SAN ANTONIO, TX--(Marketwire - February 2, 2010) - Harte-Hanks, Inc. (
NYSE:
HHS) today
reported fourth quarter 2009 diluted earnings per share of $0.21 on
revenues of $217.5 million. These results compare to diluted earnings per
share of $0.23 on $269.6 million in revenues for the fourth quarter of
2008. Excluding the $6.95 million legal settlement in principle announced
on January 28, 2010, our diluted earnings per share for the quarter would
have been $0.28 on revenues of $217.5 million.
The following table presents financial highlights of the company's
operations for the fourth quarter of 2009 and 2008, respectively. Full
financial results are attached.
RESULTS FROM OPERATIONS (unaudited)
(In thousands, except per share
amounts) Three Months Ended December 31,
--------------------------------------
2009 2008 % Change
------------ ------------ -----------
Operating revenues $ 217,489 $ 269,643 -19.3%
Operating income 19,827 25,520 -22.3%
Net income 13,492 14,326 -5.8%
Diluted earnings per share 0.21 0.23 -8.7%
Diluted shares (weighted average
common and common equivalent shares
outstanding) 64,100 63,584 0.8%
------------ ------------ -----------
For the three months ended December 31, 2009, the company generated free
cash flow (defined below) of $19.1 million, down from $20.8 million in the
prior year's fourth quarter.
For the year, the company's revenues decreased 20.6% to $860.1 million and
operating income decreased 29.7% to $82.4 million. Diluted earnings per
share for the year were $0.75 compared to $0.98 for 2008. Excluding the
$6.95 million legal settlement in principle announced on January 28, 2010,
our diluted earnings per share for the year would have been $0.81 on
revenues of $860.1 million.
RESULTS FROM OPERATIONS (unaudited)
(In thousands, except per
share amounts) Year Ended December 31,
-----------------------------------------------
2009 2008 % Change
--------------- --------------- --------------
Operating revenues $ 860,143 $ 1,082,821 -20.6%
Operating income 82,430 117,317 -29.7%
Net income 47,715 62,741 -24.0%
Diluted earnings per share 0.75 0.98 -23.5%
Diluted shares (weighted
average common and common
equivalent shares
outstanding) 63,885 64,104 -0.3%
--------------- --------------- --------------
Commenting on the 2009 performance, Chairman, President and Chief Executive
Officer Larry Franklin said, "2009 was a challenging year for both the U.S.
and global economies. As our clients changed their marketing plans, we
adjusted and evolved our offerings to meet our client needs. Although
economic uncertainty remains we did see some slight revenue improvement in
both Shoppers and Direct Marketing toward the end of the quarter. Excluding
the previously announced legal settlement in principle, our fourth quarter
operating income would have slightly increased over last year. The
distinctive value both of our businesses provide our customers will
continue to create opportunities for us."
Discussing the performance of individual business segments, Executive Vice
President and Chief Financial Officer, Doug Shepard said, "Direct Marketing
fourth quarter revenues and operating income declined 19.0% and 5.1%,
respectively. Operating income margins were 18.3% versus 15.6% in the
fourth quarter of 2008. Direct Marketing continued to manage its expenses
and limit the decline in operating income to $1.5 million on a $35.9
million revenue decrease.
"All vertical markets experienced revenue declines in the fourth quarter.
Our select markets vertical revenue declined in the low teens and financial
services declined in the mid-teens. Retail, high tech and the
pharma/healthcare verticals each declined in the low 20% range.
"Shoppers experienced a fourth quarter revenue decrease of 20.2% and an
operating loss of $5.4 million including the legal settlement in principle.
Based on circulation distributed for the same time period in the fourth
quarter of 2009 and 2008 and adjusting for an extra week in the fourth
quarter of 2008, Shoppers revenue for that circulation declined 12.5% in
the fourth quarter. This is Shoppers best performance since the second
quarter of 2007. Excluding the previously announced legal settlement in
principle of $6.95 million, Shoppers would have had operating income of
$1.6 million."
Concluding, Franklin said, "I am proud of the way our people have continued
to lead us through the most difficult operating environment in decades, if
not the most difficult in our history. They have worked tirelessly to
deliver results for our customers while carefully managing our expenses by
changing the way we do business, which allowed us to have excellent profit
performance in 2009. While we believe 2010 will continue to be challenging
we also believe our very talented people and our financial strength will
allow us to continue developing new capabilities that deliver more results
for all our clients. We are well positioned for an improved economic
environment."
Selected Highlights:
-- Jeannine Falcone was promoted to Harte-Hanks, Inc. Corporate Vice
President with responsibility for leading The Agency Inside
Harte-Hanks, a full service, multichannel relationship marketing agency
specializing in direct and digital communications. Jeannine has been
with Harte-Hanks for over 16 years and has served as Managing Director
for the agency since 2007. Throughout her tenure with the company, she
has worked in key roles in Account Services and served clients in
multiple industries. Prior to joining Harte-Hanks she was with DiMark,
Inc., a provider of marketing and database services based in Langhorne,
Pennsylvania which was acquired by Harte-Hanks in April 1996. The
Agency Inside Harte-Hanks provides multichannel customer relationship
management services, including a full-range of digital offerings.
-- Jeannette Kocsis, Senior Vice President of Digital Marketing at The
Agency Inside Harte-Hanks, was recently named to the Mobile Marketers'
Women to Watch 2010 list. She oversees our digital strategy and media
programs. Jeannette and her team create digital acquisition, conversion
and retention programs, as part of multichannel and stand-alone
programs. She is also a contributing author to "Social Media Marketing
for Dummies." Harte-Hanks provides comprehensive mobile and social
marketing services as part of our complete multichannel capabilities.
-- A national pharmaceutical company selling specialty formulated
nutritional products has engaged Harte-Hanks to create a digital
marketing plan and redesign their online store. Services will include
digital strategy, analytics, creative and search engine optimization.
-- A global provider of transportation, e-commerce and business services
signed a multi-year agreement for us to expand inbound call volume to
support their general customer care inquires.
-- A luxury auto manufacturer has renewed its agreement with us to provide
a marketing portal allowing dealers to create and execute their own
multi-channel marketing campaigns.
-- A major financial institution has signed a multi-year contract for us
to expand their mortgage business through a direct mail program to
their existing customers and a reverse mortgage product aimed at new
customers.
About Harte-Hanks:
Harte-Hanks® is a worldwide, direct and targeted marketing company that
provides direct marketing services and shopper advertising opportunities to
local, regional, national and international consumer and
business-to-business marketers. Harte-Hanks Direct Marketing improves
return on its clients' marketing investment by increasing their prospect
and customer value through solutions and services organized around five
groupings of integrated activities: Information (data
collection/management) - Opportunity (data access/utilization) - Insight
(data analysis/interpretation) - Engagement (program and campaign creation
and development) - Interaction (program execution). Harte-Hanks Shoppers is
North America's largest owner, operator and distributor of shopper
publications, with shoppers that are zoned into more than 950 separate
editions with approximately 11.5 million circulation each week in
California and Florida. Harte-Hanks Shoppers brings buyers and sellers
together at a local level, helping businesses and individuals get results
from targeted, local advertisements, both through Shoppers' printed
publications and online through the PennySaverUSA.com™ and
TheFlyer.com™ websites. Visit the Harte-Hanks Web site at
http://www.harte-hanks.com.
For more information, contact: Executive Vice President and Chief
Financial Officer Doug Shepard at (210) 829-9120 or e-mail at
doug_shepard@harte-hanks.com.
Note: The company will host a conference call to discuss the earnings
release on February 2, 2010, at 10:00 a.m. Central Time. The conference
call number is (800) 988-9498 for domestic callers and (210) 234-0029 for
international callers, passcode 121693. The conference call will also be
audio webcast. To access the audio webcast, please go to
https://e-meetings.verizonbusiness.com, conference number 1500178, passcode
121693. There will be an audio replay available shortly after the call
through February 9, 2010. To access the audio replay, please call (800)
731-6041 for domestic callers and (402) 220-0347 for international callers,
passcode 121693. The replay also will be available on the Harte-Hanks Web
site under the "Investors" section for 30 days.
Cautionary Note Regarding Forward-Looking Statements:
This press release and our related earnings conference call contain
"forward-looking statements" within the meaning of the federal securities
laws. All such statements are qualified by this cautionary note, which is
provided pursuant to the safe harbor provisions of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Statements other than historical facts are forward-looking and may be
identified by words such as "may," "will," "expects," "believes,"
"anticipates," "plans," "estimates," "seeks," "could," "intends," or words
of similar meaning. Examples include statements regarding (1) our
strategies and initiatives, (2) adjustments to our cost structure and other
actions designed to respond to market conditions and improve our
performance, and the anticipated effectiveness and expenses associated with
these actions, (3) our financial outlook for revenues, earnings per share,
operating income, expense related to equity-based compensation, capital
resources and other financial items, (4) our expectations for our
businesses and for the industries in which we operate, including with
regard to the negative performance trends in our Shoppers business and the
adverse impact of the economic downturn in the United States and other
economies on the marketing expenditures and activities of our Direct
Marketing clients and prospects, (5) competitive factors, (6) acquisition
and development plans, (7) our stock repurchase program and (8) other
statements regarding future events, conditions or outcomes. These
forward-looking statements involve risks, uncertainties, assumptions and
other factors that are difficult to predict and that could cause actual
results to vary materially from what is expressed in or indicated by the
forward-looking statements. In that event, our business, financial
condition, results of operations or liquidity could be materially adversely
affected and investors in our securities could lose part or all of their
investments. These risks, uncertainties, assumptions and other factors
include, without limitation, (1) international, domestic, regional and
local economic and business conditions, including market conditions in
California and Florida that may continue to adversely impact local
advertising expenditures in our Shoppers publications and the adverse
impact of the economic downturn in the United States and other economies on
the marketing expenditures and activities of our Direct Marketing clients
and prospects, (2) the demand for our services by clients and prospective
clients, including the willingness of existing clients to maintain or
increase their spending and our ability to predict changes in client
preferences, (3) the financial condition and marketing budgets of our
clients, including client bankruptcies or other developments that may
result in increased bad debt expense, (4) economic and other business
factors that impact the industry verticals that we serve, including any
consolidation of clients and prospective clients in these verticals, (5)
our ability to manage and timely adjust our level of personnel and capacity
and to otherwise effectively service our clients, (6) the impact of
competition and our ability to continually improve our processes and to
develop and introduce new products and services in a timely and
cost-effective manner, (7) our ability to protect our data centers against
security breaches and other interruptions in our operations and to protect
sensitive personal information of our clients and their customers, (8)
concern over consumer privacy issues, which may lead to enactment of
legislation restricting or prohibiting the collection and use of
information that is currently legally available, (9) the impact of other
regulations, including restrictions on unsolicited marketing communications
and other consumer protection laws, (10) fluctuations in paper prices and
postal rates, (11) the number of options and other equity securities that
we may issue to employees, (12) market conditions and other factors that
may impact the number of shares, if any, that we may repurchase in
connection with our repurchase program, (13) unanticipated developments
regarding litigation, including the actual outcome of our proposed
settlement with Shoppers' employee Frank Gattuso and former employee Ernest
Sigala, individually and on behalf of a certified class, to settle and
resolve a previously disclosed class action lawsuit filed in 2001, or
other contingent liabilities, and (14) other factors discussed under "Item
1A. Risk Factors" in our Annual Report on Form 10-K for the year ended
December 31, 2008, and any updates thereto in our Forms 10-Q. The
forward-looking statements in this press release and our related earnings
conference call are made only as of the date hereof and we undertake no
obligation to update publicly any forward-looking statement, even if new
information becomes available or other events occur in the future.
Supplemental Non-GAAP Financial Measures:
In this press release and our related earnings conference call, the company
intends to provide investors with a better understanding of operating
results and underlying trends to assess the company's performance and
liquidity. Harte-Hanks evaluates its operating performance based on
several measures, including the non-GAAP financial measures of (1) free
cash flow, defined as net income, plus depreciation and amortization, plus
stock-based compensation (tax-effected), less capital expenditures, and (2)
EBITDA, defined as net income before interest, taxes, depreciation, and
amortization. Harte-Hanks believes that free cash flow and EBITDA are
useful supplemental financial measures for investors because they
facilitate investors' ability to evaluate the operational strength of the
company's business. Free cash flow and EBITDA, however, are not calculated
in accordance with GAAP and they should not be considered substitutes for
net income as an indicator of operating performance. A quantitative
reconciliation of free cash flow and EBITDA to net income is found in the
tables attached to this release.
Harte-Hanks, Inc.
Consolidated Statements of Operations (Unaudited)
Three months ended Twelve months ended
December 31, December 31,
In thousands, except per ---------------------- ----------------------
share data 2009 2008 2009 2008
---------- ---------- ---------- ----------
Operating revenues $ 217,489 $ 269,643 $ 860,143 $1,082,821
Operating expenses:
Labor 89,500 112,875 366,077 448,769
Production and
distribution 78,528 103,155 312,230 398,701
Advertising, selling,
general and administrative 16,005 18,603 62,479 81,655
Shopper legal settlement 6,950 - 6,950 -
Depreciation and
amortization 6,679 9,490 29,977 36,379
---------- ---------- ---------- ----------
197,662 244,123 777,713 965,504
---------- ---------- ---------- ----------
Operating income 19,827 25,520 82,430 117,317
---------- ---------- ---------- ----------
Other expenses (income):
Interest expense 703 3,413 8,150 14,201
Interest income (37) (62) (182) (378)
Other, net 361 (76) 2,520 1,925
---------- ---------- ---------- ----------
1,027 3,275 10,488 15,748
---------- ---------- ---------- ----------
Income before income taxes 18,800 22,245 71,942 101,569
Income tax expense 5,308 7,919 24,227 38,828
---------- ---------- ---------- ----------
Net income $ 13,492 $ 14,326 $ 47,715 $ 62,741
========== ========== ========== ==========
Basic earnings per
common share $ 0.21 $ 0.23 $ 0.75 $ 0.98
========== ========== ========== ==========
Weighted-average common
shares outstanding 63,574 63,376 63,556 63,933
========== ========== ========== ==========
Diluted earnings per
common share $ 0.21 $ 0.23 $ 0.75 $ 0.98
========== ========== ========== ==========
Weighted-average common
and common equivalent
shares outstanding 64,100 63,584 63,885 64,104
========== ========== ========== ==========
Harte-Hanks, Inc.
Balance Sheet Data (Unaudited)
December 31, December 31,
In thousands 2009 2008
---------- ----------
Cash and cash equivalents $ 86,598 $ 30,161
Total debt $ 239,688 $ 270,625
Harte-Hanks, Inc.
Business Segment Information (Unaudited)
Three months ended Twelve months ended
December 31, December 31,
-------------------------- ----------------------------
In thousands 2009 2008 % Change 2009 2008 % Change
-------- -------- ------ -------- ---------- ------
OPERATING REVENUES:
Direct
Marketing $153,010 $188,860 -19.0% $585,988 $ 732,740 -20.0%
Shoppers 64,479 80,783 -20.2% 274,155 350,081 -21.7%
-------- -------- -------- ----------
Total
operating
revenues $217,489 $269,643 -19.3% $860,143 $1,082,821 -20.6%
-------- -------- -------- ----------
OPERATING INCOME:
Direct
Marketing $ 27,932 $ 29,422 -5.1% $ 95,812 $ 103,121 -7.1%
Shoppers (5,370) (975) -450.8% (1,354) 25,884 -105.2%
General
corporate
expense (2,735) (2,927) 6.6% (12,028) (11,688) -2.9%
-------- -------- -------- ----------
Total
operating
income $ 19,827 $ 25,520 -22.3% $ 82,430 $ 117,317 -29.7%
-------- -------- -------- ----------
DEPRECIATION AND
AMORTIZATION:
Direct
Marketing $ 4,881 $ 6,769 -27.9% $ 21,205 $ 27,253 -22.2%
Shoppers 1,793 2,713 -33.9% 8,747 9,103 -3.9%
General
corporate
expense 5 8 -37.5% 25 23 8.7%
-------- -------- -------- ----------
Total
depreciation
and
amortization $ 6,679 $ 9,490 -29.6% $ 29,977 $ 36,379 -17.6%
-------- -------- -------- ----------
Reconciliation of Net Income to Free Cash Flow
Three months ended Twelve months ended
December 31, December 31,
------------------ --------------------
In thousands 2009 2008 2009 2008
-------- -------- -------- ----------
Net Income $ 13,492 $ 14,326 $ 47,715 $ 62,741
Add: After-tax
stock-based
compensation
(Note 1) 587 836 2,578 3,599
Add:
depreciation
and
amortization 6,679 9,490 29,977 36,379
Less: capital
expenditures 1,609 3,807 9,011 19,948
-------- -------- -------- ----------
Free cash flow $ 19,149 $ 20,845 $ 71,259 $ 82,771
-------- -------- -------- ----------
Note 1: Pre-tax compensation expense was $817 and $1,298 for the
three months ended December 31, 2009 and 2008, respectively.
Pre-tax compensation expense was $3,890 and $5,287 for the
twelve months ended December 31, 2009 and 2008, respectively.
Reconciliation of Net Income to EBITDA
Three months ended Twelve months ended
December 31, December 31,
------------------ --------------------
In thousands 2009 2008 2009 2008
-------- -------- -------- ----------
Net Income $ 13,492 $ 14,326 $ 47,715 $ 62,741
Add: Depreciation
and amortization 6,679 9,490 29,977 36,379
Interest
expense, net
and
non-operating,
net 1,027 3,275 10,488 15,748
Income tax
expense 5,308 7,919 24,227 38,828
-------- -------- -------- ----------
EBITDA $ 26,506 $ 35,010 $112,407 $ 153,696
-------- -------- -------- ----------
EBITDA by
Segment:
Direct
Marketing $ 32,813 $ 36,191 $117,017 $ 130,374
Shoppers (3,577) 1,738 7,393 34,987
Corporate (2,730) (2,919) (12,003) (11,665)
-------- -------- -------- ----------
$ 26,506 $ 35,010 $112,407 $ 153,696
-------- -------- -------- ----------
Harte-Hanks, Inc.
Direct Marketing Revenue Mix (Unaudited)
Vertical Markets - Percent of Direct Marketing Revenue
Three months ended Twelve months ended
December 31, December 31,
------------------ ------------------
2009 2008 2009 2008
-------- -------- -------- --------
Retail 28% 28% 26% 25%
Financial and Insurance Services 13% 13% 13% 16%
Technology 28% 29% 29% 28%
Healthcare and Pharmaceuticals 11% 11% 11% 11%
Other Select Markets 20% 19% 21% 20%
-------- -------- -------- --------
100% 100% 100% 100%
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