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

February 02, 2010 | About:
10qk

10qk

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Harris Interactive Inc. (HPOL) filed Quarterly Report for the period ended 2009-12-31.

Harris Interactive Inc. has a market cap of $71.2 million; its shares were traded at around $1.32 with and P/S ratio of 0.4. Harris Interactive Inc. had an annual average earning growth of 4.3% over the past 5 years.HPOL is in the portfolios of Chuck Royce of ROYCE & ASSOCIATES.

Highlight of Business Operations:

Restructuring and other charges. Restructuring and other charges were $383 or less than 1% of total revenue for the three months ended December 31, 2009, compared with $5,844 or 11.5% of total revenue for the same prior year period. Other charges for the three months ended December 31, 2009 consisted primarily of costs associated with reorganizing the operational structure of our businesses in Asia. There were no restructuring activities during the three months ended December 31, 2009. For the three months ended December 31, 2008, we incurred restructuring charges of $3,120 related to headcount reductions and consolidations of leased office space at our U.S. facilities and $2,724 of

Interest expense. Interest expense was $499 or 1.1% of total revenue for the three months ended December 31, 2009, compared with $1,374 or 2.7% of total revenue for the same prior year period. Interest expense for the three months ended December 31, 2008 included a $961 charge to reflect the ineffectiveness of our interest rate swap as a cash flow hedge as a result of the violation of certain financial covenants under our credit agreement. There was no such charge during the three months ended December 31, 2009. Interest expense for the three months ended December 31, 2009 also reflects the impact of the decline in outstanding debt as we continue to make required principal payments.

Income taxes. We recorded an income tax benefit of $1,227 for the three months ended December 31, 2009, compared with an income tax provision of $18,509 for the same prior year period. The tax benefit for the three months ended December 31, 2009 was principally impacted by the tax benefits related to operating losses in certain of our foreign jurisdictions and a tax law change which resulted in an additional tax benefit of $1,103. Based upon managements assessment of the realizability of the Companys U.S. deferred tax assets, a full valuation allowance continues to be recorded at December 31, 2009.

Interest expense. Interest expense was $1,036 or 1.2% of total revenue for the six months ended December 31, 2009, compared with $1,830 or 1.8% of total revenue for the same prior year period. Interest expense for the six months ended December 31, 2008 included a $961 charge to reflect the ineffectiveness of our interest rate swap as a cash flow hedge as a result of the violation of certain financial covenants under our credit agreement. There was no such charge during the six months ended December 31, 2009. Interest expense for the six months ended December 31, 2009 also reflects the impact of the decline in outstanding debt as we continue to make required principal payments.

Income taxes. We recorded an income tax benefit of $1,476 for the six months ended December 31, 2009, compared with an income tax provision of $17,315 for the same prior year period. The tax benefit for the six months ended December 31, 2009 was principally impacted by the tax benefits related to operating losses in certain of our foreign jurisdictions and a tax law change which resulted in an additional tax benefit of $1,103. Based upon managements assessment of the realizability of the Companys U.S. deferred tax assets, a full valuation allowance continues to be recorded at December 31, 2009.

At December 31, 2009, we had cash, cash equivalents, and marketable securities of $15,137, 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, additional cash that may be generated from our operations and funds to the extent available through our credit facilities discussed below. Until we achieve certain 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 credit facilities. In addition, the revolving line expires on July 15, 2010 unless extended by our lenders. While we believe that our available sources of cash, even without access to our revolving line, 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 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.

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