SAN ANTONIO, TX--(Marketwire - February 1, 2011) - Harte-Hanks, Inc. (
NYSE:
HHS) today
reported fourth quarter 2010 diluted earnings per share of $0.24 on
revenues of $236.0 million. These results compare to diluted earnings per
share of $0.21 on $217.5 million in revenues for the fourth quarter of
2009.
The following table presents financial highlights of the company's
operations for the fourth quarter of 2010 and 2009, respectively. Full
financial results are attached.
RESULTS FROM OPERATIONS (unaudited)
(In thousands, except per share amounts) Three Months Ended December 31,
-------------------------------
2010 2009 % Change
---------- ---------- ---------
Operating revenues $ 235,993 $ 217,489 8.5%
Operating income 25,109 19,827 26.6%
Net income 15,604 13,492 15.7%
Diluted earnings per share 0.24 0.21 14.3%
Diluted shares (weighted average common
and common equivalent shares outstanding) 64,198 64,100 0.2%
---------- ---------- ---------
For the three months ended December 31, 2010, the company generated free
cash flow (defined below) of $17.3 million, down from $19.1 million in the
prior year's fourth quarter.
For the year, the company's revenues increased slightly to $860.5 million
and operating income increased 10.5% to $91.1 million. Diluted earnings per
share for the year were $0.84 compared to $0.75 for 2009.
RESULTS FROM OPERATIONS (unaudited)
(In thousands, except per share amounts) Year Ended December 31,
-------------------------------
2010 2009 % Change
---------- ---------- ---------
Operating revenues $ 860,526 $ 860,143 0.0%
Operating income 91,053 82,430 10.5%
Net income 53,604 47,715 12.3%
Diluted earnings per share 0.84 0.75 12.0%
Diluted shares (weighted average common
and common equivalent shares outstanding) 64,139 63,885 0.4%
---------- ---------- ---------
Commenting on the 2010 performance, Chairman, President and Chief Executive
Officer Larry Franklin said, "We are very pleased with our fourth quarter
revenue performance particularly in Direct Marketing. The one-time project
we discussed in the third quarter accounted for approximately 50% of the
revenue growth. We had very strong revenue performance in our Software and
Data business and The Agency Inside Harte-Hanks. The 5.0% revenue decline
in Shoppers was slightly higher than the 4.2% decline in the third quarter.
There were several factors influencing the HDM profit performance. A
majority of the margin percentage decline was from incentive compensation
that resulted from the strong fourth quarter revenue performance. As
previously mentioned we are (and will continue) investing in the people and
product development necessary to execute multichannel and digital
strategies in both businesses. We are very pleased with our Shopper profit
performance in 2010 and the progress in their digital strategy."
Discussing the performance of individual business segments, Executive Vice
President and Chief Financial Officer, Doug Shepard, said, "Direct
Marketing fourth quarter revenues increased 14.2% and operating income
declined 3.7%. Revenue for each Direct Marketing vertical increased
approximately 10% in the fourth quarter compared to the fourth quarter of
2009 except for the pharma/healthcare vertical. Our pharma/healthcare
vertical increased approximately 55% due to the one-time project related to
a voluntary product recall for a long-standing customer that was carried
over from the third quarter. Operating income margins were 15.4% versus
18.3% in the fourth quarter of 2009.
Shoppers experienced a fourth quarter revenue decrease of 5.0% compared to
the fourth quarter of 2009 and an operating profit of $0.9 million. For the
year, Shoppers revenue decreased 5.4% and operating income excluding the
fourth quarter 2009 legal settlement of $6.95 million increased $10.0
million."
Concluding, Franklin said, "We are pleased with the fourth quarter revenue
growth in Direct Marketing, but we do not expect to have that level of
growth over the next few quarters. We do however expect to see some margin
improvement during 2011. For Shoppers, California and Florida remain very
difficult markets with unemployment still over 12%. Additionally we face
significant paper price increases and a postage increase. We continue to
invest in our digital strategy and are very excited about the progress we
are making. In both of our businesses, I am confident we have the
leadership team that will leverage these investments for long term success
while delivering excellent short term results for our customers, our people
and our shareholders. We are excited about the future because of our
financial strength and our people."
Selected Highlights:
-- Harte-Hanks Direct Marketing renewed and expanded its relationship with
one of the world's largest technology solution providers. In addition
to providing global data management strategy and related support
services for this client (as Harte-Hanks has done in the past),
Harte-Hanks' Mason Zimbler B2B agency will monitor and manage the
social marketing presence of the client's sales force for a major new
product initiative.
-- Harte-Hanks Direct Marketing's Trillium Software® provided a Basel II
compliance solution to one of its largest existing customers, a global
financial institution, centered on its Trillium Software System® and
related services. The bank will use the Trillium Software System to
evaluate risk, and for capital reserve calculation and reporting.
This solution represents a new way to leverage Trillium's ability to
capture and cleanse data to generate reliable, comprehensive and
actionable reports.
-- Trillium Software® introduced its TrilliumApps™ a Web-based
collection of pre-developed information quality rules, processes and
full data quality workflows that can be easily downloaded at no cost
and inserted into existing Trillium Software System® environments.
TrilliumApps has been built leveraging the broad and deep experience
of Trillium Software consultants and engineers working across a wide
variety of industries, geographies and projects. TrilliumApps organizes
the content for easy access to rules and applications (apps), enabling
customers to explore, select and download their chosen apps directly
to their desktops.
-- Harte-Hanks Direct Marketing won a competitive process to deliver a
large relationship marketing program for a nation-wide financial service
provider. The Agency Inside Harte-Hanks will coordinate marketing
strategy development and execution, drawing from Harte-Hanks' marketing
database, data services, email and targeted mail capabilities to provide
an integrated multichannel solution to the client.
-- In the fourth quarter, Mazda Europe selected Harte-Hanks' Trillium
Software System® to analyze and consolidate customer data for its
company-wide customer relationship management (CRM) initiative. Mazda
will utilize the Trillium Software System to fulfill the necessary
consolidation and cleansing of data in real time, while continually
assuring that its mission-critical customer data is of the highest
possible quality.
-- Harte-Hanks leveraged its relationship with a long-standing department
store client to secure significant new business for Harte-Hanks
Shoppers, PennySaverUSA.com® and Harte-Hanks Direct Marketing's
Trillium Software®. The Trillium Software System will be used for
data quality control and improvement to increase the effectiveness of
the client's multichannel marketing initiatives. This client is
currently one of Harte-Hanks Direct Marketing's largest mail and data
services clients.
-- Harte-Hanks' Trillium Software® licensed the Trillium Software
System® to another of the world's largest financial institutions for
automating their data quality processes, as well as to support Basel II
reporting requirements. Trillium software also secured new clients, and
significant renewals or expansions for existing clients, in the consumer
electronics, financial services, consumer packaged goods, hotel,
consumer retail, healthcare services and telecommunications industries.
-- Harte-Hanks Direct Marketing renewed and expanded its relationship with
Texas Instruments, a large semiconductor company. In addition to
providing technical support and fulfillment for Texas Instruments
(as Harte-Hanks has done in the past), Harte-Hanks social media support
specialists will monitor online forums for customer feedback so that the
client can address questions and make product design changes in response
to marketplace commentary.
-- The Agency Inside Harte-Hanks was selected by a large regional bank to
develop a relationship marketing program to deepen the banks
relationship with its customers. This multichannel program will also
integrate Harte-Hanks Direct Marketing's data and direct mail services
to deliver improved client results.
-- Harte-Hanks Direct Marketing expanded its relationship with a large
nationwide retailer in support of its sophisticated direct mail
programs. This client will now leverage Harte-Hanks' database and
analytics services to drive marketing strategies for multichannel
programs, most of which will be fulfilled by Harte-Hanks.
-- Harte-Hanks Aberdeen Group announced the launch of
Advantage.Aberdeen.com, a website providing technology marketers with
access to marketing program tools allowing them to utilize Aberdeen
Group's fact-based technology marketing research as campaign content,
and to direct lead generation activities to Aberdeen's more than 2.5
million technology decision makers in over 40 countries, 90% of the
Fortune 1,000, and 93% of the Technology 500.
-- The Agency Inside Harte-Hanks and its client Comcast won a 2010 "Silver"
MARK Award from the Cable & Telecommunications Association for Marketing
(CTAM) for a multichannel marketing program. The honor recognized an
advertising effort targeted to Comcast customers who received a Nintendo
Wii console for signing up for new "Triple Play" services (TV,
high-speed internet and voice). A direct mail effort compelled these new
Nintendo Wii users to hook their consoles up to Comcast High-Speed
Internet.
-- Harte-Hanks increased its regular quarterly cash dividend, bringing the
cash dividend for the first quarter of 2011 to 8.0 cents per share.
This represents a 6.7% increase in the regular quarterly dividend and
is the company's fourteenth dividend increase since its 1993 public
offering. With the payment of this dividend, Harte-Hanks will have
paid consecutive quarterly dividends since the first quarter of 1995.
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.
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 continuing economic uncertainty 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, (a) domestic, international and local economic
and business conditions, including (i) market conditions in California and
Florida that may continue to adversely impact local advertising
expenditures in our Shoppers publications and (ii) the adverse impact of
continuing economic uncertainty in the United States and elsewhere on the
marketing expenditures and activities of our clients and prospects, (b) the
demand for our services by clients and prospective clients, including (i)
the willingness of existing clients to maintain or increase their spending
on products and services that are or remain profitable for us, and (ii) our
ability to predict changes in client preferences, (c) the financial
condition and marketing budgets of our clients, including client
bankruptcies or other developments that may result in increased bad debt
expense, (d) economic and other business factors that impact the industry
verticals that we serve, including any consolidation of clients and
prospective clients in these verticals, (e) our ability to manage and
timely adjust our capacity and headcount, and to otherwise effectively
service our clients, (f) 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, (g) our ability to
protect our data centers against security breaches and other interruptions,
and to protect sensitive personal information of our clients and their
customers, (h) increasing concern over consumer privacy issues, or
enactment of legislation restricting the collection and use of information
that is currently legally available, (i) the impact of other regulations,
including restrictions on unsolicited marketing communications and other
consumer protection laws, (j) fluctuations in fuel prices, paper prices,
postal rates and postal delivery schedules, (k) the number of equity
securities that we may issue to employees, (l) the number of shares, if
any, that we may repurchase in connection with our repurchase program, (m)
unanticipated developments regarding litigation including the actual
outcome of our preliminary settlement to resolve a previously disclosed
class action lawsuit filed in 2001, or other contingent liabilities, and
(n) other factors discussed under "Item 1A. Risk Factors" in our Annual
Report on Form 10-K for the year ended December 31, 2009. 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.
This document may contain trademarks that are owned or licensed by
Harte-Hanks, Inc. and its subsidiaries, including, without limitation,
Harte-Hanks® and other names and marks. All other brand names, product
names, or trademarks belong to their respective holders.
Harte-Hanks, Inc.
Consolidated Statements of Operations (Unaudited)
Three months ended Twelve months ended
December 31, December 31,
-------------------- --------------------
In thousands, except per share
data 2010 2009 2010 2009
--------- --------- --------- ---------
Operating revenues $ 235,993 $ 217,489 $ 860,526 $ 860,143
Operating expenses:
Labor 97,464 89,500 356,037 366,077
Production and distribution 90,698 78,528 323,217 312,230
Advertising, selling, general
and administrative 16,851 16,005 66,792 62,479
Shopper legal settlement - 6,950 - 6,950
Depreciation and amortization 5,871 6,679 23,427 29,977
--------- --------- --------- ---------
210,884 197,662 769,473 777,713
--------- --------- --------- ---------
Operating income 25,109 19,827 91,053 82,430
--------- --------- --------- ---------
Other expenses (income):
Interest expense 722 703 2,824 8,150
Interest income (64) (37) (200) (182)
Other, net 596 361 2,102 2,520
--------- --------- --------- ---------
1,254 1,027 4,726 10,488
--------- --------- --------- ---------
Income before income taxes 23,855 18,800 86,327 71,942
Income tax expense 8,251 5,308 32,723 24,227
--------- --------- --------- ---------
Net income $ 15,604 $ 13,492 $ 53,604 $ 47,715
========= ========= ========= =========
Basic earnings per common share $ 0.25 $ 0.21 $ 0.84 $ 0.75
========= ========= ========= =========
Weighted-average common
shares outstanding 63,626 63,574 63,616 63,556
========= ========= ========= =========
Diluted earnings per common
share $ 0.24 $ 0.21 $ 0.84 $ 0.75
========= ========= ========= =========
Weighted-average common and
common equivalent shares
outstanding 64,198 64,100 64,139 63,885
========= ========= ========= =========
Harte-Hanks, Inc.
Balance Sheet Data (Unaudited)
December 31, December 31,
In thousands 2010 2009
------------- -------------
Cash and cash equivalents $ 85,996 $ 86,598
Total debt $ 193,000 $ 239,688
Harte-Hanks, Inc.
Business Segment Information (Unaudited)
Three months ended Twelve months ended
December 31, December 31,
-------------------------- ---------------------------
% %
In thousands 2010 2009 Change 2010 2009 Change
-------- -------- ------ -------- -------- -------
OPERATING
REVENUES:
Direct
Marketing $174,758 $153,010 14.2% $601,283 $585,988 2.6%
Shoppers 61,235 64,479 -5.0% 259,243 274,155 -5.4%
-------- -------- -------- --------
Total
operating
revenues $235,993 $217,489 8.5% $860,526 $860,143 0.0%
-------- -------- -------- --------
OPERATING
INCOME:
Direct
Marketing $ 26,903 $ 27,932 -3.7% $ 86,748 $ 95,812 -9.5%
Shoppers 887 (5,370) 116.5% 15,602 (1,354) -1252.3%
General
corporate
expense (2,681) (2,735) 2.0% (11,297) (12,028) 6.1%
-------- -------- -------- --------
Total
operating
income $ 25,109 $ 19,827 26.6% $ 91,053 $ 82,430 10.5%
-------- -------- -------- --------
DEPRECIATION AND
AMORTIZATION:
Direct
Marketing $ 4,403 $ 4,881 -9.8% $ 17,081 $ 21,205 -19.4%
Shoppers 1,464 1,793 -18.3% 6,333 8,747 -27.6%
General
corporate
expense 4 5 -20.0% 13 25 -48.0%
-------- -------- -------- --------
Total
depreciation
and
amortization $ 5,871 $ 6,679 -12.1% $ 23,427 $ 29,977 -21.9%
-------- -------- -------- --------
Reconciliation of Net Income to Free Cash Flow
Three months ended Twelve months ended
December 31, December 31,
------------------ -------------------
In thousands 2010 2009 2010 2009
-------- -------- -------- --------
Net Income $ 15,604 $ 13,492 $ 53,604 $ 47,715
Add: After-tax
stock-based
compensation
(Note 1) 623 587 2,418 2,578
Add: depreciation
and amortization 5,871 6,679 23,427 29,977
Less: capital
expenditures 4,818 1,609 17,449 9,011
-------- -------- -------- --------
Free cash flow $ 17,280 $ 19,149 $ 62,000 $ 71,259
-------- -------- -------- --------
Note 1: Pre-tax compensation expense was $953 and $817 for the three
months ended December 31, 2010 and 2009, respectively.
Pre-tax compensation expense was $3,907 and $3,890 for the twelve
months ended December 31, 2010 and 2009, respectively.
Reconciliation of Net Income to EBITDA
Three months ended Twelve months ended
December 31, December 31,
------------------ -------------------
In thousands 2010 2009 2010 2009
-------- -------- -------- --------
Net Income $ 15,604 $ 13,492 $ 53,604 $ 47,715
Add: Depreciation
and
amortization 5,871 6,679 23,427 29,977
Interest
expense, net
and non-
operating, net 1,254 1,027 4,726 10,488
Income tax
expense 8,251 5,308 32,723 24,227
-------- -------- -------- --------
EBITDA $ 30,980 $ 26,506 $114,480 $112,407
-------- -------- -------- --------
EBITDA by Segment:
Direct
Marketing $ 31,306 $ 32,813 $103,829 $117,017
Shoppers 2,351 (3,577) 21,935 7,393
Corporate (2,677) (2,730) (11,284) (12,003)
-------- -------- -------- --------
$ 30,980 $ 26,506 $114,480 $112,407
-------- -------- -------- --------
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,
-------------------- --------------------
2010 2009 2010 2009
--------- --------- --------- ---------
Retail 27% 28% 26% 26%
Financial and Insurance Services 12% 13% 13% 13%
Technology 26% 28% 27% 29%
Healthcare and Pharmaceuticals 15% 11% 13% 11%
Other Select Markets 20% 20% 21% 21%
--------- --------- --------- ---------
100% 100% 100% 100%
========= ========= ========= =========