SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1995
_____ 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 1-7120
HARTE-HANKS COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware 74-1677284
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
200 Concord Plaza Drive, San Antonio, Texas 78216
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code -- 210/829-9000
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 the number of shares outstanding of each of the issuer's classes
of common stock: $1 par value, 18,373,849 shares as of March 31, 1995
<PAGE>
<TABLE>
HARTE-HANKS COMMUNICATIONS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
FORM 10-Q REPORT
March 31, 1995
<CAPTION>
Page
<S> <C>
Part I. Financial Information
Item 1. Interim Condensed Consolidated Financial
Statements (Unaudited)
Condensed Consolidated Balance Sheets - 3
March 31, 1995 and December 31, 1994
Consolidated Statements of Operations - 4
Three months ended March 31, 1995 and 1994
Consolidated Statements of Cash Flows - 5
Three months ended March 31, 1995 and 1994
Notes to Interim Condensed Consolidated Financial 6
Statements
Item 2. Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 12
(a) Exhibits
(b) Reports on Form 8-K
Signature 12
</TABLE>
TABLE
<PAGE>
Harte-Hanks Communications, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (in thousands, except per share and share amounts)
(Unaudited)
<CAPTION>
March 31, December 31,
1995 1994
<S> <C> <C>
Assets
Current assets
Cash.............................................. $ 3,979 $ 4,391
Accounts receivable, net.......................... 64,553 70,929
Inventory......................................... 15,875 13,454
Prepaid expenses.................................. 7,274 5,904
Current deferred income tax benefit............... 6,830 6,808
Other current assets.............................. 3,561 4,143
Total current assets............................ 102,072 105,629
Property, plant and equipment, net.................. 84,657 91,278
Goodwill, net....................................... 278,406 290,335
Other assets........................................ 6,592 9,656
Total assets.................................... $ 471,727 $ 496,898
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable.................................. $ 35,757 $ 31,229
Accrued payroll and related expenses.............. 12,121 17,996
Accrued interest.................................. 695 731
Prepaid subscriptions............................. 3,387 3,978
Current portion of film contracts................. 1,337 1,717
Income taxes payable.............................. 13,745 1,867
Other current liabilities......................... 15,612 13,165
Current portion of long term debt................. 398 469
Total current liabilities....................... 83,052 71,152
Long term debt...................................... 250,820 292,858
Other long term liabilities......................... 24,067 25,248
Total liabilities............................... 357,939 389,258
Stockholders' equity
Common stock, $1 par value, authorized 50,000,000
shares. Issued and outstanding 1995: 18,373,849
shares; 1994: 18,342,503 shares................. 18,374 18,342
Additional paid-in capital........................ 144,814 144,350
Accumulated deficit............................... (47,455) (53,107)
Minimum pension liability adjustment.............. (1,945) (1,945)
Total stockholders' equity...................... 113,788 107,640
Total liabilities and stockholders' equity...... $ 471,727 $ 496,898
<FN>
See Notes to Interim Condensed Consolidated Financial Statements.
</TABLE>
TABLE
<PAGE>
Harte-Hanks Communications, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended March 31,
1995 1994
<S> <C> <C>
Operating revenues.................................... $130,178 $115,115
Operating expenses
Payroll............................................. 49,704 47,412
Production and distribution......................... 47,273 40,131
Advertising, selling, general and administrative.... 14,763 13,603
Depreciation........................................ 3,416 3,180
Goodwill amortization............................... 2,424 2,350
117,580 106,676
Operating income...................................... 12,598 8,439
Other expenses (income)
Interest expense.................................... 4,946 3,966
Interest income..................................... (102) (36)
Gain on divestiture................................. (12,293) --
Other, net.......................................... 443 124
(7,006) 4,054
Income before income tax expense...................... 19,604 4,385
Income tax expense.................................... 13,494 2,118
Net income............................................ $ 6,110 $ 2,267
Primary:
Earnings per common share........................... $ 0.32 $ 0.12
Weighted average common and common equivalent
shares outstanding................................ 19,139 19,051
Fully diluted:
Earnings per common share........................... $ 0.31 $ 0.12
Weighted average common and common equivalent
share outstanding................................. 20,601 20,483
<FN>
See Notes to Interim Condensed Consolidated Financial Statements.
</TABLE>
TABLE
<PAGE>
Harte-Hanks Communications, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (in thousands)
(Unaudited)
<CAPTION>
Three Months Ended March 31,
1995 1994
<S> <C> <C>
Operating Activities
Net income.......................................... $ 6,110 $ 2,267
Add (deduct) non-cash income and expenses:
Depreciation ................................... 3,416 3,180
Goodwill amortization........................... 2,424 2,350
Amortization of option related expense.......... 240 474
Film amortization............................... 654 616
Deferred income taxes........................... (1,321) (849)
Other, net...................................... 300 236
Gain on divestiture............................. (12,293) --
Changes in operating assets and liabilities,
net of acquisitions and divestiture
Decrease in accounts receivable, net.............. 3,626 4,916
(Increase) decrease in inventory.................. (3,614) 1,268
Increase in prepaid expenses and other
current assets.................................. (1,732) (2,994)
Increase (decrease) in accounts payable........... 1,822 (3,874)
Increase in other accrued expenses
and other liabilities........................... 9,212 3,398
Other, net........................................ 222 225
Net cash provided by operating activities....... 9,066 11,213
Investing Activities
Purchases of property, plant and equipment.......... (3,344) (3,660)
Proceeds from the sale of property, plant
and equipment and divested assets................. 40,113 62
Acquisitions........................................ (5,760) --
Payments on film contracts.......................... (507) (504)
Net cash provided by (used in)
investing activities............................ 30,502 (4,102)
Financing Activities
Long term debt borrowings........................... 521,255 156,625
Payments on long term debt, including current
maturities ....................................... (561,273) (165,197)
Issuance of common stock............................ 496 183
Dividends paid...................................... (458) --
Net cash used in financing activities............. (39,980) (8,389)
Net decrease in cash................................ (412) (1,278)
Cash at beginning of year........................... 4,391 4,392
Cash at end of period............................... $ 3,979 $ 3,114
<FN>
See Notes to Interim Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
Harte-Hanks Communications, Inc. and Subsidiaries
Notes to Interim Condensed Consolidated Financial Statements
(Unaudited)
Note A - Financial Statements
The accompanying unaudited Interim Condensed Consolidated Financial
Statements include the accounts of Harte-Hanks Communications, Inc.
and subsidiaries (the "Company").
The statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
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, all adjustments
(consisting of normal recurring adjustments) considered necessary for
a fair presentation have been included. Operating results for the
three months ended March 31, 1995 are not necessarily indicative of
the results that may be expected for the year ending December 31. For
further information, refer to the consolidated financial statements
and footnotes included in the Company's annual report on Form 10-K for
the year ended December 31, 1994.
Certain prior period amounts have been reclassified for comparative
purposes.
Note B - Divestiture
In March 1995, the Company completed the previously announced sale of
its suburban Boston community newspapers, which consisted of three
daily and 11 weekly publications. As a result of this transaction,
the Company recognized a gain on divestiture of $2.3 million, or 11
cents per share, net of $10.0 million of income taxes.
Note C - Income Taxes
The Company's quarterly income tax provision of $13.5 million includes
$10.0 million related to the gain on divestiture. The Company's
income taxes on operations of $3.5 million were calculated using an
effective income tax rate of 47.2%. The Company's effective income
tax rate is derived by estimating pretax income and income tax expense
for the year ended December 31, 1995. The effective income tax rate
calculated is higher than the federal statutory rate of 35% due to the
addition of state taxes and to certain expenses recorded for financial
reporting purposes (primarily goodwill amortization), which are not
deductible for federal income tax purposes.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Operating results were as follows:
<TABLE>
Three months ended
In thousands March 31, 1995 March 31, 1994 Change
<S> <C> <C> <C>
Revenues $130,178 $115,115 13.1%
Operating expenses 117,580 106,676 10.2%
Operating income $ 12,598 $ 8,439 49.3%
Net income $ 6,191 $ 2,267 173.1%
Fully diluted earnings
per share $ 0.31 $ 0.12 158.3%
</TABLE>
Consolidated revenues grew 13.1% to $130.2 million and operating income grew
49.3% to $12.6 million in the first quarter of 1995 as compared to the first
quarter of 1994. The most dramatic growth occurred in the direct marketing
business where revenues increased 32.1% and operating income increased
105.0%. The Company's overall growth resulted from increased business with
both new and existing customers, new products and services as well as
advertising and circulation rate increases. Operating expenses also rose
due to the growth in business as well as higher newsprint prices and postal
rates.
Net income of $6.2 million for the first quarter of 1995 includes a gain on
divestiture, net of income taxes, of $2.3 million discussed under "Gain on
Divestiture" (page 10). Excluding this net gain on divestiture, net income
was $3.9 million, or 20 cents per share, on a fully diluted basis.
Direct Marketing
Direct marketing operating results were as follows:
<TABLE>
Three months ended
In thousands March 31, 1995 March 31, 1994 Change
<S> <C> <C> <C>
Revenues $45,772 $34,651 32.1%
Operating expenses 41,094 32,369 27.0%
Operating income $ 4,678 $ 2,282 105.0%
</TABLE>
Direct marketing revenues increased $11.1 million, or 32.1%, in the first
quarter of 1995 when compared to 1994. All service offerings experienced
growth with the most significant revenue increases occurring in database,
integrated direct marketing and response management. Direct marketing
service offerings enable Harte-Hanks customers to identify and communicate
with their marketing targets, evaluate responses and measure the
effectiveness of their marketing communications. Overall, revenue growth
resulted from increased business with both new and existing customers,
particularly in services provided to the retail, banking, financial
services, high technology industries and to international customers.
Although the majority of direct marketing revenue growth came from existing
operations, revenue growth was also affected by the October 1994 acquisition
of Select Marketing Inc., an Austin, Texas company offering response
management services, and the January 1995 acquisition of Steinert &
Associates, a New York City direct marketing communications and advertising
firm offering integrated direct marketing services.
Operating expenses increased $8.7 million, or 27.0%, in the first quarter of
1995 when compared to 1994. Payroll costs increased $3.1 million, primarily
due to increased hiring to support direct marketing's revenue growth.
Production costs increased $4.6 million due to increased volumes. Operating
expense growth was also impacted by the acquisitions made in the fourth
quarter of 1994 and the first quarter of 1995.
Shoppers
Shopper operating results were as follows:
<TABLE>
Three months ended
In thousands March 31, 1995 March 31, 1994 Change
<S> <C> <C> <C>
Revenues $43,646 $42,092 3.7%
Operating expenses 40,704 39,831 2.2%
Operating income $ 2,942 $ 2,261 30.1%
</TABLE>
Excluding revenues from the Company's smallest shopper that was sold in
February 1994, shopper revenues grew $2.5 million, or 6.1%, in the first
quarter of 1995 as compared to 1994. Revenue increases occurred primarily
in existing circulation zones and were also due, in part, to new
circulation. Revenues in existing circulation zones rose due to increased
rates. The revenue increase due to circulation expansion resulted from an
additional 131,000 households added since March 31, 1994 as well as
increased circulation of the newsstand product. The newsstand product was
introduced in the Southern California market in late 1993. Total weekly
shopper household circulation was 7.0 million at March 31, 1995.
Excluding operating expenses from the divested shopper, first quarter
operating expenses increased $2.0 million, or 5.1%, when compared to 1994.
Postage costs increased $1.8 million, or 16.9%, due primarily to a postage
rate increase as well as to increased circulation and higher overweight
postage costs. This increase was offset partially by lower payroll costs of
$0.6 million, or 4.3%. Payroll costs decreased due to reduced headcount and
changes in commission plans. Newsprint costs were flat, despite increased
newsprint prices, due to reduced volumes. Newsprint consumption decreased,
in part, due to the implementation of pagination technology in the Company's
Southern California shopper. Pagination permits a more efficient
publication design and reduces the number of pages in the book.
<PAGE>
Newspapers
Newspaper operating results were as follows:
<TABLE>
Three months ended
In thousands March 31, 1995 March 31, 1994 Change
<S> <C> <C> <C>
Revenues $34,878 $32,221 8.2%
Operating expenses 29,341 27,559 6.5%
Operating income $ 5,537 $ 4,662 18.8%
</TABLE>
Newspaper revenues increased $2.6 million, or 8.2%, in the first quarter of
1995 when compared to 1994. Overall advertising revenues were up $2.0
million, or 8.0%. In particular, classified advertising revenues grew 14.6%
as a result of increases both in rates and volumes. The classified growth
was attributable to growth in automotive volumes as well as help wanted
volumes in the Company's suburban markets. Retail advertising revenues
increased 2.8% as a result of increased rates, while insert revenues rose
slightly. In addition, niche and specialty product revenues were up
primarily as a result of a direct mail initiative into South Texas, which
began in 1994. Circulation revenues increased 7.9%, reflecting home
delivery price increases in the fall of 1994.
Newspaper operating expenses increased $1.8 million, or 6.5%, in the first
quarter of 1995 when compared to 1994. Payroll costs were $0.5 million
higher, or 3.9%, due to increased sales commissions on higher advertising
volumes and normal payroll increases. Newsprint costs increased $0.5
million, or 14.6%, as a result of higher average newsprint prices offset
slightly by reduced volumes. The reduction in volumes was attributable to
newsprint savings from the new press installed in July 1994 at the Corpus
Christi Caller-Times as well as to various operating decisions that affected
newsprint consumption. Costs associated with the direct mail program also
rose due to the postal rate increase in January 1995, as well as to
increased volumes.
Television
Television operating results were as follows:
<TABLE>
Three months ended
In thousands March 31, 1995 March 31, 1994 Change
<S> <C> <C> <C>
Revenues $5,882 $6,151 -4.4%
Operating expenses 4,457 4,711 -5.4%
Operating income $1,425 $1,440 -1.0%
</TABLE>
Revenues for the television segment decreased $0.3 million, or 4.4%, in the
first quarter of 1995 when compared to 1994. Revenues from the television
station operation decreased $0.1 million, or 2.8%, when compared to 1994,
which benefited from significant political revenue and CBS coverage of the
NFL playoffs and winter Olympics. The television segment revenue decrease
was also affected by decreased revenues from the segment's print graphics
services and the absence of a direct mail publication in the first quarter
of 1995.
First quarter expenses for the television segment decreased $0.3 million, or
5.4%, when compared to 1994 primarily due to reduced costs associated with
print graphics and direct mail services.
Gain on Divestiture
In March 1995, the Company completed the previously announced sale of its
suburban Boston community newspapers, which consisted of three daily and 11
weekly publications. As a result of this transaction, the Company
recognized a gain on divestiture of $2.3 million, or 11 cents per share, net
of $10.0 million of income taxes.
Interest Expense
Interest expense increased $1.0 million in the first quarter of 1995 when
compared to 1994 as a result of higher interest rates. Although short term
interest rates rose throughout 1994, the impact on the Company was mitigated
somewhat by more favorable pricing under terms of the Company's credit
facility. The more favorable pricing is a result of increased operating
cash flow, as defined in the Company's credit facility agreement, and
reduced debt levels. In addition, the Company is realizing lower interest
costs and commitment fees after amending its revolving credit commitment in
February 1995.
Income Taxes
The Company's income tax expense of $13.5 million for the first quarter of
1995 includes $10.0 million of income taxes relating to the gain on
divestiture. The remaining income tax expense of $3.5 million related to
operations increased $1.4 million when compared to the first quarter of
1994. The expense increase was directly related to the increased income
levels.
Liquidity and Capital Resources
Cash provided from operating activities for the three months ended March 31,
1995 was $9.1 million as compared to $11.2 million for the three months
ended March 31, 1994. Net cash inflows for investing activities were
$30.5 million as compared to outflows of $4.1 million in 1994. Year-to-date
investing activities for 1995 included $40.1 million in sales proceeds from
the sale of property, plant and equipment and divested assets. These
proceeds resulted primarily from the sale of the Boston community newspapers
and were used to reduce borrowings under the Company's credit facility.
Also included in year-to-date investing activities were expenditures of $5.8
million for acquisitions and $3.3 million for equipment purchases.
<PAGE>
Capital resources are available from and provided through the Company's
unsecured credit facility. All borrowings under the revolving credit
facility are to be repaid by December 31, 2001. Management believes that
its credit facility, together with cash provided from operating activities,
will be sufficient to fund operations, anticipated capital and film
expenditures and debt service requirements for the foreseeable future. As
of March 31, 1995, the Company had $115.0 million of unused borrowing
capacity under its credit facility, of which $24.1 million was reserved to
serve as backup for the Company's outstanding commercial paper and other
short-term borrowing facilities.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. See index to Exhibits on Page 13.
(b) No reports on Form 8-K were filed for the three months ended
March 31, 1995.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
<TABLE>
HARTE-HANKS COMMUNICATIONS, INC.
<S> <C>
May 10, 1995 /s/ Richard L. Ritchie
Date Richard L. Ritchie
Senior Vice President,
Finance and Chief Financial
and Accounting Officer
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit Page No.
<S> <C> <C>
*10(n) Second Amendment to Third Amended and Restated Loan 14
Agreement dated as of February 2, 1995 among the
Company, NationsBank of Texas, N.A., National
Westminster Bank USA, The Bank of Nova Scotia,
The First National Bank of Boston, Bank of Hawaii,
The Bank of Tokyo, LTD., Dallas Agency, Corestates
Bank, N.A. and CIBC Inc. and Toronto-Dominion (Texas),
Inc. in its Individual Capacity and as Agent.
*11 Statement Regarding Computation of Net Income 35
Common Share
*27 Financial Data Schedules 36
* Filed herewith.
</TABLE>
SECOND AMENDMENT TO
THIRD AMENDED AND RESTATED LOAN AGREEMENT
This Second Amendment to Third Amended and Restated Loan Agreement
(the "Amendment"), made as of this 2nd day of February, 1995, among
Harte-Hanks Communications, Inc., a Delaware corporation ("Borrower"),
Toronto Dominion (Texas), Inc., NationsBank of Texas, N.A., NatWest
Bank, N.A.(formerly known as National Westminster Bank USA), The First
National Bank of Boston, Bank of Hawaii, CoreStates Bank, N.A., The Bank
of Nova Scotia, CIBC, Inc., and The Bank of Tokyo, Ltd., Dallas Agency
(collectively, the "Banks"), and Toronto Dominion (Texas), Inc., as
agent for the Banks (the "Agent"),
W I T N E S S E T H:
WHEREAS, the Borrower, the Agent and the Banks (other than Bank of
Tokyo) are parties to that certain Third Amended and Restated Loan
Agreement dated as of May 19, 1993, as amended by that First Amendment
to Loan Agreement dated as of November 3, 1993, (collectively, the "Loan
Agreement"); and
WHEREAS, the parties hereto have mutually agreed that Bank of
Tokyo shall enter into the Loan Agreement as a Bank pursuant to this
Amendment, that National Bank of Canada shall withdraw as a Bank under
this Agreement, and that Toronto Dominion (Texas), Inc., a Delaware
corporation and a wholly-owned subsidiary of The Toronto-Dominion Bank,
shall take the place of such Bank as a `Bank' under the Loan Agreement;
and
WHEREAS, the Borrower has requested that certain terms of the Loan
Agreement be amended and the Agent and the Banks have agreed to the
requested amendments on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises set forth above,
the terms and conditions contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree that all capitalized terms used but not
otherwise defined herein shall have the meanings ascribed thereto in the
Loan Agreement, and further agree as follows:
1. Amendment to Article 1.
(a) Article 1 of the Loan Agreement, Definitions, is hereby
amended by deleting the existing definitions of "Banks," "Base Rate
Basis," "CD Rate Basis," "Commitment," "Commitment Ratios," "Debt
Service," "Indebtedness for Money Borrowed," "LIBOR Basis," "Maturity
Date," "Revolving Loan Commitment," "Revolving Note," and "Term Loan
Commitment" in their entirety and by substituting in lieu thereof,
respectively, the following:
"`Banks' shall mean Toronto Dominion (Texas), Inc.,
NationsBank of Texas, N.A., NatWest Bank, N.A. (formerly known as
National Westminster Bank USA), The First National Bank of Boston,
Bank of Hawaii, CoreStates Bank, N.A., The Bank of Nova Scotia,
CIBC Inc., and The Bank of Tokyo, Ltd., Dallas Agency together
with any assignees thereof pursuant to Section 11.6(b) hereof; and
"Bank" shall mean any one of the foregoing Banks.
"`Base Rate Basis' shall mean a simple interest rate equal
to the sum of (i) the Base Rate, and (ii) one-half of one percent
(1/2%) per annum. Interest on Base Rate Advances shall be subject
to adjustment as provided in Section 2.5 hereof.
"`CD Rate Basis' shall mean a simple per annum interest rate
(rounded upward to the nearest one-hundredth (1/100th) of one
percent) equal to the sum of (a) the quotient of (i) the CD Rate
divided by (ii) one minus the Domestic Reserve Percentage, stated
as a decimal, plus (b) the Assessment Rate, plus (c) one and
five-eighths percent (1-5/8%). The CD Rate Basis shall apply to
Interest Periods of thirty (30), sixty (60), ninety (90), and one
hundred eighty (180) days, and, once determined, shall remain
unchanged during the applicable Interest Period, except for
changes to reflect adjustments in the Domestic Reserve Percentage
and the Assessment Rate. Interest on CD Rate Advances shall also
be subject to adjustment as provided in Section 2.5 hereof.
"`Commitment' shall mean, collectively, the Revolving Loan
Commitment and, prior to the Termination Date, the Term Loan
Commitment.
"`Commitment Ratios' shall mean the obligation of each of
the Banks to make Advances to the Borrower under the Revolving
Loan Commitment, and, prior to the Termination Date, the Term Loan
Commitment, to the extent of its respective percentage, as set
forth on Schedule 1 to this Agreement.
"`Debt Service' shall mean the sum of, for the succeeding
four fiscal quarters, (i) Total Interest Expense, and (ii) the
aggregate of all scheduled principal payments under the Revolving
Loans.
"`Indebtedness for Money Borrowed' shall mean money borrowed
and indebtedness represented by notes payable and drafts accepted
representing extensions of credit, all obligations evidenced by
bonds, debentures, notes or other similar instruments,including,
without limitation, any Subordinated Debt, and shall expressly
include, without limitation, indebtedness under Capitalized Lease
Obligations, and all indebtedness upon which interest charges are
customarily paid by the Borrower Group or which are required to be
recognized under generally accepted accounting principles.
Indebtedness for Money Borrowed shall also include (without
double-counting) any Guaranty of indebtedness for money borrowed
(of the type described in this definition) issued by any member of
the Borrower Group. Indebtedness for Money Borrowed shall exclude
(i) repurchase notes and any amount in respect of any obligation
to repurchase any Redeemable Stock at the option of the holders
thereof pursuant to the terms of a Stockholders Agreement unless
and until the Parent Company (or the Borrower if the Parent
Company shall have been merged into or consolidated with the
Borrower) is required to purchase such Parent Company Stock
pursuant to the terms of such Stockholders Agreement, (ii) letters
of credit securing other Indebtedness for Money Borrowed and
letters of credit issued for the benefit of a third-party
insurance company in support of obligations of any member of the
Borrower Group under Plans managed by such third-party insurance
company, and (iii) the $20,000,000 Goldman Sachs Group, L.P.
Convertible Note, dated as of September 17, 1992.
"`LIBOR Basis' shall mean a simple interest rate equal to
the sum of (a) the quotient, rounded upwards to the nearest
one-sixteenth of a percent (1/16%), of (i) the LIBOR Rate and
(ii) one minus the LIBOR Reserve Percentage, stated as a decimal,
plus (b) one and one-half percent (1-1/2%). The LIBOR Basis shall
apply to Interest Periods of from one (1), two (2), three (3),
six (6), nine (9) and twelve (12) months, as available to each
Bank and subject to the provisions of Section 2.3 and Article 10
hereof and, once determined, shall remain unchanged during the
applicable Interest Period, except for changes to reflect
adjustments in the LIBOR Reserve Percentage. The Borrower may not
elect an Interest Period of twelve (12) months unless the Agent
has notified the Borrower that each of the Banks has available to
it funds for its respective portion of the proposed Advance which
are not required for other purposes, that such funds are available
to each of the Banks at a rate at or below the LIBOR Rate for such
proposed Advance and Interest Period, and that each of the Banks
has agreed (each in its sole discretion) to fund its respective
portion of such Advance. Interest on LIBOR Advances shall also be
subject to adjustment as provided in Section 2.5 hereof.
"`Maturity Date' shall mean December 31, 2001, or such
earlier date as payment of the Loans shall be due (whether by
acceleration or otherwise).
"`Revolving Loan Commitment' shall mean the several
obligations of the Banks to advance a sum not to exceed
$120,000,000 for the period from the Agreement Date through
August 1, 1993, $220,000,000 for the period from August 1, 1993
through the Termination Date, and $320,000,000 for the period from
the Termination Date and thereafter, as such Revolving Loan
Commitment is reduced from time to time pursuant to Section 2.8(a)
hereof, in the aggregate at any one time outstanding, in
accordance with their respective Commitment Ratios, to the
Borrower pursuant to the terms hereof, as such obligation may be
reduced from time to time pursuant to the terms hereof.
"`Revolving Notes' shall mean those certain amended reducing
revolving promissory notes evidencing the principal amount of the
Revolving Loan Commitment, one issued to each of the Banks by the
Borrower, and any extensions, renewals or amendments to any of the
foregoing.
"`Term Loan Commitment' shall mean the several obligations
of the Banks to advance the sum of up to $100,000,000, in
accordance with their respective Commitment Ratios, to the
Borrower on the Agreement Date pursuant to the terms hereof. The
Term Loan Commitment shall expire on the Termination Date."
(b) Article 1 of the Loan Agreement, Definitions, is hereby
amended by adding the following definitions of "Amendment Date," and
"Termination Date" thereto:
"`Amendment Date' shall mean February 2, 1995, which shall
be the effective date of the Second Amendment to this Agreement.
"`Termination Date' shall mean February 2, 1995."
2. Amendment to Section 2.4. Section 2.4 of the Loan
Agreement, Line of Credit Fee, is hereby amended by deleting existing
Section 2.4 in its entirety and by substituting in lieu thereof the
following:
"Section 2.4. Line of Credit Fee. The Borrower agrees to
pay to the Banks, in accordance with their Commitment Ratios, a
line of credit fee on the aggregate unborrowed balance of the
Revolving Loan Commitment for each day from the Amendment Date
until the Maturity Date at a percentage rate in accordance with
the following schedule:
<TABLE>
If the ratio as of the end of a
quarter of the Borrower Group's Then the line of credit fee
Indebtedness for Money Borrowed percentage following the
to its Operating Cash Flow for the quarter in which such ratio
twelve-month period then ended is: is reported shall be:
<CAPTION>
<C> <C>
Greater than or equal
to 4:1 .3750%
Less than 4:1 but greater than or
equal to 2.5:1 .2500%
Less than 2.5:1 .1875%
</TABLE>
The Line of Credit Fee shall be computed on the basis of a year of
365/366 days for the actual number of days elapsed, payable
quarterly in arrears (a) on the last day of each calendar quarter
during the term of this Agreement, and (b) on the Maturity Date."
3. Amendment to Section 2.5. Section 2.5 of the Loan
Agreement, Interest Adjustment, is hereby amended by deleting the table
contained in existing Section 2.5 in its entirety and by substituting in
lieu thereof the following:
<TABLE>
TABLE
<CAPTION>
<C> <C> <C> <C>
If the ratio of
the Borrower
Group's
Indebtedness
for Money
Borrowed to its
Operating
Cash Flow as
of the end of a
quarter is:<PAGE>
Then interest
otherwise payable at
the Base Rate Basis
shall:<PAGE>
And interest
otherwise payable
at the CD Rate
Basis shall:<PAGE>
And interest
otherwise
payable at the
LIBOR Basis
shall:<PAGE>
Greater than 5.0:1 Remain unchanged Remain unchanged Remain unchanged Less than or equal to
5.0:1 but greater than
4.5:1<PAGE>
Be reduced by one-quarter of
one percent (1/4%) from the
Base Rate Basis<PAGE>
Be reduced by one-quarter
of one percent (1/4%)
from the CD Rate Basis<PAGE>
Be reduced by
one-quarter of one
percent (1/4%) from the
LIBOR Basis<PAGE>
Less than or equal to
4.5:1 but greater than
4.0:1<PAGE>
Be reduced by one-half of one
percent (1/2%) from the Base
Rate Basis<PAGE>
Be reduced by one-half of
one percent (1/2%) from
the CD Rate Basis<PAGE>
Be reduced by one-half of
one percent (1/2%) from
the LIBOR Basis<PAGE>
Less than or equal to
4.0:1 but greater than
3.5:1<PAGE>
Be reduced by one-half of one
percent (1/2%) from the Base
Rate Basis<PAGE>
Be reduced by five-eighths
of one percent (5/8%)
from the CD Rate Basis<PAGE>
Be reduced by five-eighths
of one percent (5/8%)
from the LIBOR Basis<PAGE>
Less than or equal to
3.5:1 but greater than
3.0<PAGE>
Be reduced by one-half of one
percent (1/2%) from the Base
Rate Basis<PAGE>
Be reduced by seven-
eighths of one percent
(7/8%) from the CD Rate
Basis<PAGE>
Be reduced by
seven-eighths of one
percent (7/8%) from the
LIBOR Basis<PAGE>
Less than or equal to
3.0:1 but greater than
2.5:1<PAGE>
Be reduced by one-half of one
percent (1/2%) from the Base
Rate Basis<PAGE>
Be reduced by one percent
(1%) from the CD Rate
Basis<PAGE>
Be reduced by one
percent (1%) from the
LIBOR Basis<PAGE>
Less than or equal to
2.5:1<PAGE>
Be reduced by one-half of one
percent (1/2%) from the Base
Rate Basis<PAGE>
Be reduced by one and
one-eighth percent (1-
1/8%) from the CD Rate
Basis<PAGE>
Be reduced by one and
one-eighth percent
(1-1/8%) from the
LIBOR Basis</TABLE>
4. Amendment to Section 2.8. Section 2.8 of the Loan
Agreement, Reduction and Increase of Commitments; Repayment of Loans,
shall be amended by deleting existing Section 2.8 in its entirety and
by substituting in lieu thereof the following:
"Section 2.8. Reduction and Increase of Commitments;
Repayment of Loans.
(a) Except as expressly provided below, the
principal amount of the Loans outstanding under the Revolving
Loan Commitment shall be no
greater than the amounts set forth below for the dates shown, and each
such reduced amount shall be the Revolving Loan Commitment of the
Banks from and after the dates given:
<TABLE>
Maximum Revolving Loan
Period Ended Amount of Reduction Commitment
Remaining
<CAPTION>
<C> <C> <C>
June 30, 1998 $35,200,000 $284,800,000
December 31, 1998 $35,200,000 $249,600,000
June 30, 1999 $38,400,000 $211,200,000
December 31, 1999 $38,400,000 $172,800,000
June 30, 2000 $41,600,000 $131,200,000
December 31, 2000 $41,600,000 $ 89,600,000
June 30, 2001 $44,800,000 $ 44,800,000
December 31, 2001 $44,800,000 $ -0-
</TABLE>
Each remaining entry in the column "Maximum Revolving Loan
Commitment Remaining" in the table above shall be adjusted
downward with each cancellation of the Revolving Loan Commitment
under Section 2.7 hereof, or other permanent prepayment or
reduction of the Revolving Loan Commitment.
(b) The principal balance of the Term Loan
outstanding, along with all interest and other charges due
thereon, shall be due and payable in full on the Termination
Date by converting all amounts due under the Term Loan into
a Revolving Loan. The Term Loan Commitment shall expire on
the Termination Date.
Additionally, on the Termination Date, the Borrower shall execute
and deliver to each Bank an amended Revolving Loan Note,
reflecting all amounts previously owed to such Bank by the
Borrower under both the original Revolving Loan Note and the Term
Loan Note to such Bank, and in the principal amount of each Bank's
Revolving Loan Commitment as shown on Schedule 1 attached to the
First Amendment to this Agreement. Upon receiving such amended
Revolving Loan Note, each Bank will mark its respective original
Revolving Loan Note and Term Loan Note "cancelled" and such
original Revolving Loan Note and Term Loan Note shall be delivered
to the Agent for forwarding on to the Borrower.
(c) Amounts of principal outstanding on the dates
given in subparagraph (a) above in excess of the reduced Revolving
Loan Commitment for such date shall be due and payable on such
date, together with any amount required to be paid by the Borrower
under the reimbursement provisions of Section 2.11. Each Bank's
Revolving Loan Commitment shall be reduced on the dates above in
accordance with its Commitment Ratio. A final payment of all
principal amounts then outstanding under the Revolving Loan
Commitment shall be due and payable on the Maturity Date."
5. Amendment to Section 5.11. Section 5.11 of the Loan
Agreement, Interest Rate Hedging, is hereby amended by deleting existing
Section 5.11 in its entirety and by substituting in lieu thereof the
following:
"Section 5.11. Interest Rate Hedging. The Borrower shall
be permitted to enter into one or more Interest Hedge Agreements,
on such terms and conditions as may be acceptable to the
Borrower."
6. Amendment to Section 7.5. Section 7.5 of the Loan
Agreement, Liquidation, Change in Ownership, and Disposition of Assets,
is hereby amended by deleting existing Section 7.5 in its entirety and
by substituting in lieu thereof the following:
"Section 7.5. Liquidation, Change in Ownership, and
Disposition of Assets. Neither the Parent Company, the Borrower
nor any Restricted Subsidiary shall at any time merge,
consolidate, liquidate or dissolve itself (or suffer any
liquidation or dissolution) or otherwise wind up or cease its
corporate existence, or sell, lease, abandon, transfer or
otherwise dispose of all or any part of their respective Assets,
property or business, except so long as no Default then exists or
would be caused thereby, (a) the Parent Company may merge into the
Borrower, (b) between and among themselves, the Restricted
Subsidiaries may merge with and acquire one another, or may merge
into the Borrower or be liquidated, and (c) the Borrower Group may
from time to time sell a part of its Assets, property or business,
provided that if and to the extent the net, after-tax cash
proceeds of all such sales exceed $30,000,000 in any calendar year
or the aggregate amount of $200,000,000 at any time from the
Termination Date through the remaining term of this Agreement,
such proceeds shall be delivered to the Agent and used to
permanently reduce the Revolving Loan Commitment, in inverse order
of maturity."
7. Amendment to Section 7.7. Section 7.7 of the Loan
Agreement, Restricted Payments and Purchases; Loans to or Investments in
Unrestricted Subsidiaries, shall be amended by deleting existing
Section 7.7(b) in its entirety and by substituting in lieu thereof the
following:
"(b) Restricted Payments and Restricted Purchases, provided that
the aggregate amount of such Restricted Payments and Restricted
Purchases referred to in this clause (b) after the Amendment Date
does not exceed $15,000,000;"
8. Amendment to Section 7.8. Section 7.8 of the Loan
Agreement, Debt to Cash Flow Ratio, is hereby amended by deleting
existing Section 7.8 in its entirety and by substituting in lieu thereof
of the following:
"Section 7.8. Debt to Cash Flow Ratio. The Borrower shall
not at any time permit the ratio of (x) the Borrower Group's
Indebtedness for Money Borrowed to (y) the Borrower Group's
Operating Cash Flow to exceed the ratios set forth below:
<TABLE>
Period Ratio
<CAPTION>
<C> <C>
Amendment Date through
December 31, 1995 5.50:1
January 1, 1996 through
December 31, 1996 5.0:1
January 1, 1997 through
December 31, 1997 4.5:1
January 1, 1998 through
December 31, 1998 4.25:1
January 1, 1999 and
thereafter 4.0:1"
</TABLE>
9. Amendment to Section 7.9. Section 7.9 of the Loan
Agreement, Debt Service Ratios is hereby amended by deleting existing
Section 7.9(a) in its entirety and substituting in lieu thereof the
following:
"(a) Debt Service. The Borrower shall not as of
the end of any calendar quarter permit the ratio of (i) the
Borrower Group's Operating Cash Flow to (ii) the Borrower
Group's Debt Service to be less than 1.20:1."
10. Amendment to Section 11.1. Section 11.1 of the Loan
Agreement, Notices, is hereby amended by adding the following at the end
of Section 11.1(a):
"10. The Bank of Tokyo, Ltd.,
Dallas Agency
2001 Ross Avenue
LB118
Suite 3150
Dallas, Texas 75201
Attn: John E. Beckwith"
11. Conditions Precedent to Effectiveness of Amendment. This
Amendment shall be effective on the date (the "Effective Date") on which
the following conditions precedent have been satisfied:
(a) The Borrower shall have paid to the Agent, for the
account of the Banks on a pro rata basis after giving effect to
this Amendment, an amendment fee in the amount of .10% of the
Commitment as of the Effective Date of this Amendment;
(b) The Borrower, the Agent, and the Banks shall have
executed and delivered this Amendment;
(c) The Borrower shall have delivered to the Agent
for the benefit of each of the Banks (i) the replacement Revolving
Notes and (ii) an opinion of counsel in form and substance
satisfactory to the Agent and its special counsel; and
(d) The Borrower shall have executed and delivered
such other documents as the Agent may reasonably request.
12. No Other Amendment or Waiver. Except for the amendments
expressly set forth above, the replacement Revolving Notes, and the
revised Schedule 1 to the Loan Agreement, which is attached to this
Amendment as Schedule 1, the text of the Loan Agreement and all other
Loan Documents shall remain unchanged and in full force and effect. The
Borrower acknowledges and expressly agrees that the Agent and the Banks
reserve the right to, and do in fact, require strict compliance with all
terms and provisions of the Loan Agreement.
13. Representations and Warranties. The Borrower hereby
represents and warrants in favor of the Agent and the Banks as follows:
(a) The Borrower has the corporate power and
authority (i) to enter into this Amendment and (ii) to do all acts and
things as are required or contemplated hereunder to be done, observed
and performed by it;
(b) This Amendment has been duly authorized, validly
executed and delivered by one or more Authorized Signatories of
the Borrower, and constitutes the legal, valid and binding
obligation of the Borrower, enforceable against it in accordance
with its terms;
(c) The execution and delivery of this Amendment and
performance by the Borrower under the Loan Agreement, as amended
hereby, do not and will not require the consent or approval of any
regulatory authority or governmental authority or agency having
jurisdiction over Borrower which has not already been obtained,
nor contravene or conflict with the charter documents of Borrower,
or the provision of any statute, judgment, order, indenture,
instrument, agreement, or undertaking, to which Borrower is party
or by which any of its Assets or properties are or may become
bound;
(d) There has been no material adverse change in the
business, Assets or financial conditions as reflected in the
Borrower's December 31, 1993 audited financial statements and the
Borrower's September 30, 1994 unaudited financial statements; and
(e) As of the Effective Date of, and after giving
effect to this Amendment, (i) no Default or Event of Default exists under
the Loan Agreement or is caused by this Amendment, and (ii) each
representation and warranty set forth in Article 4 of the Loan
Agreement is hereby restated and affirmed as true and correct in
all material respects as of such date hereof, except to the extent
previously fulfilled in accordance with the terms of the Loan
Agreement, as amended hereby, and to the extent relating
specifically to the Agreement Date.
14. Governing Law. This amendment shall be governed by and
construed in accordance with the laws of the State of New York.
15. References to an Effect on the Loan Agreement. Upon the
Effective Date, each reference in the Loan Agreement to "this
Agreement," "hereunder," "hereof," "herein," or words of like import,
shall mean and be a reference to the Loan Agreement as amended hereby
and each reference to the Loan Agreement in any other document,
instrument, or agreement executed or delivered in connection with the
Loan Agreement shall mean and be a reference to the Loan Agreement as
amended hereby.
16. Counterparts. This Amendment may be executed by one
or more of the parties hereto on any number of separate counterparts,
each of which shall be deemed an original and all of which, taken together,
shall be deemed to constitute one and the same instrument. Delivery of
an executed counterpart of this Amendment by facsimile transmission
shall be as effective as delivery of a manually executed counterpart
hereof.
IN WITNESS WHEREOF, this Amendment has been duly executed as of
the day and year first written above.
<TABLE>
BORROWER: HARTE-HANKS COMMUNICATIONS, INC.
<CAPTION>
<C> <C>
By: Richard L. Ritchie
Title: Senior V-P, Finance & Chief Financial
Officer
AGENT: TORONTO DOMINION (TEXAS), INC.
By: Sophia Sgarbi
Title: Vice President
BANKS: TORONTO DOMINION (TEXAS), INC.
By: Sophia Sgarbi
Title: Vice President
NATIONSBANK OF TEXAS, N.A.
By: Jay Tweed
Title: Vice President
NATWEST BANK, N.A.
(formerly NATIONAL WESTMINSTER BANK USA)
By: Alexandra Pyrrous
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By: Mark Evans
Title: Director
BANK OF HAWAII
By: Elizabeth O. MacLean
Title: Vice President
CORESTATES BANK N.A.
By: Doug Blackman
Title: Vice President
THE BANK OF NOVA SCOTIA
By: F. C. H. Ashby
Title: Senior Manager
CIBC INC.
By: Reid J. Murray
Title: Managing Director
THE BANK OF TOKYO, LTD., DALLAS AGENCY
By: J. Beckwith
Title: Vice President
/TABLE
<PAGE>
THIS PAGE MUST BE KEPT AS THE
LAST PAGE OF THE DOCUMENT.
SoftSolution Network ID: ATL-104794.4 Type: MISC
<TABLE> Exhibit 11
Harte-Hanks Communications, Inc. and Subsidiaries
Earnings Per Share Computations
(in thousands, except per share data)
<CAPTION>
PRIMARY
Three Months Ended March 31,
1995 1994
<S> <C> <C>
Net income................................ $ 6,110 $ 2,267
Shares used in net earnings per
share computations...................... 19,139 19,051
Earnings per share........................ $ .32 $ .12
</TABLE>
<TABLE>
Computation of Shares Used In Net Earnings Per Share Computations
<CAPTION>
Three Months Ended March 31,
1995 1994
<S> <C> <C>
Average outstanding common shares......... 18,363 18,147
Average common equivalent shares --
dilutive effect of option shares........ 776 904
Shares used in net earnings
per share computations.................. 19,139 19,051
</TABLE>
<TABLE>
FULLY DILUTED
<CAPTION>
Three Months Ended March 31,
1995 1994
<S> <C> <C>
Net income................................ $ 6,110 $ 2,267
Adjusted net income for interest
on convertible note..................... $ 6,298 $ 2,455
Shares used in net earnings
per share computations.................. 20,601 20,483
Earnings per share........................ $ .31 $ .12
</TABLE>
<TABLE>
Computation of Shares Used In Net Earnings Per Share Computations
<CAPTION>
Three Months Ended March 31,
1995 1994
<S> <C> <C>
Average outstanding common shares......... 18,363 18,147
Average common equivalent shares --
dilutive effect of option shares........ 809 907
Dilutive effect of convertible note....... 1,429 1,429
Shares used in net earnings
per share computations.................. 20,601 20,483
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 3979
<SECURITIES> 0
<RECEIVABLES> 67091
<ALLOWANCES> 3005
<INVENTORY> 15875
<CURRENT-ASSETS> 102072
<PP&E> 180712
<DEPRECIATION> 96055
<TOTAL-ASSETS> 471727
<CURRENT-LIABILITIES> 83052
<BONDS> 250820
<COMMON> 18374
0
0
<OTHER-SE> 95414
<TOTAL-LIABILITY-AND-EQUITY> 113788
<SALES> 130178
<TOTAL-REVENUES> 130178
<CGS> 96977
<TOTAL-COSTS> 117580
<OTHER-EXPENSES> (11952)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4946
<INCOME-PRETAX> 19604
<INCOME-TAX> 13494
<INCOME-CONTINUING> 6110
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6110
<EPS-PRIMARY> .32
<EPS-DILUTED> .31
</TABLE>
