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Despite lower profit, revenue guidance, Dolan shares up

Because of a slowdown in foreclosures in the U.S., The Dolan Company, the parent company of The Daily Record, Tuesday reported drops in profit and revenue for the second quarter of 2011.

Dolan reported net income of $2.6 million for the quarter, or 9 cents per share, a 70 percent decline from the $8.6 million, or 29 cents per share, earned in the corresponding quarter of 2010. Total revenue for the quarter was $69.4 million, down 12.3 percent from $79.2 million during the corresponding quarter last year.

Analysts polled by Thomson Reuters had been expecting quarterly earnings of 9 cents per share.

Minneapolis-based Dolan also lowered its full-year revenue guidance for 2011, saying it will be in the $297 million to $305 million range, down from $308 million to $325 million reported in May.

That guidance adjustment was based on no significant improvement in foreclosure volumes for the rest of the year, and operating expenses as a percent of total revenues are 90 percent to almost 92 percent. Other factors related to interest payments and cash distributions to shareholders.

Despite the news, shares of The Dolan Company rose 69 cents, or 8.8 percent, to close Tuesday at $8.50 on the New York Stock Exchange.

Dolan has two divisions, business information and professional services. The business information division has nearly 60 publications of mainly business and legal newspapers in 21 markets. The professional services division provides specialized services to the legal profession through subsidiaries NDeX, Counsel Press and DiscoverReady.

“The second quarter remained challenging as we continue to experience a slowdown in our foreclosure processing business,” James P. Dolan, chairman, president and CEO of the company, said in a statement. “Regulatory scrutiny and negotiated process change have caused mortgage servicers to slow down foreclosure referrals while they review their internal procedures.”

Dolan said the slowdown in default referrals directly affected the company’s professional services division, as well as its business information division, since default-related public revenues are an integral revenue source.

The company’s professional services division saw a 14.2 percent decrease in revenue to $48.4 million during the second quarter, while the business information division revenue was $21 million, down 7.6 percent from the second quarter of 2010. The professional services decline was a result of lower NDeX file volume, although DiscoverReady and Counsel Press revenue increased.

The acquisitions of DataStream in December and Federal News Service last August helped offset a weakness in public notice advertising for the business information division, the company said. Total operating expenses within the division also rose 6.1 percent from the second quarter of 2010, due mainly to additional operating costs associated with the acquisitions of the two entities.

The company also recently purchased the assets of ACT Litigation Services Inc., a litigation automation firm. The Dolan Company had borrowed $60 million to fund closing payments in connection to the acquisition of ACT Litigation Services.

“We’re working hard for the long term here, and we know the current quarter is not attractive,” Dolan said in a conference call with investors Tuesday. “This is a stepping stone for where we want to be five years from now, 10 years from now.”