clients or are unable to attract additional business from current or new clients for any reason, including any of the following: the provision of poor legal services, the loss of key attorneys (such as David Trott, who has developed and maintains a substantial amount of Trott & Trott’s client relationships), the desire of the law firm’s clients to allocate files among several law firms or a decrease in the number of residential mortgage foreclosures in Michigan or Indiana, including due to market factors or governmental action. Further, we could lose referrals from our law firm customers to the extent that Trott & Trott’s clients direct it to use another provider of mortgage default processing services or the clients of either law firm increase the amount of mortgage default processing services that they conduct in-house, and we could lose either law firm customer if we materially breach our services agreements with such customer.
 
Regulation of the legal profession may constrain APC’s and Counsel Press’ operations, and numerous issues arising out of that regulation, its interpretation or its evolution could impair our ability to provide professional services to our customers and reduce our revenues and profitability.
 
Each state has adopted laws, regulations and codes of ethics that provide for the licensure of attorneys, which grants attorneys the exclusive right to practice law and places restrictions upon the activities of licensed attorneys. The boundaries of the “practice of law,” however, are indistinct, vary from one state to another and are the product of complex interactions among state law, bar associations and constitutional law formulated by the U.S. Supreme Court. Many states define the practice of law to include the giving of advice and opinions regarding another person’s legal rights, the preparation of legal documents or the preparation of court documents for another person. In addition, all states and the American Bar Association prohibit attorneys from sharing fees for legal services with non-attorneys.
 
Pursuant to services agreements between APC and its two law firm customers, we provide mortgage default processing services. Through Counsel Press, we provide procedural and technical advice to law firms and attorneys to enable them to file appellate briefs, records and appendices on behalf of their clients that are compliant with court rules. Current laws, regulations and codes of ethics related to the practice of law pose the following principal risks:
 
  •  State or local bar associations, state or local prosecutors or other persons may challenge the services provided by APC or Counsel Press as constituting the unauthorized practice of law. Any such challenge could have a disruptive effect upon the operations of our business, including the diversion of significant time and attention of our senior management. We may also incur significant expenses in connection with such a challenge, including substantial fees for attorneys and other professional advisors. If a challenge to APC’s or Counsel Press’ operations were successful, we may need to materially modify our professional services operations in a manner that adversely affects that division’s revenues and profitability and we could be subject to a range of penalties that could damage our reputation in the legal markets we serve. In addition, any similar challenge to the operations of APC’s law firm customers could adversely impact their mortgage default business, which would in turn adversely affect our Professional Service Division’s revenues and profitability; and
 
  •  The services agreements to which APC is a party could be deemed to be unenforceable if a court were to determine that such agreements constituted an impermissible fee sharing arrangement between the law firm and APC.
 
Applicable laws, regulations and codes of ethics, including their interpretation and enforcement, could change in a manner that restricts APC’s or Counsel Press’ operations. Any such change in laws, policies or practices could increase our cost of doing business or adversely affect our revenues and profitability.


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Failure to effectively customize our proprietary case management software system so that it can be used to serve Feiwell & Hannoy and other law firms could adversely affect our mortgage default processing service business and growth prospects.
 
Our proprietary case management software system stores, manages and reports on the large amount of data associated with each foreclosure, bankruptcy or eviction case file serviced by APC in Michigan, a non-judicial foreclosure state. Because Indiana is a judicial foreclosure state, which means the foreclosure is processed through the courts, Feiwell & Hannoy must satisfy requirements that are significantly different from those that apply in Michigan. We are working to customize our proprietary case management software system so that it can be used to assist Feiwell & Hannoy in satisfying these foreclosure requirements. If we are not, on a timely basis, able to effectively customize our case management software system to serve Feiwell & Hannoy, we may not be able to realize the operational efficiencies and increased capacity to handle files that we anticipated when we acquired the mortgage default processing service business of Feiwell & Hannoy. Further, we agreed to the fees we receive from Feiwell & Hannoy for each case file the firm refers to us on the assumption that we would realize those operational efficiencies. Therefore, the failure to effectively customize our case management software system could impact our profitability under our services agreement with Feiwell & Hannoy.
 
In addition, the success of our growth strategy with respect to our mortgage default processing service business depends on our ability to use our case management software system as the platform to provide processing services in other states regardless of their foreclosure process requirements. If we are unable to effectively customize our software system so that it can be used to service other law firms that we expect to partner with in the future, we may not be able to execute our growth strategy for our Professional Services Division.
 
Claims, even if not valid, that our case management software system, document conversion system or other proprietary software products and information systems infringe on the intellectual property rights of others could increase our expenses or inhibit us from offering certain services.
 
Other persons could claim that they have patents and other intellectual property rights that cover or affect our use of software products and other components of information systems on which we rely to operate our business, including our proprietary case management software system we use to provide mortgage default processing services and our proprietary document conversion system we use to provide appellate services. Litigation may be necessary to determine the validity and scope of third-party rights or to defend against claims of infringement. Any litigation, regardless of the outcome, could result in substantial costs and diversion of resources and could have a material adverse effect on our business. If a court determines that one or more of the software products or other components of information systems we use infringes on intellectual property owned by others or we agree to settle such a dispute, we may be liable for money damages. In addition, we may be required to cease using those products and components unless we obtain licenses from the owners of the intellectual property or redesign those products and components in such a way as to avoid infringement. In any event, such situations may increase our expenses or adversely affect the marketability of our services.
 
Risks Relating to Our Business in General
 
We depend on key personnel and we may not be able to operate and grow our business effectively if we lose the services of any of our key personnel or are unable to attract qualified personnel in the future.
 
We rely heavily on our senior management team, including James P. Dolan, our founder, Chairman, President and Chief Executive Officer; Scott J. Pollei, our Executive Vice President and Chief Financial Officer; David A. Trott, President of APC; and Mark W.C. Stodder, our Executive Vice President, Business Information, because they have a unique understanding of our diverse product and service offerings and the ability to manage an organization that has a diverse group of employees. Our ability to retain Messrs. Dolan, Pollei, Trott and Stodder and other key personnel is therefore very important to our future success. In addition,


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we rely on our senior management, especially Mr. Dolan, to identify growth opportunities through the development or acquisition of additional publications and professional services opportunities.
 
We have employment agreements with Messrs. Dolan, Pollei, Trott and Stodder. These employment agreements, however, do not ensure that Messrs. Dolan, Pollei, Trott and Stodder will not voluntarily terminate their employment with us. Further, we do not have employment agreements with other key personnel. In addition, we do not have non-competition or non-solicitation agreements with many of our key personnel other than our executive officers and, therefore, these personnel may leave to work for a competitor at any time. We also do not have key man insurance for any of our current management or other key personnel. The loss of any key personnel would require the remaining key personnel to divert immediate and substantial attention to seeking a replacement. Competition for senior management personnel is intense. An inability to find a suitable replacement for any departing executive officer or key employee on a timely basis could adversely affect our ability to operate and grow our business.
 
We intend to continue to pursue acquisition opportunities, which we may not do successfully and may subject us to considerable business and financial risk.
 
We have grown, and anticipate that we will continue to grow, through opportunistic acquisitions of business information and professional services businesses. While we evaluate potential acquisitions on an ongoing basis, we may not be successful in assessing the value, strengths and weaknesses of acquisition opportunities or consummating acquisitions on acceptable terms. Furthermore, we may not be successful in identifying acquisition opportunities and suitable acquisition opportunities may not even be made available or known to us. In addition, we may compete for certain acquisition targets with companies that have greater financial resources than we do. Our ability to pursue acquisition opportunities may also be limited by non-competition provisions to which we are subject. For example, until 2008, our ability to provide data, public records, electronic data and information within North America with respect to bankruptcy case filings, Uniform Commercial Code financing statements, tax liens, attorney liens, certain monetary judgments and tenant evictions is limited by non-competition provisions that we agreed to when our predecessor sold its national public records unit. In addition, our ability to carry public notices in Michigan and to provide mortgage default processing services in Indiana is limited by non-competition provisions to which we agreed when we purchased a 35.0% membership interest in DLNP and the mortgage default processing service business of Feiwell & Hannoy. We anticipate financing future acquisitions through cash provided by operating activities, proceeds from this offering, borrowings under our bank credit facility or other debt or equity financing, which would reduce our cash available for other purposes.
 
Acquisitions may expose us to particular business and financial risks that include, but are not limited to:
 
  •  diverting management’s time, attention and resources from managing our business;
 
  •  incurring additional indebtedness and assuming liabilities;
 
  •  incurring significant additional capital expenditures and operating expenses to improve, coordinate or integrate managerial, operational, financial and administrative systems;
 
  •  experiencing an adverse impact on our earnings from non-recurring acquisition-related charges or the write-off or amortization of acquired goodwill and other intangible assets;
 
  •  failing to integrate the operations and personnel of the acquired businesses;
 
  •  facing operational difficulties in new markets or with new product or service offerings; and
 
  •  failing to retain key personnel and customers of the acquired businesses, including subscribers and advertisers for acquired publications and clients of the law firm customers served by acquired mortgage default processing businesses.
 
We may not be able to successfully manage acquired businesses or increase our cash flow from these operations. If we are unable to successfully implement our acquisition strategy or address the risks associated with acquisitions, or if we encounter unforeseen expenses, difficulties, complications or delays frequently


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encountered in connection with the integration of acquired entities and the expansion of operations, our growth and ability to compete may be impaired, we may fail to achieve acquisition synergies and we may be required to focus resources on integration of operations rather than other profitable areas.
 
We may have difficulty managing our growth, which may result in operating inefficiencies and negatively impact our operating margins.
 
Our growth may place a significant strain on our management and operations, especially as we continue to expand our product and service offerings, the number of markets we serve and the number of local offices we maintain throughout the United States, including through acquiring new businesses. We may not be able to manage our growth on a timely or cost effective basis or accurately predict the timing or rate of this growth. We believe that our current and anticipated growth will require us to continue implementing new and enhanced systems, expanding and upgrading our data processing software and training our personnel to utilize these systems and software. Our growth has also required, and will continue to require, that we increase our investment in management personnel, financial and management systems and controls and office facilities. In particular, we are, and will continue to be, highly dependent on the effective and reliable operation of our centralized accounting, circulation and information systems. In addition, the scope of procedures for assuring compliance with applicable rules and regulations has changed as the size and complexity of our business has changed. If we fail to manage these and other growth requirements successfully or if we are unable to implement or maintain our centralized systems, or rely on their output, we may experience operating inefficiencies or not achieve anticipated efficiencies. For example, we recently experienced difficulties in transitioning from our legacy circulation systems to our new circulation system that hampered our ability to efficiently keep track of information related to subscriptions for our business information products. In addition, the increased costs associated with our expected growth may not be offset by corresponding increases in our revenues, which would decrease our operating margins.
 
We rely on our proprietary case management software system, document conversion systems, web sites and online networks, and a disruption, failure or security compromise of these systems may disrupt our business, damage our reputation and adversely affect our revenues and profitability.
 
Our proprietary case management software system is critical to our mortgage default processing service business because it enables us to efficiently and timely service a large number of foreclosure, bankruptcy, eviction and, to a lesser extent, litigation case files. Our appellate services business relies on our proprietary document conversion systems that facilitate our efficient processing of appellate briefs, records and appendices. Similarly, we rely on our web sites and email notification systems to provide timely, relevant and dependable business information to our customers. Therefore, network or system shutdowns caused by events such as computer hacking, dissemination of computer viruses, worms and other destructive or disruptive software, denial of service attacks and other malicious activity, as well as power outages, natural disasters and similar events, could have an adverse impact on our operations, customer satisfaction and revenues due to degradation of service, service disruption or damage to equipment and data.
 
In addition to shutdowns, our systems are subject to risks caused by misappropriation, misuse, leakage, falsification and accidental release or loss of information, including sensitive case file data maintained in our proprietary case management system and credit card information for our business information customers. As a result of the increasing awareness concerning the importance of safeguarding personal information, the potential misuse of such information and legislation that has been adopted or is being considered regarding the protection and security of personal information, information-related risks are increasing, particularly for businesses like ours that handle a large amount of personal data.
 
Disruptions or security compromises of our systems could result in large expenditures to repair or replace such systems, remedy any security breaches and protect us from similar events in the future. We also could be exposed to negligence claims or other legal proceedings brought by our customers or their clients, and we could incur significant legal expenses and our management’s attention may be diverted from our operations in defending ourselves against and resolving lawsuits or claims. In addition, if we were to suffer damage to our reputation as a result of any system failure or security compromise, the clients of our law firm


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customers to which we provide mortgage default processing services could choose to send fewer foreclosure, bankruptcy or eviction case files to these customers. Any such reduction in the number of case files handled by our customers would also reduce the number of mortgage default case files serviced by us. Similarly, our appellate services clients may elect to use other service providers. In addition, customers of our Business Information Division may seek out alternative sources of the business information available on our web sites and email notification systems. Further, in the event that any disruption or security compromise constituted a material breach under our services agreements, our law firm customers could terminate these agreements. In any of these cases, our revenues and profitability could be adversely affected.
 
We may be required to incur additional indebtedness or raise additional capital to fund our operations and acquisitions or repay our indebtedness.
 
We may not generate a sufficient amount of cash from our operations to finance growth opportunities, including acquisitions, or fund our operations, including payments on our indebtedness and unanticipated capital expenditures. Our ability to pursue any material expansion of our business, including through acquisitions or increased capital spending, will likely depend on our ability to obtain third-party financing. This financing may not be available to us at all or at an acceptable cost.
 
We will incur significant increased costs as a result of operating as a public company, and our management will be required to devote substantial time to various compliance issues.
 
As a result of this offering, we will become subject to reporting, corporate governance and other obligations under the Securities Exchange Act of 1934, including the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the rules and regulations of The New York Stock Exchange. For example, Section 404 of the Sarbanes-Oxley Act will require annual management assessment of the effectiveness of our internal control over financial reporting and a report by our independent auditors addressing these assessments beginning with the year ending December 31, 2008. These reporting and other obligations will place significant demands on our management, administrative, operational and accounting resources, especially if we have to design and implement enhanced processes and controls to address any material weaknesses in our internal control over financial reporting that are identified by us or our independent auditors. We will also incur substantial additional legal, accounting and other expenses that we did not incur as a private company to comply with these requirements. These regulations may also make it more difficult to attract and retain qualified members for our board of directors and its various committees. Any failure to comply with these regulations, including if we fail to account for transactions and report information to our investors on a timely and accurate basis, or to otherwise be able to conclude in a timely manner that our internal control over financial reporting is operating effectively, could decrease investor confidence in our public disclosure, impair our ability to obtain financing when needed or have an adverse effect on our stock price.
 
We have incurred in the past, and may incur in the future, net losses.
 
We incurred net losses of $(1.3) million, $(7.5) million, $(20.3) million and $(27.8) million for the years ended December 31, 2004, 2005 and 2006 and the three months ended March 31, 2007, respectively. These net losses have been attributable to our non-cash interest expense related to redeemable preferred stock, which we will not incur after consummation of this offering because we will use a portion of our net proceeds from this offering to redeem our preferred stock. However, we expect our operating expenses to increase in the future as we expand our operations. If our operating expenses exceed our expectations, whether because we are unable to realize the anticipated operational efficiencies from centralization of acquired accounting, circulation, advertising, production and appellate and default processing systems in a timely manner following future expansions or for other reasons, or if our revenues do not grow to offset these increased expenses, we may continue to incur net losses in the future.
 
We are subject to risks relating to litigation due to the nature of our product and service offerings.
 
We may, from time to time, be subject to or named as a party in libel actions, negligence claims, and other legal proceedings in the ordinary course of our business given the editorial content of our business


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information products and the technical rules with which our appellate services and mortgage default processing businesses must comply and the strict deadlines these businesses must meet. We could incur significant legal expenses and our management’s attention may be diverted from our operations in defending ourselves against and resolving lawsuits or claims. An adverse resolution of any future lawsuits or claims against us could result in a negative perception of us and cause the market price of our common stock to decline or otherwise have an adverse effect on our operating results and growth prospects.
 
Our failure to comply with the covenants contained on our debt instruments could result in an event of default that could adversely affect our financial condition and ability to operate our business as planned.
 
We have, and after this offering will continue to have, significant debt and debt service obligations. Our credit agreement contains, and any agreements to refinance our debt likely will contain, financial and restrictive covenants that limit our ability to incur additional debt, including to finance future operations or other capital needs, and to engage in other activities that we may believe are in our long-term best interests, including to dispose of or acquire assets. Our failure to comply with these covenants may result in an event of default, which if not cured or waived, could result in the banks accelerating the maturity of our indebtedness or preventing us from accessing availability under our credit facility. If the maturity of our indebtedness is accelerated, we may not have sufficient cash resources to satisfy our debt obligations and we may not be able to continue our operations as planned. In addition, the indebtedness under our credit agreement is secured by a security interest in substantially all of our tangible and intangible assets, including the equity interests of our subsidiaries, and therefore, if we are unable to repay such indebtedness the banks could foreclose on these assets and sell the pledged equity interests, which could adversely affect our ability to operate our business. We will incur additional indebtedness in the future if the two minority members of APC exercise their right to require APC to repurchase all or any portion of their APC membership interests (currently 22.6%) within six months after the second anniversary of the effective date of this offering because the purchase price paid by APC in connection with any such repurchase would be in the form of a three-year unsecured note. The principal amount of the note would be equal to 6.25 times APC’s trailing twelve month EBITDA and would bear interest at a rate equal to prime plus 2%.
 
Risks Associated with Purchasing Our Common Stock in this Offering
 
As a new investor, you will incur immediate and substantial dilution.
 
If you purchase shares of our common stock in this offering, you will experience an immediate and substantial dilution of $      in pro forma net tangible book value per share of your investment. This means that the price you pay for the shares you acquire in this offering will be significantly higher than your net tangible book value per share. If we issue additional shares of common stock in the future, including the           shares of common stock we have reserved for issuance under our employee stock purchase plan, you may experience further dilution in the net tangible book value of your shares. Likewise, you will incur additional dilution if the holders of outstanding options to purchase shares of our common stock at prices below our net tangible book value per share exercise their options after this offering. Upon consummation of this offering, there will be           shares of common stock that will be issuable upon the exercise of outstanding stock options, with a weighted average exercise price of $      per share, including options exercisable for           shares of common stock, with an exercise price equal to the initial public offering price, that we intend to issue on the date of this prospectus.
 
Our common stock does not have a trading history, and you may not be able to trade our common stock if an active trading market does not develop.
 
Prior to this offering, there has been no public market for our common stock. We have applied to list our common stock on The New York Stock Exchange under the symbol “DM.” Although the underwriters have informed us that they intend to make a market in our common stock, they are not obligated to do so, and any market-making may be discontinued at any time without prior notice. Therefore, an active trading market for our common stock may not develop or, if it does develop, may not continue. As a result, the market price of


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our common stock, as well as your ability to sell our common stock, could be adversely affected. You should not view the initial public offering price as any indication of prices that will prevail in the trading market.
 
The market price of our common stock may be volatile and will depend on a variety of factors, which could cause our common stock to trade at prices below the initial public offering price.
 
The initial public offering price of the common stock will be determined through negotiations between representatives of the underwriters and us and may not be representative of the price that will prevail in the open market. If an active trading market develops following the offering, the market price of our common stock may fluctuate significantly. Some of the factors that could affect our share price include, but are not limited to:
 
  •  variations in our quarterly operating results;
 
  •  changes in the legal or regulatory environment affecting our business;
 
  •  changes in our earnings estimates or expectations as to our future financial performance, including financial estimates by securities analysts and investors;
 
  •  the contents of published research reports about us or our industry or the failure of securities analysts to cover our common stock after this offering;
 
  •  additions or departures of key management personnel;
 
  •  any increased indebtedness we may incur in the future;
 
  •  announcements by us or others and developments affecting us;
 
  •  actions by institutional stockholders;
 
  •  changes in market valuations of similar companies;
 
  •  speculation or reports by the press or investment community with respect to us or our industry in general; and
 
  •  general economic, market and political conditions.
 
These factors could cause our common stock to trade at prices below the initial public offering price, which could prevent you from selling your common stock at or above the initial public offering price. In addition, the stock market in general, and The New York Stock Exchange in particular, has from time to time experienced significant price and volume fluctuations that have affected the market prices of individual securities. These fluctuations often have been unrelated or disproportionate to the operating performance of publicly traded companies. In the past, following periods of volatility in the market price of a particular company’s securities, securities class-action litigation has often been brought against that company. If similar litigation were instituted against us, it could result in substantial costs and divert management’s attention and resources from our operations.
 
Certain of our directors and executive officers, their immediate family members and affiliated entities, including stockholders that have designated members of our board of directors, will receive a material benefit from our redemption of their preferred stock in connection with this offering.
 
Messrs. Dolan, Bergstrom, Pollei, Stodder and Baumbach, as well as members of their immediate families and affiliated entities, own shares of our preferred stock that we will redeem using a portion of our net proceeds from this offering. In addition, we will redeem shares of preferred stock held by stockholders that have designated several current or recent members of our board pursuant to rights granted to these stockholders under our amended and restated stockholders agreement dated as of September 1, 2004. Specifically:
 
  •  ABRY Mezzanine Partners, L.P. and ABRY Investment Partners, L.P., or the ABRY funds, designated Peni Garber, an employee and officer of ABRY Partners, LLC, as a member of our board;


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  •  BG Media Investors L.P., or BGMI, designated Edward Carroll, a member of the general partner of BGMI, and Earl Macomber, an interest holder in the general partner of BGMI, as members of our board; Mr. Macomber stepped down from our board in March 2007;
 
  •  Caisse de dépôt et placement du Québec, or CDPQ, designated Jacques Massicotte, George Rossi, and Pierre Bédard as members of our board; Mr. Bédard stepped down from our board in March 2007;
 
  •  Cherry Tree Ventures IV Limited Partnership, or Cherry Tree, designated Anton J. Christianson, managing partner of Cherry Tree Investments, as a member of our board;
 
  •  The David J. Winton trust, or the Winton trust, designated David Michael Winton, the income beneficiary of the Winton trust, as a member of our board; and
 
  •  DMIC LLC, or DMIC, designated Dean Bachmeier, a principal with Private Capital Management, Inc., as a member of our board; Mr. Bachmeier stepped down from our board in March 2007.
 
We will use approximately  % of our net proceeds from this offering to redeem all of our series A preferred stock and series B preferred stock (in each case including shares issued upon conversion of our series C preferred stock). In connection with the redemption, we will pay an aggregate of $      and issue an aggregate of           shares of our common stock to the above-described persons. In addition, Messrs. Baumbach and Stodder hold           and          shares of our common stock, respectively, that are subject to our right to redeem such shares upon their termination of employment. Our redemption right will terminate upon the consummation of this offering. See “Certain Relationships and Related Transactions,” “Use of Proceeds” and “Principal and Selling Stockholders” for a more detailed description of the benefits that certain related parties will receive in connection with this offering.
 
Future offerings of debt or equity securities by us may adversely affect the market price of our common stock or your rights as holders of our common stock.
 
In the future, we may attempt to increase our capital resources by offering debt or additional equity securities, including commercial paper, medium-term notes, senior or subordinated notes, shares of preferred stock or shares of our common stock. Upon liquidation, holders of such debt securities and preferred shares, if issued, and lenders with respect to other borrowings, would receive a distribution of our available assets prior to the holders of our common stock. Additional equity offerings may dilute the economic and voting rights of our existing stockholders and/or reduce the market price of our common stock. After this offering, we will have an aggregate of           shares of common stock authorized but unissued and not reserved for issuance under our incentive compensation plan or employee stock purchase plan and           shares of authorized but unissued preferred stock. We may issue all of these shares without any action or approval by our stockholders. We intend to continue to actively pursue acquisitions and may issue shares of common stock in connection with these acquisitions. Further, we may continue to issue equity interests in APC in connection with acquisitions of mortgage default processing service businesses. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings.
 
Sales of a substantial number of shares of our common stock following this offering may adversely affect the market price of our common stock or our ability to raise additional capital.
 
Sales of a substantial number of shares of our common stock in the public market following this offering, or the perception that large sales could occur, could cause the market price of our common stock to decline or limit our future ability to raise capital through an offering of equity securities. Other than the restricted shares of common stock we intend to issue on the date of this prospectus, all of the shares of our common stock outstanding upon consummation of this offering will be freely tradable without restriction or further registration under the federal securities laws, unless held by our “affiliates” within the meaning of Rule 144 under the Securities Act or subject to lock-up agreements with the underwriters or a holdback agreement with us. Shares held by our “affiliates” will be “restricted securities” and will be subject to the volume, manner of sale and notice restrictions of Rule 144. In addition, our certificate of incorporation will


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permit the issuance of up to           shares of common stock. After this offering, we will have an aggregate of           shares of our common stock authorized but unissued. Thus, we have the ability to issue substantial amounts of common stock in the future, which would dilute the percentage ownership held by the investors who purchase our shares in this offering.
 
We, each of our directors, each of our executive officers, the selling stockholders and certain other significant stockholders have agreed for a period of 180 days after the date of this prospectus, subject to extensions in certain limited circumstances, to not, without the prior written consent of Goldman, Sachs & Co. and Merrill Lynch, directly or indirectly, offer to sell, sell, pledge or otherwise dispose of any shares of our common stock, subject to certain permitted exceptions. Certain of our other stockholders have entered into a registration rights agreement with us pursuant to which they have agreed to not effect any public sale of our securities for a 90-day holdback period following the date of this prospectus.
 
Following the effectiveness of the registration statement of which this prospectus forms a part, we intend to file a registration statement(s) on Form S-8 under the Securities Act covering      shares of common stock that will be issuable pursuant to our incentive compensation plan (including      shares of restricted stock we intend to issue on the date of this prospectus) and      shares of common stock that will be issuable pursuant to our employee stock purchase plan, which in the aggregate equals  % of the aggregate number of shares of our common stock that will be outstanding upon completion of this offering. Accordingly, subject to applicable vesting requirements, the exercise of options, the provisions of Rule 144 with respect to affiliates, the six-month transfer restriction applicable to employees that purchase shares of our common stock under our employee stock purchase plan and, if applicable, expiration of the 180-day lock-up agreements and 90-day holdback agreement, shares registered under the registration statement(s) on Form S-8 will be available for sale in the open market. In addition, we have granted most of our current stockholders registration rights with respect to their shares of our common stock. For a more detailed description of additional shares that may be sold in the future, see the sections of this prospectus captioned “Shares Eligible for Future Sale” and “Underwriting.”
 
Anti-takeover provisions in our amended and restated certificate of incorporation and our amended and restated by-laws may discourage, delay or prevent a merger or acquisition that you may consider favorable or prevent the removal of our current board of directors and management.
 
Our amended and restated certificate or incorporation and our amended and restated bylaws could delay, defer or prevent a third party from acquiring us, despite the possible benefit to our stockholders, or otherwise adversely affect the price of our common stock and your rights as a holder of our common stock. For example, our amended and restated certificate of incorporation and amended and restated bylaws will (1) permit our board of directors to issue one or more series of preferred stock with rights and preferences designated by our board, (2) stagger the terms of our board of directors into three classes and (3) impose advance notice requirements for stockholder proposals and nominations of directors to be considered at stockholders’ meetings. These provisions may discourage potential takeover attempts, discourage bids for our common stock at a premium over market price or adversely affect the market price of, and the voting and other rights of the holders of, our common stock. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors other than the candidates nominated by our board. We will also be subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder and which may discourage, delay or prevent a change of control of our company. See “Description of Capital Stock” for additional information on the anti-takeover measures applicable to us. In addition, our bank credit facility contains provisions that could limit our ability to enter into change of control transactions.


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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
This prospectus includes forward-looking statements that reflect our current expectations and projections about our future results, performance, prospects and opportunities. We have tried to identify these forward-looking statements by using words such as “may,” “will,” “expect,” “anticipate,” “believe,” “intend,” “estimate” and similar expressions. These forward-looking statements are based on information currently available to us and are subject to a number of risks, uncertainties and other factors, including those described in “Risk Factors” in this prospectus, 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 prospectus.


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USE OF PROCEEDS
 
We estimate that the net proceeds that we will receive from our sale of           shares of common stock in this offering will be $      million, assuming an initial public offering price of $      per share, the mid-point of the range shown on the cover of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any proceeds from the sale of shares by the selling stockholders.
 
We expect that we will use our estimated net proceeds from this offering for the following:
 
  •  approximately $      million to redeem all outstanding shares of our series A preferred stock, including shares issued upon conversion of all outstanding shares of our series C preferred stock upon consummation of this offering;
 
  •  approximately $      million to redeem all outstanding shares of our series B preferred stock that will be issued upon conversion of all outstanding shares of our series C preferred stock upon consummation of this offering;
 
  •  approximately $      million to repay outstanding indebtedness under our bank credit facility, which indebtedness has been outstanding since          , matures on           and consists of $      of principal and $      of interest that is accruing at a rate of  %; and
 
  •  the balance of approximately $      for general corporate purposes, including for acquisitions and working capital.
 
Upon consummation of this offering, each share of our series C preferred stock, including all accrued and unpaid dividends that have accrued at a rate of 6% per annum through the conversion date, will convert into           shares of common stock,           shares of series A preferred stock and one share of series B preferred stock (based on accrued and unpaid dividends, which we have assumed is the date hereof). The redemption price for the series B preferred stock is equal to $1,000 per share. The redemption price for the series A preferred stock is equal to $100 per share plus all accrued and unpaid dividends that have accrued at a rate of 6% per annum through the redemption date (which for purposes of the above, we have assumed is the date hereof). We will redeem all outstanding shares of our series A preferred stock and series B preferred stock upon consummation of this offering.
 
We will retain broad discretion in the allocation of the net proceeds of this offering that are not used to redeem our preferred stock or repay outstanding indebtedness under our bank credit facility. Although we evaluate potential acquisitions in the ordinary course of business, we have no specific understandings, commitments or agreements with respect to any acquisition at this time. Until we use such remaining net proceeds of this offering for acquisitions or general corporate purposes, we intend to invest the funds in short-term, investment-grade, interest-bearing securities. We cannot predict whether the proceeds invested will yield a favorable return.
 
DIVIDEND POLICY
 
We have not declared or paid any dividends on our common stock since our inception and do not intend to pay any dividends on our common stock in the foreseeable future. We currently expect that we will retain our future earnings, if any, for use in the operation and expansion of our business. Future cash dividends, if any, will be at the discretion of our board of directors and will depend upon, among other things, our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions (including in our credit agreement) and other factors our board of directors may deem relevant.


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CAPITALIZATION
 
The following table sets forth our cash and cash equivalents and capitalization as of March 31, 2007:
 
  •  on an actual basis; and
 
  •  on an as adjusted basis to give effect to (1) the receipt by us of the net proceeds from the sale of      shares of common stock at an assumed initial public offering price of $      per share (the mid-point of the range set forth on the cover of this prospectus) after deducting the estimated underwriting discounts and commissions and the estimated offering expenses payable by us, (2) the conversion of all outstanding shares of series C preferred stock into      shares of series A preferred stock, 38,132 shares of series B preferred stock and      shares of common stock, (3) our application of a portion of our net proceeds from this offering to redeem all outstanding shares of series A and series B preferred stock (in each case, including shares issued upon conversion of our series C preferred stock) and to repay approximately $           of outstanding indebtedness under our bank credit facility and (4) the issuance of      restricted shares of common stock on the date of this prospectus.
 
You should read this table in conjunction with our consolidated financial statements and the accompanying notes and our pro forma financial information included elsewhere in this prospectus, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Use of Proceeds.”
 
                 
    March 31, 2007  
          As
 
    Actual     Adjusted  
    (Unaudited)  
    (Dollars in thousands)  
 
Cash and cash equivalents
  $ 1,406     $            
                 
Current maturities of long-term debt
  $ 9,517     $  
                 
Long-term debt, excluding current portion
               
Senior variable-rate term note
    79,893          
Borrowing under variable-rate revolving line of credit
    4,000          
Unsecured note payable
    1,594          
Capital lease obligations
    40          
                 
Total long-term debt
    85,527          
                 
Series C mandatorily redeemable, convertible, participating preferred stock, $0.001 par value; 40,000 shares authorized and 38,132 shares issued and outstanding, actual; 0 shares authorized, issued and outstanding, as adjusted; liquidation preference of $64,250
    102,754        
Series B mandatorily redeemable, nonconvertible preferred stock, $0.001 par value; 40,000 shares authorized and 0 shares issued and outstanding, actual; 0 shares authorized and issued and outstanding, as adjusted; liquidation preference of $0
           
Series A mandatorily redeemable, nonconvertible preferred stock, $0.001 par value; 550,000 shares authorized and 287,000 shares issued and outstanding, actual; 0 shares authorized, issued and outstanding, as adjusted; liquidation preference of $35,549
    35,549        
                 
Total debt and redeemable preferred stock
    233,347          
                 


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    March 31, 2007  
          As
 
    Actual     Adjusted  
    (Unaudited)  
    (Dollars in thousands)  
 
Stockholders’ equity (deficit)
               
Common stock, $0.001 par value; 2,000,000 shares authorized and shares issued and outstanding, actual and pro forma;   shares authorized and   shares issued and outstanding, pro forma as adjusted
  $ 1     $    
Additional paid-in capital
    313          
Accumulated deficit
    (56,965 )        
                 
Total stockholders’ equity (deficit)
    (56,651 )        
                 
Total capitalization
  $ 176,696     $  
                 

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DILUTION
 
If you invest in our common stock, your interest will be diluted to the extent of the difference between the public offering price per share of our common stock and the pro forma net tangible book value per share of our common stock after this offering. We calculate net tangible book value per share by dividing the net tangible book value (total assets less intangible assets, deferred financing costs and total liabilities) by the number of outstanding shares of common stock.
 
Based on shares outstanding as of March 31, 2007, our net tangible book value at March 31, 2007, would have been $     , or $      per share of common stock.
 
After giving effect to (1) the receipt by us of the net proceeds from the sale of           shares of common stock at an assumed initial public offering price of $      per share (the mid-point of the range set forth on the cover of this prospectus) after deducting the estimated underwriting discounts and commissions and the estimated offering expenses payable by us, (2) the conversion of all outstanding shares of series C preferred stock into           shares of series A preferred stock, 38,132 shares of series B preferred stock and           shares of common stock, (3) our intended application of a portion of our net proceeds from this offering to redeem all outstanding shares of series A and series B preferred stock (in each case, including shares issued upon conversion of our series C preferred stock) and repay approximately $           of outstanding indebtedness under our bank credit facility and (4) the issuance of          restricted shares of common stock on the date of this prospectus, our as adjusted net tangible book value at March 31, 2007, would have been $      million, or $      per share of common stock. This represents an immediate and substantial dilution of $      per share to new investors.
 
The following table illustrates this per share dilution:
 
                 
Assumed public offering price per share
              $        
                 
Net tangible book value per share at March 31, 2007
  $            
                 
Increase per share attributable to new investors in this offering
  $            
                 
Net tangible book value per share at March 31, 2007 as adjusted for this offering
          $    
                 
Dilution per share to new investors
          $    
                 
 
The following table summarizes, as of March 31, 2007, the difference between existing stockholders and new investors with respect to the number of shares of common stock purchased from us in the offering (after giving effect to the issuance of common stock in connection with the conversion of the series C preferred stock), the total consideration paid to us and the average price per share paid by existing stockholders and by new investors purchasing common stock in the offering:
 
                                                 
                Average Price
 
    Shares Purchased     Total Consideration     Per Share  
    Number     Percentage     Number     Percentage     Number     Percentage  
    (Amounts in thousands, except percentages and per share data)  
 
Existing Stockholders
            %             %             %
                                                 
New Investors in the Offering
                      %                       %                       %
                                                 
Total
                                               
 
The above information excludes           shares of common stock issuable upon the exercise of outstanding stock options under our incentive compensation plan as of March 31, 2007, with an exercise price of $      per share.


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SELECTED HISTORICAL AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
 
The following table presents our selected consolidated financial data for the periods and as of the dates presented below. We derived the historical financial data for the fiscal years ended December 31, 2004, 2005 and 2006, and the historical financial data as of December 31, 2005 and 2006, from our audited consolidated financial statements that are included in this prospectus. The 2006 financial data has been restated as discussed in Note 16 to our audited consolidated financial statements that are included in this prospectus. We derived the historical financial data for the period from August 1, 2003, to December 31, 2003, and the historical financial data as of December 31, 2003, and 2004, from our audited consolidated financial statements not included in this prospectus. We derived the historical financial data for the fiscal years ended March 31, 2002, and March 31, 2003, and for the period from April 1, 2003, to July 31, 2003, and the historical financial data as of March 31, 2002, from the unaudited consolidated financial statements of our predecessor not included in this prospectus. Our fiscal year end is December 31. Our predecessor’s fiscal year end was March 31. We derived the historical financial data for the three months ended March 31, 2006, and 2007, and the historical financial data as of March 31, 2007, from our unaudited consolidated financial statements that are included in this prospectus. Our unaudited selected consolidated financial data as of March 31, 2007, and for the three months ended March 31, 2006, and 2007 have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of our management, reflect all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of this data in all material respects.
 
The pro forma financial data for the year ended December 31, 2006, gives effect to our acquisition of an 81.0% interest in APC on March 14, 2006, and APC’s subsequent acquisition of the mortgage default processing service business of Feiwell & Hannoy on January 9, 2007, as if each had occurred on January 1, 2006. Because the results of Feiwell & Hannoy since January 9, 2007, are already included in our statement of operations for the three months ended March 31, 2007, pro forma adjustments to our operating results for the first quarter of 2007 to give effect to the Feiwell & Hannoy acquisition as if it had occurred on January 1, 2007, would not be significant (it would increase our total revenues by $280,000 and reduce our net loss by $34,000). Therefore, we have not provided pro forma financial data for the three months ended March 31, 2007. The pro forma as adjusted financial data for the year ended December 31, 2006, gives effect to the APC and Feiwell & Hannoy acquisitions and, along with the as adjusted financial data for the three months ended March 31, 2007, reflects (1) the conversion of all outstanding shares of our series C preferred stock into           shares of common stock,           shares of series A preferred stock and           shares of series B preferred stock upon consummation of this offering; (2) our redemption of all outstanding shares of our series A preferred stock and series B preferred stock (in each case, including shares issued upon conversion of our series C preferred stock) with a portion of the net proceeds from this offering; (3) our repayment of approximately $     of outstanding indebtedness under our bank credit facility with a portion of our net proceeds from this offering; (4) the issuance of           restricted shares of common stock on the date of this prospectus; and (5) an increase of           and           weighted average shares outstanding as of December 31, 2006, and March 31, 2007, respectively, related to the issuance of shares of our common stock that would have been issued by us in this offering at an assumed initial public offering price of $           per share (the mid-point of the range set forth on the cover of this prospectus), less estimated underwriting discounts and commissions and estimated offering expenses payable by us, in order to redeem all outstanding shares of preferred stock and repay approximately $           of outstanding indebtedness under our bank credit facility.
 
The pro forma consolidated financial data presented below is based upon available information and assumptions that we believe are reasonable; however, we can provide no assurance that the assumptions used in the preparation of the pro forma consolidated financial data are correct. The pro forma financial data is for illustrative and informational purposes only and is not intended to represent or be indicative of what our results of operations would have been if our acquisition of an 81.0% interest in APC or APC’s acquisition of the mortgage default processing service business of Feiwell & Hannoy had occurred on January 1, 2006. The pro forma financial data also should not be considered representative of our future results of operations.
 
You should read the following information along with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our consolidated financial statements and the accompanying notes, the financial statements of certain acquired businesses and our pro forma information, which are included elsewhere in this prospectus.


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                Period from
                                                       
                April 1,
    Period from
                                                 
                2003 to
    August 1,
    Years Ended December 31,                    
    Years Ended March 31,     July 31,
    2003 to
                2006
          2006
    Three Months Ended March 31,  
    2002
    2003
    2003
    December 31,
                (Restated)
    2006
    (Pro Forma
          2007
    2007
 
    (Predecessor)     (Predecessor)     (Predecessor)     2003     2004     2005     (Actual)     (Pro Forma)     as Adjusted)     2006     (Actual)     (As Adjusted)  
          (Unaudited)                                   (Unaudited)           (Unaudited)        
    (Dollars in thousands, except per share data)                          
Consolidated Statement of Operations Data:
                                                                                               
Business information revenues
  $ 42,820     $ 43,056     $ 14,026     $ 18,945     $ 51,689     $ 66,726     $ 73,831     $ 73,831     $             $ 17,913     $ 19,480     $          
Professional services revenues
                                  11,133       37,812       53,839               4,801       16,215          
                                                                                                 
Total revenues
    42,820       43,056       14,026       18,945       51,689       77,859       111,643       127,670               22,714       35,695          
                                                                                                 
Total operating expenses
    41,972       42,399       18,386       17,376       47,642       69,546       92,711       107,162               19,214       28,371          
Equity in earnings of Detroit Legal News Publishing, LLC, net of amortization
                                  287       2,736       2,736               461       915          
                                                                                                 
Operating income (loss)
    848       657       (4,360 )     1,569       4,047       8,600       21,668       23,244               3,961       8,239          
Non-cash interest expense related to redeemable preferred stock(1)
                      (718 )     (2,805 )     (9,998 )     (28,455 )     (28,455 )             (2,938 )     (29,942 )        
Interest expense, net
    (8,113 )     (6,316 )     (5,880 )     (406 )     (1,147 )     (1,874 )     (6,433 )     (8,478 )             (1,476 )     (2,035 )        
Other expense, net
    (228 )     (775 )                             (202 )     (202 )             (10 )     (8 )        
                                                                                                 
Income (loss) from continuing operations before income taxes and minority interest
    (7,493 )     (6,434 )     (10,240 )     445       95       (3,272 )     (13,422 )     (13,891 )             (463 )     (23,746 )        
Income tax (expense) benefit
    (52 )     (2 )           (569 )     (889 )     (2,436 )     (4,974 )     (4,607 )             200       (3,140 )        
Minority interest in net income of subsidiary(2)
                                        (1,913 )     (2,407 )             (126 )     (900 )        
                                                                                                 
Income (loss) from continuing
operations(3)
  $ (7,545 )   $ (6,436 )   $ (10,240 )   $ (124 )   $ (794 )   $ (5,708 )   $ (20,309 )   $ (20,905 )           $ (389 )   $ (27,786 )        
                                                                                                 
Income (loss) from continuing operations per share(3)(4)(6)
                                                                                               
Basic
                    $       $       $       $       $       $       $       $       $    
Diluted
                    $       $       $       $       $       $       $       $       $    
Weighted average shares outstanding(4)(6)
                                                                                               
Basic
                                                                                         
Diluted
                                                                                         
Non-GAAP Data:
                                                                                               
Adjusted EBITDA (unaudited)(5)
    4,997       3,617       (3,026 )     2,596       6,875       13,353       28,776       31,672     $         5,845       10,734     $    
Adjusted EBITDA margin (unaudited)(5)
    11.7 %     8.4 %     (21.6 )%     13.7 %     13.3 %     17.2 %     25.8 %     24.8 %     %     25.7 %     30.1 %     %
 
                                                                                               


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    As of
                                 
    March 31,
    As of December 31,     As of
 
    2002
    2003
                  2006
    March 31,
 
    Predecessor     Predecessor       2004     2005     (Restated)     2007  
    (Unaudited)                               (Unaudited)  
    (In thousands)  
Consolidated Balance Sheet Data:
                                                 
Cash and cash equivalents
  $ 782     $ 70       $ 19,148     $ 2,348     $ 786     $ 1,406  
Total working capital (deficit)
    (38,663 )     (2,656 )       13,886       (6,790 )     (8,991 )     (12,348 )
Total assets
    97,290       58,898         116,522       135,395       186,119       211,061  
Long-term debt, less current portion
    21,905       16,937         29,730       36,920       72,760       85,527  
Redeemable preferred stock
          29,418         69,645       79,740       108,329       138,303  
Total liabilities and minority interest
    75,889       58,998         117,898       144,238       214,994       267,712  
Total stockholders’ equity (deficit)
    21,401       (99 )       (1,376 )     (8,843 )     (28,875 )     (56,651 )
                                                   
 
(1) Consists of accrued but unpaid dividends on our series A preferred stock and series C preferred stock and the change in fair value of the shares of our series C preferred stock, with each share of our series C preferred stock being convertible into (1) one share of our series B preferred stock and (2) a number of shares of our series A preferred stock and our common stock. The conversion of our series C preferred stock and redemption of our preferred stock upon consummation of this offering will eliminate the non-cash interest expense we record for the change in fair value of our series C preferred stock.
 
(2) Consists of the 19.0% membership interest in APC held by Trott & Trott as of December 31, 2006, and the 18.1% and 4.5% membership interest in APC held by Trott & Trott and Feiwell & Hannoy, respectively, as of March 31, 2007. Under the terms of the APC operating agreement, each month we are required to pay distributions to each of Trott & Trott and Feiwell & Hannoy in an amount equal to its percentage share of APC’s earnings before interest, taxes, depreciation and amortization less any debt service, capital expenditures and working capital. Feiwell & Hannoy received its 4.5% membership interest in APC on January 9, 2007, in connection with APC’s acquisition of its mortgage default processing service business.
 
(3) Excludes income or loss from discontinued operations of the predecessor’s public records business in July 2003 and our telemarketing operations in September 2005.
 
(4) Basic per share amounts are computed, generally, by dividing net income (loss) by the weighted-average number of common shares outstanding. We believe that the series C preferred stock is a participating security because the holders of the convertible preferred stock participate in any dividends paid on our common stock on an as if converted basis. Consequently, the two-class method of income allocation is used in determining net income (loss), except during periods of net losses. Under this method, net income (loss) is allocated on a pro rata basis to the common stock and series C preferred stock to the extent that each class may share in income for the period had it been distributed. Diluted per share amounts assume the conversion, exercise, or issuance of all potential common stock instruments (see Note 13 to our consolidated financial statements included in this prospectus for information on stock options) unless their effect is anti-dilutive, thereby reducing the loss per share or increasing the income per share.
 
(5) The adjusted EBITDA measure presented consists of income (loss) from continuing operations (1) before (a) non-cash interest expense related to redeemable preferred stock; (b) net interest expense; (c) income tax expense; (d) depreciation and amortization; (e) non-cash compensation expense; and (f) minority interest in net income of subsidiary; and (2) after minority interest distributions paid. Adjusted EBITDA margin is the ratio of adjusted EBITDA to total revenues. We are providing adjusted EBITDA, a non-GAAP financial measure, along with GAAP measures, as a measure of profitability because adjusted EBITDA helps us evaluate and compare our performance on a consistent basis for different periods of time by removing from our operating results the impact of the non-cash interest expense arising from the common stock conversion option in our series C preferred stock (which will have no impact on our financial performance after the consummation of this offering due to the redemption or conversion of all of our outstanding shares of preferred stock), as well as the impact of our net cash or borrowing position, operating in different tax jurisdictions and the accounting methods used to compute depreciation and amortization, which impact has been significant and fluctuated from time to time due to the variety of acquisitions that we have completed since our inception. Adjusted EBITDA also excludes non-cash compensation expense because this is a non-cash charge for stock options that we have granted. We exclude this non-cash expense from adjusted EBITDA because we believe any amount we are required to record as share-based compensation expense contains subjective assumptions over which our management has no control, such as share price and volatility. As a result, we do not believe that the inclusion of non-cash compensation expense in our adjusted EBITDA allows for a meaningful evaluation of our performance. In addition, as companies are permitted to use different methods to calculate share-based compensation, we believe including this expense inhibits comparability of our performance with other companies that may have chosen calculation methods different from ours in their determination of non-cash compensation expense. In contrast, we believe that excluding non-cash compensation expense allows for increased comparability within our industry, as other public companies in our industry have similarly elected to exclude non-cash compensation expense from their adjusted EBITDA calculations. We also adjust EBITDA for minority interest in net income of subsidiary and cash distributions paid to minority members of APC because we believe this provides more timely and relevant information with respect to our financial performance. We exclude amounts with respect to minority interest in net income of subsidiary because this is a non-cash adjustment that does not reflect amounts actually paid to APC’s minority members because (1) distributions for any month are actually paid by APC in the following month and (2) it does not include adjustments for APC’s debt or capital expenditures, which are both included in the calculation of amounts actually paid to APC’s minority members. We instead include the amount of these cash distributions in adjusted EBITDA because they include these adjustments and reflect amounts actually paid by APC, thus allowing for a more accurate determination of our performance and ongoing obligations. Due to the foregoing, we believe that adjusted EBITDA is meaningful information about our business operations that investors should consider along with our GAAP financial information. We use adjusted EBITDA for planning purposes, including the preparation of internal annual operating budgets, and to measure our operating performance and the effectiveness of our operating strategies. We also use a variation of adjusted


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EBITDA in monitoring our compliance with certain financial covenants in our credit agreement and are using adjusted EBITDA to determine performance-based short-term incentive payments for our executive officers.
 
Adjusted EBITDA is a non-GAAP measure that has limitations because it does not include all items of income and expense that affect our operations. This non-GAAP financial measure is not prepared in accordance with, and should not be considered an alternative to, measurements required by GAAP, such as operating income, net income (loss), net income (loss) per share, cash flow from continuing operating activities or any other measure of performance or liquidity derived in accordance with GAAP. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measures. In addition, it should be noted that companies calculate adjusted EBITDA differently and, therefore, adjusted EBITDA as presented for us may not be comparable to the calculations of adjusted EBITDA reported by other companies.
 
    The following is a reconciliation of income (loss) from continuing operations to adjusted EBITDA (dollars in thousands):
 
                                                                                                   
                Period
                                                         
                from
                                                         
                April 1,
      Period from
                                                 
                2003 to
      August 1,
    Years Ended December 31,     Three Months Ended March 31,  
    Years Ended March 31,     July 31,
      2003 to
                2006
          2006
                   
    2002
    2003
    2003
      December 31,
                (Restated)
    2006
    (Pro Forma
          2007
    2007
 
    (Predecessor)     (Predecessor)     (Predecessor)       2003     2004     2005     (Actual)     (Pro Forma)     as Adjusted)     2006     (Actual)     (As Adjusted)  
    (Unaudited)                               (Unaudited)           (Unaudited)        
Income (loss) from continuing operations
    (7,545 )     (6,436 )     (10,240 )       (124 )   $ (794 )   $ (5,708 )   $ (20,309 )   $ (20,905 )   $           $ (389 )   $ (27,786 )   $        
Non-cash compensation expense
                                          52       52                     10          
Non-cash interest expense related to redeemable preferred stock
                        718       2,805       9,998       28,455       28,455               2,938       29,942          
Interest expense, net
    8,113       6,316       5,880         406       1,147       1,874       6,433       8,478               1,476       2,035          
Income tax expense (benefit)
    52       2               569       889       2,436       4,974       4,607               (200 )     3,140          
Depreciation expense
    908       818       256         353       1,278       1,591       2,442       2,785               461       755          
Amortization of intangibles
    3,469       2,917       1,078         674       1,550       3,162       5,156       6,627               971       1,844          
Amortization of DLNP intangible
                                          1,503       1,503               462       360          
Minority interest in net income of subsidiary
                                          1,913       2,407               126       900          
Cash distributions to minority interest
                                          (1,843 )     (2,337 )                   (466 )        
                                                                                                   
Adjusted EBITDA
  $ 4,997     $ 3,617     $ (3,026 )     $ 2,596     $ 6,875     $ 13,353     $ 28,776     $ 31,672     $       $ 5,845     $ 10,734     $  
                                                                                                   
 
                                                                                                 
 
(6) Due to the significant change in capital structure at the closing of our predecessor’s July 31, 2003, restructuring, the predecessor’s earnings per share information has not been presented because it is not considered comparable. The restructuring of our predecessor was accomplished when, on July 31, 2003, certain stockholders of our predecessor exchanged shares of our predecessor’s common stock and preferred stock for shares of DMIC II Company, which was incorporated in March 2003 by James P. Dolan, our President and Chief Executive Officer, and Cherry Tree Ventures IV and later changed its name to Dolan Media Company on August 1, 2003 following this exchange, our predecessor sold us its business information and telemarketing divisions, retaining the national public records operations, in exchange for all the shares of our predecessor that we had obtained from our stockholders in the above described exchange. Upon consummation of this purchase and sale, our predecessor was merged with a wholly-owned subsidiary of Reed Elsevier Inc.


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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion should be read in conjunction with our consolidated financial statements and the accompanying notes, the financial statements of certain acquired businesses and our pro forma financial information included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of various factors, including the risks discussed in “Risk Factors” and elsewhere in this prospectus. See “Cautionary Note Regarding Forward-Looking Statements.” For purposes of this prospectus, the pro forma adjustments we have made to our historical operating results in 2006 assume that the following transactions were completed on January 1, 2006: our acquisition of an 81.0% interest in APC on March 14, 2006, and APC’s subsequent acquisition of the mortgage default processing service business of Feiwell & Hannoy on January 9, 2007.
 
Overview
 
We are a leading provider of mission critical business information and professional services to legal, financial and real estate sectors in the United States. We serve our customers through two complementary operating segments: our Business Information Division and our Professional Services Division. Our Business Information Division currently publishes 60 print publications consisting of 14 paid daily publications, 29 paid non-daily publications and 17 non-paid non-daily publications. In addition, we provide business information electronically through our 42 on-line publication web sites, our 11 non-publication web sites and our email notification systems. Our Professional Services Division comprises two operating units, APC, which provides mortgage default processing services to two law firms, one in Michigan and one in Indiana, and Counsel Press, which provides appellate services to law firms and attorneys nationwide.
 
We have grown significantly since our predecessor company commenced operations in 1992, in large part due to:
 
  •  the completion of 38 acquisitions by our Business Information Division;
 
  •  the formation of our Professional Services Division through the acquisition of Counsel Press in January 2005;
 
  •  the November 2005 acquisition of a 35.0% interest in DLNP, Michigan’s largest court and commercial newspaper publisher and operator of a statewide public notice placement network;
 
  •  the formation of our mortgage default processing service operating unit and resulting expansion of our Professional Services Division in March 2006 through the acquisition of an 81.0% interest in APC, which provides mortgage default processing services in Michigan for Trott & Trott; and
 
  •  APC entering the Indiana market in January 2007 by acquiring the mortgage default processing service business of the law firm of Feiwell & Hannoy.
 
Recent Acquisitions
 
On March 14, 2006, we acquired 81.0% of the membership interests of APC from Trott & Trott for $40 million in cash and           shares of our common stock.
 
On October 31, 2006, we purchased substantially all of the publishing assets of Happy Sac International Co. (the Watchman Group in St. Louis, Missouri) for approximately $3.1 million in cash. The assets included court and commercial newspapers in and around the St. Louis metropolitan area.
 
On November 10, 2006, APC purchased the mortgage default processing service business of Robert A. Tremain and Associates, a Michigan law firm, for $3.6 million in cash. In connection with this acquisition, Trott & Trott purchased the law firm business of Robert A. Tremain. We believe this acquisition will increase the number of case files referred to APC by Trott & Trott in 2007.
 
On January 9, 2007, we acquired the mortgage default processing service business of Feiwell & Hannoy for $13.0 million in cash, a $3.5 million promissory note payable in two equal annual installments of $1.75 million beginning January 9, 2008, with no interest accruing on the note, and a 4.5% membership interest in APC. Under the terms of the asset purchase agreement with Feiwell & Hannoy, we were required


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to guarantee APC’s obligations under the note payable to Feiwell & Hannoy. In connection with this guarantee, Trott & Trott, as the holder of 19.0% of the membership interests of APC, executed a reimbursement agreement with us, whereby Trott & Trott agreed to reimburse us for 19.0% of any amounts we are required to pay to Feiwell & Hannoy pursuant to our guarantee of the note. As a result of the acquisition, we currently own 77.4% of APC, Trott & Trott owns 18.1% of APC and Feiwell & Hannoy owns 4.5% of APC. Under the terms of APC’s amended and restated operating agreement, Trott & Trott and Feiwell & Hannoy have the right, for a period of six months following the second anniversary of this offering, to require APC to repurchase all or any portion of the APC membership interests held by Trott & Trott and Feiwell & Hannoy at a purchase price based on 6.25 times APC’s trailing twelve month earnings before interest, taxes, depreciation and amortization. The aggregate purchase price would be payable by APC in the form of a three-year unsecured note bearing interest at a rate equal to prime plus 2.0%.
 
On March 30, 2007, we acquired the business information assets of Venture Publications, Inc., consisting primarily of several publications serving Mississippi and an annual business trade show, for $2.8 million in cash. Up to $0.6 million in additional cash purchase price may be payable based on the amount of revenues we derive from the acquired business during the one-year period following the closing of the acquisition.
 
We have accounted for each of the acquisitions described above under the purchase method of accounting. The results of the acquired businesses of APC, Tremain and Feiwell & Hannoy have been included in the Professional Services segment, and the results of the acquired business of the Watchman Group and Venture Publications have been included in the Business Information segment, in our consolidated financial statements since the date of such acquisition.
 
Revenues
 
We derive revenues from two operating segments, our Business Information Division and our Professional Services Division. In 2006 and the first quarter of 2007, our total revenues were $111.6 million ($127.7 million on a pro forma basis) and $35.7 million, respectively, and the percentage of our total revenues attributed to each of our segments was as follows:
 
  •  66.1% (57.8% on a pro forma basis) and 54.6%, respectively, from our Business Information Division; and
 
  •  33.9% (42.2% on a pro forma basis) and 45.4%, respectively, from our Professional Services Division.
 
Business Information.  Our Business Information Division generates revenues primarily from display and classified advertising, public notices and subscriptions. We sell commercial advertising consisting of display and classified advertising in all of our print products and on most of our web sites. Our display and classified advertising revenues accounted for 28.4% (24.9% on a pro forma basis) and 21.1% of our total revenues and 43.0% and 38.7% of our Business Information Division’s revenues in 2006 and the first quarter of 2007, respectively. 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.
 
We publish 286 different types of public notices in our court and commercial newspapers, including foreclosure notices, probate notices, notices of fictitious business names, limited liability company and other entity notices, unclaimed property notices, notices of governmental hearings and trustee sale notices. Our public notice revenues accounted for 22.4% (19.6% on a pro forma basis) and 21.2% of our total revenues and 33.8% and 38.8% of our Business Information Division’s revenues in 2006 and the first quarter of 2007, respectively. We recognize public notice revenues upon placement of a public notice in one of our court and commercial newspapers. Public notice revenues are driven by the volume and mix of public notices published, which are affected by the number of residential mortgage foreclosures in the 12 markets where we publish public notices because of the high volume of foreclosure notices we publish in our court and commercial newspapers. In six of the states in which we publish public notices, the price for public notices is statutorily regulated, with market forces determining the pricing for the remaining states.
 
We sell our business information products primarily through subscriptions. In 2006 and the first quarter of 2007, our circulation revenues, which consist of subscriptions and single-copy sales, accounted for 12.2% (10.6% on a pro forma basis) and 10.2%, respectively, of our total revenues and 18.4% and 18.7%,


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respectively, of our Business Information Division’s revenues. We recognize subscription revenues ratably over the subscription periods, which range from three months to multiple years, with the average subscription period in 2006 being twelve months. Deferred revenue includes payment for subscriptions collected in advance that we expect to recognize in future periods. Circulation revenues are driven by the number of copies sold and the subscription rates charged to customers. Our other business information revenues, comprising sales from commercial printing and database information, accounted for 3.2% (2.8% on a pro forma basis) and 2.1% of our total revenues and 4.8% and 3.8% of our Business Information Division’s revenues in 2006 and the first quarter of 2007, respectively. We recognize our other business information revenues upon delivery of the printed or electronic product to our customers.
 
Professional Services.  Our Professional Services Division generates revenues primarily by providing mortgage default processing and appellate services through fee-based arrangements. Through APC, we assist law firms in processing foreclosure, bankruptcy, eviction and, to a lesser extent, litigation case files for residential mortgages that are in default. We currently provide these services for Trott & Trott, a Michigan law firm of which David A. Trott, APC’s President, is majority shareholder and managing attorney, and Feiwell & Hannoy, an Indiana law firm. In 2006, we serviced approximately 62,600 mortgage default case files and our mortgage default processing service revenues accounted for 22.1% of our total revenues (31.9% on a pro forma basis) and 65.3% of our Professional Services Division’s revenues (75.6% on a pro forma basis). For the three months ended March 31, 2007, we serviced approximately 29,900 mortgage default case files and our mortgage default processing service revenues accounted for 34.0% of our total revenues and 74.8% of our Professional Services Division’s revenues. We recognize mortgage default processing service revenues on a ratable basis over the period during which the services are provided, which is generally 35 to 60 days for Trott & Trott and 55 to 270 days for Feiwell & Hannoy. We consolidate the operations, including revenues, of APC and record a minority interest adjustment for the percentage of earnings that we do not own. See “— Minority Interests in Net Income of Subsidiary” for a description of the impact of the minority interests in APC on our operating results. We bill Trott & Trott for services performed and record amounts billed for services not yet performed as deferred revenue. We bill Feiwell & Hannoy in two installments and record amounts for services performed but not yet billed as unbilled services and amounts billed for services not yet performed as deferred revenue. We expect mortgage default processing service revenues to increase in 2007 due to a full year of APC’s operations and the acquisition of Feiwell & Hannoy’s mortgage default processing service operations.
 
We have entered into long-term services agreements with Trott & Trott and Feiwell & Hannoy that each provide for the exclusive referral of files from the law firm to APC for servicing, unless Trott & Trott is otherwise directed by its clients. These agreements have initial terms of fifteen years, which terms may be automatically extended for up to two successive ten year periods. Under each services agreement, we are paid a fixed fee for each residential mortgage default file referred by the law firm to us for servicing, with the amount of such fixed fee being based upon the type of file and, in the case of the Trott & Trott agreement, the annual volume of these files. We receive this fixed fee upon referral of a foreclosure case file, which consists of any mortgage default case file referred to us, regardless of whether the case actually proceeds to foreclosure. If such file leads to a bankruptcy, eviction or litigation proceeding, we are entitled to an additional fixed fee in connection with handling a file for such proceedings. APC’s revenues are primarily driven by the number of residential mortgage defaults in Michigan and Indiana, as well as how many of the files we handle that actually result in evictions, bankruptcies and/or litigation. Our agreement with Trott & Trott contemplates the review and possible revision of the fees received by APC on or before January 1, 2008, and each second anniversary after that. Under the Feiwell & Hannoy agreement, the fixed fee per file increases on an annual basis through 2012 to account for inflation as measured by the consumer price index. In each year after 2012, APC and Feiwell & Hannoy have agreed to review and possibly revise the fee schedule. 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. See “Certain Relationships and Related Transactions — David A. Trott” for information regarding the services agreements and the relationship among David A. Trott, APC’s President, APC and Trott & Trott.
 
Through Counsel Press, we assist law firms and attorneys throughout the United States in organizing, printing and filing appellate briefs, records and appendices that comply with the applicable rules of the


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U.S. Supreme Court, any of the 13 federal circuit courts and any state appellate court or appellate division. In 2006 and the first quarter of 2007, our appellate service revenues accounted for 11.8% (10.3% on a pro forma basis) and 11.4% of our total revenues and 34.7% (24.4% on a pro forma basis) and 25.2% of our Professional Services Division’s revenues, respectively. Counsel Press charges its customers 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 appeals we file. In 2006 and the first quarter of 2007, we provided appellate services to attorneys in connection with approximately 8,300 and 2,200 appellate filings, respectively, in federal and state courts. We recognize appellate service revenues as the services are provided.
 
Operating Expenses
 
Our operating expenses consist of the following:
 
  •  Direct operating expenses, which consist primarily of the cost of compensation and employee benefits for our editorial personnel within our Business Information Division and the processing staff at APC and Counsel Press, and production and distribution expenses, such as compensation and employee benefits for personnel involved in the production and distribution of our business information products, the cost of newsprint and the cost of delivery of our business information products;
 
  •  Selling, general and administrative expenses, which consist primarily of the cost of compensation 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 one to 30 years; and
 
  •  Amortization expense, which represents the cost of finite-lived intangibles acquired through business combinations allocated over the estimated useful lives of these intangibles, with such useful lives ranging from one to 30 years.
 
Equity in Earnings of Detroit Legal News Publishing
 
In November 2005, we acquired 35.0% of the membership interests in DLNP, the publisher of Detroit Legal News and seven other publications, for $16.8 million. We account for our investment in DLNP using the equity method. Our percentage share of DLNP’s earnings was $2.7 million and $915,000, net of amortization of $1.5 million and $360,000, in 2006 and the first quarter of 2007, respectively, which we recognized as operating income. APC 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 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.
 
Under the terms of the amended and restated operating agreement for DLNP, on a date that is within 60 days prior to November 30, 2011, and each November 30th after that, each member of DLNP has the right, but not the obligation, to deliver a notice to the other members, declaring the value of all of the membership interests of DLNP. Upon receipt of this notice, each other member has up to 60 days to elect to either purchase his, her or its pro rata share of the initiating member’s membership interests or sell to the initiating member a pro rata portion of the membership interest of DLNP owned by the non-initiating member. Depending on the election of the other members, the member that delivered the initial notice of value to the other members will be required to either sell his or her membership interests, or purchase the membership interests of other members. The purchase price payable for the membership interests of DLNP will be based on the value set forth in the initial notice delivered by the initiating member.
 
Minority Interest in Net Income of Subsidiary
 
Minority interest in net income of subsidiary consisted of the 19.0% membership interest in APC held by Trott & Trott as of December 31, 2006, and the 18.1% and 4.5% membership interest in APC held by


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Trott & Trott and Feiwell & Hannoy, respectively, as of March 31, 2007. We acquired 81.0% of APC on March 14, 2006. In January 2007, APC sold 4.5% membership interest in APC to Feiwell & Hannoy, leaving us and Trott & Trott with 77.4% and 18.1%, respectively, of the aggregate membership interests in APC. Under the terms of the APC operating agreement, each month we are required to distribute APC’s earnings before interest, taxes, depreciation and amortization less debt service with respect to any indebtedness of APC, capital expenditures and working capital needs to APC’s members on the basis of common equity interest owned. We have paid distributions to Trott & Trott of $1.8 million in 2006 and $410,000 in the first three months of 2007. There were no such distributions in 2005 because we acquired APC in March 2006. During 2007, we have also paid distributions of $56,000 to Feiwell & Hannoy. There was not a corresponding distribution in 2006 because Feiwell & Hannoy did not own its membership interests in APC until January 2007.
 
Application of Critical Accounting Policies
 
We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities.
 
We continually evaluate the policies and estimates we use to prepare our consolidated financial statements. In general, management’s estimates and assumptions are based on historical experience, information provided by third-party professionals and assumptions that management believes to be reasonable under the facts and circumstances at the time these estimates and assumptions are made. Because of the uncertainty inherent in these matters, actual results could differ significantly from the estimates, assumptions and judgments we use in applying these critical accounting policies.
 
We believe the critical accounting policies that require the most significant estimates, assumptions and judgments to be used in the preparation of our consolidated financial statements are purchase accounting, valuation of our equity securities of privately-held companies, impairment of goodwill, other intangible assets and other long-lived assets, share-based compensation expense, income tax accounting and allowances for doubtful accounts.
 
Purchase Accounting
 
We have acquired a number of businesses during the last several years, and we expect to acquire additional businesses in the future. Under SFAS No. 141, Business Combinations, we are required to account for business combinations using the purchase method of accounting. The purchase method requires us to determine the fair value of all acquired assets, including identifiable intangible assets, and all assumed liabilities. The cost of the acquisition is allocated to the acquired assets and assumed liabilities in amounts equal to the fair value of each asset and liability, and any remaining acquisition cost is classified as goodwill. This allocation process requires extensive use of estimates and assumptions, including estimates of future cash flows to be generated by the acquired assets. Certain identifiable, finite-lived intangible assets, such as mastheads and trade names and advertising, subscriber and other customer lists, are amortized on a straight-line basis over the intangible asset’s estimated useful life. The estimated useful life of amortizable identifiable intangible assets ranges from one to 30 years. Goodwill is not amortized. Accordingly, the accounting for acquisitions has had, and will continue to have, a significant impact on our operating results.
 
Valuation of Our Company Equity Securities
 
The valuation of our common stock has had a material effect on our operating results because we account for our mandatorily redeemable preferred stock at fair value. Accordingly, we record the increase or decrease in the fair value of our redeemable preferred stock as either an increase or decrease in interest expense at each reporting period. During 2004, 2005 and 2006 and the first quarter of 2007, we recorded non-cash interest expense for the change in fair value of $1.0 million, $8.1 million, $26.5 million and $29.4, respectively. Determining the fair value of our redeemable preferred stock requires us to value two components: (1) the fixed redeemable portion and (2) the common stock conversion portion. Given the absence of an active market for our common stock because we have been a private company to date, we


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engaged an independent third-party valuation firm to help us estimate the fair value of our common stock that was used to value the conversion option. Contemporaneous third-party valuations were performed as of September 30, 2006, December 31, 2006, and March 31, 2007. The estimated fair value of our common stock per share was as follows as of the following dates:
 
                                             
December 31,
    March 31,
    June 30,
    September 30,
    December 31,
    March 31,
 
2005
   
2006
   
2006
   
2006
   
2006
   
2007
 
 
$                $                 $                $                $                 $             
 
A variety of objective and subjective factors were considered to estimate the fair value of our common stock, including a contemporaneous valuation analysis using the income and market approaches, the likelihood of achieving and the timing of a liquidity event, such as an initial public offering or sale of the company, the cash flow and EBITDA-based trading multiples of comparable companies, including our competitors and other similar publicly-traded companies, and the results of operations, market conditions, competitive position and the stock performance of these companies.
 
In preparing a discounted cash flow analysis (income approach), certain significant assumptions were made regarding:
 
  •  the rate of our revenue growth;
 
  •  the rate of our EBITDA growth and expected EBITDA margins;
 
  •  capital expenditures;
 
  •  the discount rate, based on estimated capital structure and the cost of our equity and debt;
 
  •  a minority discount, reflecting the fact that our individual stockholders are minority investors without the ability to control our business;
 
  •  the terminal multiple, based upon our anticipated growth prospects and private and public market valuations of comparable companies; and
 
  •  non-marketability discounts.
 
In our valuations, we applied a non-marketability discount of 35% for periods prior to December 31, 2006, 15% for December 31, 2006, and 5% for March 31, 2007. We applied a minority discount of 12.0% for March 31, 2006, and September 30, 2006, but did not apply this discount for periods after September 30, 2006, as we had begun to explore the possibility of completing a public offering of our shares. Other significant factors that contributed to the changes in the fair value of our common stock are as follows:
 
  •  March 31, 2006 versus September 30, 2006 — We increased our near-term income forecast due to the fact that our revenues from our Business Information Division and Professional Services Division, as well our equity in earnings of DLNP, exceeded expectations.
 
  •  September 30, 2006 versus December 31, 2006 — We acquired two businesses and two customer lists during the fourth quarter of 2006. The purchase multiple we paid in each transaction was less than the multiple used to value our business in the aggregate. Accordingly, these transactions were accretive and increased the value of our common stock. In addition, we decreased the non-marketability discount because we had begun the process of exploring strategic alternatives to raise additional capital and provide liquidity to our stockholders.
 
  •  December 31, 2006, versus March 31, 2007 — During the first quarter of 2007, we purchased the mortgage default processing service business of Feiwell & Hannoy and the business information assets of Venture Publications. The purchase multiple we paid in each of these transactions was less than the multiple used to value our business in the aggregate. Accordingly, these transactions were accretive and increased the value of our common stock. We increased its forecasted growth rate for 2009 through 2011 based on positive trends in the Company’s operating performance. For example, our revenues for the first quarter of 2007 increased by 57.1% over the first quarter of 2006, primarily as a result of APC’s strong operating performance. In addition, we became aware of continued trends in the residential mortgage foreclosure industry, and believed that residential mortgage delinquencies and defaults would continue to increase primarily as a result of the increased issuance of subprime loans


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  and popularity of non-traditional loan structures. Further compounding these trends were increases in mortgage interest rates from recent lows and the slowing of demand in the residential real estate market in many regions of the United States, which made it more difficult for borrowers in distress to sell their homes. We believed that the increased volume of delinquencies and defaults would create additional demand for default processing services and has serve as a growth catalyst for the mortgage default processing market. We also began the formal process of going public for this offering, which lead us to eliminate the minority discount and to reduce the non-marketability discount.
 
The Company equally weighted the income and market approach for each valuation period. Changes in these assumptions could cause our estimates to vary widely, which could materially impact our historical results of operations.
 
The common stock conversion option in our series C preferred stock will terminate and have no further effect on our future operating results upon consummation of this offering because all of our series C preferred stock will convert into shares of common stock, series A preferred stock and series B preferred stock at that time.
 
Goodwill, Other Intangible Assets and Other Long-Lived Assets
 
Goodwill represents the excess of the cost of an acquired entity over the net of the amounts assigned to acquired assets and assumed liabilities. Intangible assets represent assets that lack physical substance but can be distinguished from goodwill. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, we test goodwill allocated to each of our reporting units (our Business Information Division and Professional Services Division) and other intangible assets for impairment on an annual basis and between annual tests if circumstances, such as loss of key personnel, unanticipated competition, higher or earlier than expected customer attrition or other unforeseen developments, indicate that a possible impairment may exist. In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, we test all other long-lived assets, such as fixed assets, for impairment if circumstances indicate that a possible impairment exists. Impairment in value exists when the carrying amount of goodwill, other intangible assets and other long-lived asset is not recoverable because it exceeds such asset’s implied fair value, with the excess recorded as a charge to earnings. If we determine that an impairment in value has occurred, the carrying value of the asset is reduced to its fair value. An impairment test involves considerable management judgment and estimates regarding future cash flows and operating results. Any changes in key assumptions about our businesses and their prospects, or changes in market conditions, could result in an impairment charge, and such a charge could have a material effect on our consolidated financial statements because of the significance of goodwill, other intangible assets and other long-lived assets to our consolidated balance sheet.
 
We determine the estimated useful lives and related amortization expense for our intangible assets. To the extent actual useful lives are less than our previously estimated lives, we will increase our amortization expense. If the unamortized balance were deemed to be unrecoverable, we would recognize an impairment charge to the extent necessary to reduce the unamortized balance to the amount of expected future discounted cash flows, with the amount of such impairment charged to operations in the current period. We estimate useful lives of our intangible assets by reference to current and projected dynamics in the business information and mortgage default processing service industries and anticipated competitor actions. The amount of net loss in 2006 would have been approximately $0.6 million lower if the actual useful lives of our finite-lived intangible assets were 10% longer than the estimates and approximately $0.7 million higher if the actual useful lives of our finite-lived intangible assets were 10% shorter than the estimates.
 
We were previously engaged in the business of in-bound and out-bound teleservices. In September 2005, we sold our telemarketing operations to management personnel of this operating unit. In connection with the sale of our discontinued telemarketing operations, we wrote off goodwill of $0.7 million in 2005.
 
Share-Based Compensation Expense
 
During 2006, we adopted the provisions of SFAS No. 123(R), Share-Based Payment concurrently with the approval and adoption of our 2006 Equity Incentive Plan. SFAS No. 123(R) requires that all share-based payments to employees and non-employee directors, including grants of stock options and shares of restricted stock, be recognized in the financial statements based on the estimated fair value of the equity or liability instruments issued.


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To date, we have made only a limited number of equity awards, consisting of stock options granted in October 2006, under our incentive compensation plan. Share-based compensation expense that we recognized for these grants is reflected in our selling, general and administrative expenses for 2006 and the first quarter of 2007. In the future, we intend to make a more significant number of equity awards, including stock option awards with an exercise price equal to the initial public offering price, as well as restricted shares of our common stock, that we intend to issue to our executive officers, employees and non-employee directors on the date of this prospectus. Therefore, we expect to record increased share-based compensation expense in the future, which expense for future equity awards will be reflected in our selling, general and administrative expenses and/or direct operating expenses for future periods, depending on to whom we grant an award. The actual amount of share-based compensation expense we record in any fiscal period will depend on a number of factors, including the number of shares and vesting period of equity awards, the fair value of our common stock at the time of issuance, the expected volatility of our stock price over time and the estimated forfeiture rate. Accordingly, we expect that the estimates, assumptions and judgments required to account for share-based compensation expense under SFAS No. 123(R) will have increased significance after the consummation of this offering.
 
In accordance with SFAS No. 123(R), we have used the Black-Scholes option pricing model to estimate the fair value on the date of grant of the stock option awards that we issued on October 11, 2006 (which represent the only equity awards we have made to date) because these awards contained only service conditions for the grantees. Our determination of the fair value of these stock option awards was affected by the estimated fair value of our common stock on the date of grant, which was based on a third-party appraisal provided to us as of September 30, 2006, in connection with determining the fair value of the common stock conversion feature of our mandatorily redeemable preferred stock, as well as assumptions regarding a number of highly complex and subjective variables that are discussed below. In connection with our Black-Scholes option pricing model, we made assumptions regarding expected option exercise and employee terminations to calculate the expected life of the options. SFAS No. 123(R) requires companies to estimate forfeitures of share-based awards at the time of grant and revise such estimates in subsequent periods if actual forfeitures differ from original projections. We also made assumptions with respect to expected stock price volatility based on the average volatility of similar public companies. In addition, we chose to use the risk free interest rate for the U.S. Treasury zero coupon yield curve in effect at the time of grant for a bond with a maturity similar to the expected life of the options. Our shared-based compensation expense under SFAS 123(R) for 2006 and the first quarter of 2007 was approximately $52,000 and $10,000, respectively, before income taxes. We expect to incur an additional $           of share-based compensation expense for the remainder of 2007 in connection with previously granted stock options and the stock options we intend to grant on the date of this prospectus.
 
Certain of the shares of nonvested stock that we expect to grant to participants may be subject to performance or market conditions that may affect the number of shares of nonvested stock that will ultimately vest at the end of the requisite service period. For example, we expect to issue restricted shares of common stock on the date of this prospectus, some of which will vest on the grant date and over the following four-year period and some of which will vest over a four-year period based on whether targeted increases in the trading price of our common stock are achieved. The fair value of share-based awards that contain performance conditions will be estimated using the Black-Scholes option pricing model at the grant date, with compensation expense recognized as the requisite service is rendered. The fair value of share-based awards that contain market conditions will be estimated using a lattice model. This lattice model will take into account the effect of the market conditions on the fair value at the time of grant. Compensation expense will be recognized over the requisite service period, regardless of whether the market condition is satisfied. We will need to exercise considerable judgment to estimate the number of shares of nonvested stock that will ultimately be earned based on the expected satisfaction of associated performance or market conditions. In connection with the restricted shares of common stock that we intend to grant on the date of this prospectus, we expect to incur a $           share-based compensation expense for the remainder of 2007.
 
Income Taxes
 
We account for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes. Under SFAS No. 109, income taxes are recognized for the following: (1) amount of taxes payable for the current year and (2) deferred tax assets and liabilities for the future tax consequence of events that have been


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recognized differently in the financial statements than for tax purposes. Deferred tax assets and liabilities are established using statutory tax rates and are adjusted for tax rate changes. SFAS No. 109 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized.
 
We consider accounting for income taxes critical to our operations because management is required to make significant subjective judgments in developing our provision for income taxes, including the determination of deferred tax assets and liabilities, and any valuation allowances that may be required against deferred tax assets. In addition, we operate within multiple taxing jurisdictions and are subject to audit in these jurisdictions. These audits can involve complex issues, which could require an extended period of time to resolve. The completion of these audits could result in an increase to amounts previously paid to the taxing jurisdictions. We do not expect the completion of these audits to have a material effect on our consolidated financial statements.
 
Accounts Receivable Allowances
 
We extend credit to our advertisers, public notice publishers and professional service customers based upon an evaluation of each customer’s financial condition, and collateral is generally not required. We establish allowances for doubtful accounts based on estimates of losses related to customer receivable balances. Specifically, we use prior credit losses as a percentage of credit sales, the aging of accounts receivable and specific identification of potential losses to establish reserves for credit losses on accounts receivable. We believe that no significant concentration of credit risk exists with respect to our Business Information Division. We had a significant concentration of credit risk with respect to our Professional Services Division as of December 31, 2006, with approximately $3.0 million, or 19.1% of our consolidated accounts receivable balance, due from Trott & Trott. As of March 31, 2007, the amount due from Trott & Trott was $3.1 million, or 17.8% of our consolidated accounts receivable balance, and the amount due from Feiwell & Hannoy was $1.4 million, or 7.8% of our consolidated accounts receivable balance. However, to date, we have not experienced any problems with respect to collecting prompt payment from Trott & Trott or from Feiwell & Hannoy, each of which are required to remit all amounts due to APC with respect to files serviced by APC in accordance with the time periods set forth in the applicable services agreement.
 
We consider accounting for our allowance for doubtful accounts critical to both of our operating segments because of the significance of accounts receivable to our current assets and operating cash flows. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances might be required, which could have a material effect on our financial statements. See “Liquidity and Capital Resources” below for information regarding our receivables, allowance for doubtful accounts and day sales outstanding.
 
New Accounting Pronouncements
 
On February 15, 2007, the Financial Accounting Standards Board, or FASB, issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. Under SFAS No. 159, we may elect to report financial instruments and certain other items at fair value on a contract-by-contract basis with changes in value reported in earnings. This election is irrevocable. SFAS No. 159 provides an opportunity to mitigate volatility in reported earnings that is caused by measuring hedged assets and liabilities that were previously required to use a different accounting method than the related hedging contracts when the complex hedge accounting provisions of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, are not met. SFAS No. 159 is effective for years beginning after November 15, 2007. Early adoption within 120 days of the beginning of our 2007 fiscal year is permissible, provided we have not yet issued interim financial statements for 2007 and have not adopted SFAS No. 159. We are currently evaluating the potential impact of adopting this standard.
 
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, or SFAS No. 157, which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. This statement is effective for us beginning January 1,


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2008. We are currently assessing the potential impact that the adoption of SFAS No. 157 will have on our financial statements.
 
Recently Adopted Accounting Pronouncement
 
We adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109 (FIN 48), on January 1, 2007. As a result of the implementation of FIN 48, we recognized no adjustment in the liability for unrecognized income tax benefits. At the adoption date of January 1, 2007, we had $153,000 of unrecognized income tax benefits. All of the unrecognized income tax benefits, if recognized, would favorably affect our effective income tax rate in future periods. There were no material adjustments for the unrecognized income tax benefits in the first quarter of 2007.
 
We are subject to U.S. federal income tax, as well as income tax of multiple state jurisdictions. Currently, we are not under examination in any jurisdiction. For federal purposes, tax years 2000-2006 remain open to examination as a result of earlier net operating losses being utilized in recent years. The statute of limitations remains open on the earlier years for three years subsequent to the utilization of net operating losses. For state purposes, the statute of limitations remains open in a similar manner for states in which our operations have generated net operating losses.
 
We continue to recognize interest and penalties related to uncertain tax positions in income tax expense. Upon adoption of FIN 48, we had $36,000 of accrued interest related to uncertain tax positions.
 
We do not anticipate any significant increases or decreases in unrecognized income tax benefits within twelve months of adoption of FIN 48. Immaterial amounts of interest expense will continue to accrue.
 
RESTATEMENT OF FINANCIAL INFORMATION
 
Subsequent to the issuance of our audited consolidated financial statements for 2006, it was brought to our management’s attention by our independent auditors that an error was made in computing the fair value of our series C preferred stock. This error, which consisted of using an incorrect redemption date in a net present value calculation, affected only our consolidated financial statements for 2006. To correct the error, we have increased our liability for the series C preferred stock from $67.0 million to $73.3 million, and we have increased our non-cash interest expense from $22.2 million to $28.5 million for 2006. The correction of the error had no impact on our income tax expense because the non-cash interest expense associated with our redeemable preferred stock is treated as a permanent difference and is therefore not deductible for tax purposes.
 
RESULTS OF OPERATIONS
 
The following table sets forth selected operating results, including as a percentage of total revenues, for the periods indicated below:
 
                                                                                                 
    Years Ended December 31,                          
                                  % of
          % of
                         
                            2006
    Revenues
    2006
    Revenues
    Three Months Ended March 31,  
          % of
          % of
    (Restated)
    (Restated)
    (Pro
    (Pro
          % of
          % of
 
    2004     Revenues     2005     Revenues     (Actual)     (Actual)     Forma)(2)     Forma)(2)     2006     Revenues     2007     Revenues  
    (Dollars in thousands)  
 
Revenues:
                                                                                               
                                                                                                 
Business Information
  $ 51,689       100 %   $ 66,726       85.7 %   $ 73,831       66.1 %   $ 73,831       57.8 %   $ 17,913       78.9 %   $ 19,480       54.6 %
                                                                                                 
Professional Services
                11,133       14.3 %     37,812       33.9 %     53,839       42.2 %     4,801       21.1 %     16,215       45.4 %
                                                                                                 
                                                                                                 
Total revenues
    51,689       100 %     77,859       100 %     111,643       100 %     127,670       100 %     22,714       100.0 %     35,695       100.0 %
                                                                                                 
Operating expenses:
                                                                                               
                                                                                                 
Business Information
    45,120       87.3 %     57,682       74.1 %     61,059       54.7 %     61,059       47.8 %     14,512       63.9 %     15,903       44.6 %
                                                                                                 
Professional Services
          0.0 %     8,824       11.3 %     26,865       24.1 %     41,316       32.4 %     3,543       15.6 %     11,132       31.2 %
                                                                                                 
Unallocated corporate operating expenses
    2,522       4.9 %     3,040       3.9 %     4,787       4.3 %     4,787       3.7 %     1,159       5.1 %     1,336       3.7 %
                                                                                                 
                                                                                                 
Total operating expenses
    47,642       92.2 %     69,546       89.3 %     92,711       83.0 %     107,162       83.9 %     19,214       84.6 %     28,371       79.5 %
                                                                                                 
Equity in earnings of Detroit Legal News Publishing, LLC, net of amortization
                287       0.4 %     2,736       2.5 %     2,736       2.1 %     461       2.0 %     915       2.6 %
                                                                                                 
                                                                                                 
Operating income
    4,047       7.8 %     8,600       11.0 %     21,668       19.4 %     23,244       18.2 %     3,961       17.4 %     8,239       23.1 %


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    Years Ended December 31,                          
                                  % of
          % of
                         
                            2006
    Revenues
    2006
    Revenues
    Three Months Ended March 31,  
          % of
          % of
    (Restated)
    (Restated)
    (Pro
    (Pro
          % of
          % of
 
    2004     Revenues     2005     Revenues     (Actual)     (Actual)     Forma)(2)     Forma)(2)     2006     Revenues     2007     Revenues  
    (Dollars in thousands)  
 
                                                                                                 
Non-cash interest expense related to redeemable preferred stock
    (2,805 )     (5.4 )%     (9,998 )     (12.8 )%     (28,455 )     (25.5 )%     (28,455 )     (22.3 )%     (2,938 )     (12.9 )%     (29,942 )     (83.9 )%
                                                                                                 
Interest expense, net
    (1,147 )     (2.2 )%     (1,874 )     (2.4 )%     (6,433 )     (5.8 )%     (8,478 )     (6.6 )%     (1,476 )     (6.5 )%     (2,035 )     (5.7 )%
                                                                                                 
Other expense, net
                            (202 )     (0.2 )%     (202 )     (0.2 )%     (10 )     0.0 %     (8 )     0.0 %
                                                                                                 
                                                                                                 
Income (loss) from continuing operations before income taxes
    95       0.2 %     (3,272 )     (4.2 )%     (13,422 )     (12.0 )%     (13,891 )     (10.9 )%     (463 )     (2.0 )%     (23,746 )     (66.5 )%
                                                                                                 
Income tax (expense) benefit
    (889 )     (1.7 )%     (2,436 )     (3.1 )%     (4,974 )     (4.5 )%     (4,607 )     (3.6 )%     200       0.9 %     (3,140 )     (8.8 )%
                                                                                                 
Minority interest
                            (1,913 )     (1.7 )%     (2,407 )     (1.9 )%     (126 )     (0.6 )%     (900 )     (2.5 )%
                                                                                                 
                                                                                                 
Loss from continuing operations
  $ (794 )     (1.5 )%   $ (5,708 )     (7.3 )%   $ (20,309 )     (18.2 )%   $ (20,905 )     (16.4 )%     (389 )     (1.7 )%     (27,786 )     (77.8 )%
                                                                                                 
                                                                                                 
Adjusted EBITDA (unaudited)(1)
  $ 6,875       13.3 %   $ 13,353       17.2 %   $ 28,776       25.8 %   $ 31,672       24.8 %     5,845       25.7 %     10,734       30.1 %
                                                                                                 
 
(1) See “Selected Consolidated Financial Data” for a reconciliation of loss from continuing operations to adjusted EBITDA and why we think it is important to disclose adjusted EBITDA.
 
(2) The pro forma financial data for the year ended December 31, 2006, gives effect to our acquisition of an 81.0% interest in APC on March 14, 2006, and APC’s subsequent acquisition of the mortgage default processing service business of Feiwell & Hannoy on January 9, 2007, as if each had occurred on January 1, 2006. The pro forma consolidated financial data is based upon available information and assumptions that we believe are reasonable; however, we can provide no assurance that the assumptions used in the preparation of the pro forma financial data are correct. The pro forma financial data is for illustrative and informational purposes only and is not intended to represent or be indicative of what our results of operations would have been if our acquisition of a majority stake in APC or APC’s acquisition of the mortgage default processing service business of Feiwell & Hannoy had occurred on January 1, 2006. The pro forma financial data also should not be considered representative of our future results of operations.
 
Three Months Ended March 31, 2007, Compared to Three Months Ended March 31, 2006
 
Revenues
 
Our total revenues increased $13.0 million, or 57.1%, to $35.7 million for the three months ended March 31, 2007, from $22.7 million for the three months ended March 31, 2006. This increase in total revenues consisted of the following:
 
  •  $7.9 million of increased revenues from our mortgage default processing service operations in Michigan, which we acquired when we acquired APC on March 14, 2006, and for which we recognized a full quarter of revenues in 2007;
 
  •  $2.8 million of revenues from our mortgage default processing service operations in Indiana, which we acquired from Feiwell & Hannoy in January 2007; and
 
  •  $2.3 million of increased revenues from our organic growth within existing businesses (i.e., businesses that we operated in the first quarter of 2006 and 2007).
 
We derived 78.9% and 54.6% of our total revenues from our Business Information Division and 21.1% and 45.4% of our total revenues from our Professional Services Division for the three months ended 2006 and 2007, respectively. This change in the mix between our two operating segments resulted primarily from our acquisition of APC in March 2006.
 
Operating Expenses  Our total operating expenses increased $9.2 million, or 47.7%, to $28.4 million for the three months ended March 31, 2007, from $19.2 million for the three months ended March 31, 2006. Operating expenses attributable to our corporate operations, which largely consist of compensation for our executive officers and other corporate personnel, increased $0.2 million, or 15.3%, to $1.3 million, for the three months ended March 31, 2007, from $1.2 million for the three months ended March 31, 2006. Total operating expenses as a percentage of revenues decreased from 84.6% in the first quarter of 2006 to 79.5% in the first quarter of 2007 principally because our higher margin Professional Services revenues increased as a percentage of total revenues in 2007.
 
Direct Operating Expenses.  Our direct operating expenses increased $4.3 million, or 54.4%, to $12.2 million for the three months ended March 31, 2007, from $7.9 million for the three months ended March 31, 2006. This increase in direct operating expenses was primarily attributable to the cost of compensation and employee benefits for the processing staff of the mortgage default processing service business of Feiwell & Hannoy that we acquired in the first quarter of 2007 and of APC that we acquired in

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2006 for which we recognized a full quarter of expenses during the three months ended March 31, 2007. Direct operating expenses as a percentage of revenue decreased from 34.7% in the first quarter of 2006 to 34.1% in the first quarter of 2007 due to the increase in higher margin revenue.
 
Selling, General and Administrative Expenses.  Our selling, general and administrative expenses increased $3.7 million, or 37.4%, to $13.6 million for the three months ended March 31, 2007, from $9.9 million for the three months ended March 31, 2006, due to the costs of employee salaries, bonuses and benefits for the mortgage default processing service business of Feiwell & Hannoy that we acquired in the first quarter of 2007 and for APC that we acquired in 2006 and for which we recognized a full quarter of operating expenses in the three months ended March 31, 2007. Our selling, general and administrative expenses for our existing businesses that we operated in the first quarter of 2006 and 2007 increased by 13.6% between the first quarter of 2006 and the first quarter of 2007 due primarily to increased sales commission expense related to increased advertising and appellate services sales. Selling, general and administrative expense as a percentage of revenue decreased from 43.6% in the first quarter of 2006 to 38.1% in the first quarter of 2007 due to our Professional Services businesses requiring less overhead than our Business Information businesses. To the extent our mix of businesses shifts more toward Professional Services, selling, general and administration expenses will decrease as a percentage of revenue.
 
Depreciation and Amortization Expense.  Our depreciation expense increased $0.3 million, or 63.8%, to $0.8 million for the three months ended March 31, 2007, from $0.5 million for the three months ended March 31, 2006, due to higher fixed asset balances in 2007. Our amortization expense increased $0.9 million, or 89.9%, to $1.8 million for the three months ended March 31, 2007, from $1.0 million for the three months ended March 31, 2006, primarily due to the amortization of finite-lived intangible assets acquired in the APC acquisition on March 14, 2006.
 
Adjusted EBITDA
 
Adjusted EBITDA (as defined and discussed under “Selected Historical and Unaudited Pro Forma Consolidated Financial Data”) increased $4.9 million, or 83.6%, to $10.7 million for the three months ended March 31, 2007, from $5.8 million for the three months ended March 31, 2006, due to the cumulative effect of the factors described above that are applicable to the calculation of adjusted EBITDA. Adjusted EBITDA as a percentage of revenues, which we also refer to as Adjusted EBITDA margin, increased to 30.1% for the three months ended March 31, 2007, from 25.7% for the three months ended March 31, 2006.
 
Non-Cash Interest Expense Related to Redeemable Preferred Stock
 
Non-cash interest expense related to redeemable preferred stock consists of non-cash interest expense related to the dividend accretion on our series A preferred stock and series C preferred stock and the change in the fair value of our series C preferred stock. Non-cash interest expense related to redeemable preferred stock increased $27.0 million to $29.9 million for the three months ended March 31, 2007, from $2.9 million for the three months ended March 31, 2006, primarily due to the increase in the fair value of our series C preferred stock. Non-cash interest expense related to redeemable preferred stock will no longer be incurred after the consummation of this offering because we will use a portion of the proceeds from this offering to redeem all of our outstanding preferred stock.
 
Interest Expense, Net
 
Interest expense, net consists primarily of interest expense on outstanding borrowings under our bank credit facility, offset by interest income from our invested cash balances and the increase in the estimated fair value of our interest rate swaps. Interest expense, net increased $0.6 million to $2.0 million for the three months ended March 31, 2007, from $1.5 million for the three months ended March 31, 2006, due primarily to increased average outstanding borrowings under our bank credit facility, and to a lesser extent to interest rate increases, given that our interest rate swaps are only a partial hedge of our exposure to interest rate fluctuations. For the three months ended March 31, 2007, our average outstanding borrowings were $89.8 million compared to $49.5 million for the three months ended March 31, 2006. This increase in average outstanding borrowings was due to the debt borrowed to finance our acquisitions in the first quarter of 2006 and 2007. Interest income decreased $0.1 million to $0.1 million for the three months ended March 31, 2007,


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from $0.2 million for the three months ended March 31, 2006. The estimated fair value of our fixed rate interest rate swaps decreased by $0.3 million, to a $0.2 million liability for the three months ended March 31, 2007, from a $0.2 million asset for the three months ended March 31, 2006, due to the decrease in variable interest rates. We are required by our bank credit facility to maintain an interest rate protection program, and therefore we use interest rate swaps to manage our interest rate risk.
 
Income Tax Expense
 
We recorded income tax benefit of $0.2 million and expense of $3.1 million for the three months ended March 31, 2006, and March 31, 2007, respectively. For these quarterly periods, we used an effective tax rate based on our annual projected income in accordance with APB No. 28.
 
Business Information Division Results
 
Revenues.  Business Information Division revenues increased $1.6 million, or 8.7%, to $19.5 million for the three months ended March 31, 2007, from $17.9 million for the three months ended March 31, 2006. Our display and classified advertising revenues increased $0.4 million, or 6.1%, to $7.5 million for the three months ended March 31, 2007, from $7.1 million for the three months ended March 31, 2006, primarily due to growth in the number of advertisements placed in our publications. Our public notice revenues increased $1.1 million, or 17.7%, to $7.6 million for the three months ended March 31, 2007, from $6.4 million for the three months ended March 31, 2006, primarily due to the increased number of foreclosure notices placed in our publications.
 
Circulation revenues increased $0.2 million, or 4.7%, to $3.6 million for the three months ended March 31, 2007 from $3.5 million for the three months ended March 31, 2006. This increase was due to an increase in the average price per subscription, which was significantly offset by a decline in the number of paid subscribers. As of March 31, 2007, our paid publications had approximately 75,500 subscribers, a decrease of approximately 2,700, or 3.5%, from total paid subscribers of approximately 78,200 as of March 31, 2006. This decrease was primarily due to our termination of discounted subscription programs for LawyersUSA and for publications in Colorado and Maryland, partially offset by an increase in paid subscribers related to our acquisition of the Mississippi publications of Venture Publications. Other Business Information Division revenues decreased $0.2 million, or 18.7%, to $0.7 million for the three months ended March 31, 2007, from $0.9 million for the three months ended March 31, 2006, primarily due to decreased commercial printing sales.
 
Operating Expenses.  Total direct operating expenses attributable to our Business Information Division increased $0.2 million, or 3.8%, to $6.8 million for the three months ended March 31, 2007, from $6.5 million for the three months ended March 31, 2006. This increase was primarily attributable to spending on outside software programmers working on web-related initiatives. Selling, general and administrative expenses attributable to our Business Information Division increased $1.0 million, or 14.6%, to $7.9 million for the three months ended March 31, 2007, from $6.9 million for the three months ended March 31, 2006, due to increased circulation marketing spending. Total operating expenses attributable to our Business Information Division as a percentage of Business Information Division revenue increased slightly from 80.0% in the first quarter of 2006 to 80.8% in the first quarter of 2007.
 
Professional Services Division Results
 
Revenues.  Professional services revenues increased $11.4 million to $16.2 million for the three months ended March 31, 2007, from $4.8 million for the three months ended March 31, 2006, primarily due to the $10.6 million increase in mortgage default processing service revenues to $12.1 million in the first quarter of 2007 from $1.5 million in the first quarter of 2006. This increase was primarily attributable to the two and one half additional months of APC’s revenue we recorded in the first quarter of 2007 compared to the first quarter of 2006 because we acquired APC on March 14, 2006, and the revenues from the mortgage default processing service business of Feiwell & Hannoy, which we acquired in January 2007. Appellate services revenues increased $0.8 million, or 23.1%, to $4.1 million for the three months ended March 31, 2007, from $3.3 million for the three months ended March 31, 2006. This increase was attributable to Counsel Press


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providing assistance with respect to a greater number of appellate filings (approximately 2,200 in the first quarter of 2007 compared to approximately 1,800 in the first quarter of 2006).
 
Operating Expenses.  Total direct operating expenses attributable to our Professional Services Division increased $4.0 million to $5.4 million for the three months ended March 31, 2007, from $1.4 million for the three months ended March 31, 2006, primarily due to the additional two and one half months we owned APC in the first quarter of 2007 and the expenses of the mortgage default processing service business of Feiwell & Hannoy, which we acquired in January 2007. Selling, general and administrative expenses attributable to our Professional Services Division increased $2.6 million to $4.3 million for the three months ended March 31, 2007, from $1.7 million for the three months ended March 31, 2006, due to the additional two and one half months we owned APC in 2007 and our acquisition of the mortgage default processing service business of Feiwell & Hannoy in January 2007. Depreciation expense attributable to our Professional Services Division increased $0.3 million to $0.3 million for the three months ended March 31, 2007 from $0.1 million in the first quarter of 2006. This increase was attributable to the inclusion of fixed assets from APC and Feiwell & Hannoy that were acquired in 2006 and 2007, respectively. Amortization expense increased $0.7 million to $1.1 million in the first quarter of 2007 from $0.4 million in the first quarter of 2006 due to the amortization of finite-lived intangible assets associated with APC, which was acquired during 2006. Total operating expense attributable to our Professional Services Division as a percentage of Professional Services Division revenue decreased from 73.8% for the three months ended March 31, 2006, to 68.7% for the three months ended March 31, 2007.
 
Year Ended December 31, 2006 (Restated), Compared to Year Ended December 31, 2005
 
Revenues
 
Our total revenues increased $33.8 million, or 43.4%, to $111.6 million in 2006 ($127.7 million on a pro forma basis) from $77.9 million in 2005. This increase in total revenues consisted of the following:
 
  •  $24.7 million of revenues from APC, which we acquired in March 2006;
 
  •  $1.5 million of increased revenues from businesses that we acquired in 2005 and for which we recognized a full year of revenues in 2006, consisting of $0.8 million of revenues from the business information publications and online legislative reporting system of Arizona News Service that we acquired in April 2005 and $0.7 million of appellate service revenues from Counsel Press, which we acquired in January 2005; and
 
  •  $7.6 million of increased revenues from our organic growth within existing businesses (i.e., businesses that we operated in 2005 and 2006).
 
We derived 85.7% and 66.1% of our total revenues from our Business Information Division and 14.3% and 33.9% of our total revenues from our Professional Services Division in 2005 and 2006, respectively. This change in the mix between our two operating segments resulted primarily from our acquisition of APC on March 14, 2006.
 
Operating Expenses
 
Our total operating expenses increased $23.2 million, or 33.3%, to $92.7 million in 2006 ($107.2 million on a pro forma basis) from $69.5 million in 2005. Operating expenses attributable to our corporate operations, which largely consist of compensation for our executive officers and other corporate personnel, increased $1.7 million, or 57.5%, to $4.8 million in 2006 from $3.0 million in 2005 because we transferred certain accounting and circulation jobs, which were previously accounted for within our Business Information segment, to our corporate headquarters at the beginning of 2006 and increased executive compensation in 2006. Total operating expenses as a percentage of revenue decreased from 89.3% in 2005 to 83.0% in 2006 principally because we have centralized our accounting, circulation and advertising production systems.
 
Direct Operating Expenses.  Our direct operating expenses increased $9.6 million, or 33.5%, to $38.4 million in 2006 ($45.2 million on a pro forma basis) from $28.8 million in 2005. This increase in direct operating expenses was primarily attributable to production and distribution expenses for businesses that we acquired in 2006 and those businesses that we acquired in 2005 for which we recognized a full year of


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expenses. Direct operating expenses as a percentage of revenue decreased from 36.9% in 2005 to 34.4% in 2006 due to the increase in higher margin revenue.
 
Selling, General and Administrative Expenses.  Our selling, general and administrative expenses increased $10.7 million, or 29.7%, to $46.7 million in 2006 ($52.6 million on a pro forma basis) from $36.0 million in 2005 due to the costs of employee salaries, bonuses and benefits for businesses that we acquired in 2006 or acquired in 2005 and for which we recognized a full year of operating expenses in 2006, partially offset by savings realized from the centralization of finance, accounting and circulation functions. Our selling, general and administrative expenses for our existing businesses that we operated in 2005 and 2006 increased by 10.2% between 2005 and 2006. Selling, general and administrative expense as a percentage of revenue decreased from 46.3% in 2005 to 41.8% in 2006 due to our revenues having increased at a faster rate than our selling, general and administrative expenses, which in part was due to our centralization efforts.
 
Depreciation and Amortization Expense.  Our depreciation expense increased $0.9 million, or 53.5%, to $2.4 million in 2006 ($2.8 million on a pro forma basis) from $1.6 million in 2005 due to higher fixed asset balances in 2006. Our amortization expense increased $2.0 million, or 63.1%, to $5.2 million in 2006 ($6.6 million on a pro forma basis) from $3.2 million in 2005 primarily due to the amortization of finite-lived intangible assets acquired in the APC acquisition in March 2006.
 
Adjusted EBITDA
 
Adjusted EBITDA (as defined and discussed under “Selected Historical and Unaudited Pro Forma Consolidated Financial Data”) increased $15.4 million, or 115.5%, to $28.8 million in 2006 ($31.7 million on a pro forma basis) from $13.4 million in 2005 due to the cumulative effect of the factors described above that are applicable to the calculation of adjusted EBITDA. Adjusted EBITDA as a percentage of revenues, which we also refer to as adjusted EBITDA margin, increased to 25.8% for 2006 from 17.2% for 2005.
 
Non-Cash Interest Expense Related to Redeemable Preferred Stock
 
Non-cash interest expense related to redeemable preferred stock increased $18.5 million to $28.5 million in 2006 from $10.0 million in 2005 primarily due to the increase in the fair value of our series C preferred stock.
 
Interest Expense, Net
 
Interest expense, net increased $4.6 million to $6.4 million in 2006 ($8.5 million on a pro forma basis) from $1.9 million in 2005 due primarily to increased average outstanding borrowings under our bank credit facility, and to a lesser extent to interest rate increases, given that our interest rate swaps are only a partial hedge of our exposure to interest rate fluctuations. During 2006, our average outstanding borrowings were $74.9 million compared to $31.8 million during 2005. This increase in average outstanding borrowings was due to the debt borrowed to finance our acquisitions in 2006. Interest income increased $0.1 million, or 18.2%, to $0.4 million in 2006 from $0.3 million in 2005. The estimated fair value of our fixed rate interest rate swaps decreased by $0.2 million in 2006 due to the decrease in variable interest rates.
 
Income Tax Expense
 
We recorded income tax expense of $2.4 million and $5.0 million for 2005 and 2006, respectively. Our effective tax rate differs from the statutory U.S. federal corporate income tax rate of 35.0% due to the non-cash interest expense that we record for dividend accretion and the change in the fair value of our series C preferred stock of $10.0 million in 2005 and $28.5 million in 2006, which will not be deductible for tax purposes. Excluding these amounts, our effective tax rate would have been 36.2% and 37.9% for 2005 and 2006, respectively.
 
Loss from Discontinued Operations
 
We previously were engaged in the business of in-bound and out-bound teleservices. In September 2005, we sold our telemarketing operations to management personnel of this operating unit and incurred a $1.8 million loss, net of tax benefit, from discontinued operations in 2005. We did not incur a corresponding loss in 2006.


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Business Information Division Results
 
Revenues.  Business Information Division revenues increased $7.1 million, or 10.6%, to $73.8 million in 2006 from $66.7 million in 2005. Our display and classified advertising revenues increased $3.5 million, or 12.3%, to $31.7 million in 2006 from $28.3 million in 2005, primarily due to growth in the number of advertisements placed in our publications. Our public notice revenues increased $4.1 million, or 19.9%, to $25.0 million in 2006 from $20.8 million in 2005, primarily due to the increased number of foreclosure notices placed in our publications.
 
Circulation revenues decreased $0.3 million, or 2.3%, to $13.6 million in 2006 from $13.9 million in 2005, primarily due to a decrease in the number of paid subscriptions, partially offset by an increase in the average price per subscription. As of December 31, 2006, our paid publications had approximately 72,800 subscribers, a decrease of approximately 6,600, or 8.3%, from total paid subscribers of approximately 79,400 as of December 31, 2005. This decrease was primarily due to the loss of approximately 1,100 subscribers to our Louisiana/Gulf Coast publications as a result of the Hurricane Katrina disaster, approximately 1,900 subscribers as a result of our termination of a discounted subscription program for Lawyers USA and approximately 3,600 subscribers as a result of our termination of discounted subscription programs at many of our other publications. Other Business Information Division revenues decreased $0.2 million, or 5.2%, to $3.5 million in 2006 from $3.7 million in 2005, primarily due to decreased sales of database information. Approximately $0.8 million of the increase in our Business Information Division’s revenues was due to the inclusion of a full year of operations of Arizona News Service, which we acquired on April 30, 2005.
 
Operating Expenses.  Total direct operating expenses attributable to our Business Information Division increased $0.9 million, or 3.4%, to $26.6 million in 2006 from $25.7 million in 2005. This increase was primarily attributable to an annual compensation increase and increased spending on web-related initiatives. Selling, general and administrative expenses attributable to our Business Information Division increased $2.4 million, or 8.3%, to $30.7 million in 2006 from $28.4 million in 2005 due to an annual compensation increase and increased circulation and marketing spending. Total operating expenses attributable to our Business Information Division as a percentage of Business Information Division revenue decreased from 86.4% in 2005 to 82.7% in 2006 due to the increase in higher margin revenue.
 
Professional Services Division Results
 
Revenues.  Professional services revenues increased $26.7 million to $37.8 million in 2006 ($53.8 million on a pro forma basis) from $11.1 million in 2005, primarily due to the inclusion of mortgage default processing revenues of $24.7 million generated by APC, in which we acquired a majority stake during March 2006. Appellate services revenues increased $2.0 million, or 17.9%, to $13.1 million in 2006 from $11.1 million in 2005. Approximately $0.7 million of this increase was due to the additional month of Counsel Press’ revenue we recorded in 2006 compared to 2005 because we acquired Counsel Press near the end of January 2005, with the balance of the increase attributable to Counsel Press having provided assistance with respect to a greater number of appellate filings in 2006 (approximately 8,300 in 2006 compared to approximately 7,400 in 2005) and Counsel Press’ acquisition of the assets of The Reporter Company Printers and Publishers in October 2006.
 
Operating Expenses.  Total direct operating expenses attributable to our Professional Services Division increased $8.8 million to $11.8 million ($18.6 million on a pro forma basis) in 2006 from $3.0 million in 2005, primarily due to the addition of APC in 2006 and the additional month we owned Counsel Press in 2006. Selling, general and administrative expenses attributable to our Professional Services Division increased $6.6 million to $11.5 million ($17.4 million on a pro forma basis) in 2006 from $4.9 million in 2005, also primarily due to the addition of APC in 2006 and the additional month we owned Counsel Press in 2006. Depreciation expense attributable to our Professional Services Division increased $0.8 million to $0.9 million in 2006 from $0.1 million in 2005. This increase was attributable to the inclusion in 2006 of fixed assets from APC. Amortization expense increased $1.8 million to $2.6 million in 2006 from $0.8 million in 2005 due to the amortization in 2006 of finite-lived intangible assets associated with APC, which was acquired during 2006. Total operating expense attributable to our Professional Services Division as a percentage of Professional Services Division revenue decreased from 79.3% in 2005 to 71.0% in 2006.


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Year Ended December 31, 2005, Compared to Year Ended December 31, 2004
 
Revenues
 
Our total revenues increased $26.2 million, or 50.6%, to $77.9 million in 2005 from $51.7 million in 2004. This increase in total revenues consisted of the following:
 
  •  $12.6 million of increased revenues from businesses that we acquired in 2005, including $1.5 million of revenues from the business information publications and online legislative reporting system of Arizona News Service that we acquired in April 2005 and $11.1 million from Counsel Press, which we acquired in January 2005;
 
  •  $11.1 million of increased revenues from the Lawyers Weekly publications that we acquired in 2004 and for which we recognized a full year of revenues in 2005; and
 
  •  $2.5 million of increased revenues from organic growth within existing businesses.
 
We derived 100.0% and 85.7% of our total revenues from our Business Information Division and 0.0% and 14.3% of our total revenues from our Professional Services Division in 2004 and 2005, respectively.
 
Operating Expenses
 
Total operating expenses increased $21.9 million, or 46.0%, to $69.5 million in 2005 from $47.6 million in 2004. Total operating expenses increased primarily due to the inclusion of operating expenses from our Lawyers Weekly publications for a full year and operating expenses from Counsel Press and Arizona News Service.
 
Direct Operating Expenses.  Our direct operating expenses increased $7.1 million, or 32.5%, to $28.8 million in 2005 from $21.7 million in 2004. This increase in direct operating expenses was primarily attributable to production and distribution expenses for businesses that we acquired in 2005 and those businesses that we acquired in 2004 for which we recognized a full year of expenses. Our direct operating expenses as a percentage of revenue decreased from 42.0% in 2004 to 36.9% in 2005 due to increased higher margin revenues.
 
Selling, General and Administrative Expenses.  Our selling, general and administrative expenses increased $12.9 million, or 56.0%, to $36.0 million in 2005 from $23.1 million in 2004. Our selling, general and administrative expenses as a percentage of revenue increased from 44.7% in 2004 to 46.3% in 2005. This increase was attributable to the inclusion of expenses from businesses that we acquired in late 2004 and 2005 and increased spending on corporate technology and infrastructure improvements, as well as marketing campaigns to increase circulation. Our selling, general and administrative expenses for our existing businesses that we operated in 2004 or 2005 increased by 8.0% between 2004 and 2005 because of increased corporate spending on information technology.
 
Depreciation and Amortization Expenses.  Depreciation expense increased $0.3 million, or 24.5%, to $1.6 million in 2005 from $1.3 million in 2004. This increase was attributable to higher fixed asset balances in 2005. Amortization expense increased $1.6 million to $3.2 million in 2005 from $1.6 million in 2004. The increase in amortization expense was due to the amortization of finite-lived intangible assets acquired in our acquisition of Counsel Press in January 2005.
 
Adjusted EBITDA
 
Adjusted EBITDA (as defined and discussed under “Selected Historical and Unaudited Pro Forma Consolidated Financial Data”) increased $6.5 million, or 94.2%, to $13.4 million in 2005 from $6.9 million in 2004 due to the cumulative effect of the factors described above that are applicable to the calculation of adjusted EBITDA. Our adjusted EBITDA margin increased to 17.2% in 2005 from 13.3% in 2004.
 
Non-cash Interest Expense Related to Redeemable Preferred Stock
 
Non-cash interest expense related to redeemable preferred stock increased $7.2 million to $10.0 million in 2005 from $2.8 million in 2004 primarily due to the issuance and sale of shares of our series C preferred stock in September 2004.


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Interest Expense, Net
 
Interest expense, net increased $0.7 million, or 63.4%, to $1.9 million in 2005 from $1.1 million in 2004 primarily due to increased average outstanding borrowings under our senior credit facility and interest rate increases. During 2005, our average outstanding borrowings were $31.8 million compared to $23.6 million during 2004. This increase in average outstanding was due to the debt borrowed to finance certain of our acquisitions in 2005. Interest income increased $0.3 million to $0.3 million in 2005 from $0.1 million in 2004. The estimated fair value of our fixed rate interest rate swaps increased by $0.2 million in 2005 due to the increase in variable interest rates.
 
Income Tax Expense
 
We recorded income tax expense of $0.9 million and $2.4 million in 2004 and 2005, respectively. Our effective tax rate differs from the statutory U.S. federal corporate income tax rate of 35.0% due to the non-cash interest expense that we record for dividend accretion and the change in the fair value of our series C preferred stock of $2.8 million in 2004 and $10.0 million in 2005, which will not be deductible for tax purposes. Excluding these amounts, our effective tax rate would have been 30.7% and 36.2% for 2004 and 2005, respectively. The 2004 effective tax rate varied from the statutory rate due to utilization of net operating loss carryforwards that were previously reserved.
 
Loss from Discontinued Operations
 
Loss from discontinued operations, net of tax benefit, increased $1.3 million to $1.8 million in 2005 from $0.5 million in 2004. This increase was attributable to the sale of our telemarketing operations to management personnel of this operating unit in September 2005.
 
Business Information Division Results
 
Revenues.  Business Information Division revenues increased $15.0 million, or 29.1%, to $66.7 million in 2005 from $51.7 million in 2004. Approximately $9.8 million of this increase was due to the inclusion of a full year of operations of Lawyers Weekly, which we acquired in September 2004, and approximately $1.5 million of this increase was due to revenues from our Arizona News Service business information publications and online legislative reporting system, which we acquired in April 2005. The balance of the increase, or approximately $3.7 million, was due to growth in our operations that we owned for the entire year in 2004 and 2005. In 2005, our display and classified advertising revenues increased $7.2 million, or 34.5%, to $28.3 million in 2005 from $21.0 million in 2004, primarily due to the inclusion of advertising revenues from businesses we acquired during 2004. Advertising revenues from businesses we acquired during 2005 accounted for approximately 0.7% of the increase.
 
Our public notice revenues increased $0.9 million, or 4.6%, to $20.8 million in 2005 from $19.9 million in 2004, primarily due to the inclusion of public notice revenues from businesses we acquired in 2005.
 
Circulation revenues increased $6.2 million, or 80.5%, to $13.9 million in 2005 from $7.7 million in 2004. Approximately $5.2 million of the increase in circulation revenues was attributable to the inclusion of circulation revenues from the seven paid publications we acquired from Lawyers Weekly, approximately $0.4 million of the increase was attributable to the inclusion of circulation revenues from the paid publications and online legislative reporting system we acquired from Arizona News Service and approximately $0.6 million was attributable to circulation revenues generated by publications that we owned throughout 2004 and 2005. We had approximately 79,400 paid subscribers as of December 31, 2005, an increase of approximately 5,500, or 7.4%, from approximately 73,900 as of December 31, 2004. Other Business Information Division revenues increased $0.7 million, or 22.3%, to $3.7 million in 2005 from $3.0 million in 2004, due to licenses of certain of our business information products by Lawyers Weekly.
 
Operating Expenses.  Total direct operating expenses attributable to our Business Information Division increased $4.0 million, or 18.5%, to $25.7 in 2005 from $21.7 in 2004. This increase was primarily attributable to the inclusion of operating expenses related to Lawyers Weekly. Selling, general and administrative expenses attributable to our Business Information Division increased $7.6 million, or 36.4%, to $28.4 million in 2005 from $20.8 million in 2004 due to the inclusion of selling, general and administrative expenses related to Lawyers Weekly, the acquisition of which added five new offices. Depreciation expense attributable to our


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Business Information Division increased $0.2 million, or 17.3%, to $1.3 million in 2005 from $1.1 million in 2004. This increase was attributable to higher fixed asset balances in 2005. Amortization expense increased $0.8 million, or 51.5%, to $2.3 million in 2005 from $1.5 million in 2004 due to a full year of amortization expense related to the Lawyers Weekly finite lived-intangibles. Total operating expenses attributable to our Business Information Division as a percentage of Business Information Division revenue decreased to 86.4% from 87.3%, due to our revenues having increased at a faster rate than our operating expenses.
 
Professional Services Division Results
 
Revenues.  Professional Services Division revenues were $11.1 million in 2005 due to our acquisition of Counsel Press in January 2005, resulting in the formation of our Professional Services Division.
 
Operating Expenses.  Total direct operating expenses attributable to our Professional Services Division were $3.0 million in 2005, attributable to the direct operating expenses of Counsel Press. Selling, general and administrative expenses attributable to our Professional Services Division were $4.9 million in 2005. Depreciation expense attributable to our Professional Services Division was $0.1 million in 2005 and amortization expense was $0.8 million in 2005. These expenses were the result of our acquisition of Counsel Press.
 
LIQUIDITY AND CAPITAL RESOURCES
 
Our primary sources of liquidity are cash flows from operations, debt capacity under our credit facility, distributions received from Detroit Legal News Publishing, LLC and available cash reserves. The following table summarizes our cash and cash equivalents, working capital (deficit), long-term debt and cash flows as of, and for the years ended, December 31, 2004, 2005 and 2006, and as of, and for the three months ended, March 31, 2007 (dollars in thousands):
 
                                 
    Years Ended, or As of,
    Three Months Ended,
 
    December 31,     or As of,
 
    2004     2005     2006     March 31, 2007  
                      (Unaudited)  
 
Cash and cash equivalents
  $ 19,148     $ 2,348     $ 786     $ 1,406  
Working capital (deficit)
    13,886       (6,790 )     (8,991 )     (12,348 )
Net cash provided by operating activities
    4,840       9,736       18,307       7,172  
Net cash used in investing activities:
                               
Acquisitions and investments
    (34,471 )     (35,397 )     (53,461 )     (17,288 )
Capital expenditures
    (1,243 )     (1,494 )     (2,430 )     (1,346 )
Net cash provided by financing activities
    49,952       10,345       35,982       12,082  
Long-term debt, less current portion
    29,730       36,920       72,760       85,527  
 
Cash Flows Provided By Operating Activities
 
The most significant inflows of cash are cash receipts from our customers. Operating cash outflows include payments to employees, payments to vendors for services and supplies and payments of interest and income taxes.
 
Net cash provided by operating activities for the three months ended March 31, 2007, increased $0.9 million, or 15.1%, to $7.2 million from $6.2 million for the same period in 2006. This increase was primarily the result of a full quarter of operations of APC in 2007, which we purchased on March 14, 2006, and the inclusion of the results of the mortgage default processing service business of Feiwell & Hannoy, which we acquired on January 9, 2007.
 
Net cash provided by operating activities increased $8.6 million, or 88.0%, to $18.3 million in 2006 from $9.7 million in 2005. This increase was primarily attributable to the inclusion of the results of our Professional Services Division that we formed in 2005 for a full year in 2006 and increased cash generated by the businesses we owned throughout 2005 and 2006, partially offset by the payment of $1.8 million in minority interest distributions paid to Trott & Trott pursuant to the terms of the APC operating agreement.


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Working capital deficit expanded $3.4 million, or 37.3%, to $(12.3) million at March 31, 2007, from $(9.0) million at December 31, 2006. Current liabilities increased $5.9 million, or 21.2%, to $33.7 million at March 31, 2007, from $27.8 million at December 31, 2006. Accounts payable and accrued liabilities increased $2.8 million to $12.9 million at March 31, 2007, from $10.0 million at December 31, 2006. This increase was caused in part by the timing of payments on trade accounts payable, offset by a decrease in accrued bonuses, which declined because the 2006 year-end bonuses were paid out during the first quarter of 2007, as well as an increase in accrued income taxes payable offset by a decrease in due to sellers of acquired businesses because we paid out the DLNP earnout amount in the first quarter of 2007. Deferred revenue increased $0.6 million, or 5.2%, to $11.3 million at March 31, 2007, from $10.8 million at December 31, 2006 primarily due to deferred revenue at businesses purchased in our Professional Service Division. Current assets increased $2.5 million to $21.3 million at March 31, 2007, from $18.8 million at December 31, 2006. This increase was due primarily to the growth of accounts receivable by $1.9 million from $15.7 million at December 31, 2006, to $17.5 million at March 31, 2007, and the increase in cash from $0.8 million at December 31, 2006, to $1.4 million at March 31, 2007.
 
Working capital deficit expanded $2.2 million, or 32.4%, to $(9.0) million at December 31, 2006, from $(6.8) million at December 31, 2005. Current liabilities increased $5.3 million to $27.8 million at December 31, 2006, from $22.5 million at December 31, 2005. Accounts payable and accrued liabilities increased $2.3 million to $10.0 million at December 31, 2006, from $7.7 million at December 31, 2005. This increase was caused in part by the liabilities at the businesses purchased during 2006 and by the increased activity caused by the increased sales volume in 2006 at the businesses we owned during both 2005 and 2006. This increase was partially offset by the payment of $1.5 million to the sellers of Detroit Legal News Publishing during 2006. Deferred revenue increased $1.9 million from December 31, 2005, to December 31, 2006, because of deferred revenue at businesses purchased during 2006. Current assets increased $3.1 million to $18.8 million at December 31, 2006, from $15.8 million at December 31, 2005. The largest component of this increase was the growth of accounts receivable by $4.2 million from $11.5 million at December 31, 2005, to $15.7 million at December 31, 2006. Offsetting the increase in accounts receivable was the reduction in cash by $1.6 million.
 
The increase in accounts receivable, between December 31, 2005, and December 31, 2006, as well as between December 31, 2006, and March 31, 2007, was primarily attributable to increased sales and accounts receivable of our acquired companies during the trailing twelve or three month period, as applicable. Our allowance for doubtful accounts as a percentage of gross receivables and annual day sales outstanding, or DSO, for each of the last two years and for the three months ended March 31, 2007 is set forth in the table below:
 
                         
                Three Months
 
    Years Ended
    Ended
 
    December 31,     March 31,
 
    2005     2006     2007  
 
Allowance for doubtful accounts as a percentage of gross accounts receivable
    9.3 %     6.1 %     5.7 %
Day sales outstanding
    65.7       58.3       49.5  
 
We calculate DSO by dividing net receivables by average daily revenue excluding circulation. Average daily revenue is computed by dividing total revenue by the total number of days in the period. Our DSO decreased between 2005 and the three months ended March 31, 2007, because APC accounts comprise an increasing percentage of the accounts receivable balance and these accounts are collected faster than the accounts receivable in the other businesses we owned during that period. We decreased our allowance for doubtful accounts as a percentage of gross receivables in 2006 because of the improved collections in 2006.
 
We own 35.0% of the membership interests in DLNP, the publisher of Detroit Legal News, and received an aggregate of $3.5 million and $1.4 million as distributions from DLNP in 2006 and the first quarter of 2007, respectively. We did not receive any distributions from DLNP in 2005 because we acquired our interest in November 2005. The operating agreement for DLNP provides for us to receive quarterly distribution payments based on our ownership percentage, which are a significant source of operating cash flow.


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The increase in net cash provided by operating activities from 2005 to 2006 was offset by the uses of cash for investing activities noted below, and as a result, cash and cash equivalents declined $1.6 million to $0.8 million at December 31, 2006, from $2.3 million at December 31, 2005.
 
Net cash provided by operating activities increased $4.9 million to $9.7 million in 2005 from $4.8 million in 2004. This increase was primarily attributable to the inclusion of the results of Business Information Division businesses that we acquired in late 2004 for a full year in 2005 and the inclusion of Professional Service Division operations that we acquired in 2005. The majority of this increase was attributable to net accounts receivable, which increased $4.3 million, or 94.9%, to $11.5 million as of December 31, 2005, from $7.2 million as of December 31, 2004. This increase in net accounts receivable was primarily attributable to accounts receivable at Counsel Press that were purchased in 2005. Accounts payable increased $1.1 million, or 50.8%, to $3.3 million as of December 31, 2005, from $2.2 million as of December 31, 2004. Unearned and deferred revenue increased $0.9 million, or 10.4%, to $9.9 million as of December 31, 2005, from $9.0 million as of December 31, 2004. We did not experience a significant change in working capital between 2004 and 2005 except for changes caused by acquisitions. Our balance of cash and cash equivalents decreased $16.8 million to $2.3 million at December 31, 2005, from $19.1 million at December 31, 2004, due to the uses of cash for investing activities described below.
 
Cash Flows Used By Investing Activities
 
Net cash used by investing activities decreased $23.9 million, or 56.2%, to $18.6 million in the first quarter of 2007 from $42.5 million in the first quarter of 2006. Uses of cash in both periods pertained to acquisitions, capital expenditures and purchases of software. Cash paid for acquisitions totaled $17.3 million in the first quarter of 2007 and $42.0 million in the first quarter of 2006. Capital expenditures and purchases of software were approximately $1.3 million in the first quarter of 2007 and $0.5 million in the first quarter of 2006. We estimate that our total capital expenditures in 2007 will be approximately $6.0 million for projects intended to improve our operations. In June 2007, we moved APC to a new office location in suburban Detroit that we are leasing from an affiliate of Trott & Trott because our previous lease was expiring and to provide us room for expansion. We are also building a new data center to support our Business Information and Professional Services divisions at this suburban Detroit office. We estimate that the cost of these developments will be approximately $2.0 million in 2007 ($0.5 of which we incurred in the first quarter of 2007 with respect to leasehold improvements), with approximately $0.8 million attributable to additional leasehold improvements and $0.7 million attributable to furniture, which costs will be incurred during the remainder of 2007. We anticipate these developments will be completed during the second quarter of 2007. In addition, we expect that we will incur approximately $3.3 million of capital expenditures in 2007 for technology development ($0.8 of which we incurred in the first quarter of 2007), including $0.5 million to customize our proprietary case management software system so that it can be used in judicial foreclosure states, such as Indiana, as well as non-judicial states like Michigan. We expect that the customization of our proprietary case management software system will be completed by the end of 2007.
 
Net cash used by investing activities increased $19.0 million, or 51.4%, to $55.9 million in 2006, from $36.9 million in 2005. Net cash used by investing activities increased $1.2 million, or 3.3%, to $36.9 million in 2005 from $35.7 million in 2004. Use of cash in each period pertained to acquisitions, equity investments, capital expenditures and purchases of software. Cash paid in connection with acquisitions and equity investments totaled $53.5 million in 2006, $35.4 million in 2005 and $34.5 million in 2004. Capital expenditures and purchases of software were approximately $2.4 million in 2006, $1.5 million in 2005 and $1.2 million in 2004. The $0.9 million increase in capital expenditures in 2006 from 2005 included $0.2 million for a new circulation system.
 
Finite-lived intangible assets increased $16.7 million to $82.6 million as of March 31, 2007, from $65.9 million as of December 31, 2006. This increase was due to the services contract with Feiwell & Hannoy that resulted from the acquisition of its mortgage default processing service business and the customer list acquired in connection with the Venture Publications acquisition. These two items were partially offset by amortization expense. Finite-lived intangible assets increased $35.5 million to $65.9 million as of December 31, 2006, from $30.4 million as of December 31, 2005. This increase was attributable to our services contract with Trott & Trott, partially offset by increased amortization expense.


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Goodwill increased $5.0 million, or 6.9%, to $77.7 million as of March 31, 2007, from $72.7 million as of December 31, 2006. This increase in goodwill was due to the goodwill related to APC’s acquisition of the mortgage default processing services business from Feiwell & Hannoy. Goodwill increased $9.2 million, or 14.4%, to $72.7 million as of December 31, 2006, from $63.5 million as of December 31, 2005. The increase in goodwill was primarily attributable to goodwill related to our acquisition of a majority stake in APC in March 2006 and our acquisition of substantially all of the business information assets of Happy Sac Investment Co. (the Watchman Group in St. Louis, Missouri) in October 2006.
 
Cash Flows Provided By Financing Activities
 
Net cash provided by financing activities primarily includes borrowings under our revolving credit agreement and the issuance of long-term debt. Cash used in financing activities generally include the repayment of borrowings under the revolving credit agreement and long-term debt, the payment of fees associated with the issuance of long-term debt, the payment of minority interest distributions and payments on capital leases.
 
Net cash provided by financing activities decreased $28.5 million to $12.1 million in the first quarter of 2007 from $40.6 million in the first quarter of 2006. This decrease was due to the reduction in borrowings of senior term notes in the first quarter of 2007 as compared to the first quarter of 2006. Long-term debt, less current portion, increased $13.6 million, or 18.7%, to $86.4 million as of March 31, 2007, from $72.8 million as of December 31, 2006.
 
Net cash provided by financing activities increased $25.6 million to $36.0 million in 2006 from $10.3 million in 2005. This increase was primarily due to the issuance of long-term debt with a principal amount of approximately $56.4 million, partially offset by the repayment of $13.5 million of the borrowings on our revolving credit line, the repayment of $6.0 million of our outstanding long-term debt, the payment of $0.8 million of deferred financing fees related to our issuance of long-term debt and the payment of certain capital lease obligations. Long-term debt, less current portion, increased $35.8 million, or 97.1%, to $72.8 million as of December 31, 2006, from $36.9 million as of December 31, 2005.
 
Credit Agreement.  We have an amended and restated senior credit agreement with a six bank syndicate for which U.S. Bank, NA serves as agent. The credit facility under the credit agreement consists of a variable rate term loan and a variable rate revolving line of credit. As of December 31, 2006, we had outstanding under our credit agreement a variable rate term loan in the amount of $79.8 million. We also have the ability under our credit agreement to obtain $15 million of additional incremental term loans in connection with acquisitions permitted by our credit agreement. No amount was outstanding as of December 31, 2006, under our variable rate revolving line of credit. In January 2007, we borrowed $13.5 million on the variable rate revolving line of credit to fund the acquisition of the mortgage default processing business of Feiwell & Hannoy. At the same time, we issued a non-interest bearing note with a face amount of $3.5 million to Feiwell & Hannoy in connection with this acquisition.
 
Our credit agreement was amended as of March 27, 2007, pursuant to a second amendment to the amended and restated credit agreement. Immediately prior to the second amendment, the outstanding principal balance of the variable rate term loan commitment was $79.8 million. Pursuant to the second amendment, on March 27, 2007, we borrowed $10.0 million of additional term loan under our credit agreement. Proceeds from this borrowing were used to repay $10.0 million of the outstanding $13.5 million borrowed amount under the revolving line of credit. On March 30, 2007, we borrowed an additional $2.8 million on the revolving line of credit to fund the acquisition of the business information assets of Venture Publications. After entering into the second amendment, the variable rate term loan was increased to $89.8 million and the variable rate revolving line of credit was left unchanged at $15.0 million. Accordingly, total unused borrowing capacity under our credit agreement as of March 31, 2007, was $12.0 million available under our revolving line of credit. As of May 31, 2007, we had $88.0 million outstanding under our term loan and $3.0 million outstanding under our revolving line of credit. Borrowings under our credit agreement are at either the prime rate or LIBOR plus a margin that fluctuates on the basis of the ratio of our total liabilities to our pro forma EBITDA, calculated in accordance with our credit agreement, and are secured by substantially all of our assets, including pledges of shares of stock of all our subsidiaries.


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Under our credit agreement, we have an obligation to deliver our consolidated financial statements to U.S. Bank within 90 days after the end of our fiscal year. In addition, our credit agreement prohibits redemptions and provides that in the event we issue any additional equity securities, 50% of the cash proceeds of the issuance must be paid to our lenders in satisfaction of any outstanding indebtedness. In connection with entering into the second amendment, we secured a waiver from our lenders regarding our obligation to deliver financial statements by March 31, 2007, and obtained the lenders’ consent to consummate the redemption of our preferred stock and use proceeds from this offering for purposes other than the repayment of indebtedness under the credit facility. Our credit agreement also contains a number of negative covenants that limit us from, among other things, and with certain thresholds and exceptions:
 
  •  incurring indebtedness (including guarantee obligations) or liens;
 
  •  entering into mergers, consolidations, liquidations or dissolutions;
 
  •  selling assets;
 
  •  entering into certain acquisition transactions;
 
  •  forming or entering into partnerships and joint ventures;
 
  •  entering into negative pledge agreements;
 
  •  paying dividends, redeeming or repurchasing shares or making other payments in respect of capital stock;
 
  •  entering into transactions with affiliates;
 
  •  making investments;
 
  •  entering into sale and leaseback transactions; and
 
  •  changing our line of business.
 
Our amended and restated credit agreement also requires the maintenance of a quarterly financial ratio, as of the last day of any fiscal quarter, with respect to maximum consolidated senior leverage as follows:
 
         
Period
  Maximum Senior Leverage Ratio
 
December 31, 2006, through December 30, 2007
    4.00 to 1.00  
December 31, 2007, through December 30, 2008
    3.75 to 1.00  
December 31, 2008, through loan termination date
    3.50 to 1.00  
 
Under our credit agreement, the senior leverage ratio described above represents, for any particular date, the ratio of our outstanding indebtedness (less our subordinated debt and up to a specified amount of our cash and cash equivalents) to our pro forma EBITDA, calculated in accordance with our credit agreement, for the four fiscal quarters ended on, or most recently ended before, the applicable date.
 
Simultaneously with, or immediately after, the closing of this offering, we anticipate that we will enter into a second amended and restated credit agreement with U.S. Bank, NA that will replace our current credit agreement in its entirety. The terms of the new credit agreement are expected to provide for a variable rate term commitment of $50 million and a variable rate revolving line of credit of $100 million. U.S. Bank, NA will be the agent under the new credit agreement and would have the right to syndicate the commitment obligations under the agreement to other banks or lending institutions.
 
We intend to use $      of our net proceeds from this offering to repay $      of the outstanding principal balance of the variable rate term loans outstanding under our current credit agreement. The remaining balance of the variable rate term loans and the accrued interest on such term loans will be converted to $      of variable rate term loans and $      of variable rate revolving loans under the second amended and restated credit agreement.
 
The second amended and restated credit agreement is expected to include negative covenants similar in nature and scope to our current credit agreement, including restrictions on our ability to incur indebtedness, sell assets or pay dividends to our stockholders.


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Redemption of Preferred Stock.  Upon the consummation of this offering, we will redeem all of our outstanding shares of series A preferred stock and series B preferred stock (in each case, including shares issued upon conversion of our series C preferred stock) for approximately $       million. For further information, see “Use of Proceeds” and “Certain Relationships and Related Transactions.”
 
Future Needs
 
We plan to continue to develop and evaluate potential acquisitions to expand our product and service offerings and customer base and enter new geographic markets. We intend to fund these initiatives over the next twelve months with funds generated from operations and borrowings under our credit facility.
 
Over the longer term, we expect that cash flow from operations, supplemented by short and long term financing and the proceeds from this offering, as necessary, will be adequate to fund day-to-day operations and capital expenditure requirements. Our ability to secure short-term and long-term financing in the future will depend on several factors, including our future profitability, the quality of our short and long-term assets, our relative levels of debt and equity and the overall condition of the credit markets. Following this offering, the net proceeds remaining after the redemption of our preferred stock and repayment of outstanding indebtedness under our credit facility will be invested in short-term, investment-grade, interest-bearing securities, pending their use for other general corporate purposes, including future acquisitions.
 
CONTRACTUAL OBLIGATIONS
 
The following table represents our obligations and commitments to make future payments under contracts, such as lease agreements, and under contingent commitments as of December 31, 2006. Actual payments in future periods may vary from those reflected in the table.
 
                                         
    Less than
                         
    1 Year     1-3 Years     3-5 Years     After 5 Years     Total  
    (In thousands)  
 
Long-term debt
  $ 7,000     $ 27,000     $ 45,750     $     $ 79,750  
Capital leases
    31       10                   41  
Operating leases1
    3,550       7,695       3,513             14,758  
Preferred stock
          105,051                   105,051  
                                         
Total
  $ 10,581     $ 139,756     $ 49,263           $ 199,600  
 
 
(1)  We lease office space and equipment under certain noncancelable operating leases that expire in various years through 2016. Lease terms generally range from 5 to 10 years with one to two renewal options for extended terms. The amounts included in the table above represent future minimum lease payments for noncancelable operating leases for continuing operations and discontinued operations.
 
OFF BALANCE SHEET ARRANGEMENTS
 
We have not entered into any off balance sheet arrangements.
 
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
 
We are exposed to market risks related to interest rates. Other types of market risk, such as foreign currency risk, do not arise in the normal course of our business activities. Our exposure to changes in interest rates is limited to borrowings under our credit facility. However, as of April 1, 2007, we had swap arrangements that convert the $40.0 million of our variable rate term loan into a fixed rate obligation. Under our bank credit facility, we are required to enter into derivative financial instrument transactions, such as swaps or interest rate caps, in order to manage or reduce our exposure to risk from changes in interest rates. We do not enter into derivatives or other financial instrument transactions for speculative purposes.
 
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, or SFAS No. 133, requires us to recognize all of our derivative instruments as either assets or liabilities in the consolidated balance sheet at fair value. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship, and further, on the type of hedging relationship. As of December 31, 2006, our interest rate swap agreements were not designated for


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hedge accounting treatment under SFAS No. 133, and as a result, the fair value is classified within other assets on the our balance sheet and as a reduction of interest expense in our statement of operations for the year then ended. For the year ended December 31, 2006 and the three months ended March 31, 2007, we recognized an increase of $0.2 million and $0.2 million, respectively, of interest expense related to the decrease in fair value of the interest rate swap agreements.
 
If the future interest yield curve decreases, the fair value of the interest rate swap agreements will decrease and interest expense will increase. If the future interest yield curve increases, the fair value of the interest rate swap agreements will increase and interest expense will decrease.
 
Based on the variable-rate debt included in our debt portfolio, a 75 basis point increase in interest rates would have resulted in additional interest expense of $0.2 million (pre-tax), $0.3 million (pre-tax) and $0.1 million (pre-tax) in 2005, 2006 and the first quarter of 2007, respectively.


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BUSINESS
 
Overview
 
We are a leading provider of mission critical business information and professional services to the legal, financial and real estate sectors in the United States. We provide companies and professionals in the markets we serve with access to timely, relevant and dependable information and services that enable them to operate effectively in highly competitive and time sensitive business environments. We serve our customers through two complementary operating divisions: Business Information and Professional Services.
 
Our Business Information Division is the third largest business journal publisher and second largest court and commercial publisher, based on revenues, in the United States. Based on volume of published public notices, we are also one of the largest carriers of public notices in the United States. We use our business publishing franchises as platforms to provide a broadening array of local business information products to our customers in each of the 20 markets that we serve in the United States, which are the geographic areas surrounding the cities presented in the map below.
(MAP)
 
 
Our business information portfolio consists of publications, web sites and a broad range of events that put us at the center of local and regional communities that rely upon our proprietary content. We currently publish 60 print publications consisting of 14 paid daily publications, 29 paid non-daily publications and 17 non-paid non-daily publications. Our paid publications and non-paid and controlled publications had approximately 75,500 and 167,400 subscribers, respectively, as of March 31, 2007. In addition, we provide business information electronically through our 53 web sites and our email notification systems. Our 42 on-line publication web sites had approximately 261,900 unique users in March 2007, our 11 non-publication web sites had approximately 50,300 unique users in March 2007 and we had 52,700 subscribers to our email notification systems as of March 31, 2007. The events we produce, including professional education seminars and award programs, attracted approximately 16,000 attendees and 330 paying sponsors in 2006.
 
Our Professional Services Division comprises two operating units, APC and Counsel Press. APC, one of the leading providers of mortgage default processing services in the United States, is the dominant provider of such services in Indiana and Michigan, which had the second and third highest residential mortgage


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foreclosure rates, respectively, in 2006, based on information from the Mortgage Bankers Association, or MBA, a national association representing the real estate finance industry. APC assists its law firm customers in processing foreclosure, bankruptcy, eviction and, to a lesser extent, litigation case files, in connection with residential mortgage defaults. We serviced approximately 29,900 mortgage default case files relating to 273 mortgage loan lenders and servicers that are clients of our law firm customers in Michigan and Indiana during the first quarter of 2007. Counsel Press is the largest appellate service provider nationwide, providing appellate services to attorneys in connection with approximately 8,300 and 2,200 appellate filings in federal and state courts in 2006 and the first quarter of 2007, respectively. Counsel Press assists law firms and attorneys in organizing, printing and filing appellate briefs, records and appendices that comply with the applicable rules of the U.S. Supreme Court, any of the 13 federal circuit courts or any state appellate court or appellate division. In 2006, the customers of Counsel Press included 68 of the 100 largest U.S. law firms listed in The American Lawyer Amlaw Top 100 Survey, including each of the 12 largest law firms and 42 of the 50 largest law firms.
 
We benefit from our comprehensive knowledge of, and high profile within, our target markets. Our breadth of business publications, web sites and events, together with our professional services, facilitates regular interaction among our customers, driving opportunities to grow revenues and improve operating margins. For example, our position as a leading provider of mortgage default processing services in Michigan provides us with a unique opportunity to direct a meaningful share of public notice expenditures to DLNP, Michigan’s largest court and commercial newspaper publisher, in which we own a 35.0% interest. Further, we regularly share proprietary content among our publications and web sites and then tailor the content to each of the markets we serve. By leveraging our content throughout our businesses, we are able to reduce editorial expenses and improve our operating margins.
 
Our business model has multiple diversified revenue streams that allow us to generate revenues and cash flow throughout all phases of the business cycle. This diversification allows us to maintain the flexibility to capitalize on growth opportunities. In addition, our balanced business model produces stability by mitigating the effects of economic fluctuations. The following pie chart describes the anticipated impact of economic downturns and expansions on revenues and cash flows generated by our products and services, as well as the percentage of our total revenues generated by these products and services for the three months ended March 31, 2007.
 
(PIE CHART)
 
Revenues and cash flows from display and classified advertising and circulation tend to be cyclical in that they generally increase during economic expansions and decrease during economic downturns as a worsening economy reduces, and an improving economy increases, discretionary spending on items such as advertising and subscriptions to publications. In contrast, revenues and cash flows from public notices and mortgage default processing services tend to be counter-cyclical in that they generally increase during economic downturns and decrease during economic expansions as a worsening economy leads to a higher rate of residential mortgage foreclosures and a greater number of foreclosure-related public notices being published,


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while an improving economy has the opposite impact. Further, we consider revenues and cash flows from our appellate services to be non-cyclical in that the number of court appeals filed generally does not fluctuate significantly over the business cycle.
 
Our History
 
Our predecessor company, also named Dolan Media Company, was formed in 1992 by James P. Dolan, our Chairman, President and Chief Executive Officer, and Cherry Tree Ventures IV. Scott J. Pollei, our Chief Financial Officer, and Mark W.C. Stodder, our Executive Vice President, Business Information, joined the company in 1994. Our current company was incorporated in Delaware in March 2003 under the name DMC II Company in connection with a restructuring whereby our predecessor company spun off its business information and other businesses to us and sold its national public records unit to a wholly-owned subsidiary of Reed Elsevier Inc. After the spin-off and sale in July 2003, we resumed operations under the name Dolan Media Company. We are a holding company that conducts all of our operating activities through various subsidiaries.
 
We have a successful history of growth through acquisitions. Since 1992, our Business Information Division has completed 38 acquisitions. We have a well-established track record of successful integration and improvements in revenues and cash flows of our acquired businesses due to our disciplined management approach that emphasizes consistent operating policies and standards, a commitment to high quality, relevant local content and centralized back office operations. In January 2005, we formed our Professional Services Division by acquiring Counsel Press, a leading provider of appellate services to the legal profession. In March 2006, we expanded our Professional Services Division by acquiring an 81.0% interest in APC, which provides mortgage default processing services in Michigan for Trott & Trott. In January 2007, APC entered the Indiana market by acquiring the mortgage default processing service business of Feiwell & Hannoy. We currently own 77.4% of APC. We expect that our acquisitions will continue to be a critical component of the growth in both of our operating divisions.
 
Our Strengths
 
We intend to build on our position as a leading provider of essential business information and professional services to companies and professionals in the legal, financial and real estate sectors. We believe the following strengths will allow us to maintain a competitive advantage in the markets we serve:
 
Proprietary, Mission Critical and Customizable Information and Services.  We provide necessary business information and professional services on a timely basis to our customers in a format tailored to meet the needs and demands of their businesses. Our customers rely on our proprietary offerings to inform their operating strategies and decision making, develop business and practice opportunities and support key processes. We believe the high renewal rates for our business information products, which in the aggregate were 81% in 2006, the high retention rate of the clients of our mortgage default processing service customers (according to Trott & Trott, 95% of the clients of Trott & Trott that used Trott & Trott’s services in 2006 also used Trott & Trott’s services in 2005) and the high retention rate of our appellate services customers (89% of our customers that used our services for appellate filings in 2006 also used our services in 2005) are indicative of the significant degree to which our customers and their clients rely on our businesses.
 
Dominant Market Positions.  We believe we are the largest provider of business information targeted to the legal, financial and real estate sectors in each of our 20 markets. We are also one of the leading providers of mortgage default processing services in the United States and the largest national provider of appellate services. The value and relevance of our business information products and professional services have created sustained customer loyalty and recognized brands in our markets. As a result, we have become a trusted partner with our customers. Examples of our dominant market positions include:
 
  •  Public Notices.  We are experts in the complex legal requirements associated with public notices and our publications reach targeted members of local business communities who depend upon or otherwise are interested in the information contained in public notices. Our focus and expertise allow us to provide high quality service while processing 286 types of public notices. We carry public notices in


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  12 of the 20 markets in which we publish and on the basis of number of public notices published, we are the largest carrier of public notices in nine of those markets.
 
  •  Default Mortgage Processing Services.  We have leveraged our significant knowledge and experience with respect to the local foreclosure, bankruptcy and eviction procedures, as well as our proprietary technology, to become the leading provider of mortgage default processing services in Michigan and Indiana. Under long-term contracts, we are the exclusive provider of mortgage default processing services for two of the Midwest’s leading foreclosure law firms that handled more than 60% and 45% of residential mortgage foreclosures in Michigan and Indiana, respectively, in 2006.
 
Superior Value Proposition for Our Customers.  Our business information customers derive superior value from our dedicated efforts to provide timely, relevant, proprietary and customized content created by employees that have experience and expertise in the industries we serve. For example, 77 individuals, or approximately 40% of our editorial staff, have a law degree and/or legal background enabling them to create more valuable content for our publications and related web sites. This approach has enabled us to achieve high renewal rates for our business information products, which we believe is greatly valued by local advertisers. In addition, the clients of APC’s two law firm customers realize significant value from APC’s ability to assist them in efficiently processing large amounts of data associated with each foreclosure, bankruptcy or eviction case file because it enables these law firms to quickly address mortgage loans that are in default, which allows their clients to mitigate their losses. The flexibility, efficiency and customizable nature of our support systems enable high levels of customer service, which management believes creates a significant marketplace advantage for us. Further, our appellate service customers benefit greatly from Counsel Press’ comprehensive knowledge of the procedurally intensive requirements of, and close relationships forged with, the appellate courts.
 
Diversified Business Model.  Our balanced business model provides diversification by industry sector, product and service offering, customer base and geographic market. This diversification provides us with the opportunity to drive revenue growth and increase operating margins over time. In addition, this diversification creates stability for our business model because we have businesses that benefit during different phases of the business cycle, which provides us with the opportunity and flexibility to capitalize on growth opportunities. As of March 31, 2007, we provided our 60 print publications and 42 on-line publication web sites to nearly 290,000 subscribers, reaching a readership of approximately 540,000 (based on our research, which shows that for each publication that is subscribed for, additional people read such publication) in the legal, financial and real estate sectors in 20 U.S. markets. In 2006, we processed approximately 8,300 appellate filings for attorneys from more than 2,000 law firms, corporations, non-profit agencies and government agencies nationwide. In the first quarter of 2007, we serviced approximately 29,900 mortgage default files relating to 273 mortgage loan lenders and servicers that are clients of our two law firm customers.
 
Successful Track Record of Acquiring and Integrating New Businesses.  We have demonstrated a strategic and disciplined approach to acquiring and integrating businesses. Since our predecessor’s inception in 1992, we have completed 38 acquisitions in our Business Information Division and five acquisitions in our Professional Services Division. We have established a proven track record of improving the revenue growth, operating margins and cash flow of our acquired businesses by:
 
  •  improving the quality of products and services;
 
  •  establishing and continuously monitoring operating and financial performance benchmarks;
 
  •  centralizing back office operations;
 
  •  leveraging expertise and best practices across operating functions, including sales and marketing, technology and product development; and
 
  •  attracting, retaining and incentivizing quality managers.
 
Experienced Leadership.  The top 24 members of our senior management team, consisting of our executive officers and unit managers, have an average of more than 17 years of relevant industry experience, and each of our top three executives has been with us for more than a decade. We benefit from our managers’


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comprehensive understanding of our products and services, success in identifying and integrating acquisitions, extensive knowledge of our target communities and markets and strong relationships with current and potential business partners and customers.
 
Our Strategy
 
We intend to further enhance our leading market positions by executing the following strategies:
 
Leverage Our Portfolio of Complementary Businesses.  We have built a portfolio of complementary businesses through which we realize significant synergistic benefits. Our focus on business information and professional services for companies and other professionals in the legal, financial and real estate sectors has allowed us to develop expertise in these industries. This expertise has enabled us to establish a positive reputation and strong customer relationships in the markets we serve. We believe our prominent brand recognition among our customers will allow us to continue to expand, enhance and cross-sell the products and services we offer. In addition, as a leading provider of mortgage default processing services, we are able to control a meaningful share of public notice expenditures in the markets that this operating unit serves. This presents an opportunity to capture public notice revenue by establishing or acquiring publications that carry public notices in those markets. Because public notices are valuable information for the professional communities we serve, we also intend to use our public notices to continue to differentiate our business information products, which we believe will drive strong subscription levels and high renewal rates. We also continuously seek new opportunities to leverage our complementary businesses to increase our revenues and cash flows and maximize the impact of our cost saving measures.
 
Enhance Organic Growth.  We seek to leverage our market leading positions by continuing to develop proprietary content and valuable services that can be delivered to our customers through a variety of media distribution channels, thereby strengthening and extending our customer relationships and providing additional revenue generating opportunities. We also expect to demonstrate our commitment to, and extend our reach into, the markets we serve by developing and promoting professional education seminars, awards programs and other local events that are tailored to these markets. In addition, we intend to take advantage of new business opportunities and to expand the markets we serve by regularly identifying and evaluating additional demand for our products and services outside of our existing geographic market reach. Examples of this strategy include:
 
  •  Customize Delivery to Meet Customer Needs.  We will continue to use media channels that allow us to efficiently and effectively deliver our products and services to our customers. We offer our products and services through print, online, mobile, live events, audio/video and other media distribution channels. Our media neutral approach allows us to tailor our products and services to take advantage of the strengths inherent in each medium and allows our customers to choose their preferred method of delivery. We believe this enables us to maximize revenue opportunities from our proprietary content and services and provides us with a sustainable competitive advantage.
 
  •  Increase Market Penetration.  We will continue to use our business publishing franchise as a platform for the development of additional business information products for our targeted markets. We consistently enhance our business information products and drive new product development by encouraging innovation by our local management teams. We also intend to use our proprietary case management system, other technology-related productivity tools and efficient workflow organizational structure as the platform for growth of our mortgage default processing service business. We expect to realize significant benefits from the widespread and centralized use of this system, tools and structure because we believe they will enable us to service an even greater number of files efficiently and cost effectively, while providing a high standard of customer service. In addition, we intend to grow our appellate services business by opening new offices in additional geographic markets to increase our presence in additional local legal communities.
 
Continue to Pursue a Disciplined Acquisition Strategy in Existing and New Markets.  We will continue to identify and evaluate potential acquisitions that will allow us to expand our business information product and professional service offerings and customer base and enter new professional and geographic


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markets. We intend to pursue acquisitions that we can efficiently integrate into our organization and that we expect to be accretive to cash flow. We expect to expand our mortgage default processing services business by partnering with market-leading law firms in additional states that experience significant foreclosures. To that end, we are currently adapting our proprietary case management system to meet the applicable requirements of additional states. In addition, given the fragmented nature of the local business information market, we intend to continue to opportunistically pursue publications that enhance our strategic position in the markets we serve or that add attractive markets to our portfolio.
 
Realize Benefits of Centralization and Scale to Increase Cash Flows and Operating Profit Margins.  Because we typically acquire stand-alone businesses that lack the benefits of scale, we continue to realize significant efficiencies from centralizing our accounting, circulation, advertising production and appellate and default processing systems and will seek to obtain additional operational efficiencies through further consolidation of other management, information and back office operations. Currently, approximately 30% of our accounting personnel, 50% of our human resources personnel and 34% of our information technology personnel are located in our Minneapolis headquarters. We expect to increase those percentages over time as we continue our initiative to centralize our operations and streamline costs. While the centralization of these systems has resulted in cost savings, we have also been able to adapt these systems to address the specific needs of our local operations. As a result, each of our businesses has real-time access to important local sales, marketing and operating statistical information that we believe will continue to foster improved decision-making by our local management teams. Additionally, a key aspect of our platform is providing relevant and timely local content to the professional communities we serve. To develop a portion of such local content, we tailor editorial and other proprietary content generated across our platform. By sharing content across the platform in a centralized way, we can leverage our resources while simultaneously continuing to provide customized local content. Finally, we expect our centralization initiative and other investments in infrastructure will allow us to accelerate the realization of cost synergies in connection with future acquisitions. We believe these efforts will also enable us to increase our operating profit margins and cash flows in the future.
 
Our Industries
 
Business Information
 
We provide business information products to companies and professionals in the legal, financial and real estate sectors primarily through print and online business journals and court and commercial newspapers, as well as other electronic media offerings. Our business journals generally rely on display and classified advertising as a significant source of revenue and provide content that is relevant to the business communities they target. Our court and commercial newspapers generally rely on public notices as their primary source of revenue and offer extensive and more focused information to the legal communities they target. All of our business journals and court and commercial newspapers also generate circulation revenue to supplement their advertising and public notice revenue base. We believe, based on data we have collected over several years, that there are more than 250 local business journals and more than 350 court and commercial newspapers nationwide, which generated approximately $1.4 billion in revenues in 2006.
 
Mainstream media outlets, such as television, radio, metropolitan and national newspapers and the Internet, generally provide broad-based information to a geographically dispersed or demographically diverse audience. In contrast, we provide proprietary content that is tailored to the legal, financial and real estate sectors of each local and regional market we serve and that is not readily obtainable elsewhere. Our business information products are often the only source of local information for our targeted business communities and compete only to a limited extent for advertising customers with other media outlets, such as television, radio, metropolitan and national newspapers, the Internet, outdoor advertising, directories and direct mail. As a result of the competitive dynamics of the market and the value created for advertisers by targeted content and community relationships, we believe that the readers of our publications are a highly desirable demographic for advertisers.
 
We carry public notices in 12 of the 20 markets we serve. A public notice is a legally required announcement informing citizens about government or government-related activities that may affect citizens’


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everyday lives. Most of these activities involve the application of governmental authority to a private event, such as a mortgage foreclosure, probate filing, listings for fictitious business names, limited liability companies and other entity notices, unclaimed property notices, notices of governmental hearings and trustee sale notices. A public notice typically possesses four primary characteristics: (1) it is published in a forum independent of the government, such as a local newspaper; (2) it is capable of being archived in a secure and publicly available format; (3) it is capable of being accessed by all segments of society; and (4) the public, as well as all interested parties, must be able to verify that the notice was published and its information disseminated to the public in the legally prescribed formats. Every jurisdiction in the United States has laws that regulate the manner in which public notices are published. Statutes specify wording, frequency of publication and other unusual characteristics that may vary according to jurisdiction and make the publication of public notices more complex than traditional advertising. These laws are designed to ensure that the public receives important information about the actions of its government from a newspaper that is accessible and already a trusted source of community information. Currently, local newspapers are the medium that is used to satisfy laws regulating the process of notifying the public. The requirements for publishing public notices serve as barriers to entry to new and existing publications that desire to carry public notices. Based on our internal estimates, we believe that the total spending on public notices in business publications in the United States was in excess of $500 million in 2006.
 
Professional Services
 
Our Professional Services Division consists of two operating units: APC, our mortgage default processing service business, and Counsel Press, our appellate service business. We provide these support services to the legal profession. We believe that attorneys and law firms are increasingly looking for opportunities to outsource non-legal functions so that they can focus their efforts on the practice of law. We believe that law firms are under intense pressure to increase efficiency and restrain costs while fulfilling the growing demands of clients. We further believe that outsourcing has become an increasingly attractive choice for law firms as they identify functions outside of their core competency of practicing law that can be performed by non-attorneys and, in turn, help manage their costs.
 
Mortgage Default Processing Services
 
The outsourced mortgage default processing services market is highly fragmented, and we estimate that it primarily consists of back-office operations of approximately 350 local and regional law firms throughout the United States. We believe that increasing case volumes and rising client expectations provide an opportunity for default processors that provide efficient and effective services on a timely basis.
 
We believe that residential mortgage delinquencies and defaults are increasing primarily as a result of the increased issuance of subprime loans and popularity of non-traditional loan structures. Further compounding these trends are increases in mortgage interest rates from recent lows and the slowing of demand in the residential real estate market in many regions of the United States, which makes it more difficult for borrowers in distress to sell their homes. The increased volume of delinquencies and defaults has created additional demand for default processing services and has served as a growth catalyst for the mortgage default processing market.
 
Based on information from the MBA, approximately 54 million residential mortgage loans were being serviced in the United States as of December 31, 2006, a 5% increase from the approximately 52 million residential mortgage loans being serviced a year earlier. The MBA’s information also establishes that seriously delinquent mortgages, defined as loans that are more than 90 days past due, rose to approximately 1.2 million loans as of December 31, 2006, up 12% from approximately 1.1 million loans a year earlier. Based on information from the MBA, mortgage loans in foreclosure rose to approximately 640,000 as of December 31, 2006, a 27% increase from the approximately 510,000 loans a year earlier. Based on our estimated annual volume of mortgages in foreclosure and the average revenue we derived per file in 2006 (which we assume would be generally representative of rates charged for mortgage default processing services throughout the United States), we believe the U.S. market for residential mortgage default processing services was approximately $700 million in 2006.


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Subprime mortgages are provided to borrowers who represent higher credit risks. These mortgages typically bear rates at least 200 or 300 basis points above safer prime loans. Subprime mortgages outstanding have increased from 2.4% of all mortgages in 2001 to 19.4% of all mortgages in 2005, according to the MBA. According to Inside Mortgage Finance, a publisher of news and statistics for executives in the residential mortgage business, new subprime loans granted in 2006 totaled approximately $600 billion, or more than 20% of the total origination market, up from $120 billion in 2001. The maturation of the prime credit mortgage market, a low interest rate environment and a robust loan securitization market in recent years encouraged lenders to sustain growth by expanding into subprime lending. Subprime borrowers are more likely to default than prime borrowers. MBA statistics indicate that in the fourth quarter of 2006, the default rate for subprime mortgage loans was approximately eight times greater than for prime mortgage loans, and the default rate for subprime adjustable rate mortgages (“ARMs”) was approximately eleven times greater than for prime mortgage loans.
 
We also believe that the increasing prevalence and preference for non-traditional or so-called “Alt A” mortgages, including interest only mortgages, ARMs and option ARMs, is also contributing to mortgage delinquencies and defaults. According to Inside Mortgage Finance, Alt A mortgages represented about 16% of all mortgage originations in 2006. We believe that these non-traditional mortgage products are more likely to become delinquent and carry higher risk of default than traditional 15-year or 30-year fixed-rate mortgage loans.
 
APC provides mortgage default processing services for Trott & Trott, a law firm in Michigan, and Feiwell & Hannoy, a law firm in Indiana. We believe that the number of foreclosures in the east north central region of the United States, which consists of Illinois, Indiana, Michigan, Ohio and Wisconsin, present a particularly attractive opportunity for providers of mortgage default processing services. According to the MBA, at December 31, 2006, this region accounted for 21.5% of the nation’s residential mortgage foreclosures despite the region accounting for only 13.6% of the nation’s residential mortgages. The following chart provides a comparison of average foreclosures as a percentage of loans serviced within the east north central region to the national average during the third and fourth quarters of 2005 and the four quarters of 2006:
 
Averages for East North Central Region
Source: Mortgage Bankers Association
 
                                 
    Estimated Total
  % of National
  Foreclosures
  National
    Loans Serviced
  Loans Serviced
  as a % of
  Foreclosure
    in Region   in Region   Loans Serviced   Rate
 
2005 – 3rd quarter
    6,814,927       13.90%       1.98%       0.97%  
2005 – 4th quarter
    6,914,058       13.92%       2.05%       0.99%  
2006 – 1st quarter
    6,919,470       13.90%       2.09%       0.98%  
2006 – 2nd quarter
    7,103,506       13.87%       2.06%       0.99%  
2006 – 3rd quarter
    6,999,240       13.64%       2.24%       1.05%  
2006 – 4th quarter
    7,223,578       13.79%       2.38%       1.19%  
 
Appellate Services
 
The market for appellate consulting and printing services is highly fragmented and we believe that it includes a large number of local and regional printers across the country. The appellate services market has experienced growing demand for consulting and printing services, and we believe that this trend will continue for the foreseeable future. Federal appeals often are more sophisticated, more complicated and more voluminous than appeals in state courts, and thus we believe that federal appeals present more attractive business prospects for Counsel Press. For the twelve months ended March 31, 2006, the 13 circuits of the U.S. Court of Appeals accepted 71,988 cases based on information from the Administrative Office of the U.S. Courts, or AOC. This represented a record volume, as well as a 7% increase from the previous year, based on information from the AOC, which also reported the volume of appeals was up 24% from 2002. At the highest


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federal court level, 8,521 cases were filed in the U.S. Supreme Court in the 2005 term, according to the Chief Justice’s 2006 Year-End Report on the Federal Judiciary.
 
The National Center for State Courts in a 2005 survey reported that appellate filings in all state courts totaled just over 280,000 cases in 2004 and, with modest variations, had been at about that volume since 1995. State appellate case volume, while larger than federal case volume, we believe offers less attractive business prospects for Counsel Press because many of the state cases are simpler and have less challenging document preparation and filing needs. In addition, unlike the federal court system, 11 states and the District of Columbia have no intermediate-level appellate courts.
 
Our Products and Services
 
We provide our business information products and professional services through two operating divisions: Business Information and Professional Services. For the year ended December 31, 2006, and the three months ended March 31, 2007, we derived 66.1% (57.8%, on a pro forma basis) and 54.6%, respectively, of our revenues from our Business Information Division and 33.9% (42.2% on a pro forma basis) and 45.4%, respectively, of our revenues from our Professional Services Division. For more information concerning our financial results by business segment, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 12 to our consolidated financial statements.
 
Business Information
 
Our business information products are important sources of mission critical information for the legal, financial and real estate sectors in the 20 markets that we serve in the United States. We provide our business information products in print through our portfolio of 60 print publications, consisting of 14 paid daily publications, 29 paid non-daily publications and 17 non-paid non-daily publications. Our paid and non-paid and controlled publications had approximately 75,500 and 167,400 subscribers, respectively, as of March 31, 2007. In addition, we provide our business information products electronically through our 53 web sites and our email notification systems. Our 42 on-line publication web sites had approximately 261,900 unique users in March 2007, our 11 non-publication web sites had approximately 50,300 unique users in March 2007 and we had approximately 52,700 subscribers to our email notification systems as of March 31, 2007. Our non-publication web sites include www.lawyersweeklyjobs.com, www.lawyersweeklyclassifieds.com, www.massrules.lawyersweekly.com, www.books.lawyersweekly.com, www.dolanmedianewswires.com and www.dolanmedia.com.
 
We believe that, based on our 2006 revenues, we are the third largest publisher of local business journals in the United States and the second largest publisher of court and commercial publications that specialize in carrying public notices. Due to the diversity of our titles, only one print title, The Daily Record in Maryland, accounted for more than 10% of our Business Information Division’s revenues for 2006 and for the three months ended March 31, 2007. Our business information products contain proprietary content written and created by our staff and stories from newswires. Our journalists and contributors contribute, on average, over 850 articles and stories per week to our print titles and web sites that are tailored to the needs and preferences of our targeted markets. The newsrooms of our publications leverage this proprietary content by using internal newswires to share their stories with each other, which allows us to develop in an efficient manner content that can be customized for different local markets.


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MARKET LOCATION
Arizona
Colorado
Idaho
LA/Gulf Coast
Maryland
Massachusetts
Michigan
Minnesota
 
The following chart provides a summary of our print titles and on-line publication web sites:
 
                         
                        Unique Visitors to
            Subscribers and Undiscounted
    On-Line
    On-Line Publication
      Frequency of Publication
    Subscription Price
    Publication
    Web Site during
Titles     of Titles     as of March 31, 2007     Web Sites     March 2007
Arizona Capitol Times
    Weekly    
1,840 paid; 33 non-paid and controlled

$99/year
    www.arizonacapitoltimes.com     8,706
The Legislative Report
    Daily
(During legislative session)
    98 paid
$525/month
           
Legislation Online Arizona
    Online     159 paid; 7 non-paid
and controlled
$1,500/year
    www.azcapitolreports.com      
The Yellow Sheet
    Online year-round;
print 3x/week
(when legislature
not in session)
    68 paid online;
26 non-paid and controlled
$195/month
    www.yellowsheetreport.com      
Colorado Springs Business
Journal
    Weekly     2,332 paid; 226 non-paid and controlled;
54 online paid $79/year
    www.csbj.com     6,526
The Daily Transcript
    Daily     122 paid; 9 non-paid and controlled
$115/year
           
Fort Carson Mountaineer
    Weekly     17 paid; 6,900 non-paid;
161 non-paid and controlled
$60/year
    www.csmng.com     15,069 (this includes
all military
titles hosted on
csmng.com)
Schriever Air Force Base
Satellite Flyer
    Weekly
(Contract publication)
    1 paid; 1,750 non-paid;
168 non-paid and controlled $60/year
    www.csmng.com     See above
Air Force Academy Spirit
    Weekly
(Contract publication)
    95 paid; 3,700 non-paid;
72 non-paid and controlled $60/year
    www.csmng.com     See above
Military Officers Association
of America Monthly
    Monthly
(Contract publication)
    1,100 non-paid
$60/year
    www.csmng.com     See above
Space Observer
    Weekly
(Contract publication)
    1 paid; 3,750 non-paid
$60/year
    www.csmng.com     See above
Idaho Business Review
    Weekly    
3,288 paid; 207 non-paid
and controlled $89/year
    www.idahobusiness.net
www.idahobusinessreview.com
    9,837
New Orleans CityBusiness
    Weekly     4,243 paid; 2,400 non-paid
and controlled $97/year
    www.neworleanscitybusiness.com     39,677
Daily Journal of Commerce
    Daily     675 paid; 15 non-paid and
controlled; 43 paid online $495/year
    www.djcgulfcoast.com     3,085
Jefferson Journal
    Weekly     7 paid; 9,003 non-paid $78/year            
North Shore Report
    Bi-monthly    
38 paid; 14,190 non-paid
and controlled $69/year
           
The Daily Record
    Daily     3,605 paid; 1,752 non-paid
and controlled;
691 paid online $199/year
    www.mddailyrecord.com     22,794
Maryland Family Law
Monthly
    Monthly     227 paid; 25 non-paid
and controlled $325/year
$375/year w/supplement
           
Verdict & Settlement
Reports
    Quarterly     76 paid
$180/year
           
Maryland Business Law
Watch
    Monthly     46 paid; 6 non-paid
and controlled $325/year
           
Review of Maryland Laws
    Weekly    
221 paid; 27 non-paid
and controlled $325/year
           
Massachusetts Lawyers
Weekly
    Weekly     10,320 paid; 287 non-paid
and controlled $330/year
    www.masslawyersweekly.com     25,310
Massachusetts Medical
Law Report
    Quarterly     64 paid; 18,266 non-paid
and controlled $39/year
    www.mamedicallawreport.com     645
Massachusetts Rules
Service & Advance Sheets
    Annual print; online updates     894 paid; 4 non-paid
and controlled $49/year
    http://massrules.lawyersweekly.com/     214
Exhibit A
    Monthly     33,000 non-paid
and controlled $19.95/year
    www.exhibitanews.com      
Michigan Lawyers Weekly
    Weekly     2,946 paid; 131 non-paid
and controlled $299/year
    www.milawyersweekly.com     7,800
Michigan Medical Law Report
    Quarterly    
13 paid; 19,248 non-paid
and controlled $39.95/year
    www.mimedicallawreport.com     45
Finance and Commerce
    Daily     750 paid; 63 non-paid
and controlled $210/year
    www.finance-commerce.com     6,835
Finance and Commerce —
Real Estate Thursday edition
    Weekly     661 paid; 81 non-paid
and controlled $100/year
           
Finance and Commerce —
Construction Tuesday edition
    Weekly     256 paid; 72 non-paid and
controlled $80/year
           
Minnesota Lawyer
    Weekly     1,933 paid; 60 non-paid and
controlled $225/year
    www.minnlawyer.com     10,175
St. Paul Legal Ledger
    Bi-weekly     364 paid; 85 non-paid
and controlled $130/year
    www.legal-ledger.com     1,327
Verdict & Settlement
Reports
    Quarterly     66 paid
$99/year
           
On-Line Judicial Directory
    Online     275 paid online
$85/year
    www.minnlawyer.com      
                         


67


Table of Contents

 
MARKET LOCATION
Mississippi
Missouri
New York
North Carolina
Oklahoma
OR/S Washington
Rhode Island
South Carolina
Virginia
Wisconsin
Regional
National
 
                         
                        Unique Visitors to
            Subscribers and Undiscounted
    On-Line
    On-Line Publication
      Frequency of Publication
    Subscription Price
    Publication
    Web Site during
Titles     of Titles     as of March 31, 2007     Web Sites     March 2007