10-Q 1 y89182e10vq.txt AMERICAN LAWYER MEDIA HOLDINGS, INC. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities ExchangeAct of 1934 For the quarterly period ended June 30, 2003. or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from_______ to_____ . COMMISSION FILE NUMBER: 333-50119 ----------------------------------------- AMERICAN LAWYER MEDIA HOLDINGS, INC. (Exact name of registrant as specified in its charter) DELAWARE 13-3980412 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 345 PARK AVENUE SOUTH NEW YORK, NEW YORK 10010 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 779-9200 ----------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] As of August 11, 2003, there were 1,320,330 shares of the registrant's common stock, $.01 par value, outstanding, the majority of which was held by U.S. Equity Partners, L.P. and its affiliates. EXPLANATORY NOTE The Company is not currently required to file reports under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and is not currently an "issuer" within the meaning of the Sarbanes-Oxley Act of 2002. The Company is filing this quarterly report on Form 10-Q pursuant to a covenant contained in the Indenture dated December 22, 1997 between the Company and The Bank of New York, as Trustee, governing the Company's 12 1/4% Senior Discount Notes. AMERICAN LAWYER MEDIA HOLDINGS, INC. INDEX

PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AMERICAN LAWYER MEDIA HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)

The accompanying notes to the consolidated financial statements are an integral part of these statements. 1 AMERICAN LAWYER MEDIA HOLDINGS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS) (UNAUDITED)

The accompanying notes to the consolidated financial statements are an integral part of these statements. 2 AMERICAN LAWYER MEDIA HOLDINGS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS) (UNAUDITED)

The accompanying notes to the consolidated financial statements are an integral part of these statements. 3 AMERICAN LAWYER MEDIA HOLDINGS, INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT (IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED)

The accompanying notes to the consolidated financial statements are an integral part of these statements. 4 AMERICAN LAWYER MEDIA HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)

The accompanying notes to the consolidated financial statements are an integral part of these statements. 5 AMERICAN LAWYER MEDIA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2003 (UNAUDITED) 1. ORGANIZATION & OPERATIONS American Lawyer Media Holdings, Inc. ("we," "us," "our," or the "Company") is the parent company of American Lawyer Media, Inc. ("ALM"). We publish national and regional legal publications, including The American Lawyer, New York Law Journal, The National Law Journal and Corporate Counsel. Our operations are based in New York with regional offices in eight states, the District of Columbia and London, England. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the interim financial statements include all adjustments, which are of a normal recurring nature, that management considers necessary to fairly present the financial position and the results of operations for such periods. Results of operations of interim periods are not necessarily indicative of results for a full year. These financial statements should be read in conjunction with the audited consolidated financial statements in our Annual Report on Form 10-K for December 31, 2002. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of American Lawyer Media, Inc. and our wholly-owned subsidiaries which, unless the context otherwise requires, are collectively referred to herein as "we," "us," "our," or the "Company". Intercompany transactions and balances have been eliminated in consolidation. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and to disclose contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CONCENTRATIONS OF CREDIT RISK Our financial instruments that are exposed to concentration of credit risk consist primarily of cash and cash equivalents and trade accounts receivable. We believe that we are not exposed to any significant credit risk related to cash and cash equivalents. Concentrations of credit risk with respect to trade accounts receivable are, except for amounts due from legal advertising agents ("Legal Ad Agents"), generally limited due to the large number of customers comprising our customer base. Legal Ad Agents receivables aggregated $1.2 million as of June 30, 2003. Such Legal Ad Agents do not have significant liquid net worth and, as a result, we are exposed to a certain level of credit concentration risk in this area, for which we believe we have adequately provided. 6 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) REVENUE RECOGNITION Periodical advertising revenues are generated from the placement of display and classified advertisements, as well as legal notices, in our publications. Advertising revenue is recognized upon release of the related publications. Periodical subscription revenues are recognized on a pro rata basis as issues of a subscription are served. Internet subscription revenues are recognized on a pro rata basis as issues of a subscription are served over the life of the term of the subscription. Ancillary products and services revenues consist principally of newsletter subscriptions, sales of professional books, seminar and trade show income, income from a daily fax service of court decisions and income from electronic products. Book revenues are recognized upon shipment and are reflected net of estimated returns. Newsletter revenues are recognized on the same basis as subscription revenues. Seminar and trade show revenues are recognized when the seminar or trade show is held. Daily fax service revenue is recognized upon fulfillment of orders. Internet advertising revenues are generated from the placement of display and classified advertisements, as well as directory listings, on our website. Display and classified advertising revenue is recognized upon the release of an advertisement on the website. Directory listing revenue is recognized on a pro-rata basis over the life of the directory listing, generally one year. DEFERRED SUBSCRIPTION INCOME Deferred subscription income results from advance payments or orders for subscriptions received from subscribers and is amortized on a straight-line basis over the life of the subscription as issues are served. Subscription receivables of approximately $2,206,000 and $2,073,000 are included in accounts receivable in the accompanying consolidated June 30, 2003 and December 31, 2002 balance sheets, respectively. ADVERTISING AND PROMOTIONAL EXPENDITURES Advertising and promotional expenditures totaled approximately $1,748,000 and $1,415,000 for the three months ended June 30, 2003 and 2002, respectively, and $3,351,000 and $3,307,000 for the six months ended June 30, 2003 and 2002, respectively. These costs are expensed as the related advertisement or campaign is released. CASH AND CASH EQUIVALENTS We consider time deposits and certificates of deposit with original maturities of three months or less to be cash equivalents. Cash on our consolidated balance sheet at June 30, 2003 and December 31, 2002 includes $12,000 and $139,000, respectively, of restricted cash collected in association with managing a technology show on behalf of our customer. 7 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INVENTORIES Inventories consist principally of paper and related binding materials utilized by us and our outside printers and professional books published and sold by us. Inventories are stated at the lower of cost, as determined by the average cost method, or market. In 2002, we decided to change our inventory practice for our book division. With this change we will be migrating from carrying our books in inventory to print on demand at the time of sale. As a result, we have identified inventory totaling $1.0 million that will be destroyed in 2003. At June 30, 2003, this inventory identified for destruction has been fully reserved. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is stated at cost. Significant improvements are capitalized, while expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is calculated using the straight-line method over the following estimated useful lives: Buildings 25 years Furniture, machinery and equipment 5-9 years Computer equipment and software 3-6 years Leasehold improvements are amortized over the shorter of the remaining lease term or the estimated useful life. During the three months ended June 30, 2003, we included in depreciation, amortization and other charges a $1.5 million adjustment to write-off certain leasehold improvements and furniture relating to office space abandoned during prior quarter. The lease was obtained in connection with our acquisition of Law.com, Inc. on May 1, 2002. GOODWILL Effective January 1, 2002, we adopted Statement of Financial Accounting Standards Statement ("SFAS") No. 141, "Business Combinations" ("SFAS No. 141") and SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142"). Based on the results of our annual goodwill impairment test in the fourth quarter of 2002, it was determined that there was an impairment of the goodwill and intangible assets associated solely with the acquisition of Law.com. The write-down of these assets recognized the value based on the current economic conditions and the future cash projection of this segment of the business. As a result of this review, we recorded an impairment for goodwill and our trademark intangibles in the fourth quarter of 2002 of $19.5 million, all of which was generated from our acquisition of Law.com. The impairment totaled $18.9 million for goodwill and $0.6 million for trademark intangibles. INTANGIBLE ASSETS Intangible assets represent advertiser commitments, uniform resource locators, copyrights, trademarks, customer and subscriber lists and non-compete agreements. Under SFAS No. 142, an acquired intangible asset should be separately recognized apart from goodwill if the benefit of the 8 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) intangible is obtained through contractual or other legal rights, or if the intangible asset can be sold, transferred, licensed, rented, or exchanged. Intangible assets deemed to have a finite lives are amortized on a straight-line basis over useful lives ranging from 6 months through 30 years. ACCOUNTING FOR LONG-LIVED ASSETS We evaluate whether there has been an impairment in any of our long-lived assets on an annual basis or if certain circumstances indicate that a possible impairment may exist. An impairment in value exists when the carrying value of a long-lived asset exceeds its fair value. If it is determined that an impairment in value has occurred, the carrying value is written down to its fair value. Goodwill and certain other intangibles are tested for impairment under FAS No. 142 and all other long-lived assets are tested for impairment under FAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." DEFERRED FINANCING COSTS Deferred financing costs are amortized over the life of the related debt using the straight-line method. RECLASSIFICATIONS Certain amounts have been reclassified to conform with the current year presentation. INCOME TAXES Income taxes are accounted for in accordance with FAS No. 109, "Accounting for Income Taxes," which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax basis of recorded assets and liabilities. STOCK OPTION PLANS We have a stock option plan under which incentive and nonqualified stock options may be granted periodically to certain of our employee and non-employee directors. Pursuant to SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure," we have elected to continue to account for employee stock-based compensation under APB Opinion No. 25, "Accounting for Stock Issued to Employees," using an intrinsic value approach to measure compensation expense. Accordingly, no compensation expense has been recognized for options granted under our stock option plan since all such options were granted at exercise prices equal to or greater than fair market value on the date of grant. The following table summarizes relevant information as to our reported results under the intrinsic value method of accounting for stock awards, with supplemental information, as if the fair value recognition provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," had been applied to the three and six month periods ended June 30, 2003 and 2002 (in thousands): 9 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES We utilized an interest rate swap agreement to convert our fixed rate interest on our $175.0 million senior notes to a variable rate. At June 30, 2002, we had an interest rate swap outstanding with a notional amount of $175.0 million and a fair market value of $0.2 million. In July 2002, our interest rate swap agreement was terminated. During the six months ended June 30, 2002, we recorded a net gain of $110,000 which was recorded in earnings as a component of interest expense because the swap did not qualify for hedge accounting. 3. DEBT In December 1997, we issued $63,275,000 aggregate principal amount at maturity of 12 1/4% Senior Discount Notes due 2008 (the "Discount Notes"), at a discount rate of $553.14 per Discount Note. The Discount Notes accrete interest compounded semi-annually at a rate of 12.25% to an aggregate principal amount of $63,275,000 by December 2002. Commencing in June 2003, cash interest would have been payable semi-annually until maturity each June 15 and December 15 if not for the waiver and consent entered into described in the next paragraph. The Discount Notes are senior, unsecured obligations. The Discount Notes may be redeemed at any time by us, in whole or in part, at various redemption prices that include accrued and unpaid interest as well as any existing liquidating damages. The Discount Notes contain certain covenants that, among other things, limit the incurrence of additional indebtedness, by us and our subsidiaries, the payment of dividends and other restricted payments by us and our subsidiaries, restrictions on distributions from certain restricted subsidiaries, asset sales, transactions with affiliates, incurrence of liens and mergers and consolidations. Financing costs, totaling $1,693,000, have been capitalized and are being amortized over the term of the Discount Notes. Assuming that there is no redemption of the Discount Notes prior to maturity, the entire principal will be payable on December 15, 2008. On February 27, 2003, we entered into a waiver and consent with the holders of the Discount Notes due 2008 which provides for the waiver of cash payment by us of semi-annual interest that was to begin in June 2003. The Discount Notes will now become "cash-pay" in December 2004, with the first interest payment due on June 15, 2005. The Discount Notes will continue to accrete until December 2004, at which time the aggregate principal amount of the Discount Notes will be $80,260,705. Beginning on December 15, 2004, cash interest on the Discount Notes will accrue at the rate of 12.25% per year. Bruce Wasserstein, chairman of the board of directors of us and ALM, and certain of his affiliates own all of the Discount Notes. On December 22, 1997, we issued $175.0 million aggregate principal amount of 9 3/4% Senior Notes (the "Notes") due December 15, 2007. The Notes accrue interest at 9.75% which is payable in cash semi-annually on June 15 and December 15 of each year. The Notes are unsecured general senior obligations and are fully and unconditionally guaranteed, on a joint and several and 10 3. DEBT (CONTINUED) senior unsecured basis, by each of ALM's existing and future subsidiaries. Separate financial statements of, and other disclosures concerning, the guarantors are not included herein because of the guarantors' full and unconditional guarantee of the Notes and ALM's determination that separate financial statements and other disclosures concerning the guarantors are not material and would not provide any additional meaningful disclosure. The Notes may be redeemed at any time by ALM, in whole or in part, at various redemption prices that include accrued and unpaid interest. The Notes contain certain covenants that, among other things, limit the incurrence of additional indebtedness by ALM and its subsidiaries, the payment of dividends and other restricted payments by ALM and its subsidiaries, asset sales, transactions with affiliates, the incurrence of liens, and mergers and consolidations. Financing costs, totaling $7.2 million, were capitalized and are being amortized over the term of the Notes. Amortization of deferred financing costs is recorded as interest expense. Assuming there is no redemption of the Notes prior to maturity, the entire principal will be payable on December 15, 2007. As of June 30, 2003, Bruce Wasserstein and certain affiliates own approximately 4% of the Notes issued by us. On May 1, 2002, we, The New York Law Publishing Company ("NYLP") and ALM entered into a credit agreement, dated as of May 1, 2002, with GE Corporate Finance ("GECC") and the lenders signatory thereto under which GECC has provided our operating subsidiary, NYLP, with a $40 million revolving credit facility (the "GECC Facility"). The GECC Facility replaces our prior revolving credit facility and proceeds from the GECC Facility were used to refinance existing indebtedness, provide working capital and finance capital expenditures. The obligations of NYLP under the GECC Facility are guaranteed by us, ALM and all of our domestic subsidiaries, and are secured by all of the personal property assets of us, ALM and our domestic subsidiaries (including the stock of all our domestic subsidiaries and 65% of the stock of our first-tier foreign subsidiaries). The GECC Facility bears interest at a fluctuating rate determined by reference to (i) the index rate plus a margin of 2.00%, or (ii) the Eurodollar Rate ("LIBOR") plus a margin of 3.5%. We are also required to pay customary fees with respect to the GECC Facility, including an up-front arrangement fee, monthly administrative agency fees and commitment fees on the unused portion of the GECC Facility. The GECC Facility includes both affirmative and negative covenants that include meeting certain financial ratios. The term of the GECC Facility is 60 months. On November 13, 2002, the GECC Facility was amended to clarify language in the GECC credit agreement, as well as to allow us to assume a lease by and between 1140 Associates, Inc. and Law.com, Inc. In addition, on February 27, 2003, the GECC Facility was amended to modify the covenants relating to the total leverage ratio, interest coverage ratio and fixed charge ratio until December 2004. These covenants now provide alternative compliance levels and associated incremental interest rates. In addition, the GECC facility was amended to allow for the Discount Note transaction described above. At June 30, 2003, the amount outstanding under the GECC Facility was $30.9 million. The available balance under the unused commitment is reduced by any letters of credit outstanding totaled $7.0 million at June 30, 2003. A 10% increase in the average interest rate of borrowing under the GECC Facility during the six months ended June 30, 2003 would have increased our net loss to approximately $5.6 million. 11 4. RESTRUCTURING CHARGE During 2002, upon the decision to restructure certain of our operations, we accrued approximately $1.5 million of restructuring charges. These charges primarily related to severance arrangements for approximately 55 employees in various regions and divisions and were included in operating income in the above mentioned period. As of June 30, 2003, approximately $0.5 million, representing the unpaid charges, is included in accrued expenses. The following is a summary of our restructuring charge activity (in thousands): Unpaid restructuring charge accrual at December 31, 2002.......................................... $ 1,068 Less: Payments during the three months ended June 30, 2003.............................................. (576) ----------- Unpaid restructuring charge accrual at June 30, 2003.............................................. $ 492 ===========

5. ACQUISITION OF LAW.COM Effective May 1, 2002, we acquired Law.com, Inc., a Delaware corporation, ("Law.com"), and a provider of web content and seminars for the legal industry. Prior to our acquisition of Law.com, Law.com's RealLegal applications services business was spun off to Law.com shareholders as a new entity, RealLegal, LLC. We acquired Law.com through the acquisition of all of the 1,707,790 shares of outstanding common stock of Law.com from its shareholders in exchange for an aggregate of 120,030 shares of Holdings' common stock, par value $0.01 per share valued at approximately $20 million. We and Law.com share substantially all of the same common stockholders, however, were not deemed to be entities under common control. The amount of consideration was determined based on independent third party valuations undertaken in March 2002 of our equity and of the Web content and seminar business of Law.com. The acquired businesses include practice centers for specialty law practice areas, state web sites and information sites for in-house counsel, law students and legal technology professionals. The acquisition was accounted for under the purchase method of accounting and the results of operations have been included in the financial statements since acquisition. After completion of our acquisition of Law.com, we contributed all of the outstanding shares of common stock of Law.com to ALM as a capital contribution. Law.com operates as ALM's subsidiary. The pro forma unaudited consolidated results of operation for the three and six months ended June 30, 2002, assuming consummation of the acquisition as of the beginning of the respective period, is as follows (in thousands):

12 5. ACQUISITION OF LAW.COM (CONTINUED) At the time of the acquisition of Law.com, we recorded an investment in RealLegal, LLC of $4.7 million for 4,745,000 units of Series A Preferred Stock. This investment was in exchange for the extinguishment of an existing accounts receivable due from RealLegal, LLC and for future advertising commitments by RealLegal, LLC to us. This investment is carried at cost and included in other assets in the accompanying Consolidated Balance Sheet. RealLegal, LLC and we share substantially the same stockholders, however, are not deemed to be entities under common control. Effective May 1, 2002, RealLegal, LLC entered into an Operating Agreement with us (the "Operating Agreement"). The Operating Agreement provides, among other things, for us to provide RealLegal, LLC with certain content to be used in connection with its MA3000 product and certain advertising, in exchange for a periodic payment by RealLegal, LLC comprised of cash and equity in RealLegal, LLC. The above acquisition has been accounted for under the purchase method of accounting and the results of operations of the acquired businesses have been included in the financial statements since acquisition. The excess of the purchase price over net assets acquired was allocated to intangible assets and goodwill. 6. SEGMENT INFORMATION Operating segments represent components of our business that are evaluated regularly by key chief operating decision makers in assessing performance and resource allocation. We have determined that our reportable segments consist of our regional newspapers (the "Regional Newspapers"), national businesses (the "National Businesses") and our online business, Law.com ("Online"). We have also reflected unallocated costs related to our corporate and administrative functions as a separate unit ("Corporate") so as to not distort our other segments. For the years presented herein, the Regional Newspapers are comprised of the following businesses: New York Law Journal; The National Law Journal; and twelve other regional newspapers. The National Businesses are comprised of the following businesses: our magazine group, which includes The American Lawyer and eight other magazines; our newsletters; our hard and soft cover books; our trade shows and seminars; our licensing and research business; our litigation services division and our international operations. Online is comprised of Law.com, which primarily includes web content, seminars and practice areas. Corporate overhead is comprised of: unallocated costs relating to our administrative offices, which include executive management, legal, human resources, accounting, information systems, business development, office services, government affairs and public relations. In addition, Corporate includes us, ALM and ALM Properties, Inc., one of ALM's subsidiaries. We evaluate performance based on the segments' income (loss) from operations before unallocated corporate overhead and interest expense. The accounting policies of the reportable segments are the same as those described in Note 2. 13 6. SEGMENT INFORMATION (CONTINUED)

A reconciliation of combined segment profit to consolidated net loss is as follows:

14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with our historical consolidated financial statements, including the notes thereto, included elsewhere in this Form 10-Q. ANY STATEMENTS IN THIS QUARTERLY REPORT CONCERNING OUR BUSINESS OUTLOOK OR FUTURE ECONOMIC PERFORMANCE, ANTICIPATED PROFITABILITY, REVENUES, EXPENSES OR OTHER FINANCIAL ITEMS, TOGETHER WITH OTHER STATEMENTS THAT ARE NOT HISTORICAL FACTS, ARE "FORWARD-LOOKING STATEMENTS" AS THAT TERM IS DEFINED UNDER THE FEDERAL SECURITIES LAWS. FORWARD-LOOKING STATEMENTS ARE SUBJECT TO RISKS, UNCERTAINTIES AND OTHER FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE STATED IN SUCH STATEMENTS. SUCH RISKS, UNCERTAINTIES AND FACTORS INCLUDE, BUT ARE NOT LIMITED TO, CHANGES IN THE LEVELS OF ADVERTISING REVENUES, CHANGES AND DELAYS IN NEW PRODUCT INTRODUCTIONS, CUSTOMER ACCEPTANCE OF NEW PRODUCTS AND GENERAL ECONOMIC CONDITIONS, AS WELL AS OTHER RISKS DETAILED IN OUR FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. OVERVIEW The following discussion compares our financial results for the six months ended June 30, 2003 to the six months ended June 30, 2002. Effective May 1, 2002, we acquired Law.com, Inc., a Delaware corporation ("Law.com"), and a provider of web content and seminars for the legal industry. Prior to the acquisition of Law.com, Law.com's RealLegal applications services business was spun off to Law.com shareholders as a new entity, RealLegal, LLC. We acquired Law.com through the acquisition of all of the 1,707,790 shares of outstanding common stock of Law.com from its shareholders in exchange for an aggregate of 120,030 shares of our common stock, par value $0.01 per share. The acquired businesses include practice centers for specialty law practice areas, state Web sites and information sites for in-house counsel, law students and legal technology professionals. After completion of our acquisition of Law.com, we contributed all of the outstanding shares of common stock of Law.com to ALM as a capital contribution. Law.com operates as a subsidiary of ALM. We utilized an interest rate swap agreement to convert our fixed rate interest on our $175.0 million senior notes to a variable rate. At June 30, 2002, we had an interest rate swap outstanding with a notional amount of $175.0 million and a fair market value of $0.2 million. In July 2002, our interest rate swap agreement was terminated. During the six months ended June 30, 2002, we recorded a net gain of $110,000, which was recorded in earnings as a component of interest expense because the swap did not qualify for hedge accounting. During the three months ended June 30, 2003, we included in depreciation, amortization and other charges a $1.5 million adjustment to write-off certain leasehold improvements and furniture relating to office space abandoned during prior quarter. The lease was obtained in connection with our acquisition of Law.com on May 1, 2002. GAAP refers to accounting principles generally accepted in the United States of America. Throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"), management discusses financial measures in accordance with GAAP and also on a non-GAAP basis. As of January 1, 2003, we have decided to create a uniform 15 definition of EBITDA for discussion in our quarterly and annual reports. Our definition of EBITDA is earnings before interest, income taxes, depreciation, amortization and other charges. Any additional amounts which we believe need to be disclosed to you in order to allow you to more accurately compare our prior and ongoing operations from period to period will be explicitly stated in our future reports. In order to provide accurate comparisons, EBITDA for periods prior to January 31, 2003 may be restated to conform to the definition detailed above and, as a result, may differ from previously reported results. All references in this MD&A to EBITDA are to a non-GAAP financial measure. We believe that the use of non-GAAP financial measures enables us and investors to evaluate, and compare from period to period, the results from ongoing operations in a more meaningful and consistent manner. Reconciliations of GAAP to non-GAAP financial measures are included on page 27. The following table presents the results of operations (in thousands) for the three and six months ended June 30, 2003 and 2002.

RESULTS OF OPERATIONS Six months ended June 30, 2003 compared to six months ended June 30, 2002 Overview. Revenues increased by $2.2 million, or 3.4%, from $66.8 million for the six months ended June 30, 2002 to $69.0 million for the six months ended June 30, 2003. Operating expenses decreased $2.1 million, or 3.2%, from $64.6 million for the six months ended June 30, 2002 to $62.5 million for the six months ended June 30, 2003. As a result, operating income increased $4.4 million from $2.2 million for the six months ended June 30, 2002 to $6.6 million for the six months ended June 30, 2003. EBITDA increased $4.4 million, or 42.0%, from $10.5 million for the six months ended June 30, 2002 to $14.9 million for the six months ended June 30, 2003. Net loss totaled $5.5 million for the six months ended June 30, 2003 as compared to a net loss of $8.1 million for the six months ended June 30, 2002. Revenues. Revenues increased by $2.2 million, or 3.4%, from $66.8 million for the six months ended June 30, 2002 to $69.0 million for the six months ended June 30, 2003. Revenue growth for the six months ended June 30, 2003 compared to the six months ended June 30, 2002 reflects revenues recorded in our Law.com subsidiary of $2.3 million as compared to $0.8 million for the six months ended June 30, 2002. The results for the six months ended June 30, 2003 16 include revenue from Law.com for the entire period, while the results for the six months ended June 30, 2002 only include revenue subsequent to the May 1, 2002 acquisition date of Law.com. In addition, law firm and legal notice advertising revenues, subscription revenues in our print publications, royalty and licensing fees and sales of reprints increased during the six months ended June 30, 2003 as compared to the same period in 2002. These increases were partially offset by decreases in advertising revenues associated with certain barter transactions where we exchanged advertising services for an equity interest in certain companies, a decrease in classified advertising and a decrease in newsletter revenues. Advertising revenues increased $0.3 million, or 0.9%, from $38.2 million for the six months ended June 30, 2002 to $38.5 million for the six months ended June 30, 2003. The increase was due primarily to law firm and legal notice advertising revenues, which increased $0.6 million and $0.5 million, respectively, for the six months ended June 30, 2003 compared to the six months ended June 30, 2002. These increases were partially offset by $0.8 million of advertising revenues in the six months ended June 30, 2002 associated with certain barter transactions where we exchanged advertising services for an equity interest in certain companies with no like revenue recorded during the same period in 2003. In addition, classified advertising revenues also declined. Subscription revenues increased $0.7 million, or 5.9%, from $11.5 million for the six months ended June 30, 2002 to $12.2 million for the six months ended June 30, 2003. The increase primarily reflects increased online subscription revenues resulting from our acquisition of Law.com, as well as an increase in print subscription revenue resulting from increased marketing efforts. Revenues from ancillary products and services increased $1.2 million, or 7.3%, from $17.1 million for the six months ended June 30, 2002 to $18.3 million for the six months ended June 30, 2003. The increase in revenues resulted primarily from higher reprint sales, higher royalty and licensing fees, increased book sales and an increase in phone and web research revenue. These increases were partially offset by lower newsletter sales. Operating expenses. Operating expenses decreased $2.1 million, or 3.2%, from $64.6 million for the six months ended June 30, 2002 to $62.5 million for the six months ended June 30, 2003. Lower operating expenses during the six months ended June 30, 2003 as compared to the six months ended June 30, 2002 were primarily realized through lower production and distribution expenses, editorial expenses and general and administrative expenses resulting from realized savings from our cost containment and restructuring efforts initiated in 2002. These savings were partially offset by an increase in selling expenses of $0.2 million, resulting primarily from an increase in Law.com selling expenses during the six months ended June 30, 2003 as compared to the same period in 2002. The results for the six months ended June 30, 2003 include Law.com's expenses for the entire period, while the results for the same period in 2002 only include expenses subsequent to the May 1, 2002 acquisition date of Law.com. Editorial expenses decreased $0.5 million, or 4.8%, from $10.9 million for the six months ended June 30, 2002 to $10.4 million for the six months ended June 30, 2003. The decrease in editorial expenses primarily resulted from realized savings in artwork and photos, salaries and related payroll taxes and employee benefit expenses and consulting and professional fees from our cost containment and restructuring efforts initiated in 2002. These decreases were partially offset by an increase in contributing editor fees in our print publications and from an increase in Law.com editorial expenses of $0.2 million during the six months ended June 30, 2003, as compared to the same period in 2002. The results for the six months ended June 30, 2003 include 17 Law.com's expenses for the entire period, while the results for the same period in 2002 only include expenses subsequent to the May 1, 2002 acquisition date of Law.com. Production and distribution expenses decreased $0.7 million, or 5.6%, from $13.0 million for the six months ended June 30, 2002 to $12.3 million for the six months ended June 30, 2003. Production and distribution expenses decreased primarily from lower printing and related expenses resulting from reductions in print volume and lower printing costs, a decrease in salaries and related payroll taxes and employee benefits and other realized savings from our cost containment and restructuring efforts initiated in 2002. These decreases were partially offset by an increase in Law.com production and distribution expenses of $0.3 million during the six months ended June 30, 2003 as compared to the same period in 2002. The results for the six months ended June 30, 2003 include Law.com's expenses for the entire period, while the results for the same period in 2002 only include expenses subsequent to the May 1, 2002 acquisition date of Law.com. Selling expenses increased $0.2 million or 1.3%, from $13.4 million for the six months ended June 30, 2002 to $13.6 million for the six months ended June 30, 2003. Law.com's selling expenses increased $1.1 million which includes expenses for the entire six month 2003 period while the results for the same period in 2002 includes expenses subsequent to the May 1, 2002 acquisition date of Law.com. This increase was partially offset by realized savings of $0.9 million from our cost containment and restructuring efforts initiated in 2002. General and administrative expenses decreased $0.9 million, or 5.0%, from $18.7 million for the six months ended June 30, 2002 to $17.8 million for the six months ended June 30, 2003. General and administrative expenses decreased $1.5 million in our print and ancillary businesses during the six months ended June 30, 2003 as compared to the six months ended June 30, 2002. This decrease resulted primarily from lower salary and related taxes and employee benefits, lower legal fees and a net reduction of our provision for uncollectible accounts due to an improvement in our accounts receivable aging performance. These decreases were partially offset by higher management consulting and professional fees and an increase in other taxes in our print and ancillary businesses. In addition, Law.com general and administrative expenses increased $0.5 million during the six months ended June 30, 2003 as compared to the same period in 2002. The results for the six months ended June 30, 2003 include Law.com's expenses for the entire period, while the results for the same period in 2002 only include expenses subsequent to the May 1, 2002 acquisition date of Law.com. Depreciation, amortization and other charges remained flat at $8.4 million for the six months ended June 30, 2003 as compared to the six months ended June 30, 2003. Lower amortization expense was recorded during the six months ended June 30, 2003 as compared to the six months ended June 30, 2002 due to certain non-compete and other intangible assets being fully amortized by the end of 2002. This was partially offset by an increase in depreciation expense related to capital assets acquired with the acquisition of Law.com in the second quarter of 2002. Also, during the six months ended June 30, 2003, we included in depreciation, amortization and other charges a $1.5 million adjustment to write-off leasehold improvements and furniture relating to office space abandoned during a prior quarter. The lease was obtained in connection with our acquisition of Law.com on May 1, 2002. Operating income. As a result of the above factors, our operating income increased $4.4 million from $2.2 million for the six months ended June 30, 2002 to $6.6 million for the six months ended June 30, 2003. In addition, EBITDA increased $4.4 million, or 42.0%, from $10.5 18 million for the six months ended June 30, 2002 to $14.9 million for the six months ended June 30, 2003. Interest expense. Total interest expense increased $0.8 million from $13.1 million for the six months ended June 30, 2002 to $13.9 million for the six months ended June 30, 2003. This increase was primarily due to an increase in the average carrying balance on our revolving credit facility with GECC and on our 12 1/4% Senior Discount Notes, higher average interest rate and increased amortization of deferred financing charge on our GECC revolving credit facility for the six months ended June 30, 2003 as compared to the six months ended June 30, 2002. Partially offsetting these increases was a reduction of interest expense of $0.1 million related to a gain recorded on our outstanding interest rate swap in 2002. Income tax benefit. Income tax benefit decreased $1.0 million for the six months ended June 30, 2003 as compared to the six months ended June 30, 2002. Income tax benefit for 2002 and 2003 reflects the tax effect of the pretax loss recognized for those periods. Net Loss. As a result of the above factors, our net loss declined $2.6 million from a loss of $8.1 million for the six months ended June 30, 2002 to $5.5 million for the six months ended June 30, 2003. Operating segments. Operating segments represent components of our business that are evaluated regularly by key chief operating decision makers in assessing performance and resource allocation. We have determined that our reportable segments consist of our regional newspapers (the "Regional Newspapers"), national businesses (the "National Businesses") and our online business, Law.com ("Online"). We have also reflected unallocated costs related to our corporate and administrative functions as a separate unit ("Corporate") so as to not distort our other segments. For the six months ended June 30, 2003 and 2002 presented herein, the Regional Newspapers are comprised of the following: New York Law Journal; The National Law Journal; and twelve other daily and weekly newspapers. The National Businesses are comprised of the following: The American Lawyer and eight other magazines; our newsletters, our hard and soft cover books; our trade shows and seminars; our licensing and syndication business; our litigation services division and our international operations. Online is administered by Law.com and consists primarily of web content, seminars and practice areas. Corporate is comprised of: unallocated costs relating to our administrative offices, which include executive management, legal, human resources, accounting, information systems, business development, office services, government affairs and public relations. In addition, Corporate includes us, ALM and ALM Properties, Inc., one of our subsidiaries. Regional Newspapers Revenues. Revenues for our Regional Newspapers decreased $0.1 million, from $44.2 million for the six months ended June 30, 2002 to $44.1 million for the six months ended June 30, 2003. Advertising revenues decreased $0.5 million, from $29.7 million for the six months ended June 30, 2002 to $29.2 million for the six months ended June 30, 2003. The decrease was due 19 primarily to lower display advertising revenues of $0.6 million associated with certain barter transactions where we exchanged advertising services for an equity interest in certain companies and also from a decrease of $0.5 million in classified advertising revenues. These decreases were partially offset by increases in legal notice and law firm advertising revenues, which increased $0.5 million and $0.1 million, respectively, for the six months ended June 30, 2003 compared to the six months ended June 30, 2002. Partially offsetting decreases in advertising revenues were increases in subscription and ancillary revenues. Operating expenses. Total operating expenses declined $1.8 million, or 5.9%, from $31.5 million for the six months ended June 30, 2002 to $29.7 million for the six months ended June 30, 2003. Cost of goods sold decreased primarily due to lower paper, printing, fulfillment and other production costs resulting from realized savings from our continued cost containment efforts. Also, salaries and related taxes and benefits decreased due to our restructuring efforts initiated in 2002. Selling costs decreased due to lower print and radio advertising expenses realized from continued cost containment efforts. Salary and payroll related taxes and benefits also declined due to restructuring efforts in 2002. Partially offsetting the decrease in selling expenses was an increase in direct mail efforts, due to our decision to invest in marketing during this time period. General and administrative expenses decreased primarily due to lower allocated corporate overhead expenses. This decrease was realized from corporate expense reductions from continued cost containment and also from restructuring efforts initiated in 2002. In addition, general and administrative expenses decreased due to lower salary and payroll related taxes and benefits expenses realized from restructuring and continued cost containment efforts initiated in 2002. Operating income. Our operating profit increased $1.7 million, from $12.7 million for the six months ended June 30, 2002 to $14.4 million for the six months ended June 30, 2003. EBITDA increased $1.7 million, or 13.0%, from $13.0 million for the six months ended June 30, 2002 to $14.7 million for the six months ended June 30, 2003. National Businesses Revenues. Revenues for our National Businesses increased $0.8 million, or 4.0%, from $21.8 million for the six months ended June 30, 2002 to $22.6 million for the six months ended June 30, 2003. Advertising revenues for our National Businesses were $7.9 million for both the six months ended June 30, 2003 and 2002. Display advertising revenue decreased due to a decrease in advertising associated with certain barter transactions where we exchanged advertising services for an equity interest in certain companies. This decrease was offset by increases in law firm and directory advertising revenues. Subscription revenues increased $0.1 million. Ancillary revenues increased $0.7 million due primarily to higher reprint sales, higher book sales, increases in phone and web research revenue in our litigation services business and increased licensing revenue. This was partially offset by decreases in newsletter revenue and seminar and trade show revenue. Operating expenses. Operating expenses for our National Businesses declined $2.0 million, or 10.3%, from $19.3 million for the six months ended June 30, 2002 to $17.3 million for the six months ended June 30, 2003. Cost of goods sold decreased due primarily to lower printing and production costs resulting from our continued cost containment efforts. Also, salaries and related taxes and benefits expenses decreased due to our restructuring efforts initiated in 2002. These decreases were partially offset by increased contributing editor costs. Selling expenses decreased due to continued cost containment efforts realized, lower trade show expenses and expense reductions as our national sales force continues to allocate their time selling online products for Law.com. In addition, selling and general and administrative expenses decreased due to lower 20 allocated corporate overhead expenses. This decrease resulted from corporate expense reductions realized from continued cost containment and also from restructuring efforts initiated in 2002. Operating profit. Our operating profit increased $2.7 million, or 102.7% from $2.6 million for the six months ended June 30, 2002 to $5.3 million for the six months ended June 30, 2003. EBITDA increased $2.7 million, or 103.8%, from $2.6 million for the six months ended June 30, 2002 to $5.3 million for the six months ended June 30, 2003. Online Our online business consists primarily of Law.com, a provider of web content and seminars for the legal industry whose businesses include practice centers for specialty law practice areas, state web sites and information sites for in-house counsel, law students and legal technology professionals. Total revenues for Online for the six months ended June 30, 2003 totaled $2.3 million, or 3.4%, of our revenues. As we acquired Law.com in May 2002, we do not have comparable six month results for this segment. Operating expenses for Online totaled $5.5 million for the six months ended June 30, 2003. Included in operating expenses for the six months ended June 30, 2003 is a $1.5 million charge to depreciation, amortization and other charges to write-off certain leasehold improvements and furniture relating to office space abandoned during a prior quarter. The lease was obtained in connection with our acquisition of Law.com, Inc. As a result, operating loss for Online was $3.2 million and EBITDA loss was $1.1 million for the six months ended June 30, 2003. Corporate Operating expenses. Operating expenses for Corporate decreased $2.3 million from $12.3 million for the six months ended June 30, 2002 to $10.0 million for the six months ended June 30, 2003. These decreases were due primarily to lower salary and payroll related taxes and employee benefits and lower legal fees. Lower amortization expense was recorded during the six months ended June 30, 2003 as compared to the six months ended June 30, 2002 due to certain non-compete and other intangible assets being fully amortized by the end of 2002. Corporate depreciation expense decreased due to certain capital assets becoming fully depreciated in 2002. These decreases were partially offset by increases in management consulting and other professional fees and an increase in other taxes. Three months ended June 30, 2003 compared to three months ended June 30, 2002 Overview. Revenues increased by $0.7 million, or 2.1%, from $34.4 million for the three months ended June 30, 2002 to $35.1 million for the three months ended June 30, 2003. Operating expenses decreased $1.2 million, or 3.7%, from $32.5 million for the three months ended June 30, 2002 to $31.3 million for the three months ended June 30, 2003. As a result, operating income increased $2.0 million from $1.9 million for the three months ended June 30, 2002 to $3.9 million for the three months ended June 30, 2003. EBITDA increased $2.9 million, or 49.6%, from $5.8 million for the three months ended June 30, 2002 to $8.7 million for the three months ended June 30, 2003. Net loss totaled $3.1 million for the three months ended June 30, 2002 as compared to a net loss of $1.9 million for the three months ended June 30, 2003. Revenues. Revenues increased by $0.7 million, or 2.1%, from $34.4 million for the three months ended June 30, 2002 to $35.1 million for the three months ended June 30, 2003. Revenue growth for the three months ended June 30, 2003 compared to the three months ended June 30, 21 2002 is due primarily from revenues recorded in our Law.com subsidiary of $1.1 million for the three months ended June 30, 2003 as compared to $0.8 million for the three months ended June 30, 2002. The results for the three months ended June 30, 2003 include revenue from Law.com for the entire period, while the results for the three months ended June 30, 2002 only include revenue subsequent to the May 1, 2002 acquisition date of Law.com. In addition, law firm and legal notice advertising revenues, subscription revenues in our print publications, royalty and licensing fees, trade show and seminar revenue, directory revenue and sales of reprints increased during the three months ended June 30, 2003 as compared to the same period in 2002. These increases were partially offset by decreases in display advertising revenues associated with certain barter transactions where we exchanged advertising services for an equity interest in certain companies, a decrease in classified advertising and a decrease in newsletter revenues. Advertising revenues decreased $0.2 million, or 1.0%, from $20.1 million for the three months ended June 30, 2002 to $19.9 million for the three months ended June 30, 2003. Advertising revenue declines were due to decreases in display advertising revenues associated with certain barter transactions where we exchanged advertising services for an equity interest in certain companies and decreases in classified revenues for the three months ended June 30, 2003 compared to the three months ended June 30, 2002. These decreases were partially offset by increases in law firm, legal notice and directory advertising revenue for the three months ended June 30, 2003 compared to the three months ended June 30, 2002. Subscription revenues increased $0.2 million, or 3.3%, from $6.0 million for the three months ended June 30, 2002 to $6.2 million for the three months ended June 30, 2003. The increase reflects both increased online and print subscription revenues resulting from increased marketing efforts. Revenues from ancillary products and services increased $0.7 million, or 8.5%, from $8.3 million for the three months ended June 30, 2002 to $9.0 million for the three months ended June 30, 2003. The increase in revenues resulted primarily from higher reprint sales, higher royalty and licensing fees and an increase in trade show and seminar revenue. These increases were partially offset by lower newsletter sales. Operating expenses. Operating expenses decreased $1.2 million, or 3.7%, from $32.5 million for the three months ended June 30, 2002 to $31.3 million for the three months ended June 30, 2003. Lower operating expenses during the three months ended June 30, 2003 as compared to the three months ended June 30, 2002 were primarily realized through lower general and administrative, production and distribution and editorial expenses resulting from realized savings from our cost containment and restructuring efforts initiated in 2002. These savings were partially offset by an increase of $0.3 million in Law.com selling expenses during the three months ended June 30, 2003, as compared to the same period in 2002. The results for the three months ended June 30, 2003 include Law.com's expenses for the entire period, while the results for the same period in 2002 only include expenses subsequent to the May 1, 2002 acquisition date of Law.com. Editorial expenses decreased $0.3 million, or 6.4%, from $5.5 million for the three months ended June 30, 2002 to $5.2 million for the three months ended June 30, 2003. The decrease in editorial expenses primarily resulted from realized savings in artwork and photos, salaries and related expenses and consulting and professional fees from our cost containment and restructuring efforts initiated in 2002. These decreases were partially offset by an increase in contributing editor fees in our print publications. 22 Production and distribution expenses decreased $0.5 million, or 8.2%, from $6.5 million for the three months ended June 30, 2002 to $6.0 million for the three months ended June 30, 2003. Production and distribution expenses decreased primarily from lower printing and related expenses resulting from reductions in print volume and lower printing costs, lower book production costs, a decrease in salaries and related payroll taxes and employee benefits and other realized savings from our cost containment and also from restructuring efforts initiated in 2002. Selling expenses increased $0.2 million or 2.3%, from $6.6 million for the three months ended June 30, 2002 to $6.8 million for the three months ended June 30, 2003. Selling expenses increased primarily due to an increase in Law.com selling expenses of $0.3 million, during the three months ended June 30, 2003, as compared to the same period in 2002. The results for the three months ended June 30, 2003 include Law.com's expenses for the entire period, while the results for the same period in 2002 only include expenses subsequent to the May 1, 2002 acquisition date of Law.com. This increase was partially offset by realized savings from our cost containment and also from restructuring efforts initiated in 2002. General and administrative expenses decreased $1.3 million, or 13.4%, from $9.8 million for the three months ended June 30, 2002 to $8.5 million for the three months ended June 30, 2003. This decrease resulted from lower legal fees and a net reduction of our provision for uncollectible accounts due to an improvement in our accounts receivable aging performance. These decreases were partially offset by increased management consulting and other professional fees and an increase in other taxes in our print and ancillary businesses. Depreciation, amortization and other charges increased $0.9 million, or 20.6%, from $4.0 million for the three months ended June 30, 2002 to $4.9 million for the three months ended June 30, 2003. Depreciation expense increased for the three months ended June 30, 2003 as compared to the three months ended June 30, 2002 related to capital assets acquired with the acquisition of Law.com in the second quarter of 2002. During the three months ended June 30, 2003, we included in depreciation, amortization and other charges a $1.5 million adjustment to write-off leasehold improvements and furniture relating to office space abandoned during a prior quarter. The lease was obtained in connection with our acquisition of Law.com. In addition, partially offsetting these increases was lower amortization expense recorded during the three months ended June 30, 2003 as compared to the three months ended June 30, 2002 due to certain non-compete and other intangible assets being fully amortized in 2002. Operating income. As a result of the above factors, our operating income increased $2.0 million from $1.9 million for the three months ended June 30, 2002 to $3.9 million for the three months ended June 30, 2003. In addition, EBITDA increased $2.9 million, or 49.6%, from $5.8 million for the three months ended June 30, 2002 to $8.7 million for the three months ended June 30, 2003. Interest expense. Total interest expense decreased $0.2 million from $7.1 million for the three months ended June 30, 2002 to $6.9 million for the three months ended June 30, 2003. For the three months ended June 30, 2002, we recorded an additional interest expense of $0.4 million related to our outstanding interest rate swap with no like expense recorded during the three months ended June 30, 2003. Partially offsetting this decrease was higher average carrying balances on our GECC Facility and on our 12 1/4% Senior Discount Notes, higher average interest rates and increased amortization of a deferred financing on our GECC Facility in 2003, resulted in a higher interest expense for the three months ended June 30, 2003 as compared to the three months ended June 30, 2002. 23 Other loss. Other loss decreased $0.1 million for the three months ended June 30, 2003 as compared to the three months ended June 30, 2002. This decrease was due to the write-off of the remaining unamortized deferred financing costs resulting from the payoff of our old revolving line of credit with no like costs for the three months ended June 30, 2003. Income tax benefit. Income tax benefit decreased $1.1 million for the three months ended June 30, 2003 as compared to the three months ended June 30, 2002. Income tax benefit for 2002 and 2003 reflects the tax effect of the pretax loss recognized for those periods. Net Loss. As a result of the above factors, our net loss declined $1.2 million from a loss of $3.1 million for the three months ended June 30, 2002 to $1.9 million for the three months ended June 30, 2003. Operating segments. Operating segments represent components of our business that are evaluated regularly by key chief operating decision makers in assessing performance and resource allocation. We have determined that our reportable segments consist of our regional newspapers (the "Regional Newspapers"), national businesses (the "National Businesses") and our online business, Law.com ("Online"). We have also reflected unallocated costs related to our corporate and administrative functions as a separate unit ("Corporate") so as to not distort our other segments. For the three months ended June 30, 2003 and 2002 presented herein, the Regional Newspapers are comprised of the following: New York Law Journal; The National Law Journal; and twelve other daily and weekly newspapers. The National Businesses are comprised of the following: The American Lawyer and eight other magazines; our newsletters, our hard and soft cover books; our trade shows and seminars; our licensing and syndication business; our litigation services division and our international operations. Online is administered by Law.com and consists primarily of web content, seminars and practice areas. Corporate is comprised of: unallocated costs relating to our administrative offices, which include executive management, legal, human resources, accounting, information systems, business development, office services, government affairs and public relations. In addition, Corporate includes us, ALM and ALM Properties, Inc., one of our subsidiaries. Regional Newspapers Revenues. Revenues for our Regional Newspapers decreased $0.5 million, or 2.4%, from $22.4 million for the three months ended June 30, 2002 to $21.9 million for the three months ended June 30, 2003. Advertising revenues decreased $0.6 million, from $15.2 million for the three months ended June 30, 2002 to $14.6 million for the three months ended June 30, 2003. The decrease was due primarily to lower display advertising revenues associated with certain barter transactions where we exchanged advertising services for an equity interest in certain companies and from a decrease in classified advertising revenues. These decreases were partially offset by an increase in legal notice advertising revenues of $0.1 million for the three months ended June 30, 2003 compared to the three months ended June 30, 2002. Subscription and royalty revenue increases for the three months ended June 30, 2003 as compared to the three months ended June 30, 2002 were offset by lower book, seminar and trade show and web and phone research revenues. 24 Operating expenses. Total operating expenses declined $1.0 million, or 6.6%, from $15.2 million for the three months ended June 30, 2002 to $14.2 million for the three months ended June 30, 2003. Cost of goods sold decreased due primarily to lower printing, fulfillment, postage and freight, other production costs and lower professional fees and selling costs decreased due to lower print and radio advertising and travel expenses resulting from realized savings from our continued cost containment efforts. Partially offsetting the decrease in selling expenses was an increase in direct mail efforts, due to our decision to invest in marketing during this time period. General and administrative expenses decreased primarily due to lower allocated corporate overhead expenses. In addition, we realized savings in salary and payroll related taxes and benefits expenses from restructuring and continued cost containment efforts initiated in 2002. Operating income. Our operating profit increased $0.5 million; from $7.1 million for the three months ended June 30, 2002 to $7.6 million for the three months ended June 30, 2003. EBITDA increased $0.4 million, or 6.0%, from $7.4 million for the three months ended June 30, 2002 to $7.8 million for the three months ended June 30, 2003. National Businesses Revenues. Revenues for our National Businesses increased $1.0 million, or 8.7%, from $11.2 million for the three months ended June 30, 2002 to $12.2 million for the three months ended June 30, 2003. Revenue from our ancillary products increased $0.7 million due primarily to higher reprint sales, higher book sales, increases in phone and web research revenue in our litigation services business, increases in seminar and trade shows and increased licensing fees. Advertising revenues for our National Businesses increased $0.2 million from $4.4 million for the three months ended June 30, 2002 to $4.6 million for the three months ended June 30, 2003. Advertising revenue increased due to higher law firm and directory advertising revenue. These increases were partially offset by a decrease in advertising associated with certain barter transactions where we exchanged advertising services for an equity interest in certain companies and by decreases in newsletter revenue. Operating expenses. Operating expenses for our National Businesses declined $0.5 million, or 4.9%, from $9.4 million for the three months ended June 30, 2002 to $8.9 million for the three months ended June 30, 2003. Cost of goods sold decreased due primarily to lower printing, production and professional fees resulting from our continued cost containment efforts. Also, salaries and payroll related taxes and benefits expense decreased due to our restructuring efforts initiated in 2002. These decreases were partially offset by increased contributing editor costs and subscription postage. Selling expenses decreased due to continued cost containment efforts realized, lower trade show expenses and expense reductions as our national sales force continues to allocate their time selling online products for Law.com. In addition, selling and general and administrative expenses decreased due to lower allocated corporate overhead expenses. This decrease resulted from corporate expense reductions realized from continued cost containment and also from restructuring efforts initiated in 2002. Operating profit. Our operating profit increased $1.5 million, or 78.5%, from $1.8 million for the three months ended June 30, 2002 to $3.3 million for the three months ended June 30, 2003. EBITDA increased $1.4 million, or 78.4%, from $1.8 million for the three months ended June 30, 2002 to $3.2 million for the three months ended June 30, 2003. 25 Online Our online business consists primarily of Law.com, a provider of web content and seminars for the legal industry whose businesses include practice centers for specialty law practice areas, state web sites and information sites for in-house counsel, law students and legal technology professionals. Total revenues for Online, for the three months ended June 30, 2003 totaled $1.1 million, or 3.1%, of our revenues. As we acquired Law.com in May 2002, we do not have comparable quarterly results for this segment. Included in operating expenses for the three months ended June 30, 2003 is a $1.5 million charge to depreciation, amortization and other charges to write-off certain leasehold improvements and furniture relating to office space abandoned during a prior quarter. The lease was obtained in connection with our acquisition of Law.com, Inc. Operating expenses for Online totaled $3.5 million for the three months ended June 30, 2003. As a result, operating loss for Online was $2.4 million and EBITDA loss was $0.6 million for the three months ended June 30, 2003. Corporate Operating expenses. Operating expenses for Corporate decreased $1.6 million from $6.2 million for the three months ended June 30, 2002 to $4.6 million for the three months ended June 30, 2003. These decreases were due primarily to lower salary and payroll related taxes and employee benefits and lower legal fees. Lower amortization expense was recorded during the three months ended June 30, 2003 as compared to the three months ended June 30, 2002 due to certain non-compete and other intangible assets being fully amortized by the end of 2002. Corporate depreciation expense decreased due to certain capital assets becoming fully depreciated in 2002. These decreases were partially offset by increases in other taxes, rent expense and lower allocated corporate expenses due to corporate expense reductions from continued cost containment. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities. Net cash provided by operating activities totaled $4.4 million for the six months ended June 30, 2003, which primarily reflects depreciation, amortization and other charges of $8.4 million, accretion of interest on Senior Discount Notes of $4.2 million, a decrease in accounts receivable of $0.7, the amortization of non-cash interest of $0.6 million and an increase in other current assets of $0.3 million. This was partially offset by a net loss of $5.5 million, a decrease in deferred income tax of $1.9 million, a decrease in accounts payable and accrued expenses of $1.4 million and a decrease in deferred income of $1.1 million. Net cash used in investing activities. Net cash used in investing activities was $1.6 million for the six months ended June 30, 2003, resulting from capital expenditures of $1.2 million and deferred payments from acquisitions made in 2001 and 2002. Capital expenditures totaled $1.2 million for the six months ended June 30, 2003 compared to capital expenditures of $1.5 million for the six months ended June 30, 2002. Capital expenditures for the six months ended June 30, 2003 included costs of $1.1 million attributed to hardware and software upgrades, database development and implementation of a disaster recovery system and $0.1 million attributed to leasehold improvements throughout the regions. Capital expenditures for 2002 primarily resulted from database development, enhancements to existing computer systems and facilities and equipment modernization. 26 Net cash used in financing activities. Net cash used in financing activities totaled $1.4 million for the six months ended June 30, 2003, which reflects a net paydown on our GECC Facility. Liquidity. Our principal sources of funds are cash flows from operating activities, which may be supplemented by borrowings under our GECC Facility. The GECC Facility had $30.9 million outstanding as of June 30, 2003 and accrues interest. We believe that these funds will be sufficient to meet our current financial obligations, which include the payment of interest on the $175,000,000 of 9.75% senior notes, interest under our GECC Facility, working capital, capital expenditures and other obligations for the next 12 months. No assurance can be given, however, that this will be the case. Our future operating performance and ability to service or refinance our debt, meet future debt covenants, and to repay, extend or refinance any credit agreements to which we are a party will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control. RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES Reconciliations of GAAP to non-GAAP financial measures, such as EBITDA, are provided below. We believe that the use of non-GAAP financial measures enables us and investors to evaluate, and compare from period to period our results from ongoing operations in a more meaningful and consistent manner.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK See footnote 3 to the Consolidated Financial Statements. ITEM 4. CONTROLS AND PROCEDURES (a) Disclosure Controls and Procedures. The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company's disclosure controls and procedures are effective. (b) Internal Control Over Financial Reporting. There have not been any changes in the Company's internal controls over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. 27 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS We are a party to various litigation matters incidental to the conduct of our business. We do not believe that the outcome of any of the matters in which we are currently involved will have a material adverse effect on our financial condition or on the results of our operations. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 31.1 Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K None. 28 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMERICAN LAWYER MEDIA HOLDINGS, INC. August 12, 2003 /s/ WILLIAM L. POLLAK ------------------------------------------ William L. Pollak PRESIDENT AND CHIEF EXECUTIVE OFFICER August 12, 2003 /s/ STEPHEN C. JACOBS ------------------------------------------ Stephen C. Jacobs VICE PRESIDENT AND CHIEF FINANCIAL OFFICER

AMERICAN LAWYER MEDIA HOLDINGS INC 10-Q