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HarteHanks Inc. Reports Operating Results (10-Q)

May 05, 2009 | About:
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HarteHanks Inc. (HHS) filed Quarterly Report for the period ended 2009-03-31.

Harte-Hanks is a worldwide direct and targeted marketing company that provides 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 a process of `customer optimization` organized around five strategic considerations: Information data collection/management -- Opportunity data access/utilization -- Insight data analysis/interpretation -- Engagement knowledge application -- Interaction program execution. Expert in integrating this process Harte-Hanks Direct Marketing is highly skilled at tailoring solutions for each of the vertical markets it serves. HarteHanks Inc. has a market cap of $608.2 million; its shares were traded at around $9.58 with a P/E ratio of 9.7 and P/S ratio of 0.6. The dividend yield of HarteHanks Inc. stocks is 3.1%. HarteHanks Inc. had an annual average earning growth of 10.8% over the past 10 years. GuruFocus rated HarteHanks Inc. the business predictability rank of 4.5-star.

Highlight of Business Operations:

Consolidated revenues decreased 18.9%, to $217.7 million, and operating income decreased 46.7% to $13.8 million in the first quarter of 2009 compared to the first quarter of 2008. Our overall results reflect decreased revenues of $32.3 million, or 18.0%, from our Direct Marketing segment and decreased revenues of $18.5 million, or 20.7%, from our Shoppers segment. Direct Marketing experienced a year-over-year high single-digit revenue decline from our pharma/healthcare vertical and double-digit declines from all of our other vertical markets. These results reflect the effects of the ongoing economic recession on our Direct Marketing business. 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 Shoppers revenues was the result of decreased sales in established markets, including declines in virtually every revenue category, and curtailment of circulation of approximately 1.5 million addresses from July of 2008 to February of 2009.

Operating expenses decreased $30.3 million, or 19.2%, in the first quarter of 2009 compared to the first quarter of 2008. Labor costs decreased $11.9 million, or 14.3%, due to headcount reductions, lower commissions as a result of revenue performance, and lower stock-based compensation. This decrease was partially offset by a $1.3 million increase in severance. Production and distribution costs decreased $13.2 million, or 24.5%, due to lower outsourced costs as a result of lower outsourced volumes, and lower logistics-related transportation costs resulting from reduced transportation volumes and decreased transportation costs. General and administrative expense decreased $4.0 million, or 29.5%, due primarily to less travel. Depreciation and amortization expense decreased $1.1 million, or 16.4%, due to certain intangible assets and software becoming fully amortized and decreased capital expenditures in the last several quarters.

Operating expenses decreased $8.4 million, or 10.2%, in the first quarter of 2009 compared to the first quarter of 2008. Total labor costs decreased $4.9 million, or 16.2%, as a result of reductions in our Shoppers workforce due to consolidations and circulation curtailments. Severance costs for the quarter were $0.9 million compared to $1.3 million in the first quarter of 2008. Total production costs decreased $2.8 million, or 6.5%, due primarily to decreased postage costs resulting from circulation curtailments and distribution volumes, decreased offload printing costs due to decreased distribution volumes and decreased paper costs due to circulation reductions and a decline in ad placements. This decrease was partially offset by $1.6 million in lease write-offs related to the consolidations and circulation curtailments. Total general and administrative costs decreased $1.6 million, or 23.7%, due primarily to lower promotion-related expense due to revenue levels, and lower insurance expense due to favorable workers compensation experience. This decrease was partially offset by an increase in bad debt expense. Depreciation and amortization expense increased $1.0 million, or 45.4%, due to the acceleration of depreciation of assets related to the circulation curtailments and plant consolidation.

As of March 31, 2009, cash and cash equivalents were $49.7 million, increasing $19.6 million from December 31, 2008. This net increase was a result of net cash provided by operating activities of $33.2 million, offset by cash used in investing activities of $2.1 million and net cash used in financing activities of $11.4 million.

Net cash outflows from financing activities were $11.4 million for the three months ended March 31, 2009 compared to net cash outflows of $17.1 million for the three months ended March 31, 2008. The difference is attributable primarily to $76.6 million less spent on the repurchase of our common stock, partially offset by $55.0 million less net borrowings in the first three months of 2009 than in the first three months of 2008.

Our five-year $125 million Revolving Credit Facility has a maturity date of August 12, 2010. At March 31, 2009, we did not have any outstanding amounts drawn against our Revolving Credit Facility. The five-year $200 million 2006 Term Loan Facility has a maturity date of September 6, 2011. At March 31, 2009, our debt balance related to the 2006 Term Loan Facility was $165.8 million. The four-year $100 million 2008 Term Loan Facility has a maturity date of March 7, 2012. At March 31, 2009, our debt balance related to the 2008 Term Loan Facility was $97.8 million.

Read the The complete ReportHHS is in the portfolios of Richard Pzena of Pzena Investment Management LLC.

Rating: 4.2/5 (5 votes)

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