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HarteHanks Inc. Reports Operating Results (10-Q)

May 02, 2012 | About:
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10qk

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HarteHanks Inc. (HHS) filed Quarterly Report for the period ended 2012-03-31.

Harte-hanks Inc has a market cap of $525.9 million; its shares were traded at around $8.18 with a P/E ratio of 11.8 and P/S ratio of 0.6. The dividend yield of Harte-hanks Inc stocks is 4.1%.

Highlight of Business Operations:

Consolidated revenues decreased 2.6%, to $195.2 million, and operating income decreased 9.7% to $12.9 million in the first quarter of 2012 compared to the first quarter of 2011. Our overall results reflect decreased revenues of $1.6 million, or 1.2%, from our Direct Marketing segment and decreased revenues of $3.5 million, or 5.9%, from our Shoppers segment. Direct Marketing experienced decreased revenues from our financial and high-tech verticals, which were partially offset by increased revenues from our pharmaceutical and retail vertical markets. Our select vertical was flat compared to the prior year quarter. 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.

Overall operating expenses decreased 2.0%, to $182.2 million, in the first quarter of 2012 compared to the first quarter of 2011. The overall decrease in operating expenses was driven by decreased operating expenses in Shoppers of $2.5 million, or 4.2%, and decreased operating expense of $1.3 million, or 1.0%, in Direct Marketing. The decrease at Shoppers was due to decreased severance costs, lower variable payroll costs from lower ad sales and headcount reductions, and decreased lease expense. The overall decrease at Shoppers was partially offset by an increase in general and administrative costs, including bad debt expense, an increase in postage costs due to the April 2011 and January 2012 postage rate increases, and an increase in newsprint expense due to higher paper rates. The decrease at Direct Marketing was primarily due to decreased outsourced costs resulting from decreased outsourced volumes, and lower facility lease costs. The overall decrease at Direct Marketing was partially offset by an increase in labor due to increased headcount to support revenues and an increase in medical costs, and increases in travel, employee recruiting and bad debt expense.

Net income decreased 14.2%, to $6.8 million, and diluted earnings per share decreased 8.3%, to $0.11 per share, in the first quarter of 2012 when compared to the first quarter of 2011. The decrease in net income was a result of decreased operating income from both Direct Marketing and Shoppers and increased interest expense.

Operating expenses decreased $1.3 million, or 1.0%, in the first quarter of 2012 compared to the first quarter of 2011. Labor costs increased $0.7 million, or 1.0%, due to increased headcount to support revenues, and an increase in medical costs. Production and distribution costs decreased $2.1 million, or 4.9%, due to decreased outsourced costs resulting from decreased outsourced volumes, and lower facility lease costs. General and administrative expense decreased $0.1 million, or 0.5%, due primarily to a decrease in facility costs, partially offset by increases in travel, employee recruiting and bad debt expense. Depreciation and software amortization expense increased $0.2 million, or 4.6%, due to increased capital expenditures in 2011. Intangible asset amortization was down slightly due to certain intangible assets becoming fully amortized.

Operating expenses decreased $2.5 million, or 4.2%, in the first quarter of 2012 compared to the first quarter of 2011. Total labor costs decreased $3.0 million, or 15.3%, due to decreased severance costs, and lower variable payroll costs from lower ad sales, headcount reductions and pay rate reductions. Total production costs were flat as decreased facility lease expenses and outsourced costs were offset by an increase in postage costs due to the April 2011 and January 2012 postage rate increases, and an increase in newsprint expense due to higher paper rates. Total general and administrative costs increased $0.6 million, or 19.0%, due to a legal accrual reduction in the first quarter of 2011, and an increase in bad debt expense, partially offset by lower workers compensation costs. Depreciation and software amortization expense and intangible asset amortization were flat compared to the prior year quarter.

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