<PAGE> 1
UNITED STATES
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, 2000
--------------
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, 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, 68,339,912 shares as of April 30, 2000.
<PAGE> 2
2
HARTE-HANKS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
FORM 10-Q REPORT
March 31, 2000
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Part I. Financial Information
Item 1. Interim Condensed Consolidated Financial
Statements (Unaudited)
Condensed Consolidated Balance Sheets - 3
March 31, 2000 and December 31, 1999
Consolidated Statements of Operations - 4
Three months ended March 31, 2000 and 1999
Consolidated Statements of Cash Flows - 5
Three months ended March 31, 2000 and 1999
Consolidated Statements of Stockholders' Equity - 6
Three months ended March 31, 2000 and 1999
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 6. Exhibits and Reports on Form 8-K 13
(a) Exhibits
(b) Reports on Form 8-K
Signature 14
</TABLE>
<PAGE> 3
3
Harte-Hanks, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (in thousands, except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------- ------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents ..................................... $ 44,743 $ 35,196
Accounts receivable, net ...................................... 148,343 154,030
Inventory ..................................................... 5,723 7,099
Prepaid expenses .............................................. 13,455 12,651
Current deferred income tax asset ............................. 7,153 6,848
Other current assets .......................................... 5,401 4,309
--------- ---------
Total current assets ....................................... 224,818 220,133
Property, plant and equipment, net ............................... 109,294 106,250
Goodwill and other intangibles, net .............................. 406,040 409,791
Other assets ..................................................... 37,650 33,253
--------- ---------
Total assets ............................................... $ 777,802 $ 769,427
========= =========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable .............................................. $ 53,506 $ 64,812
Accrued payroll and related expenses .......................... 20,609 25,511
Customer deposits and unearned revenue ........................ 36,224 35,622
Income taxes payable .......................................... 23,703 13,667
Other current liabilities ..................................... 9,514 14,405
--------- ---------
Total current liabilities .................................. 143,556 154,017
Long-term debt ................................................... 1,032 5,000
Other long-term liabilities ...................................... 35,173 32,792
--------- ---------
Total liabilities .......................................... 179,761 191,809
--------- ---------
Stockholders' equity
Common stock, $1 par value, 250,000,000 shares
authorized. 76,593,856 and 76,392,063 shares
issued at March 31, 2000 and December 31,
1999, respectively ......................................... 76,594 76,392
Additional paid-in capital .................................... 199,277 197,454
Accumulated other comprehensive income ........................ 14,661 12,316
Retained earnings ............................................. 509,408 493,362
--------- ---------
799,940 779,524
Less treasury stock: 8,285,621 and 8,285,966
shares at cost at March 31, 2000 and
December 31, 1999, respectively ............................ (201,899) (201,906)
--------- ---------
Total stockholders' equity ................................. 598,041 577,618
--------- ---------
Total liabilities and stockholders' equity ................. $ 777,802 $ 769,427
========= =========
</TABLE>
See Notes to Interim Condensed Consolidated Financial Statements.
<PAGE> 4
4
Harte-Hanks, Inc. and Subsidiaries
Consolidated Statements of Operations (in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
2000 1999
--------- ---------
<S> <C> <C>
Operating revenues ................................................... $ 226,057 $ 188,128
--------- ---------
Operating expenses
Payroll .......................................................... 87,068 70,852
Production and distribution ...................................... 76,003 69,408
Advertising, selling, general and administrative ................. 22,461 16,047
Depreciation ..................................................... 6,730 5,358
Goodwill and intangible amortization ............................. 3,644 2,362
--------- ---------
195,906 164,027
--------- ---------
Operating income ..................................................... 30,151 24,101
--------- ---------
Other expenses (income)
Interest expense ................................................. 254 41
Interest income .................................................. (412) (2,098)
Other, net ....................................................... 483 100
--------- ---------
325 (1,957)
--------- ---------
Income before income taxes ........................................... 29,826 26,058
Income tax expense ................................................... 12,072 10,724
--------- ---------
Net income ........................................................... $ 17,754 $ 15,334
========= =========
Basic:
Earnings per common share ........................................ $ 0.26 $ 0.22
========= =========
Weighted-average common shares outstanding ....................... 68,263 71,193
========= =========
Diluted:
Earnings per common share ........................................ $ 0.25 $ 0.21
========= =========
Weighted-average common and common equivalent
shares outstanding ............................................ 70,301 73,605
========= =========
</TABLE>
See Notes to Interim Condensed Consolidated Financial Statements.
<PAGE> 5
5
Harte-Hanks, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
2000 1999
---- ----
<S> <C> <C>
Operating Activities
Net income ............................................................................ $ 17,754 $ 15,334
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation ....................................................................... 6,730 5,358
Goodwill and intangible amortization ............................................... 3,644 2,362
Amortization of option-related compensation ........................................ 138 191
Deferred income taxes .............................................................. 1,373 2,584
Other, net ......................................................................... 262 444
Changes in operating assets and liabilities, net of acquisitions:
Decrease in accounts receivable, net ............................................... 5,687 774
Decrease in inventory .............................................................. 1,376 2,065
Decrease (increase) in prepaid expenses and other
current assets .................................................................. (1,896) 643
Increase (decrease)in accounts payable ............................................. (2,700) 2,445
Increase in other accrued expenses
and other liabilities ........................................................... 76 23
Other, net ......................................................................... 16 293
-------- --------
Net cash provided by operating activities ....................................... 32,460 32,516
-------- --------
Investing Activities
Acquisitions .......................................................................... (8,681) (414)
Purchases of property, plant and equipment ............................................ (10,300) (6,907)
Proceeds from sale of property, plant and equipment ................................... -- 26
Net purchases of available-for-sale short-term
investments ........................................................................ -- (11,657)
-------- --------
Net cash used in investing activities ........................................... (18,981) (18,952)
-------- --------
Financing Activities
Long-term borrowings .................................................................. 1,032 --
Repayment of long-term borrowings ..................................................... (5,000) --
Issuance of common stock .............................................................. 1,736 2,757
Purchase of treasury stock ............................................................ (12) (12,724)
Issuance of treasury stock ............................................................ 20 24
Dividends paid ........................................................................ (1,708) (1,420)
-------- --------
Net cash used in financing activities ........................................... (3,932) (11,363)
-------- --------
Net increase in cash .................................................................. 9,547 2,201
Cash and cash equivalents at beginning of year ........................................ 35,196 30,367
-------- --------
Cash and cash equivalents at end of period ............................................ $ 44,743 $ 32,568
======== ========
</TABLE>
See Notes to Interim Condensed Consolidated Financial Statements.
<PAGE> 6
6
Harte-Hanks, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Additional Other Total
Common Paid-In Retained Treasury Comprehensive Stockholders'
In thousands Stock Capital Earnings Stock Income Equity
--------- ---------- -------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1999 ............. $ 75,789 $ 189,698 $ 425,999 $ (114,395) $ -- $ 577,091
Common stock issued-
employee benefit plans .............. 49 1,026 -- -- -- 1,075
Exercise of stock options .............. 238 1,444 -- -- -- 1,682
Tax benefit of options
exercised ........................... -- 639 -- -- -- 639
Dividends paid ($0.02 per
share) .............................. -- -- (1,420) -- -- (1,420)
Treasury stock repurchase .............. -- -- -- (12,724) -- (12,724)
Treasury stock issued .................. -- 8 -- 16 -- 24
Comprehensive income, net of
tax:
Net income .......................... -- -- 15,334 -- -- 15,334
---------
Total comprehensive income ............. 15,334
--------- --------- --------- ---------- --------- ---------
Balance at March 31, 1999 .............. $ 76,076 $ 192,815 $ 439,913 $ (127,103) $ -- $ 581,701
========= ========= ========= ========== ========= =========
Balance at January 1, 2000 ............. $ 76,392 $ 197,454 $ 493,362 $ (201,906) $ 12,316 $ 577,618
Common stock issued-
employee benefit plans .............. 50 948 -- -- -- 998
Exercise of stock options .............. 152 586 -- -- -- 738
Tax benefit of options
exercised ........................... -- 288 -- -- -- 288
Dividends paid ($0.025 per
share) .............................. -- -- (1,708) -- -- (1,708)
Treasury stock repurchase .............. -- -- -- (12) -- (12)
Treasury stock issued .................. -- 1 -- 19 -- 20
Comprehensive income, net of
tax:
Net income .......................... -- -- 17,754 -- -- 17,754
Foreign currency
translation adjustment ........... -- -- -- -- 381 381
Change in unrealized gain
(loss) on long-term
investments, net of
reclassification
adjustments (net of
tax of $1,057) ................... -- -- -- -- 1,964 1,964
---------
Total comprehensive income ............. 20,099
--------- --------- --------- ---------- --------- ---------
Balance at March 31, 2000 .............. $ 76,594 $ 199,277 $ 509,408 $ (201,899) $ 14,661 $ 598,041
========= ========= ========= ========== ========= =========
</TABLE>
See Notes to Interim Condensed Consolidated Financial Statements.
<PAGE> 7
7
Harte-Hanks, Inc. and Subsidiaries
Notes to Interim Condensed Consolidated Financial Statements
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited Interim Condensed Consolidated Financial Statements
include the accounts of Harte-Hanks, 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, 2000 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, 1999.
Certain prior period amounts have been reclassified for comparative purposes.
NOTE B - INCOME TAXES
The Company's quarterly income tax provision of $12.1 million was calculated
using an effective income tax rate of approximately 40.5%. The Company's
effective income tax rate is derived by estimating pretax income and income tax
expense for the year ending December 31, 2000. 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.
NOTE C - EARNINGS PER SHARE
A reconciliation of basic and diluted earnings per share is as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
In thousands, except per share amount 2000 1999
- ------------------------------------- ---- ----
<S> <C> <C>
BASIC EPS
Net Income ................................................................................ $ 17,754 $ 15,334
======== ========
Weighted-average common shares outstanding
used in earnings per share computations ................................................. 68,263 71,193
======== ========
Earnings per common share ................................................................. $ 0.26 $ 0.22
======== ========
DILUTED EPS
Net Income ................................................................................ $ 17,754 $ 15,334
======== ========
Shares used in earnings per share computations ............................................ 70,301 73,605
-------- --------
Earnings per common share ................................................................. $ 0.25 $ 0.21
======== ========
Computation of shares used in earnings per share computations:
Average outstanding common shares ......................................................... 68,263 71,193
Average common equivalent shares -
dilutive effect of option shares ........................................................ 2,038 2,412
-------- --------
Shares used in earnings per share computations ............................................ 70,301 73,605
======== ========
</TABLE>
As of March 31, 2000 the Company had 1,087,127 antidilutive market price options
outstanding.
<PAGE> 8
8
NOTE D - BUSINESS SEGMENTS
Harte-Hanks is a highly focused targeted media company with operations in two
segments - direct and interactive marketing and shoppers.
Information about the Company's operations in different industry segments:
<TABLE>
<CAPTION>
Three Months Ended March 31
In thousands 2000 1999
- ------------ ---- ----
<S> <C> <C>
Operating revenues
Direct Marketing ...................................... $ 156,191 $ 124,934
Shoppers .............................................. 69,866 63,194
--------- ---------
Total operating revenues .......................... $ 226,057 $ 188,128
========= =========
Operating income
Direct Marketing ...................................... $ 21,359 $ 17,284
Shoppers .............................................. 11,087 8,785
Corporate Activities .................................. (2,295) (1,968)
--------- ---------
Total operating income ............................ $ 30,151 $ 24,101
========= =========
Income before income taxes
Operating income ...................................... $ 30,151 $ 24,101
Interest expense ...................................... (254) (41)
Interest income ....................................... 412 2,098
Other, net ............................................ (483) (100)
--------- ---------
Total income before income taxes .................. $ 29,826 $ 26,058
========= =========
</TABLE>
<PAGE> 9
9
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations
RESULTS OF OPERATIONS
Operating results were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
In thousands MARCH 31, 2000 MARCH 31, 1999 CHANGE
- ------------ -------------- -------------- ------
<S> <C> <C> <C>
Revenues $ 226,057 $ 188,128 20.2%
Operating expenses 195,906 164,027 19.4%
--------- ---------
Operating income $ 30,151 $ 24,101 25.1%
========= =========
Net income $ 17,754 $ 15,334 15.8%
========= =========
Diluted earnings
per share $ 0.25 $ 0.21 19.0%
========= =========
</TABLE>
Consolidated revenues grew 20.2% to $226.1 million and operating income grew
25.1% to $30.2 million in the first quarter of 2000 when compared to the first
quarter of 1999. The Company's overall growth resulted from acquisitions,
increased business with both new and existing customers and from the sale of new
products and services. Overall operating expenses compared to 1999 increased
19.4% to $195.9 million.
Net income grew 15.8% to $17.8 million, or 25 cents per share, compared to 21
cents per share on a diluted basis. The net income growth resulted from the
growth in operating income partially offset by a decrease of $1.7 million in
interest income due to the sale of substantially all of the Company's short-term
investments throughout 1999, the proceeds of which were used to fund
acquisitions and repurchase the Company's stock.
DIRECT MARKETING
Direct and interactive marketing operating results were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
In thousands MARCH 31, 2000 MARCH 31, 1999 CHANGE
- ------------ -------------- -------------- ------
<S> <C> <C> <C>
Revenues $ 156,191 $ 124,934 25.0%
Operating expenses 134,832 107,650 25.3%
--------- ---------
Operating income $ 21,359 $ 17,284 23.6%
========= =========
</TABLE>
Direct and interactive marketing revenues increased $31.3 million, or 25.0%, in
the first quarter of 2000 compared to 1999. Revenue increases were lead by
CRM/response management and marketing services which both had strong growth,
while CRM/database revenues were soft for the quarter. CRM/response management
revenues increased due to increased internet and fulfillment business with
existing customers, new customer gains, and the October 1999 acquisition of ZD
Market Intelligence, renamed Harte-Hanks Market Intelligence. The traditional
growth oriented business-to-business activities of CRM/response management
continued to have significant growth in the first quarter. The mutual fund and
high technology industry sectors contributed significantly to overall
CRM/response management revenue growth. Marketing services' revenues, led by its
targeted mail operations, increased due to increased product sales as well as
new product sales to new and existing customers, primarily in the banking and
retail industries. The May 1999 acquisition of Direct Marketing Associates, Inc.
also contributed to the marketing services revenue increase. CRM/database
revenues were soft, primarily due to slowdowns in the insurance and managed
care industries.
Operating expenses increased $27.2 million, or 25.3%, in the first quarter of
2000 compared to 1999. Payroll costs increased $16.2 million due to expanded
hiring to support revenue growth. Also contributing to the increased operating
<PAGE> 10
10
expenses were additional production costs of $6.6 million due to increased
volumes. Depreciation and amortization expense increased $2.7 million due to
goodwill associated with acquisitions and higher levels of capital investment to
support growth. Operating expenses were also impacted by the acquisitions noted
above.
SHOPPERS
Shopper operating results were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
In thousands MARCH 31, 2000 MARCH 31, 1999 CHANGE
- ------------ -------------- -------------- ------
<S> <C> <C> <C>
Revenues $ 69,866 $ 63,194 10.6%
Operating expenses 58,779 54,409 8.0%
-------- --------
Operating income $ 11,087 $ 8,785 26.2%
======== ========
</TABLE>
Shopper revenues increased $6.7 million, or 10.6%, in the first quarter of 2000
compared to 1999. Revenue increases were the result of improved sales in
established markets as well as year-over-year geographic expansions into new
neighborhoods in Northern and Southern California. From a product-line
perspective, Shoppers had growth in both its in-book products, primarily core
sales, employment and automotive related advertising, and its distribution
products, primarily 4-color glossy heatset flyers. Shoppers also continued to
experience success in up-selling ads onto its web-site.
Operating expenses increased $4.4 million, or 8.0%, in the first quarter of 2000
compared to 1999. The increase in operating expenses was primarily due to
increases in payroll costs of $1.7 and additional production costs of $1.2
million, including increased postage of $0.7 million due to increased volumes.
Other Income and Expense
The Company realized a loss of approximately $0.2 million in the first quarter
2000 on the disposal of certain fixed assets in its Shopper operations. In
addition, the Company wrote off approximately $0.1 million of inventory and
other assets in the first quarter of 2000.
Interest Expense/Interest Income
Interest income decreased $1.7 million in the first quarter of 2000 over the
same period in 1999 due to larger cash and investment balances in the first
quarter of 1999. The Company sold substantially all of its short-term
investments throughout 1999 in order to fund acquisitions and repurchase the
Company's stock.
Interest expense increased $0.2 million in the first quarter of 2000 over 1999
due primarily to amortization of financing costs and commitment charges relating
to the unsecured revolving credit facilities the Company obtained in November
1999.
Income Taxes
The Company's income tax expense increased $1.3 million in the first quarter of
2000 compared to the first quarter of 1999. This increase was due primarily to
the higher pre-tax income levels. The effective tax rate was 40.5% for the first
quarter of 2000 and 41.2% for the first quarter of 1999.
Liquidity and Capital Resources
Cash provided by operating activities for the three months ended March 31, 2000
was $32.5 million. Net cash outflows from investing activities were $19.0
<PAGE> 11
11
million for the first three months of 2000, and primarily relate to purchases of
fixed assets. Net cash outflows from financing activities were $3.9 million
compared to $11.4 million in 1999. The cash outflow from financing activities in
2000 is attributable primarily to the repayment of long-term borrowings. The
cash outflow in 1999 was attributable primarily to the repurchase of treasury
stock of $12.7 million.
Capital resources are also available from and provided through the Company's two
unsecured credit facilities. These credit facilities, two $100 million variable
rate, revolving loan commitments, were put in place on November 4, 1999. All
borrowings under the $100 million revolving 364-Day Credit Agreement are to be
repaid by November 3, 2000 unless the Company requests and is granted a 364-day
extension. All borrowings under the $100 million revolving Three-Year Credit
Agreement are to be repaid by November 4, 2002. As of March 31, 2000, the
Company had $200 million of unused borrowing capacity under these two credit
facilities. In addition, capital resources are available to the Company through
an unsecured credit facility obtained for the purpose of financing the
construction of a new building. This credit facility, a $2.5 million variable
rate, revolving loan commitment was put in place on November 29, 1999 and has no
stated maturity. $1.5 million of unused borrowing capacity is available from
this credit facility as of March 31, 2000. Management believes that its credit
facilities, together with cash provided from operating activities, will be
sufficient to fund operations and anticipated acquisitions and capital service
needs for the foreseeable future.
Factors That May Affect Future Results and Financial Condition
From time to time, in both written reports and oral statements by senior
management, the Company may express its expectations regarding its future
performance. These "forward-looking statements" are inherently uncertain, and
investors should realize that events could turn out to be other than what senior
management expected. Set forth below are some key factors which could affect the
Company's future performance, including its revenues, net income and earnings
per share; however, the risks described below are not the only ones the Company
faces. Additional risks and uncertainties that are not presently known, or that
the Company currently considers immaterial, could also impair the Company's
business operations.
Legislation -- There could be a material adverse impact on the Company's direct
and interactive marketing business due to the enactment of legislation or
industry regulations arising from public concern over consumer privacy issues.
Restrictions or prohibitions could be placed upon the collection and use of
information that is currently legally available.
Data Suppliers -- The Company could suffer a material adverse effect if owners
of the data the Company uses were to withdraw the data. Data providers could
withdraw their data if there is a competitive reason to do so or if legislation
is passed restricting the use of the data.
Acquisitions -- In recent years the Company has made a number of acquisitions in
its direct and interactive marketing and shopper businesses, and it expects to
pursue additional acquisition opportunities. Acquisition activities, even if not
consummated, require substantial amounts of management time and can distract
from normal operations. In addition, there can be no assurance that the
synergies and other objectives sought in acquisitions will be achieved.
Competition -- Direct and interactive marketing is a rapidly evolving business,
subject to periodic technological advancements, high turnover of customer
personnel who make buying decisions, and changing customer needs and
preferences. Consequently, the Company's direct and interactive marketing
business faces competition in each of its three sectors -- CRM/response
management, CRM/database, and marketing services. The Company's shopper business
competes
<PAGE> 12
12
for advertising, as well as for readers, with other print and electronic media.
Competition comes from local and regional newspapers, magazines, radio,
broadcast and cable television, shoppers and other communications media that
operate in the Company's markets. The extent and nature of such competition are,
in large part, determined by the location and demographics of the markets
targeted by a particular advertiser, and the number of media alternatives in
those markets. Failure to continually improve the Company's current processes
and to develop new products and services could result in loss of the Company's
customers to current or future competitors. In addition, failure to gain market
acceptance of new products and services could adversely affect the Company's
growth.
Qualified Personnel -- The Company believes that its future prospects will
depend in large part upon its ability to attract, train and retain highly
skilled technical, client services and administrative personnel. Qualified
personnel are in great demand and are likely to remain a limited resource for
the foreseeable future.
Postal Rates -- The Company's shoppers are delivered by standard mail, and
postage is the second largest expense, behind payroll, in the Company's shopper
business. The present standard postage rates went into effect in January 1999,
and a rate increase is expected in 2001. Postal rates also influence the demand
for the Company's direct and interactive marketing services even though the cost
of mailings is borne by the Company's customers and is not directly reflected in
the Company's revenues or expenses.
Newsprint Prices -- Newsprint represents a substantial expense in the Company's
shopper operations. In recent years newsprint prices have fluctuated widely, and
such fluctuations can materially affect the results of the Company's operations.
Economic Conditions -- Changes in national economic conditions can affect levels
of advertising expenditures generally, and such changes can affect each of the
Company's businesses. In addition, revenues from the Company's shopper business
are dependent to a large extent on local advertising expenditures in the markets
in which they operate. Such expenditures are substantially affected by the
strength of the local economies in those markets. Direct and interactive
marketing revenues are dependent on national and international economics.
<PAGE> 13
13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. See index to Exhibits on Page 15.
(b) No Form 8-K has been filed during the three months ended
March 31, 2000.
<PAGE> 14
14
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, INC.
May 12, 2000 /s/ Jacques D. Kerrest
------------ ----------------------------------
Date Jacques D. Kerrest
Senior Vice President, Finance and
Chief Financial Officer
<PAGE> 15
15
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
- ------- ----------------------
<S> <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. 333-02047
and incorporated by reference herein).
2(c) Agreement and Plan of Merger and Reorganization, dated
as of May 16, 1997, by and between The E.W. Scripps
Company and Harte-Hanks Communications, Inc. (filed as
Exhibit 2.1 to the Company's Form 8-K dated May 22, 1997
and incorporated by reference herein).
2(d) Acquisition Agreement, dated as of May 16, 1997, by
and between The E.W. Scripps Company and Harte-Hanks
Communications, Inc. (filed as Exhibit 2.2 to the Company's
Form 8-K dated May 22, 1997 and incorporated by reference
herein).
2(e) Stock Purchase Agreement dated as of July 26, 1997 between
ABC, Inc. and Harte-Hanks Communications, Inc. (filed as
Exhibit 2(e) to the Company's Form 10-Q for the nine months
ended September 30, 1997 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 Restated
Certificate of Incorporation (filed as Exhibit 3(c) to the
Company's Form 10-Q for the nine months ended September 30, 1996
and incorporated by reference herein).
3(d) Amendment dated May 5, 1998 to Amended and Restated Certificate
of Incorporation (filed as Exhibit 3(d) to the Company's Form
10-Q for the six months ended June 30, 1998 and incorporated by
reference herein).
3(e) Amended and Restated Certificate of Incorporation as amended
through May 5, 1998 (filed as Exhibit 3(e) to the Company's Form
10-Q for the six months ended June 30, 1998 and incorporated by
reference herein).
4(a) 364-Day Credit Agreement dated as of November 4, 1999 between
Harte-Hanks, Inc. and the Lenders named therein [$100 million]
(filed as Exhibit 4(a) to the Company's form 10-Q for the nine
months ended September 30, 1999 and incorporated by reference
herein).
</TABLE>
<PAGE> 16
16
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
- ------- ----------------------
<S> <C>
4(b) Three-Year Credit Agreement dated as of November 4, 1999 between
Harte-Hanks, Inc. and the Lenders named therein [$100 million]
(filed as Exhibit 4(b) to the Company's form 10-Q for the nine
months ended September 30, 1999 and incorporated by reference
herein).
4(c) Other long term debt instruments are not being filed pursuant to
Section (b)(4)(ii) of Item 601 of Regulation S-K. Copies of such
instruments will be furnished to the Commission upon request.
10(a) 1984 Stock Option Plan (filed as Exhibit 10(d) to the Company's
Form 10-K for the year ended December 31, 1984 and
incorporated herein by reference).
10(b) Registration Rights Agreement dated as of September 11, 1984
among HHC Holding Inc. and its stockholders (filed as Exhibit
10(b) to the Company's Form 10-K for the year ended December 31,
1993 and incorporated by reference herein).
10(c) Severance Agreement between Harte-Hanks Communications, Inc.
and Larry Franklin, dated as of July 23, 1993 (filed as Exhibit
10(f) to the Company's Registration Statement No. 33-69202
and incorporated by reference herein).
10(d) Form of Severance Agreement between Harte-Hanks
Communications, Inc. and certain Executive Officers of the
Company, dated as of July 7 or December 28,1997 (filed as
Exhibit 10(f) to the Company's Form 10-K for the year ended
December 31, 1997 and incorporated by reference herein).
10(e) Form of Severance Agreement between Harte-Hanks, Inc. and
Richard M. Hochhauser dated as of January 25, 2000 (filed as
Exhibit 10(e) to the Company's Form 10-K for the year ended
December 31, 1999 and incorporated by reference herein).
10(f) Harte-Hanks, Inc. Amended and Restated Restoration Pension Plan
dated as of January 1, 2000 (filed as Exhibit 10(f) to the
Company's Form 10-K for the year ended December 31, 1999 and
Incorporated by reference herein).
10(g) Harte-Hanks Communications, Inc. 1996 Incentive Compensation
Plan (filed as Exhibit 10(p) to the Company's Form 10-Q for the
nine months ended September 30, 1996 and incorporated by reference
herein).
10(h) Harte-Hanks, Inc. Amended and Restated 1991 Stock Option Plan
(filed as Exhibit 10(g) to the Company's Form 10-Q for the six
months ended June 30, 1998 and incorporated by reference herein).
10(i) Harte-Hanks, Inc. 1998 Director Stock Plan (filed as Exhibit 10(h)
to the Company's Form 10-Q for the six months ended June 30, 1998
and incorporated by reference herein).
10(j) Harte-Hanks, Inc. Deferred Compensation Plan (filed as Exhibit
10(i) to the Company's Form 10-K for the year ended December
31, 1998 and incorporate by reference herein).
</TABLE>
<PAGE> 17
17
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
- ------- ----------------------
<S> <C>
*11 Statement Regarding Computation of Net Income (Loss) Per Common
Share
*21 Subsidiaries of the Company.
*27 Financial Data Schedule.
</TABLE>
- ---------------------
*Filed herewith
<PAGE> 1
EXHIBIT 11
HARTE-HANKS, INC. AND SUBSIDIARIES
EARNINGS PER SHARE COMPUTATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended March,
In thousands, except per share amounts 2000 1999
- -------------------------------------- ---- ----
<S> <C> <C>
BASIC EPS
Net Income ................................................................................ $ 17,754 $ 15,334
======== ========
Weighted-average common shares outstanding
used in earnings per share computations ................................................ 68,263 71,193
======== ========
Earnings per common share ................................................................. $ 0.26 $ 0.22
======== ========
DILUTED EPS
Net Income ................................................................................ $ 17,754 $ 15,334
======== ========
Shares used in earnings per share computations ............................................ 70,301 73,605
======== ========
Earnings per common share ................................................................. $ 0.25 $ 0.21
======== ========
Computation of shares used in earnings per share computations:
Average outstanding common shares ......................................................... 68,263 71,193
Average common equivalent shares -
dilutive effect of option shares ....................................................... 2,038 2,412
-------- --------
Shares used in earnings per share computations ............................................ 70,301 73,605
======== ========
</TABLE>
<PAGE> 1
EXHIBIT 21
RESTRICTED SUBSIDIARIES
OF HARTE-HANKS , INC.
As of March 31, 2000
<TABLE>
<CAPTION>
State of
Name of Corporation Organization % Owned
- ------------------- ------------ -------
<S> <C> <C>
DiMark, Inc. New Jersey 100%
DiMark Marketing, Inc. Pennsylvania 100%(1)
Direct Marketing Associates Computer Services, Inc.
(shell corporation) Maryland 100%(9)
Direct Market Concepts, Inc. Florida 100%
DMK, Inc. Delaware 100%(2)
The Flyer Publishing Corporation Florida 100%
Harte-Hanks Data Services LLC Maryland 100%
Harte-Hanks Data Technologies LLC. Delaware 100%
Harte-Hanks Delaware, Inc. Delaware 100%
Harte-Hanks Direct, Inc. Delaware 100%
Harte-Hanks Direct Marketing/Baltimore, Inc. Maryland 100%
Harte-Hanks Direct Marketing/Cincinnati, Inc. Ohio 100%
Harte-Hanks Direct Marketing/Dallas, Inc. Delaware 100%
Harte-Hanks Direct Marketing/Fullerton, Inc. California 100%
Harte-Hanks Direct Marketing/Kansas City, Inc. Missouri 100%
Harte-Hanks do Brazil Consultoria e Servicos Ltda. Brazil 100%(3)
Harte-Hanks Limited England 100%(3)
Harte-Hanks Market Intelligence, Inc. California 100%
Harte-Hanks Market Intelligence Espana LLC Colorado 100%
Harte-Hanks Market Intelligence Europe B.V. Netherlands 100%
Harte-Hanks Market Intelligence GmbH Germany 100%(4)
Harte-Hanks Market Intelligence Limited Ireland 100%(4)
Harte-Hanks Market Intelligence Limited England 100%(4)
Harte-Hanks Market Intelligence SAS France 100%(4)
Harte-Hanks Market Research, Inc. New Jersey 100%
Harte-Hanks Partnership, Ltd. Texas 100%(5)
Harte-Hanks Pty. Limited Australia 100%(3)
Harte-Hanks Response Management/Austin L.P. Delaware 100%(6)
Harte-Hanks Response Management/Boston, Inc. Massachusetts 100%
Harte-Hanks Response Management Call Centers, Inc. Delaware 100%
Harte-Hanks Response Management Europe Belgium 100%
Harte-Hanks Shoppers, Inc. California 100%
Harte-Hanks Stock Plan, Inc. Delaware 100%
H&R Communications, Inc. New Jersey 100%(2)
HTS, Inc. Connecticut 100%
Information for Marketing Limited (shell corporation) England 100%(7)
Mars Graphic Services, Inc. New Jersey 100%(4)
NSO, Inc. Ohio 100%
Printing Management Systems, Inc. Delaware 100%
PRO Direct Response Corp. New Jersey 100%(2)
Southern Comprint Co. California 100%
Spectral Resources, Inc. New York 100%
</TABLE>
(1) Owned by Mars Graphic Services, Inc.
(2) Owned by DiMark Marketing, Inc.
(3) Owned by Harte-Hanks Data Technologies LLC
(4) Owned by Harte-Hanks Market Intelligence Europe B.V.
(5) 99.5% Owned by Harte-Hanks Delaware, Inc.
.5% Owned by Harte-Hanks , Inc.
(6) 99% Owned by Harte-Hanks Stock Plan, Inc.
1% Owned by Harte-Hanks Response Management Call Centers, Inc.
(7) Owned by Harte-Hanks Limited
(8) Owned by DiMark, Inc.
(9) Owned by Harte-Hanks Direct Marketing/Baltimore, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 44,743
<SECURITIES> 0
<RECEIVABLES> 152,429
<ALLOWANCES> 4,086
<INVENTORY> 5,723
<CURRENT-ASSETS> 224,818
<PP&E> 229,872
<DEPRECIATION> 120,578
<TOTAL-ASSETS> 777,802
<CURRENT-LIABILITIES> 143,556
<BONDS> 0
0
0
<COMMON> 76,594
<OTHER-SE> 521,447
<TOTAL-LIABILITY-AND-EQUITY> 777,802
<SALES> 226,057
<TOTAL-REVENUES> 226,057
<CGS> 163,071
<TOTAL-COSTS> 195,906
<OTHER-EXPENSES> 71
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 254
<INCOME-PRETAX> 29,826
<INCOME-TAX> 12,072
<INCOME-CONTINUING> 17,754
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,754
<EPS-BASIC> .26
<EPS-DILUTED> .25
</TABLE>
