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HarteHanks Inc. Reports Operating Results (10-Q)

November 01, 2011 | About:
10qk

10qk

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HarteHanks Inc. (HHS) filed Quarterly Report for the period ended 2011-09-30.

Harte Hanks Inc has a market cap of $551.3 million; its shares were traded at around $8.78 with a P/E ratio of 12 and P/S ratio of 0.6. The dividend yield of Harte Hanks Inc stocks is 3.6%.

Highlight of Business Operations:

Overall operating expenses increased 0.2%, to $192.1 million, in the third quarter of 2011 compared to the third quarter of 2010. The overall increase in operating expenses was driven by increased operating expenses in Direct Marketing of $3.3 million, or 2.6%. Excluding the costs associated with the one-time project described above, Direct Marketing operating expenses increased $8.4 million, or 6.8%. The increase at Direct Marketing was primarily due to increased headcount to support revenues and improve our database service capabilities, higher mail supply chain costs on higher transportation volumes, increased production service costs due to higher revenues, increased travel and increased employee recruiting. Shoppers operating expenses decreased $2.6 million, or 4.4%, due to lower variable payroll costs resulting from headcount reductions, decreased postage (excluding the third quarter 2010 postage rebate) due to a decline in distribution volumes, the elimination of the second day edition in southern California and temporary postage rate reductions, and decreased outsourced costs resulting from decreased outsourced volumes. The overall decrease at Shoppers was partially offset by the effect of a non-recurring postal incentive rebate earned in the third quarter of 2010, an increase in newsprint expense due to higher paper rates, and higher bad debt expense.

Consolidated revenues increased 0.3%, to $626.1 million, while operating income decreased 21.8% to $51.6 million in the first nine months of 2011 compared to the first nine months of 2010. Our overall results reflect increased revenues of $19.3 million, or 4.5%, from our Direct Marketing segment and decreased revenues of $17.6 million, or 8.9%, from our Shoppers segment. The Direct Marketing results were affected by the large, one-time pharmaceutical project described above. Excluding the results from this project, total Direct Marketing revenues increased $25.4 million, or 6.1%, in the first nine months of 2011 compared to the first nine months of 2010. Direct Marketing experienced increased revenues from our select, financial and retail verticals, which were partially offset by decreased revenues from our healthcare and high-tech vertical markets. The August 31, 2010 acquisition of Information Arts also contributed to Direct Marketings revenue growth. Shoppers revenue performance reflects the continued impact that the difficult economic environments in California and Florida are having on our Shoppers business. The decrease in revenues was the result of decreased sales in established markets, including declines in most revenue categories.

Operating expenses increased $3.3 million, or 2.6%, in the third quarter of 2011 compared to the third quarter of 2010. Labor costs increased $3.1 million, or 4.7%, due to increased headcounts to support revenues and improve our database service capabilities. Production and distribution costs increased $0.2 million, or 0.5%, due to higher mail supply chain costs on higher transportation volumes and increased production service costs due to higher revenues. This increase was partially offset by decreased outsourced costs resulting from decreased outsourced volumes. General and administrative expense increased $0.6 million, or 5.6%, due primarily to an increase in travel and employee recruiting. Depreciation and software amortization expense decreased $0.5 million, or 12.9%, due to decreased capital expenditures over the last few years. Intangible asset amortization was down slightly due to certain intangible assets becoming fully amortized.

Operating expenses increased $22.2 million, or 6.1%, in the first nine months of 2011 compared to the first nine months of 2010. Labor costs increased $11.7 million, or 6.1%, due to increased headcounts to support revenues and improve our database service capabilities. Production and distribution costs increased $9.2 million, or 7.1%, due to higher mail supply chain costs on higher transportation volumes, and increased outsourced costs resulting from increased outsourced volumes. General and administrative expense increased $2.6 million, or 7.9%, due primarily to an increase in travel and employee recruiting. Depreciation and software amortization expense decreased $1.1 million, or 9.1%, due to decreased capital expenditures over the last few years. Intangible asset amortization was down slightly due to certain intangible assets becoming fully amortized.

Operating expenses decreased $6.1 million, or 3.4%, in the first nine months of 2011 compared to the first nine months of 2010. During the first half of 2011, we incurred $4.1 million of charges through our efforts to reduce expenses in the Shoppers business primarily through organizational restructuring and headcount reductions. Of these charges, $3.9 million related to the retirement of the President of our Shoppers business and severance due to headcount reductions. The remaining charges related to facilities and other miscellaneous items. Total labor costs decreased $1.8 million, or 3.0%, due to lower variable payroll costs from lower ad sales, headcount reductions and lower incentive compensation. Excluding the severance and retirement charges described above, total labor costs decreased $5.9 million, or 9.8%. Total production costs decreased $1.6 million, or 1.5%, due primarily to decreased postage costs as a result of a decline in distribution volumes and the elimination of the second day edition in southern California, and decreased outsourced costs resulting from decreased outsourced volumes. These decreases were partially offset by a non-recurring postal incentive rebate received in the third quarter of 2010 and an increase in newsprint expense due to higher paper rates. Total general and administrative costs decreased $2.2 million, or 15.1%, due primarily to a $1.3 million reduction of a legal accrual. Depreciation and software amortization expense decreased $0.4 million, or 9.7%, due to decreased capital expenditures in the last few years. Intangible asset amortization decreased $0.1 million, or 23.3%, as certain intangible assets became fully amortized. Excluding the retirement, severance and other charges, and the legal accrual reduction, Shoppers operating expenses decreased $11.6 million, or 6.3%.

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