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HarteHanks Inc. Reports Operating Results (10-Q)

August 08, 2012 | About:

10qk

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HarteHanks Inc. (HHS) filed Quarterly Report for the period ended 2012-06-30.

Harte-hanks, Inc. has a market cap of $410.8 million; its shares were traded at around $6.61 with a P/E ratio of 9.9 and P/S ratio of 0.5. The dividend yield of Harte-hanks, Inc. stocks is 5.2%.

Highlight of Business Operations:

Overall operating expenses were $351.8 million in the second quarter of 2012, compared to $196.5 million in the second quarter of 2011. This $155.3 million year over year increase was a result of an impairment loss of $165.3 million related to goodwill and other intangible assets associated with our Shoppers segment recorded in the second quarter of 2012. Excluding this impairment loss, operating expenses decreased $10.0 million, or 5.1%, compared to the second quarter of 2011. This $10.0 million decrease in operating expenses was driven by decreased operating expenses in Direct Marketing of $6.1 million, or 4.6%, and decreased operating expenses of $4.5 million, or 7.3%, in Shoppers (excluding the impairment charge), partially offset by an increase in general corporate expense of $0.6 million, or 22.5%. The decrease at Direct Marketing was primarily due to decreased outsourced costs resulting from decreased outsourced volumes, and decreased mail supply chain costs resulting from decreased volumes, partially offset by costs related to the recently announced departure of our Direct Marketing President. The decrease at Shoppers was due to decreased severance costs, decreased stock-based compensation, lower payroll costs from lower ad sales and headcount reductions, a decrease in facility lease expense, and a decrease in newsprint expense related to a decline in volumes. The overall decrease at Shoppers was partially offset by a legal accrual reduction in the second quarter of 2011, an increase in postage costs due to the January 2012 postage rate increases, and the write-off of software in the second quarter of 2012.

We recorded a net loss of $109.7 million and diluted loss per share of $1.74 in the second quarter of 2012. Excluding the impairment loss, second quarter 2012 net income and diluted earnings per share would have been $7.0 million and $0.11, respectively. These results, excluding the impairment loss, compare to net income of $9.4 million and diluted earnings per share of $0.15 in the first quarter of 2011. The decrease in net income, excluding the impairment loss, is primarily a result of decreased operating income from Direct Marketing and an increase in general corporate expense.

We recorded a net loss of $102.9 million, and diluted loss per share of $1.63, in the first half of 2012. Excluding the impairment loss, net income and diluted earnings per share for first half of 2012 would have been $13.8 million and $0.22, respectively. These results, excluding the impairment loss, compare to net income of $17.3 million, and diluted earnings per share of $0.27 in the first half of 2011. The decrease in net income, excluding the impairment loss, is primarily a result of decreased operating income from both Direct Marketing and Shoppers, and an increase in general corporate expense.

Shoppers operating expenses were $222.3 million in the second quarter of 2012, compared to $61.4 million in the second quarter of 2011. This $160.8 million year over year increase was primarily a result of an impairment loss of $165.3 million related to goodwill and other intangible assets recorded in the second quarter of 2012. Excluding this impairment loss, operating expenses decreased $4.5 million, or 7.3%, compared to the second quarter of 2011. Total labor costs decreased $4.8 million, or 22.1%, due to decreased severance costs, decreased stock-based compensation, and lower payroll costs from lower ad sales, headcount reductions and pay rate reductions. Total production costs were up $0.2 million, or 0.6%, due to an increase in postage costs resulting from the January 2012 postage rate increase, an increase in offload printing costs due to an increase in heatset volumes, and an increase in newsprint prices, partially offset by a decrease in facility lease expense and newsprint expense related to a decline in volumes. Total general and administrative costs decreased $0.4 million, or 9.6%, due to decreased bad debt expense and lower credit card processing fees, partially offset by a legal accrual reduction in the second quarter of 2011. Depreciation and software amortization expense increased $0.5 million, or 38.6% due to writing off software related to various digital initiatives. Intangible asset amortization was flat compared to the prior year quarter.

Shoppers operating expenses were $277.8 million in the first half of 2012, compared to $119.4 million in the first half of 2011. This $158.4 million year over year increase was primarily a result of the impairment loss discussed above. Excluding this impairment loss, operating expenses decreased $7.0 million, or 5.8%, compared to the first half of 2011. Total labor costs decreased $7.8 million, or 18.8%, due to decreased severance costs, decreased stock-based compensation, and lower payroll costs from lower ad sales, headcount reductions and pay rate reductions. Total production costs were up $0.2 million, or 0.3%, due to an increase in postage costs resulting from the April 2011 and January 2012 postage rate increases and increased newsprint prices, partially offset by a decrease in facility lease expense. Total general and administrative costs increased $0.2 million, or 2.5%, due to legal accrual reductions in the first half of 2011 and increased bad debt expense, partially offset by lower workers compensation costs and lower credit card processing fees. Depreciation and software amortization expense increased $0.5 million, or 19.4%, due to writing off software related to various digital initiatives. Intangible asset amortization was flat compared to the prior year quarter.

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