<PAGE> 1
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 June 30, 1996
- ------ 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, 36,491,296 shares as of June 30, 1996.
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HARTE-HANKS COMMUNICATIONS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
FORM 10-Q REPORT
June 30, 1996
<TABLE>
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Page
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<S> <C>
Part I. Financial Information
Item 1. Interim Condensed Consolidated Financial
Statements (Unaudited)
Condensed Consolidated Balance Sheets - 3
June 30, 1996 and December 31, 1995
Consolidated Statements of Operations - 4
Three months ended June 30, 1996 and 1995
Consolidated Statements of Operations - 5
Six months ended June 30, 1996 and 1995
Consolidated Statements of Cash Flows - 6
Six months ended June 30, 1996 and 1995
Notes to Interim Condensed Consolidated Financial 7
Statements
Item 2. Management's Discussion and Analysis of Financial 9
Condition and Results of Operations
Part II. Other Information
Item 4. Submission Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 15
(a) Exhibits
(b) Reports on Form 8-K
Signature 15
</TABLE>
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3
Harte-Hanks Communications, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (in thousands, except per share and share
amounts)
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
---- ----
<S> <C> <C>
Assets
Current assets
Cash............................................... $ 17,727 $ 18,102
Accounts receivable, net........................... 82,012 80,056
Inventory.......................................... 21,594 24,307
Prepaid expenses................................... 7,379 5,330
Current deferred income tax benefit................ 6,679 7,181
Other current assets............................... 3,739 3,477
--------- ---------
Total current assets............................. 139,130 138,453
Property, plant and equipment, net................... 106,019 102,164
Goodwill, net........................................ 293,905 283,149
Other assets......................................... 7,569 5,513
--------- ---------
Total assets..................................... $ 546,623 $ 529,279
========= =========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable.................................. $ 38,589 $ 35,768
Accrued payroll and related expenses.............. 14,401 20,677
Customer deposits and unearned revenue............ 16,832 16,174
Income taxes payable.............................. 659 1,593
Other current liabilities......................... 8,336 9,015
--------- ---------
Total current liabilities....................... 78,817 83,227
Long term debt...................................... 225,340 220,468
Other long term liabilities......................... 22,628 23,728
--------- ---------
Total liabilities............................... 326,785 327,423
--------- ---------
Stockholders' equity
Common stock, $1 par value, authorized 125,000,000
shares. Issued and outstanding 1996: 36,491,296
shares; 1995: 36,044,228 shares................. 36,491 36,044
Additional paid-in capital........................ 181,202 174,870
Retained earnings (accumulated deficit)........... 2,145 ( 9,058)
--------- ---------
Total stockholders' equity...................... 219,838 201,856
--------- ---------
Total liabilities and stockholders' equity...... $ 546,623 $ 529,279
========= =========
</TABLE>
See Notes to Interim Condensed Consolidated Financial Statements.
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Harte-Hanks Communications, Inc. and Subsidiaries
Consolidated Statements of Operations (in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
-----------------------------
1996 1995
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<S> <C> <C>
Operating revenues.................................... $159,916 $149,686
-------- --------
Operating expenses
Payroll............................................. 55,546 52,091
Production and distribution......................... 57,032 54,134
Advertising, selling, general and administrative.... 14,461 14,797
Depreciation........................................ 4,569 3,957
Goodwill amortization............................... 2,436 2,397
Merger costs........................................ 12,136 --
-------- --------
146,180 127,376
-------- --------
Operating income...................................... 13,736 22,310
-------- --------
Other expenses (income)
Interest expense.................................... 3,436 4,196
Interest income..................................... (96) (142)
Other, net.......................................... (48) 298
-------- --------
3,292 4,352
-------- --------
Income before income tax expense...................... 10,444 17,958
Income tax expense.................................... 6,538 8,257
-------- --------
Net income............................................ $ 3,906 $ 9,701
======== ========
Primary:
Earnings per share.................................. $ 0.10 $ 0.27
======== ========
Weighted average common and common equivalent
shares outstanding................................ 38,551 36,279
======== ========
Fully diluted:
Earnings per share.................................. $ 0.10 $ 0.26
======== ========
Weighted average common and common equivalent
shares outstanding................................ 38,702 37,677
======== ========
</TABLE>
See Notes to Interim Condensed Consolidated Financial Statements.
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Harte-Hanks Communications, Inc. and Subsidiaries
Consolidated Statements of Operations (in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
---------------------------
1996 1995
---- ----
<S> <C> <C>
Operating revenues.................................... $310,527 $298,708
-------- --------
Operating expenses
Payroll............................................. 111,234 105,328
Production and distribution......................... 113,059 110,654
Advertising, selling, general and administrative.... 28,646 31,003
Depreciation........................................ 8,941 7,971
Goodwill amortization............................... 4,937 4,919
Merger costs........................................ 12,136 --
-------- --------
278,953 259,875
-------- --------
Operating income...................................... 31,574 38,833
-------- --------
Other expenses (income)
Interest expense.................................... 6,884 9,217
Interest income..................................... (1,107) (352)
Other, net.......................................... 504 739
Gain on divestitures................................ -- (12,293)
-------- --------
6,281 (2,689)
-------- --------
Income before income tax expense...................... 25,293 41,522
Income tax expense.................................... 13,070 23,398
-------- --------
Net income............................................ $ 12,223 $ 18,124
======== ========
Primary:
Earnings per share.................................. $ .32 $ .51
======== ========
Weighted average common and common equivalent
shares outstanding................................ 38,420 35,673
======== ========
Fully diluted:
Earnings per share.................................. $ .32 $ 0.49
======== ========
Weighted average common and common equivalent
shares outstanding................................ 38,495 37,511
======== ========
</TABLE>
See Notes to Interim Condensed Consolidated Financial Statements.
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6
Harte-Hanks Communications, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (in thousands)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------
1996 1995
---- ----
<S> <C> <C>
Cash Flows From Operating Activities
Net income.......................................... $ 12,223 $ 18,124
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation .................................... 8,941 7,971
Goodwill amortization............................ 4,937 4,919
Amortization of option related compensation...... 599 967
Film amortization................................ 694 1,284
Deferred income taxes............................ (383) (1,430)
Other, net....................................... 778 242
Gain on divestiture.............................. -- (12,293)
Changes in operating assets and liabilities, net of
effects from acquisitions and divestitures:
Decrease (increase) in accounts receivable, net.. 1,263 1,227
Decrease (increase) in inventory................. 2,713 (5,975)
Increase in prepaid expenses and other
current assets................................ (2,325) (861)
Increase (decrease)in accounts payable........... 2,003 ( 76)
Decrease in other accrued expenses
and other liabilities......................... (8,036) (1,806)
Other, net....................................... (866) (859)
-------- --------
Net cash provided by operating
activities.................................... 22,541 11,434
-------- --------
Cash Flows From Investing Activities
Purchases of property, plant and equipment.......... (12,305) (11,994)
Proceeds from the sale of property, plant
and equipment and divested assets................. 346 40,194
Acquisitions........................................ (17,139) (5,760)
Payments on film contracts.......................... (654) (1,065)
-------- --------
Net cash provided by (used in)
investing activities.......................... (29,752) 21,375
-------- --------
Cash Flows From Financing Activities
Long term debt borrowings........................... 142,000 739,964
Payments on long term debt, including current
maturities ...................................... (137,755) (772,187)
Issuance of common stock............................ 3,611 2,292
Dividends paid...................................... (1,020) (960)
-------- --------
Net cash provided by (used in) financing
activities ...................................... 6,836 (30,891)
-------- --------
Net increase (decrease) in cash..................... (375) 1,918
Cash at beginning of year........................... 18,102 11,533
Pooling adjustment to beginning of
year balance to conform fiscal years.............. -- ( 1,504)
-------- --------
Cash at end of period............................... $ 17,727 $ 11,947
======== ========
</TABLE>
See Notes to Interim Condensed Consolidated Financial Statements.
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7
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 six months ended June 30,
1996 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, 1995.
NOTE B - ACQUISITION
Effective April 30, 1996, DiMark, Inc. ("DiMark") was merged with a
wholly-owned subsidiary of the Company, and each outstanding share of
DiMark common stock was converted into the right to acquire .656 of a share
of common stock of Harte-Hanks. As a result, Harte-Hanks issued
approximately 6.1 million shares of Harte-Hanks common stock to the
shareholders of DiMark, and DiMark's outstanding stock options were
converted into options to acquire 1,509,213 shares of Harte-Hanks common
stock. The merger was accounted for on a pooling-of-interests basis.
Accordingly, the Company's financial statements have been restated to
include the results of DiMark for all periods presented. The combined
financial results include reclassifications to conform financial statement
preparation. Merger expenses related to the transaction were $12.1 million
($8.7 million, net of income taxes). Combined and separate results of the
Company and DiMark during the reporting periods preceding the merger were
as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1996
HARTE-HANKS DIMARK ADJUSTMENTS COMBINED
----------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Revenue $124,899 $27,377 $ (1,664) $150,612
Net income 6,385 1,923 -- 8,308
FISCAL YEAR ENDED
DEC. 31, 1995
Revenue $532,852 $77,583 $ (6,924) $603,511
Net income 33,985 6,001 $ -- $ 39,986
</TABLE>
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Adjustments to revenue consist of elimination of DiMark's postage
costs from revenues and cost of sales to conform to Harte-Hanks'
accounting classification.
NOTE C - INCOME TAXES
The Company's quarterly income tax calculation is based on an
effective income tax rate that is derived by estimating pretax income
and income tax expense for the entire year ended December 31, 1996.
Included in the year-to- date income tax provision of $13.1 million is
$3.4 million in income tax benefits related to the merger costs.
Excluding the taxes related to the merger costs, the estimated annual
effective income tax rate of 44.1% for the six months ended June 30,
1996 resulted in $16.5 million in tax expense on income from
operations. 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> 9
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
Operating results (excluding the 1996 merger costs and 1995 gain on
divestiture) were as follows:
<TABLE>
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THREE MONTHS ENDED SIX MONTHS ENDED
In thousands JUNE 30, 1996 JUNE 30, 1995 CHANGE JUNE 30, 1996 JUNE 30, 1995 CHANGE
- ------------ ------------- ------------- ------ ------------- ------------- ------
<S> <C> <C> <C> <C> <C> <C>
Revenues $159,916 $149,686 6.8% $310,527 $298,708 4.0%
Operating expenses 134,044 127,376 5.2% 266,817 259,875 2.7%
-------- -------- -------- --------
Operating income $ 25,872 $ 22,310 16.0% $ 43,710 $ 38,833 12.6%
======== ======== ======== ========
Net income $ 12,628 $ 9,701 30.2% $ 20,945 $ 13,200 58.7%
======== ======== ======== ========
Fully diluted earnings
per share $ 0.33 $ 0.26 26.9% $ 0.54 $ 0.35 54.3%
======== ======== ======== ========
</TABLE>
(The above results exclude the 1996 one-time merger costs (discussed under
"Acquisition") and the 1995 gain on divestiture (discussed under "Gain on
Divestiture"). Including these items, net income was $3.9 million, or 10 cents
per share, in the second quarter of 1996 compared to net income of $9.7
million, or 26 cents per share, in 1995. For the first six months of 1996, net
income was $12.2 million, or 32 cents per share, compared to $18.1 million, or
49 cents per share, in 1995.)
Consolidated revenues grew 6.8% to $159.9 million, and operating income grew
16.0% to $25.9 million in the second quarter of 1996 when compared to the
second quarter of 1995. The Company's overall growth resulted from
acquisitions, increased business with both new and existing customers, new
products and services as well as advertising and circulation rate increases.
Overall operating expenses increased 5.2% over 1995. Excluding the sale of the
Boston newspapers, year-to-date revenues increased $19.2 million, or 6.5%, when
compared to the same period in 1995.
DIRECT MARKETING
Direct marketing operating results were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
In thousands JUNE 30, 1996 JUNE 30, 1995 CHANGE JUNE 30, 1996 JUNE 30, 1995 CHANGE
- ------------ ------------- ------------- ------ ------------- ------------- ------
<S> <C> <C> <C> <C> <C> <C>
Revenues $73,349 $65,406 12.1% $145,861 $130,022 12.2%
Operating expenses 62,893 56,114 12.1% 126,406 112,126 12.7%
------- ------- -------- --------
Operating income $10,456 $ 9,292 12.5% $ 19,455 $ 17,896 8.7%
======= ======= ======== ========
</TABLE>
Direct marketing revenues increased $7.9 million, or 12.1%, in the second
quarter of 1996 when compared to 1995. Database, response management and
outbound telemarketing services experienced significant revenue growth.
Database revenues increased due to higher product sales as well as increased
database construction, updates and creations. Response management revenues
increased primarily due to new customer gains, particularly in the high
technology industry, and to a lesser extent due to the May 31, 1996 acquisition
of Inquiry Handling Service, a Los Angeles based response management company
that serves the high tech and electronics industries. Sales lead management,
which includes lead generation and lead qualification through inbound
inquiries, experienced significant growth both from new customers and increased
<PAGE> 10
10
call volumes from existing customers. Outbound telemarketing revenues
increased primarily due to the January 1996 acquisition of PRO Direct Response
Corp., a telemarketing company with a strong customer base in the financial
services industry. Second quarter revenue growth was also impacted by the
September 1995 acquisition of H&R Communications, Inc. These revenue increases
were slightly offset by the absence of an outsourced mailing program which the
customer now performs in-house and by the sale of a local hand distribution
advertising business in July 1995. Overall, revenue growth resulted from
acquisitions and increased business with both new and existing customers,
particularly in services provided to the high technology, retail, financial
services, health care and pharmaceutical industries.
Second quarter operating expenses increased $6.8 million, or 12.1%, when
compared to 1995. Payroll costs increased $3.6 million due to expanded hiring
to support revenue growth. Also contributing to the increased operating
expenses were additional production costs of $2.4 million due to increased
volumes. Depreciation expense increased $0.6 million due to higher levels of
capital investment to support growth. Operating expenses were also impacted by
the acquisitions noted above and the sale of the local hand distribution
advertising business in July 1995.
Direct marketing revenues increased $15.8 million, or 12.2%, in the first six
months of 1996 as compared to the comparable 1995 period. Database, response
management and outbound telemarketing experienced significant revenue growth.
Overall, revenue growth resulted from acquisitions and increased business,
particularly in the high technology, banking, financial services, health care
and pharmaceutical industries.
Year-to-date 1996 operating expenses rose $14.3 million, or 12.7%, when
compared to 1995. Payroll costs increased $10.2 million due to expanded hiring
to support revenue growth and to the 1995 reversal of executive compensation,
which was waived by the executives. In addition, production costs increased
$2.6 million due to increased volumes. Depreciation expense increased $1.2
million due to higher levels of capital investment to support growth. The
acquisitions also impacted operating expense growth.
SHOPPERS
Shopper operating results were as follows:
<TABLE>
<CAPTION>
THREEE MONTHS ENDED SIX MONTHS ENDED
In thousands JUNE 30, 1996 JUNE 30, 1995 CHANGE JUNE 30, 1996 JUNE 30, 1995 CHANGE
- ------------ -------------- ------------- ------ ------------- ------------- ------
<S> <C> <C> <C> <C> <C> <C>
Revenues $48,936 $48,285 1.3% $ 91,930 $ 91,931 0.0%
Operating expenses 41,550 41,838 -0.7% 81,213 82,542 -1.6%
------- ------- -------- --------
Operating income $ 7,386 $ 6,447 14.6% $ 10,717 $ 9,389 14.1%
======= ======= ======== ========
</TABLE>
Shopper revenues increased $0.7 million, or 1.3%, in the second quarter of 1996
when compared to the same period in 1995. The increase was primarily due to
increased in-book advertising revenues resulting from higher display
advertising volumes as well as increased usage of the Company's print and
deliver products. Display advertising volumes increased due to growth in the
Company's core business accounts as well as increased in-column display
advertisements made possible with pagination technology implemented in 1995.
These increases were offset by lower insert revenues as a result of reduced
volumes as well as revenue declines related to intentional reductions of
marginal circulation in Dallas.
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Shopper operating expenses decreased $0.3 million, or 0.7%, in the second
quarter of 1996 when compared to 1995. Postage expense decreased $1.3 million
due to less overweight postage associated with the lower insert volumes. In
addition, the reduced circulation in the Dallas market contributed to the
decreased expense. These decreases were offset by paper cost increases of $0.8
million. These increases were primarily attributable to higher rates. Payroll
costs also increased $0.4 million as a result of higher commissions on greater
sales volumes.
Year-to-date shopper revenues remained constant at $91.9 million when compared
to the same period in 1995. Revenue growth was experienced in both the display
advertising and print and deliver product categories. These increases were
offset by lower insert volumes as well as reduced revenues related to
circulation reduction in Dallas.
Year-to-date shopper operating expenses decreased $1.3 million, or 1.6%, in
1996 when compared to the same period in 1995. This decline was due to lower
postage costs of $2.5 million and to lower operating expenses related to the
reduction in marginal circulation in Dallas. These decreases were offset by
increased paper costs of $1.8 million, or 21.2%.
NEWSPAPERS
Newspaper operating results were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
In thousands JUNE 30, 1996 JUNE 30, 1995 CHANGE JUNE 30, 1996 JUNE 30, 1995 CHANGE
- ------------ ------------- ------------- ------ ------------- ------------- ------
<S> <C> <C> <C> <C> <C> <C>
Revenues $30,803 $29,282 5.2% $60,139 $64,160 -6.3%
Operating expenses 23,529 22,338 5.3% 47,004 51,680 -9.0%
------- ------- ------- -------
Operating income $ 7,274 $ 6,944 4.8% $13,135 $12,480 5.2%
======= ======= ======= =======
</TABLE>
Newspaper revenues increased $1.5 million, or 5.2%, in the second quarter of
1996 when compared to the same period in 1995. Overall advertising revenues
were up $0.6 million, or 2.7%. In particular, classified advertising revenues
increased $0.4 million, or 6.3%, as a result of rate increases. Retail
advertising revenues were up $0.2 million, or 1.8%, due to increased rates
slightly offset by lower volumes. Circulation revenues increased $0.3 million,
or 4.9%, due to home delivery rate increases in all markets and a Sunday
single-copy rate increase at the Corpus Christi paper. Niche product revenue
increased $0.6 million primarily due to the continued growth of existing direct
mail programs as well as the launch of new programs in 1996. In addition, new
revenue initiatives in community publications, total market coverage products,
Internet and audiotext added to second quarter revenue growth.
Newspaper operating expenses increased $1.2 million, or 5.3% in the second
quarter of 1996 when compared to 1995. Newsprint expense increased $0.9
million, or 21.4%, as a result of higher average newsprint prices offset
slightly by reduced volumes. Postage costs also increased slightly due to
growth in direct mail volumes.
Excluding the sale of the Boston newspapers (discussed under "Gain on
Divestiture"), year-to-date newspaper revenues increased $3.3 million, or 5.8%,
when compared to the same period in 1995. Overall advertising revenues were up
$1.2 million, or 3.2%. In particular, classified advertising revenues
increased $1.0 million, or 6.7%, as a result of rate increases. Retail
<PAGE> 12
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advertising revenues were up $0.3 million, or 1.8%, due to increased rates
slightly offset by lower volumes. Circulation revenues increased $0.9 million,
or 6.5%, due to rate increases. Niche product revenue also increased $1.1
million, primarily due to the continued growth of existing revenue streams as
well as the launch of revenue initiatives.
Excluding the sale of the Boston newspapers, year-to-date newspaper operating
expenses increased $2.8 million, or 6.4%, when compared to 1995. Newsprint
expense increased $2.1 million, or 28.2%, as a result of higher average
newsprint prices offset slightly by reduced volumes. Postage costs also
increased slightly due to growth in direct mail volumes.
TELEVISION
Television operating results were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
In thousands JUNE 30, 1996 JUNE 30, 1995 CHANGE JUNE 30, 1996 JUNE 30, 1995 CHANGE
- ------------ ------------- ------------- ------ ------------- ------------- ------
<S> <C> <C> <C> <C> <C>
Revenues $6,828 $ 6,713 1.7% $12,597 $12,595 0.0%
Operating expenses 4,267 4,667 -8.6% 8,564 9,124 -6.1%
------ ------- ------- -------
Operating income $2,561 $ 2,046 25.2% $ 4,033 $ 3,471 16.2%
====== ======= ======= =======
</TABLE>
Revenues for the television segment increased $0.1 million, or 1.7%, in the
second quarter of 1996 when compared to 1995. This increase was primarily
attributable to local advertising and an increase in network compensation
revenue due to a renegotiated network affiliation agreement. These increases
in revenue were partially offset by decreased national advertising demands.
Second quarter operating expenses decreased $0.4 million, or 8.6%, when
compared to the same period in 1995. The decrease was due primarily to film
cost savings, as well as effective management of other production and general
and administrative costs. Partially offsetting these cost reductions was an
increase in payroll costs due to additional investment in sales and news.
Revenues for the television segment remained relatively constant for the first
half of 1996 when compared to the same period in 1995. Increased local
advertising and network compensation revenues were offset by lower national
advertising revenues, reflecting continued weak CBS network performance.
First half operating expenses for the television segment decreased $0.6
million, or 6.1%, when compared to the same period in 1995. The decrease was
due primarily to lower film costs, which were slightly offset by higher payroll
costs.
Acquisition
As described in Note 2 to the Notes to Interim Condensed Consolidated Financial
Statements included herein, on April 30, 1996, DiMark was merged with a
wholly-owned subsidiary of the Company, and each outstanding share of DiMark
common stock was converted into the right to acquire .656 of a share of common
stock of Harte-Hanks. As a result, Harte-Hanks issued approximately 6.1
million shares of Harte-Hanks Common Stock to the shareholders of DiMark, and
DiMark's outstanding stock options were converted into options to acquire 1.5
million shares of Harte-Hanks common stock. The merger was accounted for on a
pooling-of-interests basis, and all historical information has been restated as
if the pooling occurred at the beginning of the periods presented. One-time
merger
<PAGE> 13
13
expenses of $12.1 million ($8.7 million after-tax) were recognized in the
second quarter of 1996.
DiMark provides a full range of outsource marketing, database services and
telemarketing to clients in the insurance, healthcare, pharmaceutical,
financial services and telecommunications industries, as well as direct
response printing services.
Interest Expense/Interest Income
Interest expense decreased $0.8 million in the second quarter of 1996 when
compared to the same period in 1995 due to lower effective interest rates and
lower debt levels. Year-to-date interest expense declined $2.3 million in the
first half of 1996 when compared to 1995, primarily due to lower debt levels
and rates. Debt levels decreased due to proceeds from the divestiture
described below in "Gain on Divestiture", the 1995 conversion of the Company's
6-1/4% notes to common stock and increased cash flow from operations.
Interest income increased $0.8 million in the first half of 1996 when compared
to 1995 due to interest income related to an income tax refund that resulted
from a favorable tax settlement.
Gain on Divestiture
In March 1995, the Company sold its suburban Boston community newspapers. As a
result of this transaction, the Company recognized a gain on divestiture of
$2.3 million, or 7 cents per share, net of $10.0 million of income taxes.
Income Taxes
Excluding the income taxes related to the 1996 merger costs and the 1995 gain
on divestiture, income tax expense in the second quarter and the first six
months of 1996 increased due to higher income levels.
Liquidity and Capital Resources
Cash provided from operating activities for the six months ended June 30, 1996
was $22.5 million as compared to $11.4 million for the same period in 1995.
Net cash outflows for investing activities were $29.8 million as compared to
inflows of $21.4 million in 1995. Investing activities for the first six
months of 1996 included acquisitions of $17.1 million and for the first six
months of 1995 included $40.2 million in proceeds from the sale of property,
plant and equipment and divested assets.
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 June 30, 1996, the
Company had $96 million of unused borrowing capacity under its credit facility.
<PAGE> 14
14
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its annual meeting of stockholders on April 30, 1996. At the
meeting the stockholders were requested to vote on the following:
1. To approve the issuance of shares of Harte-Hanks Common Stock to
DiMark stockholders pursuant to the Agreement and Plan of Merger dated
as of February 4, 1996 by and among Harte-Hanks, HHD Acquisition Corp.,
a New Jersey corporation and wholly-owned subsidiary of Harte-Hanks
("Newco") and DiMark, Inc., a New Jersey corporation ("DiMark"),
providing for the merger of Newco with and into DiMark and the
conversion of each outstanding share of DiMark common stock, no par
value per share, into .656 of a share of Harte-Hanks common stock, par
value $1.00 per share. The result of the vote was as follows:
<TABLE>
<CAPTION>
For Against Abstentions Nonvotes
---------- ---------- ------------ ------------
<S> <C> <C> <C>
24,520,634 19,130 10,847 1,765,101
</TABLE>
2. To elect Houston H. Harte, Andrew B. Shelton and Richard M. Hochhauser
as Class III directors for a three- year term and David L. Copeland as
a Class I director for a one-year term. The result of the vote was as
follows:
<TABLE>
<CAPTION>
For Withheld
---------- ---------
<S> <C> <C>
Houston H. Harte 26,300,727 14,985
Andrew B. Shelton 26,300,733 14,979
Richard M. Hochhauser 26,299,157 16,555
David L. Copeland 26,300,474 15,238
</TABLE>
The names of each director whose term of office continued are: Peter
T. Flawn, Larry Franklin, Christopher M. Harte, Edward H. Harte and
James L. Johnson.
3. To approve an amendment to the Certificate of Incorporation of Harte-
Hanks to increase the number of authorized shares of Harte-Hanks Common
Stock from 50,000,000 to 125,000,000. The result of the vote was as
follows:
<TABLE>
<CAPTION>
For Against Abstentions Nonvotes
---------- ---------- ------------ -----------
<S> <C> <C> <C>
23,058,863 1,485,165 10,847 1,765,101
</TABLE>
4. To approve an amendment to the Harte-Hanks Communications, Inc. 1991
Stock Option Plan to increase the aggregate number of shares of Harte-
Hanks Common Stock that may be issued under such Plan from 3,000,000 to
4,000,000. The result of the vote was as follows:
<TABLE>
<CAPTION>
For Against Abstentions
---------- ----------- ------------
<S> <C> <C>
25,723,451 570,511 21,750
</TABLE>
5. To approve the adoption of the Harte-Hanks Communications, Inc. 1996
Incentive Compensation Plan. The result of the vote was as follows:
<TABLE>
<CAPTION>
For Against Abstentions
----------- ---------- ------------
<S> <C> <C>
26,086,356 219,213 10,143
</TABLE>
<PAGE> 15
15
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. See index to Exhibits on Page 16.
(b) The company filed a report on Form 8-K dated April 30, 1996
relating to the agreement to acquire DiMark, Inc.
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.
HARTE-HANKS COMMUNICATIONS, INC.
August 7, 1996 /s/ Richard L. Ritchie
----------------------- -----------------------------
Date Richard L. Ritchie
Senior Vice President,
Finance and Chief Financial
and Accounting Officer
<PAGE> 16
16
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit Page No.
- ------- ---------------------------------------------------------------- --------
<S> <C> <C>
2(a) Certificate of Ownership and Merger (filed
as Exhibit 2(a) to the Company's Registration
Statement No. 33-69202 and incorporated by
reference herein).
2(b) Agreement and Plan of Merger dated as of February 4,
1996 among Harte-Hanks Communications, Inc., HHD
Acquisition Corp. and DiMark, Inc. (filed as
Appendix A to the Company's Registration Statement
No. 333-2047 and incorporated by reference herein).
3(a) Amended and Restated Certificate of Incorporation
(filed as Exhibit 3(a) to the Company's Form 10-K
for the year ended December 31, 1993 and
incorporated by reference herein).
3(b) Amended and Restated Bylaws (filed as Exhibit 3(b)
to the Company's Registration Statement No. 33-69202
and incorporated by reference herein).
*3(c) Amendment dated April 30, 1996 to Amended and 17
Restated Certificate of Incorporation.
*3(d) Amended and Restated Certificate of Incorporation 20
as amended through April 30, 1996.
4(a) Long term debt instruments are not being filed
pursuant to Section (b)(4)(iii) of Item 601 of
Regulation S-K. Copies of such instruments will
be furnished to the Commission upon request.
*10(o) Amendment No. 3 to Harte-Hanks Communications 27
(formerly HHC Holding Inc.) 1991 Stock Option Plan.
*10(p) Harte-Hanks Communications, Inc. 1996 Incentive 28
Compensation Plan.
*11 Statements Regarding Computation of Per 29
Share Earnings
*27 Financial Data Schedules 31
</TABLE>
- -------------------------------
* Filed herewith.
<PAGE> 1
EXHIBIT 3(c)
CERTIFICATE OF AMENDMENT
CERTIFICATE OF INCORPORATION
OF
HARTE-HANKS COMMUNICATIONS, INC.
Harte-Hanks Communications, Inc. a corporation organized and existing under the
Delaware General Corporation Law (the "Corporation")
DOES HEREBY CERTIFY:
FIRST: that at a meeting of the Board of Directors of the
Corporation, resolutions were duly adopted setting forth a proposed amendment
of the Amended and Restated Certificate of Incorporation of the Corporation,
declaring such amendment to be advisable, and directing that the amendment be
submitted to the stockholders of the Corporation for their consideration. The
resolutions setting forth the proposed amendment are as follows:
RESOLVED, that it is in the best interests of the Corporation
that the Amended and Restated Certificate of Incorporation of the
Corporation be amended to increase the number of authorized shares of
Common Stock that may be issued by the Corporation from 50,000,000 to
125,000,000.
RESOLVED FURTHER, that the Board of Directors is hereby
authorized to submit to the stockholders of the Corporation the
proposal to amend the Amended and Restated Certificate of
Incorporation of the Corporation to provide for the increase in the
number of authorized shares of Common Stock.
SECOND: that Article FOURTH of the Amended and Restated Certificate of
Incorporation of the Corporation shall be amended to read as follows:
FOURTH. The aggregate number of shares of capital stock that
the Corporation shall have the authority to issue is one hundred and twenty-six
million (126,000,000), of which one hundred twenty-five million (125,000,000)
shares shall be Common Stock of the Corporation, par value $1.00 per share, and
one million (1,000,000) shares shall be Preferred Stock, par value $1.00 per
share. Shares of Preferred Stock may be issued from time to time in one or
more series, each such series to have such distinctive designation or title as
may be fixed by the Board of Directors prior to the issuance of any shares
thereof. Each share of any series of Preferred Stock shall be identical with
all other shares of such series, except as to the date from which accumulated
preferred dividends, if any, shall be cumulative. Each such series shall have
such voting powers, if any, and such preferences and relative, participating,
optional or other special rights, with such qualifications, limitations or
restrictions of such
17
<PAGE> 2
preferences and/or rights, and the benefit of such affirmative or negative
covenants as shall be stated in the resolution or resolutions adopted by the
Board of Directors providing for the issue of such series of Preferred Stock,
including, but without limiting the generality of the foregoing, the following:
(a) The rates and times at which, and the terms and conditions on
which, dividends on Preferred Stock or series thereof shall be paid;
(b) The right, if any, of the holders of Preferred Stock or series
thereof to convert the same into, or exchange the same for, shares of other
classes or series of stock of the Corporation and the terms and conditions of
such conversion or exchange;
(c) The redemption price or prices, if any, and the time or times
at which, and the terms and condition of which, Preferred Stock or series
thereof may be redeemed;
(d) The rights of the holders of Preferred Stock or series
thereof, if any, upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or winding up of the Corporation;
(e) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock or series thereof; and
(f) Such other relative, participating, optional or other special
rights and qualifications, limitations or restrictions thereof, all as may be
stated in a resolution or resolutions providing for the issue of such Preferred
Stock.
After the requirements with respect to preferential dividends on the
Preferred Stock (fixed in accordance with the provisions of this Article
FOURTH) shall have been met and after the Corporation shall have complied with
all the requirements, if any, with respect to the setting aside of sums as
sinking funds or redemption or purchase accounts (fixed in accordance with the
provisions of this Article FOURTH), then, and not otherwise, the holders of
Common Stock shall be entitled to receive such dividends as may be declared
from time to time by the Board of Directors.
After distribution in full of the preferential amount (fixed in
accordance with the provisions of this Article FOURTH) to be distributed to the
holders of Preferred Stock in the event of the voluntary or involuntary
liquidation, distribution or sale of assets, dissolution or winding-up, of the
Corporation, the holders of the Common Stock shall be entitled to receive
ratably all of the remaining assets of the Corporation available for
distribution to stockholders.
Except as may otherwise be required by law or provided herein, each
holder of Common Stock shall have one vote in respect of each share of stock
held by such holder on all matters voted upon by stockholders.
18
<PAGE> 3
No holder of stock of any class of the Corporation shall be entitled
as of right to subscribe or purchase any shares of stock of any class whether
now or hereafter authorized, or any bonds, debentures, or other evidences of
indebtedness whether or not convertible into or exchangeable for stock.
THIRD: the stockholders of the Corporation holding the necessary
number of shares as required by statute have duly adopted and approved the
above stated amendment pursuant to Section 242 of the Delaware General
Corporation Law.
IN WITNESS WHEREOF, Harte-Hanks Communications, Inc. has caused this
Certificate of Amendment to be executed by the undersigned this 30th day of
April 1996.
HARTE-HANKS COMMUNICATIONS, INC.
By: /s/ Donald R. Crews
---------------------------
Donald R. Crews
Senior Vice President, Legal
and Secretary
19
<PAGE> 1
EXHIBIT 3(d)
AS AMENDED
THROUGH 4/30/96
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
HARTE-HANKS COMMUNICATIONS, INC.
The undersigned, Larry D. Franklin certifies that he is the President
and Chief Executive Officer of Harte- Hanks Communications, Inc., a Delaware
corporation (the "Corporation"), and further certifies as follows:
1. The name of the Corporation is Harte-Hanks Communications,
Inc.
2. The name under which the Corporation was originally
incorporated was Harte-Hanks Newspapers, Inc., and the original certificate of
incorporation of the Corporation was filed with the Secretary of State of the
State of Delaware on October 1, 1970.
This Amended and Restated Certificate of Incorporation was duly
adopted by written consent of the holders of not less than a majority of the
outstanding stock of the Corporation entitled to vote, and written notice of
the Corporation action has been given to the stockholders of the Corporation
who have not so consented in writing, all in accordance with the provisions of
the Sections 228, 245 and 242 of the Delaware General Corporation Law ("DGCL").
4. The text of the Restated Certificate of Incorporation of the
Corporation as amended hereby is restated to read in its entirety, as follows:
FIRST. The name of the Corporation is HARTE-HANKS COMMUNICATIONS,
INC.
SECOND. The name of its registered agent and the address of its
registered office in the State of Delaware are The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801.
THIRD. The purpose of the Corporation is to engage in any lawful
activity for which corporations may be organized under the DGCL.
FOURTH. The aggregate number of shares of capital stock that the
Company shall have the authority to issue is one hundred twenty six million
(126,000,000), of which one hundred twenty five million (125,000,000) shares
shall be Common Stock of the Corporation, par value $1.00 per share, and one
million (1,000,000) shares shall be Preferred Stock, par value $1.00 per share.
Shares of Preferred Stock may be issued from time to time in one or more
series, each such series to have such distinctive designation or title as may
be fixed by the Board of Directors
20
<PAGE> 2
prior to the issuance of any shares thereof. Each share of any series of
Preferred Stock shall be identical with all other shares of such series, except
as to the date from which accumulated preferred dividends, if any, shall be
cumulative. Each such series shall have such voting powers, if any, and such
preferences and relative, participating, optional or other special rights, with
such qualifications, limitations or restrictions of such preferences and/or
rights, and the benefit of such affirmative or negative covenants as shall be
stated in the resolution or resolutions adopted by the Board of Directors
providing for the issue of such series of Preferred Stock, including, but
without limiting the generality of the foregoing, the following:
(a) The rates and times at which, and the terms and conditions on
which, dividends on Preferred Stock or series thereof shall be paid;
(b) The right, if any, of the holders of Preferred Stock or series
thereof to convert the same into, or exchange the same for, shares of other
classes or series of stock of the Corporation and the terms and conditions of
such conversion or exchange;
(c) The redemption price or prices, if any, and the time or times
at which, and the terms and condition of which, Preferred Stock or series
thereof may be redeemed;
(d) The rights of the holders of Preferred Stock or series
thereof, if any, upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or winding up of the Corporation;
(e) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock or series thereof; and
(f) Such other relative, participating, optional or other special
rights and qualifications, limitations or restrictions thereof, all as may be
stated in a resolution or resolutions providing for the issue of such Preferred
Stock.
After the requirements with respect to preferential dividends on the
Preferred Stock (fixed in accordance with the provisions of this Article
FOURTH) shall have been met and after the Corporation shall have complied with
all the requirements, if any, with respect to the setting aside of sums as
sinking funds or redemption or purchase accounts (fixed in accordance with the
provisions of this Article FOURTH), then, and not otherwise, the holders of
Common Stock shall be entitled to receive such dividends as may be declared
from time to time by the Board of Directors.
After distribution in full of the preferential amount (fixed in
accordance with the provisions of this Article FOURTH) to be distributed to the
holders of Preferred Stock in the event of the voluntary or involuntary
liquidation, distribution or sale of assets, dissolution or winding-up, of the
Corporation, the holders of the Common Stock shall be entitled to receive
ratably all of the remaining assets of the Corporation available for
distribution to stockholders.
21
<PAGE> 3
Except as may otherwise be required by law or provided herein, each
holder of Common Stock shall have one vote in respect of each share of stock
held by such holder on all matters voted upon by stockholders.
No holder of stock of any class of the Corporation shall be entitled
as of right to subscribe for or purchase any shares of stock of any class
whether now or hereafter authorized, or any bonds, debentures, or other
evidences of indebtedness whether or not convertible into or exchangeable for
stock.
FIFTH. (a) Classified Board of Directors. The number of
directors of the Corporation shall be as from time to time fixed by, or in the
manner provided in, the By-laws of the Corporation. The directors shall be
divided into three classes, designated Class I, Class II and Class III. Each
class shall consist, as nearly as may be possible, of one-third of the total
number of directors constituting the entire Board of Directors. The term of
the initial Class I directors shall terminate on the date of the 1994 annual
meeting of stockholders; the term of the initial Class II directors shall
terminate on the date of the 1995 annual meeting of stockholders; and the term
of the initial Class III directors shall terminate on the date of the 1996
annual meeting of stockholders. At each annual meeting of stockholders
beginning in 1994, successors to the class of directors whose term expires at
that annual meeting shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly equal
as possible, and any additional directors of any class elected to fill a
vacancy resulting from an increase in such class shall hold office for a term
that shall coincide with the remaining term of that class, but in no case will
a decrease in the number of directors shorten the term of any incumbent
director. A director shall hold office until the annual meeting for the year
in which his term expires and until his successor shall be elected and shall
qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office. Any vacancy on the Board of
Directors, however resulting, may be filled by a majority of the directors then
in office, even if less than a quorum, or by a sole remaining director. Any
director elected to fill a vacancy shall hold office for a term that shall
coincide with the term of the class to which such director shall have been
elected.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
terms of this Restated Certificate of Incorporation or the resolution or
resolutions adopted by the Board of Directors pursuant to Article FOURTH
applicable thereto, and such directors so elected shall not be divided into
classes pursuant to this Article FIFTH unless expressly provided by such terms.
(b) Removal of Directors. Subject to the rights, if any, of the
holders of shares of Preferred Stock then outstanding, any or all of the
directors of the Corporation may be removed from office at any time, but only
for cause and only by the affirmative vote of the holders of a
22
<PAGE> 4
majority of votes represented by the outstanding shares of the Corporation then
entitled to vote generally in the election of directors, considered for
purposes of this Article FIFTH as one class.
SIXTH. (a) Right to Indemnification. Each person who was or is
made a party or is threatened to be made a party to or is involved in any
action, suit, or proceeding whether civil, criminal, administrative, or
investigative ("proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer
of the Corporation or is or was serving at the request of the Corporation as a
director or officer of another corporation or as its representative in a
partnership, joint venture, trust, or other enterprise, including service with
respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, representative
or in any other capacity while serving as a director, officer, or
representative, shall be indemnified and held harmless by the Corporation to
the fullest extent authorized by the DGCL, as the same exists or may hereafter
be amended (but, in the case of any such amendment, only to the extent that
such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment), against all expenses, liability and loss (including attorneys'
fees, judgments, fines, excise taxes under the Employee Retirement Income
Security Act or penalties, and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer or representative and shall inure to the benefit of the indemnitee's
heirs, executors and administrators; provided, however, that, except as
provided in paragraph (b) hereof with respect to proceedings to enforce rights
to indemnification, the Corporation shall indemnify any such person seeking
indemnity in connection with a proceeding (or part thereof) initiated by such
person only if such proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation. Such rights shall be contract rights and shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that, if the DGCL requires, the payment of such expenses incurred by a
director or officer in his or her capacity as a director or officer (and not in
any other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of such proceeding, shall be
made only upon delivery to the Corporation of an undertaking, by or on behalf
of such director or officer, to repay all amounts so advanced if it should
ultimately be determined by final judicial decision from which there is no
further right to appeal that such director or officer is not entitled to be
indemnified under this paragraph (a) or otherwise.
(b) Right of Claimant to Bring Suit. If a claim under paragraph
(a) is not paid in full by the Corporation within sixty (60) days after a
written claim has been received by the Corporation, except in the case of a
claim for an advancement of expenses, in which case the applicable period shall
be twenty (20) days, the claimant may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part in any such suit, or in a suit brought by the Corporation
against the claimant to recover an advancement of expenses pursuant to the
terms of an undertaking referred to in paragraph (a) hereof, the claimant shall
be entitled to be paid also the expense of prosecuting or defending such claim.
In any suit brought by the claimant to enforce a right to indemnification
hereunder, and in
23
<PAGE> 5
any suit by the Corporation to recover an advancement of expenses pursuant to
the terms of an undertaking, the Corporation shall be entitled to recover any
advanced expenses upon a final adjudication that the claimant has not met the
standards of conduct that make it permissible under the DGCL for the
Corporation to indemnify the claimant for the amount claimed, but the burden of
providing such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or
its stockholders) to have made a determination prior to the commencement of
such action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
DGCL, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant
had not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that the claimant had not met the applicable
standard of conduct.
(c) Non-Exclusivity of Rights. The rights conferred on any person
by paragraphs (a) and (b) shall not be exclusive of any other right that such
person may have or hereafter acquire under any statute, provision of the
Amended and Restated Certificate of Incorporation, By-laws, agreement, vote of
stockholders or disinterested directors, or otherwise.
(d) Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any such director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust or
other enterprise against any such expense, liability or loss, whether or not
the Corporation would have the power to indemnify such person against such
expense, liability or loss under the DGCL.
(e) Continuance. Any repeal or modification of the foregoing
paragraphs of this Article SIXTH by the stockholders of the Corporation shall
not adversely affect any right or protection of an officer, director or
representative of the Corporation existing at the time of such repeal or
modification.
SEVENTH. Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for the Corporation under the provisions of section 279 of Title 8 of
the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Corporation, as the
case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of the Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class
24
<PAGE> 6
of creditors, and/or on all the stockholders or class of stockholders, of the
Corporation, as the case may be, and also on the Corporation.
EIGHTH. The Bylaws of the Corporation may be adopted, repealed,
altered, amended, or rescinded by (a) a majority of the authorized number of
directors and, if one or more interested stockholders (as defined in Section
203 of the DGCL) exists, by a majority of the directors who are Continuing
Directors or (b) the affirmative vote of the holders of not less than 66 2/3%
of the voting power of the Company's capital stock and if such adoption,
repeal, alteration, amendment, or rescission is proposed by or on behalf of an
interested stockholder or a director affiliated with an interested stockholder,
by a majority of the disinterested shares. "Continuing Director" means a
director of the corporation who (i) was a member of the Board of the
Corporation as of September 20, 1993, or (ii) is a beneficial owner, or
affiliate of such beneficial owner, of less than 20% of the Common Stock of the
Corporation and who became a director of the Corporation subsequent to
September 20, 1993 and whose initial election or initial nomination for
election was approved by a majority of the Continuing Directors then on the
Board of Directors of the Corporation. The provisions of this Amended and
Restated Certificate of Incorporation may be altered, amended or repealed by
the affirmative vote of the holders a majority of the issued and outstanding
stock having voting power provided, that with respect to the provisions of
Articles Fifth, Seventh, Eighth, Tenth and Eleventh, the affirmative vote of
the holders of at least sixty-six and two-thirds percent (66 2/3%) of the
issued and outstanding stock having voting power shall be required.
NINTH. The Corporation may in its Bylaws by amendment thereto make
any lawful restriction upon the sale or transfer of stock of the Corporation
held by its stockholders; and all persons subscribing for stock of the
Corporation or purchasing stock, whether from the Corporation itself or from
any stockholder, shall take notice of and be bound by such lawful restrictions,
and shall be deemed to agree thereto.
TENTH. (a) A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for
any transaction from which the director derived any improper personal benefit.
If the DGCL is amended after approval by the stockholders of this article to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the DGCL, as
so amended.
(b) Any repeal of modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
ELEVENTH. Any action required or permitted to be taken at any annual
or special meeting of stockholders may be taken only upon the vote of the
stockholders at an annual or
25
<PAGE> 7
special meeting duly noticed and called, as provided in the By-laws of the
Corporation, and may not be taken by a written consent of the stockholders.
Special meetings of the stockholders of the Corporation for any
purpose or purposes may be called at any time by the chief executive officer or
by a majority of the members of the Board of Directors. Special meetings of
the stockholders of the Corporation may not be called by any other person or
persons.
IN WITNESS WHEREOF, Harte-Hanks Communications has caused this Amended
and Restated Certificate of Incorporation to be signed by its duly authorized
officers, this 30th day of September 1993.
HARTE-HANKS COMMUNICATIONS, INC.
By: /s/ Larry D. Franklin
---------------------------
Larry D. Franklin
President
[SEAL]
ATTEST:
By: /s/ Donald R. Crews
----------------------
Donald R. Crews
Secretary
26
<PAGE> 1
EXHIBIT 10(o)
AMENDMENT NO. 3 TO
HARTE-HANKS COMMUNICATIONS, INC.
1991 STOCK OPTION PLAN
The undersigned, being a duly authorized officer of Harte-Hanks
Communications, Inc., a Delaware corporation (the "Company"), executes this
Amendment (the "Amendment") to the Harte-Hanks Communications, Inc. 1991 Stock
Option Plan (the "Plan"), at the direction of and on behalf of the Company, for
the purpose of restating the number of shares issuable pursuant to the Plan.
1. Paragraph 3 of the Plan is amended and restated in its
entirety as follows:
"3. Shares Subject to the Plan. Except as otherwise required
by the provisions of paragraph 7 hereof, the aggregate number of shares of
Common Stock issuable upon the exercise of Options pursuant to the Plan shall
not exceed 4,000,000 shares. Such shares may be either authorized but unissued
shares or treasury shares.
If an Option should expire or become unexercisable for any
reason without having been exercised in full, the unpurchased shares which were
subject thereto shall, unless the Plan shall have been terminated, be available
for the grant of other Options under the Plan."
2. This Amendment No. 3 was approved by the Board of Directors of
the Company and by holders of a majority of the shares of capital stock
entitled to vote at a meeting of stockholders of the Company of April 30, 1996
and this Amendment will be effective as of April 30, 1996.
Dated: April 30, 1996
HARTE-HANKS COMMUNICATIONS, INC.
By: /s/ DONALD R. CREWS
---------------------------------
Name: Donald R. Crews
Title: Senior Vice President, Legal
27
<PAGE> 1
EXHIBIT 10(p)
1996 INCENTIVE COMPENSATION PLAN
1. This Plan continues and confirms the incentive bonus arrangements
which have applied to the Senior Management Group for the last several
years and which the Board intends to continue until amended or
terminated by further action of the Board.
2. The members of the Senior Management Group, and such other officers
and key employees of the Company as may be selected from time to time
by the Compensation Committee, are entitled to participate in this
Plan.
3. For each fiscal year, the Compensation Committee shall establish in
writing for each participant specific financial or other business
goals against which the participant's performance shall be measured.
Those goals may relate to revenues, operating income, debt levels,
earnings per share or otherwise, and may apply to the company on a
consolidated basis, to a core business or unit thereof, or any
combination of the foregoing.
4. The goals shall be established in gradations, and each participant
shall have the opportunity to receive each year as a cash bonus
pursuant to this Plan an amount up to a percent (not to exceed 100%),
determined by the Compensation Committee, of his/her base salary;
provided, however, in no event shall a participant receive a bonus of
more than $2 million pursuant to the Plan for any year.
5. All determinations of levels of goal achievement shall be based on the
Company's audited financial statements or other objective sources.
6. Bonus payments shall be made only after the Compensation Committee has
certified the extent to which goals have been attained.
7. The Compensation Committee shall have the authority to interpret this
Plan and to adopt such rules as it deems appropriate for
administrative purposes. Board approval is required to adopt any
material modification to this Plan.
28
<PAGE> 1
Exhibit 11
HARTE-HANKS COMMUNICATIONS, INC. AND SUBSIDIARIES
EARNINGS PER SHARE COMPUTATIONS
(in thousands, except per share data)
PRIMARY
<TABLE>
<CAPTION>
Three Months Ended June 30,
----------------------------
1996 1995
------- -------
<S> <C> <C>
Net income................................ $ 3,906 $ 9,701
======= =======
Shares used in net earnings per
share computations...................... 38,551 36,279
======= =======
Earnings per share........................ $ .10 $ .27
======= =======
</TABLE>
COMPUTATION OF SHARES USED IN NET EARNINGS PER SHARE COMPUTATIONS
<TABLE>
<CAPTION>
Three Months Ended June 30,
----------------------------
1996 1995
------- -------
<S> <C> <C>
Average outstanding common shares......... 36,333 34,460
Average common equivalent shares --
dilutive effect of option shares........ 2,218 1,819
------ -------
Shares used in net earnings
per share computations.................. 38,551 36,279
====== =======
</TABLE>
FULLY DILUTED
<TABLE>
<CAPTION>
Three Months Ended June 30,
----------------------------
1996 1995
------- -------
<S> <C> <C>
Net income................................ $ 3,906 $ 9,701
======= =======
Adjusted net income for interest
on convertible note..................... $ 3,906 $ 9,826
======= =======
Shares used in net earnings
per share computations.................. 38,702 37,677
======= =======
Earnings per share........................ $ .10 $ .26
======= =======
</TABLE>
COMPUTATION OF SHARES USED IN NET EARNINGS PER SHARE COMPUTATIONS
<TABLE>
<CAPTION>
Three Months Ended June 30,
-----------------------------
1996 1995
------- -------
<S> <C> <C>
Average outstanding common shares......... 36,333 34,460
Average common equivalent shares --
dilutive effect of option shares........ 2,369 1,898
Dilutive effect of convertible note....... -- 1,319
------ ------
Shares used in net earnings
per share computations.................. 38,702 37,677
====== ======
</TABLE>
29
<PAGE> 2
Exhibit 11
HARTE-HANKS COMMUNICATIONS, INC. AND SUBSIDIARIES
EARNINGS PER SHARE COMPUTATIONS
(in thousands, except per share data)
PRIMARY
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------
1996 1995
------- -------
<S> <C> <C>
Net income................................ $12,223 $18,124
======= =======
Shares used in net earnings per
share computations...................... 38,420 35,673
======= =======
Earnings per share........................ $ .32 $ .51
======= =======
</TABLE>
COMPUTATION OF SHARES USED IN NET EARNINGS PER SHARE COMPUTATIONS
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------
1996 1995
------ -------
<S> <C> <C>
Average outstanding common shares......... 36,207 34,028
Average common equivalent shares --
dilutive effect of option shares........ 2,213 1,645
------ ------
Shares used in net earnings
per share computations.................. 38,420 35,673
====== ======
</TABLE>
FULLY DILUTED
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------
1996 1995
------- -------
<S> <C> <C>
Net income................................ $12,223 $18,124
======= =======
Adjusted net income for interest
on convertible note..................... $12,223 $18,437
======= =======
Shares used in net earnings
per share computations.................. 38,495 37,511
======= =======
Earnings per share........................ $ .32 $ .49
======= =======
</TABLE>
COMPUTATION OF SHARES USED IN NET EARNINGS PER SHARE COMPUTATIONS
<TABLE>
<CAPTION>
Six Months Ended June 30,
-----------------------------
1996 1995
------- -------
<S> <C> <C>
Average outstanding common shares......... 36,207 34,028
Average common equivalent shares --
dilutive effect of option shares........ 2,288 1,752
Dilutive effect of convertible note....... -- 1,731
------ ------
Shares used in net earnings
per share computations.................. 38,495 37,511
====== ======
</TABLE>
30
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 17,727
<SECURITIES> 0
<RECEIVABLES> 84,101
<ALLOWANCES> 2,089
<INVENTORY> 21,594
<CURRENT-ASSETS> 139,130
<PP&E> 223,548
<DEPRECIATION> 106,019
<TOTAL-ASSETS> 546,623
<CURRENT-LIABILITIES> 78,817
<BONDS> 225,340
<COMMON> 36,491
0
0
<OTHER-SE> 183,347
<TOTAL-LIABILITY-AND-EQUITY> 546,623
<SALES> 310,527
<TOTAL-REVENUES> 310,527
<CGS> 224,293
<TOTAL-COSTS> 278,953
<OTHER-EXPENSES> 504
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,884
<INCOME-PRETAX> 25,293
<INCOME-TAX> 13,070
<INCOME-CONTINUING> 12,223
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,223
<EPS-PRIMARY> .32
<EPS-DILUTED> .32
</TABLE>
