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Harris Interactive Inc. Reports Operating Results (10-Q)

November 04, 2009 | About:
10qk

10qk

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Harris Interactive Inc. (HPOL) filed Quarterly Report for the period ended 2009-09-30.

Harris Interactive Inc. is a leading market research and polling firm using Internet-based and traditional methodologies to provide the clients with information about the views experiences and attitudes of people worldwide. The company provides the clients with information about the preferences needs purchase behavior and brand recognition of their potential and existing customers. The company also offers the clients continuous tracking capabilities so that they can ascertain product performance competitive position and consumer satisfaction. Harris Interactive Inc. has a market cap of $52.3 million; its shares were traded at around $0.97 with and P/S ratio of 0.3. Harris Interactive Inc. had an annual average earning growth of 4.3% over the past 5 years.

Highlight of Business Operations:

Revenue from services. Revenue from services decreased by $11,345, or 22.6%, to $38,935 for the three months ended September 30, 2009 compared with the same prior year period and included a negative foreign exchange rate impact of $1,425. The timing of the global recession was such that we did not begin to see its significant impact on our operations until the three months ended December 31, 2008. Revenue from services for the three months ended September 30, 2009 across North America, Europe and Asia generally continued to show the effects of a challenging economic environment, which in turn has resulted in decreases in the research budgets of many of our clients.

Depreciation and amortization. Depreciation and amortization was $1,754 or 4.5% of total revenue for the three months ended September 30, 2009, compared with $2,083 or 4.1% of total revenue for the same prior year period. The decrease in depreciation and amortization expense for the three months ended September 30, 2009 when compared with the same prior year period is the result of fixed and intangible assets that became fully depreciated or amortized during fiscal 2009 combined with decreased capital spending as part of our overall focus on controlling costs.

Restructuring and other charges. Restructuring and other charges were $148 or 0.4% of total revenue for the three months ended September 30, 2009, compared with $628 or 1.2% for the same prior year period. Other charges for the three months ended September 30, 2009 consisted of $148 additional legal fees associated with the amendment of our credit agreement during fiscal 2009, along with costs incurred to close our telephone-based data collection center in Brentford, United Kingdom during the three months ended September 30, 2009. Other charges for the three months ended September 30, 2008 consisted of $628 in fees paid to Alix Partners LLP to assist with performance improvement initiatives. There were no restructuring activities during the three months ended September 30, 2009 or the same prior year period.

Bookings for the three months ended September 30, 2009 were $32.7 million, compared with $43.5 million for the same prior year period. Bookings for the current quarter continued to show the effects of a challenging economic environment, which in turn has resulted in decreases in the research budgets of many of our clients.

At September 30, 2009, we had cash, cash equivalents, and marketable securities of $14,393, compared with $17,762 at June 30, 2009. Available sources of cash to support known or reasonably likely cash requirements over the next 12 months include cash, cash equivalents and marketable securities on hand at September 30, additional cash that may be generated from our operations and funds to the extent available through our credit facilities discussed below. Until we achieve leverage ratios specified in our credit agreement, we must have minimum cash balances ranging between 1.2 and 1.5 times the amount of borrowings we make under the revolving line that is part of our amended credit facilities. While we believe that our available sources of cash will support known or reasonably likely cash requirements over the next 12 months, including quarterly principal payments of $1,731 and interest payments due under our credit agreement, our ability to generate cash from our operations is dependent upon on our ability to profitably generate revenue, which requires that we continually develop new business, both for growth and to replace completed projects. Although work for no one client constitutes more than 10% of our revenue, we have had to find significant amounts of replacement and additional revenue as client relationships and work for continuing clients change and will likely have to continue to do so in the future. Our ability to profitably generate revenue depends not only on execution of our business plans, but also on general market factors outside of our control. As many of our clients treat all or a portion of their market research expenditures as discretionary, our ability to profitably generate revenue is adversely impacted whenever there are adverse macroeconomic conditions in the markets we serve.

Net cash provided by (used in) investing activities. Net cash provided by investing activities was $451 for the three months ended September 30, 2009, compared with $(2,101) used in investing activities for the same prior year period. The change from the same prior year period was principally the result of an increase in the net proceeds from the maturities and sales of marketable securities from $(1,392) for the three months ended September 30, 2008 to $513 for the three months ended September 30, 2009.

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