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HarteHanks Inc. Reports Operating Results (10-K)

March 07, 2012 | About:
Eric Houssels

10qk

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HarteHanks Inc. (HHS) filed Annual Report for the period ended 2011-12-31.

Harte-hanks Inc has a market cap of $535.2 million; its shares were traded at around $8.32 with a P/E ratio of 11.8 and P/S ratio of 0.6. The dividend yield of Harte-hanks Inc stocks is 4%.

Highlight of Business Operations:

Overall operating expenses increased 0.8%, to $775.4 million, in 2011 compared to 2010. The overall increase in operating expenses was driven by increased operating expenses in Direct Marketing of $16.2 million, or 3.2%. The Direct Marketing increase 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 travel and increased employee recruiting. The acquisition of Information Arts also contributed to the increase in Direct Marketing operating expenses. Shoppers operating expenses decreased $10.3 million, or 4.2%, due to lower variable payroll costs, decreased postage due to lower distribution volumes and the elimination of the second day edition, decreased outsourced costs on lower volumes, decreased lease expense due to facility consolidations, and a $1.3 million reduction of a legal accrual. The overall decrease at Shoppers was partially offset by $4.1 million of charges recognized in the first half of 2011 related to our efforts to reduce expenses in the Shoppers business. 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. The decrease at Shoppers was also partially offset by a non-recurring postal incentive rebate earned in the third quarter of 2010 and an increase in newsprint expense due to higher paper rates. Excluding the retirement, severance and other charges, and the legal accrual reduction, Shoppers operating expenses decreased $13.1 million, or 5.4%.

Operating expenses increased $16.2 million, or 3.2%, in 2011 compared to 2010. Labor costs increased $9.3 million, or 3.5%, due to increased headcounts to support revenues and improve our database service capabilities. Production and distribution costs increased $6.4 million, or 3.4%, due to higher mail supply chain costs on higher transportation volumes. General and administrative expense increased $2.2 million, or 4.8%, due primarily to an increase in travel and employee recruiting. Depreciation and software amortization expense decreased $1.6 million, or 9.5%, due to decreased capital expenditures over the last few years. Intangible asset amortization was down $0.1 million, or 20.9%, due to certain intangible assets becoming fully amortized.

Operating expenses increased $24.4 million, or 5.0%, in 2010 compared to 2009. The one-time project described previously contributed to this increase. Labor costs increased $2.9 million, or 1.1%, due to increased incentive compensation and commissions as a result of revenue performance. This increase was partially offset by lower payrolls due to lower average headcount, decreased severance, decreased healthcare expense and decreased pension expense. Production and distribution costs increased $20.8 million, or 12.7%, due to increased outsourced costs resulting from increased outsourced volumes, and higher mail supply chain costs along with higher transportation volumes. This increase was partially offset by decreased lease expense due to facility consolidations. General and administrative expense increased $4.8 million, or 11.9%, due primarily to an increase in travel, employee recruiting, facilities costs and bad debt expense. Depreciation and software amortization expense decreased $3.7 million, or 18.0%, due to decreased capital expenditures over the last few years. Intangible asset amortization decreased $0.4 million, or 59.6%, as certain intangible assets became fully amortized.

Operating expenses decreased $10.3 million, or 4.2%, in 2011 compared to 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 $4.4 million, or 5.5%, 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 $8.5 million, or 10.5%. Total production costs decreased $3.2 million, or 2.3%, 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, decreased outsourced costs resulting from decreased outsourced volumes, and decreased lease expense due to facility consolidations and eliminations. 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 $2.1 million, or 11.3%, due primarily to a $1.3 million reduction of a legal accrual. Depreciation and software amortization expense decreased $0.4 million, or 7.7%, due to decreased capital expenditures in the last few years. Intangible asset amortization decreased $0.1 million, or 18.6%, as certain intangible assets became fully amortized. Excluding the retirement, severance and other charges, and the legal accrual reduction, Shoppers operating expenses decreased $13.1 million, or 5.4%.

Operating expenses decreased $31.9 million, or 11.6%, in 2010 compared to 2009. A $7.0 million legal settlement in the fourth quarter of 2009 contributed to this decrease. Excluding this legal settlement, operating expenses decreased $24.9 million, or 9.3%. Total labor costs decreased $11.9 million, or 12.8%, as a result of reductions in our Shoppers workforce due to plant consolidations, administrative staff reductions, lower variable payroll costs from lower ad sales and volumes, lower severance costs, lower healthcare costs and lower pension expense. Total production costs decreased $9.8 million, or 6.7%, due primarily to decreased paper costs resulting from lower average paper rates and declines in volumes, decreased facility lease costs as a result of a lease write-off in the first quarter of 2009 related to consolidations and circulation curtailments, decreased postage costs as a result of a non-recurring postal incentive rebate received in the third quarter of 2010 and a decline in distribution volumes. Total general and administrative costs decreased $7.7 million, or 29.4%, due to the $7.0 legal settlement in the fourth quarter of 2009, and lower bad debt expense. Depreciation and software amortization expense decreased $2.1 million, or 27.3%, due to an accelerated depreciation charge in the first quarter of 2009 related to a facility consolidation in Florida, and decreased capital expenditures in the last few years. Intangible asset amortization decreased $0.3 million, or 29.7%, as certain intangible assets became fully amortized.

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