-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Krf9BRrPsBQk4tYEJuugbcy4qgLgOR2DXZQSusIgb0zyRa8LATp5NCb3bV78UKTx 5o0C8JeaYJ2u6mI+9Tpljw== 0000950129-98-004680.txt : 19981202 0000950129-98-004680.hdr.sgml : 19981202 ACCESSION NUMBER: 0000950129-98-004680 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARTE HANKS INC CENTRAL INDEX KEY: 0000045919 STANDARD INDUSTRIAL CLASSIFICATION: 2741 IRS NUMBER: 741677284 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-07120 FILM NUMBER: 98748869 BUSINESS ADDRESS: STREET 1: 200 CONCORD PLAZA DR STE 800 CITY: SAN ANTONIO STATE: TX ZIP: 78216 BUSINESS PHONE: 2108299000 FORMER COMPANY: FORMER CONFORMED NAME: HARTE HANKS COMMUNICATIONS INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: HARTE HANKS NEWSPAPERS INC DATE OF NAME CHANGE: 19771010 10-Q 1 HARTE-HANKS, INC. - DATED 09/30/98 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q X Quarterly report pursuant to Section 13 or 15(d) of the Securities - - ----- Exchange Act of 1934 For the quarterly period ended September 30, 1998 ------------------ Transition report pursuant to Section 13 or 15(d) of the Securities - - ----- Exchange Act of 1934 For the transition period from __________ to __________ Commission File Number 1-7120 ------ HARTE-HANKS, INC. (formerly HARTE-HANKS COMMUNICATIONS, INC.) ------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 74-1677284 ------------------------------- ---------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 200 Concord Plaza Drive, San Antonio, Texas 78216 --------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code -- 210/829-9000 ------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- ------- Indicate the number of shares outstanding of each of the issuer's classes of common stock: $1 par value, 70,987,850 shares as of October 31, 1998. 2 2 HARTE-HANKS, INC. AND SUBSIDIARIES TABLE OF CONTENTS FORM 10-Q REPORT September 30, 1998
Page ---- Part I. Financial Information Item 1. Interim Condensed Consolidated Financial Statements (Unaudited) Condensed Consolidated Balance Sheets - 3 September 30, 1998 and December 31, 1997 Consolidated Statements of Operations - 4 Three months ended September 30, 1998 and 1997 Consolidated Statements of Operations - 5 Nine months ended September 30, 1998 and 1997 Consolidated Statements of Cash Flows - 6 Nine months ended September 30, 1998 and 1997 Consolidated Statements of Stockholders' Equity - 7 Nine months ended September 30, 1998 and 1997 Notes to Interim Condensed Consolidated Financial 8 Statements Item 2. Management's Discussion and Analysis of Financial 11 Condition and Results of Operations Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 18 (a) Exhibits (b) Reports on Form 8-K Signature 19
3 3 Harte-Hanks, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (in thousands, except per share and share amounts) - - -------------------------------------------------------------------------------- (Unaudited)
September 30, December 31, 1998 1997 -------------- ------------- Assets Current assets Cash and cash equivalents ..................... $ 59,285 $ 83,675 Short-term investments ........................ 128,865 388,145 Accounts receivable, net ...................... 114,207 109,340 Inventory ..................................... 5,436 7,703 Prepaid expenses .............................. 8,963 8,473 Current deferred income tax benefit ........... 12,050 12,518 Other current assets .......................... 4,167 3,285 --------- --------- Total current assets ........................ 332,973 613,139 Property, plant and equipment, net ............... 92,690 89,351 Goodwill, net .................................... 254,851 250,363 Other assets ..................................... 2,266 2,070 --------- --------- Total assets ................................ $ 682,780 $ 954,923 ========= ========= Liabilities and Stockholders' Equity Current liabilities Accounts payable .............................. $ 52,914 $ 49,918 Accrued payroll and related expenses .......... 21,565 23,097 Customer deposits and unearned revenue ........ 22,439 17,944 Income taxes payable .......................... 4,255 270,440 Other current liabilities ..................... 7,596 9,950 --------- --------- Total current liabilities ................... 108,769 371,349 Other long term liabilities ...................... 20,588 17,337 --------- --------- Total liabilities ........................... 129,357 388,686 --------- --------- Stockholders' equity Common stock, $1 par value, 250,000,000 shares authorized. 75,636,889 and 74,842,982 shares issued at September 30, 1998 and December 31, 1997, respectively .......................... 75,638 74,843 Additional paid-in capital .................... 185,057 177,238 Accumulated other comprehensive income ........ (262) (577) Retained earnings ............................. 406,731 362,000 --------- --------- 667,164 613,504 Less treasury stock: 4,545,508 and 1,648,608 shares at cost at September 30, 1998 and December 31, 1997, respectively ............. (113,741) (47,267) --------- --------- Total stockholders' equity .................. 553,423 566,237 --------- --------- Total liabilities and stockholders' equity .. $ 682,780 $ 954,923 ========= =========
See Notes to Interim Condensed Consolidated Financial Statements. 4 4 Harte-Hanks, Inc. and Subsidiaries Consolidated Statements of Operations (in thousands, except per share amounts) - - -------------------------------------------------------------------------------- (Unaudited)
Three Months Ended September 30, ---------------------------------- 1998 1997 ---- ---- Operating revenues ............................... $ 183,409 $ 155,061 --------- --------- Operating expenses Payroll ........................................ 66,057 56,648 Production and distribution .................... 68,644 58,447 Advertising, selling, general and administrative 15,179 14,268 Depreciation ................................... 5,135 4,374 Goodwill amortization .......................... 1,931 1,100 --------- --------- 156,946 134,837 --------- --------- Operating income ................................. 26,463 20,224 --------- --------- Other expenses (income) Interest expense ............................... 22 1,854 Interest income ................................ (2,772) (12) Other, net ..................................... 139 239 --------- --------- (2,611) 2,081 --------- --------- Income from continuing operations before income taxes .......................................... 29,074 18,143 Income tax expense ............................... 12,154 7,673 --------- --------- Income from continuing operations ................ 16,920 10,470 Income from discontinued operations, net of income taxes ............................ -- 5,079 --------- --------- Net income ....................................... $ 16,920 $ 15,549 ========= ========= Basic earnings per common share: Continuing operations ....................... $ 0.23 $ 0.14 Discontinued operations ..................... -- 0.07 --------- --------- Basic earnings per common share .......... $ 0.23 $ 0.21 ========= ========= Weighted-average common shares outstanding ..... 72,667 74,058 ========= ========= Diluted earnings per common share: Continuing operations ....................... $ 0.22 $ 0.13 Discontinued operations ..................... -- 0.07 --------- --------- Diluted earnings per common share ........ $ 0.22 $ 0.20 ========= ========= Weighted-average common and common equivalent shares outstanding .......................... 76,192 77,184 ========= =========
See Notes to Interim Condensed Consolidated Financial Statements. 5 5 Harte-Hanks, Inc. and Subsidiaries Consolidated Statements of Operations (in thousands, except per share amounts) - - -------------------------------------------------------------------------------- (Unaudited)
Nine months ended September 30, ------------------------------- 1998 1997 ---- ---- Operating revenues ............................... $ 547,888 $ 444,449 --------- --------- Operating expenses Payroll ........................................ 198,313 166,469 Production and distribution .................... 207,721 167,857 Advertising, selling, general and administrative 48,091 41,921 Depreciation ................................... 15,727 12,415 Goodwill amortization .......................... 5,760 3,305 --------- --------- 475,612 391,967 --------- --------- Operating income ................................. 72,276 52,482 --------- --------- Other expenses (income) Interest expense ............................... 151 5,619 Interest income ................................ (11,153) (62) Other, net ..................................... 1,000 (82) --------- --------- (10,002) 5,475 --------- --------- Income from continuing operations before income taxes .......................................... 82,278 47,007 Income tax expense ............................... 34,243 19,929 --------- --------- Income from continuing operations ................ 48,035 27,078 Income from discontinued operations, net of income taxes ............................ -- 14,833 --------- --------- Net income ....................................... $ 48,035 $ 41,911 ========= ========= Basic earnings per common share: Continuing operations ........................ $ 0.66 $ 0.36 Discontinued operations ...................... -- 0.20 --------- --------- Basic earnings per common share ........... $ 0.66 $ 0.56 ========= ========= Weighted-average common shares outstanding ..... 73,230 74,293 ========= ========= Diluted earnings per common share: Continuing operations ........................ $ 0.63 $ 0.35 Discontinued operations ...................... -- 0.19 --------- --------- Diluted earnings per common share ......... $ 0.63 $ 0.54 ========= ========= Weighted-average common and common equivalent shares outstanding ............................. 76,844 77,438 ========= =========
See Notes to Interim Condensed Consolidated Financial Statements. 6 6 Harte-Hanks, Inc. and Subsidiaries Consolidated Statements of Cash Flows (in thousands) - - ------------------------------------------------------------------------------- (Unaudited)
Nine months ended September 30, ----------------------------------- 1998 1997 ---- ---- Operating Activities Net income ........................................... $ 48,035 $ 41,911 Adjustments to reconcile net income to cash (used in) provided by operating activities: Income from discontinued operations................. -- (14,833) Depreciation........................................ 15,727 12,415 Goodwill amortization............................... 5,760 3,305 Amortization of option related compensation......... 441 551 Deferred income taxes............................... 1,408 634 Other, net.......................................... (33) 593 Changes in operating assets and liabilities, net of acquisitions: (Increase) decrease in accounts receivable, net..... (3,424) 28 Decrease in inventory............................... 2,267 1,914 Increase in prepaid expenses and other current assets.................................... (1,342) (5,253) Decrease in accounts payable........................ 2,797 6,347 Decrease in other accrued expenses and other liabilities............................. (864) (3,695) Other, net.......................................... 3,784 6,247 -------- -------- Net cash provided by continuing operations........ 74,556 50,164 -------- -------- Net cash (used in) provided by discontinued operating activities.............................. (265,650) 25,682 --------- -------- Net cash (used in) provided by operating activities...................................... (191,094) 75,846 -------- -------- Investing Activities Acquisitions.......................................... (15,695) (110,351) Purchases of property, plant and equipment............ (18,982) (21,721) Proceeds from sale of property, plant and equipment... 214 1,926 Proceeds from divestiture............................. 5,000 -- Net proceeds from sale of and maturities of available-for-sale short-term investments .......... 259,765 -- Discontinued operations: Purchases of property, plant and equipment.......... -- (4,371) Proceeds from sale of property, plant and equipment. -- 19 Payments on film contracts.......................... -- (1,481) -------- -------- Net cash provided by (used in) investing activities...................................... 230,302 (135,979) -------- -------- Financing Activities Long-term borrowings.................................. -- 488,000 Payments on debt, including current maturities ...... -- (393,365) Issuance of common stock.............................. 6,180 12,248 Purchase of treasury stock............................ (66,474) (42,467) Dividends paid........................................ (3,304) (2,226) -------- -------- Net cash (used in) provided by financing activities...................................... (63,598) 62,190 --------- -------- Net (decrease) increase in cash....................... (24,390) 2,057 Cash and cash equivalents at beginning of year........ 83,675 12,017 -------- -------- Cash and cash equivalents at end of period............ $ 59,285 $ 14,074 ======== ========
See Notes to Interim Condensed Consolidated Financial Statements. 7 7 Harte-Hanks, Inc. and Subsidiaries Consolidated Statements of Stockholders' Equity - - -------------------------------------------------------------------------------- (Unaudited)
Accumulated Additional Other Total Common Paid-In Retained Treasury Comprehensive Stockholders' In thousands Stock Capital Earnings Stock Income Equity ----------------------------------------------------------------------------------- Balance at January 1, 1997 ....... $ 73,604 $ 149,875 $ 29,213 $ -- $ -- $ 252,692 Common stock issued - employee benefit plans ................ 218 2,515 -- -- -- 2,733 Exercise of stock options ........ 2,074 7,588 -- -- -- 9,662 Tax benefit of options exercised .................... -- 5,888 -- -- -- 5,888 Dividends paid ($0.02 per share) ....................... -- -- (2,226) -- -- (2,226) Net income ....................... -- -- 41,911 -- -- 41,911 Treasury stock repurchase ........ (1,509) 1,509 -- (42,467) -- (42,467) ----------------------------------------------------------------------------------- Balance at September 30, 1997 ......................... $ 74,387 $ 167,375 $ 68,898 $ (42,467) $ -- $ 268,193 =================================================================================== Balance at January 1, 1998 ....... $ 74,843 $ 177,238 $ 362,000 $ (47,267) $ (577) $ 566,237 Common stock issued - employee benefit plans ................ 162 2,908 -- -- -- 3,070 Exercise of stock options ........ 633 2,477 -- -- -- 3,110 Tax benefit of options exercised .................... -- 2,434 -- -- -- 2,434 Dividends paid ($0.03 per share) ....................... -- -- (3,304) -- -- (3,304) Net income ....................... -- -- 48,035 -- -- 48,035 Treasury stock repurchase ........ -- -- -- (66,474) -- (66,474) Change in unrealized loss on short-term investments (net of tax) ................. -- -- -- -- 315 315 ----------------------------------------------------------------------------------- Balance at September 30, 1998 ......................... $ 75,638 $ 185,057 $ 406,731 $(113,741) $ (262) $ 553,423 ===================================================================================
See Notes to Interim Condensed Consolidated Financial Statements. 8 8 Harte-Hanks, Inc. and Subsidiaries Notes to Interim Condensed Consolidated Financial Statements (Unaudited) NOTE A - BASIS OF PRESENTATION The accompanying unaudited Interim Condensed Consolidated Financial Statements include the accounts of Harte-Hanks, Inc. and subsidiaries (the "Company"). The statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months and nine months ended September 30, 1998 are not necessarily indicative of the results that may be expected for the year ending December 31. For further information, refer to the consolidated financial statements and footnotes included in the Company's annual report on Form 10-K for the year ended December 31, 1997. Certain prior period amounts have been reclassified for comparative purposes. NOTE B - DISCONTINUED NEWSPAPER AND TELEVISION OPERATIONS On October 15, 1997, the Company sold its newspaper operations, KENS-TV, the CBS affiliate in San Antonio, and KENS-AM radio to the E.W. Scripps Company (NYSE: SSP) for a cash price of $775 million plus approximately $15 million for working capital. Because the newspaper and television operations represent entire business segments that were divested, their results are reported as "discontinued operations" for January 1, 1997 through October 15, 1997. NOTE C - INCOME TAXES The Company's quarterly and nine month income tax provision of $12.2 million and $34.2 million, respectively, was calculated using an effective income tax rate of approximately 42%. The Company's effective income tax rate is derived by estimating pretax income and income tax expense for the year ending December 31, 1998. The effective income tax rate calculated is higher than the federal statutory rate of 35% due to the addition of state taxes and to certain expenses recorded for financial reporting purposes (primarily goodwill amortization) which are not deductible for federal income tax purposes. NOTE D - EARNINGS PER SHARE The Company has adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." This statement requires the presentation of basic earnings per share (EPS) and diluted EPS for reporting periods of all public companies ending after December 15, 1997, instead of the primary and fully diluted EPS previously reported. The new standard requires the 9 9 restatement of EPS for all periods presented. EPS is calculated as follows:
Three Months Ended September 30, In thousands, except per share amount 1998 1997 - - ----------------------------------------------------------------------------------------------- BASIC EPS Income from continuing operations ................................ $16,920 $10,470 Income from discontinued operations .............................. -- 5,079 ------- ------- Net Income ....................................................... $16,920 $15,549 ======= ======= Weighted-average common shares outstanding used in net earnings per share computations ................. 72,667 74,058 ======= ======= Basic earnings per common share: Continuing operations ....................................... $ 0.23 $ 0.14 Discontinued operations ..................................... -- 0.07 ------- ------- Net income .................................................. $ 0.23 $ 0.21 ======= ======= DILUTED EPS Income from continuing operations ................................ $16,920 $10,470 Income from discontinued operations .............................. -- 5,079 ------- ------- Net Income ....................................................... $16,920 $15,549 ======= ======= Shares used in net earnings per share computations ............... 76,192 77,184 ======= ======= Diluted earnings per common share: Continuing operations ....................................... $ 0.22 $ 0.13 Discontinued operations ..................................... -- 0.07 ------- ------- Net income .................................................. $ 0.22 $ 0.20 ======= ======= Computation of shares used in net earnings per share computations: Average outstanding common shares ................................ 72,667 74,058 Average common equivalent shares - dilutive effect of option shares ............................ 3,525 3,126 ------- ------- Shares used in net earnings per share computations ............... 76,192 77,184 ======= =======
Nine months ended September 30, In thousands, except per share amount 1998 1997 - - ----------------------------------------------------------------------------------------------- BASIC EPS Income from continuing operations ................................ $48,035 $27,078 Income from discontinued operations .............................. -- 14,833 ------- ------- Net Income ....................................................... $48,035 $41,911 ======= ======= Weighted-average common shares outstanding used in net earnings per share computations ................. 73,230 74,293 ======= ======= Basic earnings per common share: Continuing operations ....................................... $ 0.66 $ 0.36 Discontinued operations ..................................... -- 0.20 ------- ------- Net income .................................................. $ 0.66 $ 0.56 ======= ======= DILUTED EPS Income from continuing operations ................................ $48,035 $27,078 Income from discontinued operations .............................. -- 14,833 ------- ------- Net Income ....................................................... $48,035 $41,911 ======= ======= Shares used in net earnings per share computations .............. 76,844 77,438 ======= ======= Diluted earnings per common share: Continuing operations ....................................... $ 0.63 $ 0.35 Discontinued operations ..................................... -- 0.19 ------- ------- Net income .................................................. $ 0.63 $ 0.54 ======= ======= Computation of shares used in net earnings per share computations: Average outstanding common shares ................................ 73,230 74,293 Average common equivalent shares - dilutive effect of option shares ............................ 3,614 3,145 ------- ------- Shares used in net earnings per share computations ............... 76,844 77,438 ======= =======
10 10 NOTE E - COMPREHENSIVE INCOME The Company has adopted the provisions of SFAS No. 130, "Reporting Comprehensive Income." This statement requires the reporting of comprehensive income and its components in the financial statements, or in the notes to interim financial statements, for reporting periods ending after December 15, 1997. Comprehensive income is defined as the total non-owner changes in equity, which includes net income and all revenues, expenses, gains and losses that are excluded from net income under generally accepted accounting principles, but do not result from investments by owners or distributions to owners. The Company's total comprehensive income for the third quarter 1998 was $0.3 million less than net income, whereas comprehensive income for the third quarter 1997 was equal to net income. Total comprehensive income for the nine months ended September 30 of 1998 was $0.3 million greater than net income, whereas comprehensive income was equal to net income for the same period of 1997. NOTE F - STOCKHOLDERS' EQUITY On March 16, 1998, the Company effected a two-for-one split of its common stock in the form of a 100% stock dividend paid to holders of record on March 2, 1998. All share, per share and common stock amounts have been restated to retroactively reflect the stock split. In May 1998, the Company amended its Certificate of Incorporation to increase its total authorized common stock to 250,000,000 shares. The financial statements reflect this increase in authorized shares of common stock. In September 1998, the Company's board of directors authorized an increase of 3,000,000 shares in the Company's stock repurchase program, representing approximately 4% of its outstanding shares. NOTE G - RECENTLY ISSUED ACCOUNTING STANDARDS In October 1997, the Accounting Standards Executive Committee ("AcSEC") of the American Institute of Certified Public Accountants issued Statement of Position ("SOP") 97-2, "Software Revenue Recognition." SOP 97-2 provides guidance on the timing and amount of revenue recognition when licensing, selling, leasing or otherwise marketing computer software and is effective for transactions entered into during fiscal years beginning after December 15, 1997. The adoption of the provisions of SOP 97-2, which were effective as of January 1, 1998, have not materially affected the Company's financial condition or results of operations. 11 11 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - - ------------------------------------------------------------------------------- RESULTS OF OPERATIONS As described in Note B of the Notes to Interim Condensed Consolidated Financial Statements included herein, on October 15, 1997, the Company sold its newspaper and television operations. Therefore, the newspaper and television operations results are excluded from management's discussion and analysis of financial condition and results of operations below. Operating results from continuing operations -- direct marketing and shoppers -- were as follows:
THREE MONTHS ENDED NINE MONTHS ENDED In thousands SEPT. 30, 1998 SEPT. 30, 1997 CHANGE SEPT. 30, 1998 SEPT. 30, 1997 CHANGE - - ------------ -------------- -------------- ------ -------------- -------------- ------ Revenues $183,409 $155,061 18.3% $547,888 $444,449 23.3% Operating expenses 156,946 134,837 16.4% 475,612 391,967 21.3% -------- -------- -------- -------- Operating income $ 26,463 $ 20,224 30.8% $ 72,276 $ 52,482 37.7% ======== ======== ======== ======== Net income $ 16,920 $ 10,470 61.6% $ 48,035 $ 26,638 80.3% ======== ======== ======== ======== Diluted earnings per share $ 0.22 $ 0.14 57.1% $ 0.63 $ 0.34 85.3% ======== ======== ======== ========
(The results above exclude nine months ended September 30, 1997 non-recurring income of $0.8 million, or $0.4 million net of income taxes. This represents a gain on the sale of stock in another company partially offset by other non-recurring items. Including this gain, net income for the nine months ended September 30, 1997 was $27.1 million or 35 cents per share on a diluted basis.) Consolidated revenues grew 18.3% to $183.4 million and operating income grew 30.8% to $26.5 million in the third quarter of 1998 when compared to the third quarter of 1997. The Company's overall growth resulted from increased business with both new and existing customers and from the sale of new products and services. Overall operating expenses compared to 1997 increased 16.4% to $156.9 million. Net income grew 61.6% to $16.9 million, or 22 cents per share, compared to 14 cents per share on a diluted basis. The net income growth resulted from the growth in operating income as well as from $2.8 million interest income in the third quarter of 1998 compared to $1.9 million interest expense (allocated based upon percentage of net assets) for the same period in 1997. DIRECT MARKETING Direct marketing operating results were as follows:
THREE MONTHS ENDED NINE MONTHS ENDED In thousands SEPT. 30, 1998 SEPT. 30, 1997 CHANGE SEPT. 30, 1998 SEPT. 30, 1997 CHANGE - - ------------ -------------- -------------- ------ -------------- -------------- ------ Revenues $119,590 $105,114 13.8% $355,582 $299,317 18.8% Operating expenses 102,869 91,446 12.5% 308,221 262,431 17.4% -------- -------- -------- -------- Operating income $ 16,721 $ 13,668 22.3% $ 47,361 $ 36,886 28.4% ======== ======== ======== ========
Direct marketing revenues increased $14.5 million, or 13.8%, in the third quarter of 1998 when compared to 1997. Revenues were lead by database marketing, followed by response management and marketing services, all of which experienced good internal revenue growth for the quarter. Database marketing revenues increased primarily due to the growth in database processing, in software sales, in hardware sales and in other revenues, which consists primarily of consultive integration work. Database marketing revenues were also impacted by the November 1997 acquisition of Mercantile Software Systems, which contributed significantly to the increased hardware sales and consultive integration work. Response 12 12 management revenues increased due to increased telemarketing and internet business with existing customers, new customer gains, the August 1998 acquisition of Cornerstone Integrated Services, the November 1997 acquisition of Tele Support Services and to a lesser extent the May 1997 opening of the Langhorne, PA call center. Marketing services' revenues, led by its logistics operations, increased due to increased product sales as well as new product sales to new and existing customers, primarily in the retail industry. Operating expenses increased $11.4 million, or 12.5%, in the third quarter of 1998 when compared to 1997. Payroll costs increased $5.0 million due to expanded hiring to support revenue growth. Also contributing to the increased operating expenses were additional production costs of $4.5 million due to increased volumes. General and administrative expense increased $1.1 million due to increased professional and outside services fees and increased employee expenses related to growth offset by a decrease in bad debt expense. Depreciation expense increased $.6 million due to higher levels of capital investment to support growth. Operating expenses were also impacted by the acquisitions noted above. Direct marketing revenues increased $56.3 million, or 18.8%, in the first nine months of 1998 compared to the first nine months of 1997. Database marketing, response management and marketing services all experienced good revenue growth. Overall, revenue growth resulted from increased business with both new and existing customers, particularly in services provided to the retail, financial services, high technology and insurance industries. Operating expenses rose $45.8 million, or 17.4%, in the first nine months of 1998 when compared to the first nine months of 1997. Payroll costs increased $17.3 million due to expanded hiring to support revenue growth. In addition, production costs increased $19.0 million due to increased volumes. General and administrative expense increased $6.0 million due to increased professional and outside services fees and increased employee expenses related to growth. Depreciation expense increased $2.7 million due to the higher levels of capital investment. The acquisitions mentioned above also contributed to the increased operating expenses. SHOPPERS Shopper operating results were as follows:
THREE MONTHS ENDED NINE MONTHS ENDED In thousands SEPT. 30, 1998 SEPT. 30, 1997 CHANGE SEPT. 30, 1998 SEPT. 30, 1997 CHANGE - - ------------ -------------- -------------- ------ -------------- -------------- ------ Revenues $ 63,819 $ 49,947 27.8% $192,306 $145,132 32.5% Operating expenses 52,112 41,568 25.4% 160,836 123,490 30.2% -------- -------- -------- -------- Operating income $ 11,707 $ 8,379 39.7% $ 31,470 $ 21,642 45.4% ======== ======== ======== ========
Shopper revenues increased $13.9 million, or 27.8%, in the third quarter of 1998 as compared to 1997. The increase was primarily due to the September 1997 acquisition of the ABC Shopper Group, which accounted for $15.6 million of the revenue increase, partially offset by the sale of the Dallas-Fort Worth Shoppers Guide in April 1998 which resulted in a $2.0 million revenue decrease. Excluding the effects of the acquisition and the divestiture discussed above, revenue declines in real estate and automotive in-book advertising were partially offset by positive revenue growth in employment-related in-book advertising. Distribution product revenues remained flat due to decreases in standard print and delivery products revenues, partially offset by increased revenue from inserts. Operating expenses increased $10.5 million, or 25.4%, in the third quarter of 1998 when compared to 1997. The acquisition of the ABC Shopper Group accounted for a $13.4 million increase in operating expenses. The sale of the Dallas-Fort Worth Shoppers Guide resulted in a $2.1 million reduction in operating expenses. 13 13 Excluding the acquisition and divestiture mentioned above, operating costs declined primarily due to decreased bad debt expense of $1.1 million partially offset by increases in postage. Shopper revenues increased $47.2 million, or 32.5%, in the first nine months of 1998 compared to the first nine months of 1997. The ABC Shopper Group acquisition accounted for $47.6 million of this increase while the sale of the Dallas-Fort Worth Shoppers Guide in April 1998 resulted in a $3.2 million revenue decrease. Excluding the effects of the acquisition and the divestiture discussed above, revenues grew 2.0% due to growth in preprinted inserts, four-color glossy print and deliver products, in-book employment related advertising and improved trade sales. Gains in these categories were partially offset by declines in standard print and deliver products and in automotive and real estate related in-book advertising. Operating expenses rose $37.3 million, or 30.2%, in the first nine months of 1998 when compared to the first nine months of 1997. The acquisition of the ABC Shopper Group accounted for a $41.9 million increase in operating costs. The sale of the Dallas-Fort Worth Shoppers Guide resulted in a $3.3 million reduction in operating expenses. Excluding the acquisition and divestiture mentioned above, operating costs declined primarily due to decreased labor costs of $1.7 million which were influenced by improved production efficiencies, staff reductions and lower fringe benefit costs, as well as decreased bad debt expense of $1.6 million. Other Income and Expense The Company realized a loss of approximately $0.4 million in the first quarter 1998 on the sale of equity securities that were held in its short-term investment portfolio. In the third quarter of 1998, the Company recognized income of approximately $0.6 million for an insurance settlement. This income was partially offset by approximately $0.5 million of non-operating costs. Interest Expense/Interest Income Total Company interest income and expense were allocated to continuing and discontinued operations based on percentage of net assets through October 15, 1997. The percentage allocated to continuing operations was approximately 58% for the third quarter and first nine months of 1997. Interest expense decreased $1.8 million in the third quarter of 1998 and $5.5 million in the first nine months of 1998 over the same periods in 1997 due to the extinguishment of debt with the proceeds from the October 15, 1997 sale of the Company's newspaper and television operations. Interest income increased $2.8 million in the third quarter of 1998 and $11.1 million in the first nine months of 1998 over the same periods in 1997 due to the short-term investment of the proceeds from the sale of newspaper and television operations, after debt extinguishment, operational fundings and income tax payments. Income Taxes The Company's income tax expense increased $4.5 million in the third quarter and $14.3 million in first nine months of 1998, when compared to the third quarter and first nine months of 1997. This increase was due primarily to the higher pre-tax income levels. The effective tax rate was 41.8% for the third quarter and 41.6% for the first nine months of 1998 compared to 42.3% and 42.4%, respectively for the same periods of 1997. 14 14 Liquidity and Capital Resources Cash used in operating activities for the nine months ended September 30, 1998 was $191.1 million. The cash outflow from operating activities related primarily to the first quarter 1998 payment of $265.7 million in income taxes, resulting from the gain on the October 15, 1997 sale of newspaper and television operations. Net cash inflows from investing activities were $230.3 million for the first nine months of 1998 compared to net cash outflows of $136.0 million for the first nine months of 1997. The cash inflows from investing activities in 1998 was primarily attributable to sales and maturities of marketable securities totaling $259.8 million, the proceeds of which were used to help fund the Company's tax payments made in the first quarter of 1998, while the cash outflows from investing activities in 1997 is attributable to the acquisition of the ABC Shoppers Group in September 1997. Net cash outflows from financing activities were $63.6 million compared to net cash inflows of $62.2 million in 1997. The cash outflow from financing activities in 1998 is attributable primarily to the repurchase of treasury stock in the second and third quarters of 1998, while the cash inflow from financing activities in 1997 is attributable primarily to additional borrowings to fund the ABC Shoppers Group acquisition in September 1997. Capital resources were available from and provided through the Company's unsecured credit facility through October 15, 1997. All borrowings under the revolving credit facility were to be repaid by December 31, 2001. However, these outstanding borrowings ($306.3 million) were retired on October 15, 1997, funded primarily through the proceeds received from the sale of the Company's newspaper and television operations as described in Note B of the Notes to Interim Condensed Consolidated Financial Statements included herein. Management believes that the proceeds from the Company's sale of newspaper and television operations remaining after the retirement of debt and the payment of income taxes related to the sale, together with cash provided from operating activities, will be sufficient to fund operations and anticipated capital service needs for the foreseeable future. Divestiture On May 1, 1998, the Company sold three of its smallest shopper publications, located in Dallas, TX, Wichita, KS and Springfield, MO, to Central States Publishing, LLC. Acquisition On August 3, 1998, the Company acquired Cornerstone Integrated Services of Austin, TX, a leading provider of technical and marketing support services to major computer hardware and software manufacturers. Recent Developments On November 13, 1998, the Company acquired Printing Management Systems, Inc. of Bellmawr, New Jersey, a leading provider of integrated direct marketing services. Factors That May Affect Future Results and Financial Condition From time to time, in both written reports and oral statements by senior management, the Company may express its expectations regarding its future performance. These "forward-looking statements" are inherently uncertain, and investors should realize that events could turn out to be other than what senior management expected. Set forth below are some key factors which could affect the Company's future performance. Acquisitions -- In recent years the Company has made a number of acquisitions in its direct marketing and shopper businesses, and it expects to pursue additional acquisition opportunities. Acquisition activities, even if not consummated, require substantial amounts of management time and can distract from normal operations. In addition, there can be no assurance that the synergies and other 15 15 objectives sought in acquisitions will be achieved. Competition -- Direct marketing is a rapidly evolving business, subject to periodic technological advancements, high turnover of customer personnel who make buying decisions, and changing customer needs and preferences. Consequently, the Company's direct marketing business faces competition in each of its three sectors -- response management/teleservices, database marketing, and marketing services. The Company's shopper business competes for advertising, as well as for readers, with other print and electronic media. Competition comes from local and regional newspapers, magazines, radio, broadcast and cable television, shoppers and other communications media that operate in the Company's markets. The extent and nature of such competition are, in large part, determined by the location and demographics of the markets targeted by a particular advertiser, and the number of media alternatives in those markets. Postal Rates -- The Company's shoppers are delivered by standard mail, and postage is the second largest expense, behind payroll, in the Company's shopper business. The present standard postage rates went into effect in July 1995, and the next increase is expected January 1, 1999. Postal rates also influence the demand for the Company's direct marketing services even though the cost of mailings is borne by the Company's customers and is not directly reflected in the Company's revenues or expenses. Newsprint Prices -- Newsprint represents a substantial expense in the Company's shopper operations. In recent years newsprint prices have fluctuated widely, and such fluctuations can materially affect the results of the Company's operations. Economic Conditions -- Changes in national economic conditions can affect levels of advertising expenditures generally, and such changes can affect each of the Company's businesses. In addition, revenues from the Company's shopper business are dependent to a large extent on local advertising expenditures in the markets in which they operate. Such expenditures are substantially affected by the strength of the local economies in those markets. Direct marketing revenues are dependent on national and international economics. Year 2000 Issue - The Year 2000 Issue is a result of computer programs being written using two digits rather than four to define the applicable year. Accordingly, computer systems that rely on two digits to define an applicable year may recognize a date using "00" as the year 1900, rather than the Year 2000 (the "Year 2000 Issue"). This could result in a system failure or miscalculations causing disruptions of operations, including, but not limited to, a temporary inability to process or transmit data or engage in normal business activities. The Company relies on computer hardware, information technology ("IT Systems") and non-information technology systems ("Non-IT Systems") to operate its business. IT Systems are used in the creation and delivery of the Company's products and services, as well as, the Company's internal operations such as billing and accounting. IT Systems include systems which use information provided by third-party data suppliers to update the Company's databases. The Company also relies on Non-IT Systems (primarily consisting of embedded technology), such as microprocessors in tape drives, printing and inserting equipment, and elevators, and on utilities, such as telecommunications and power. The Company has defined Year 2000 Compliant to mean that a process will continue to run in the same manner when dealing with dates on or after January 1, 2000, as it did before January 1, 2000. The Company has conducted a comprehensive review of its IT Systems and Non-IT Systems to identify those that could be affected by the Year 2000 Issue, and has developed a remediation plan to resolve the issue. The most important areas of focus of the Company's Year 2000 remediation plan are the Company's products and services (including its databases, software that 16 16 manipulates these databases and software provided to customers); business operation support systems (billing, ordering, tracking systems, payroll and technical infrastructure (such as LANs, mail systems and websites)); and suppliers, facilities and equipment. The Company is utilizing both internal and external resources to correct or reprogram, and test the systems for the Year 2000 compliance. The Company's compliance objectives include products and services the Company has provided to customers in the past and will provide to customers in the future; all internal operating software systems and equipment; and the services, products, equipment and systems the Company has obtained and will obtain in the future from outside vendors. The Company's first objective was to remediate all products and services the Company has, or will provide, to customers. This included informing customers of their need to make their applications Year 2000 compliant to provide or accept associated files for services provided by the Company. This objective was deemed the top priority and was initiated in late 1997. In early 1998, the Company initiated action to remediate all internal business operation support systems, and the associated equipment it runs on. As part of this process, the Company developed a standard Year 2000 compliance certification memorandum to be sent to all vendors who have or are currently providing products or services to the Company, revised customer standard contract language to include a Year 2000 statement, and instituted a review process for formally responding to customer inquiries on the Company's Year 2000 compliance plans and status. The Company is also in the process of contacting its critical suppliers and other entities to determine the extent to which the Company's interface systems are vulnerable to those third parties' failure to remediate their own Year 2000 Issues. While the Company has not been informed of any material risks associated with these entities, there is no guarantee that the systems of these critical suppliers or other entities on which the Company relies, will be timely converted and will not have an adverse effect on the Company's systems or operations. In addition to the above, the Company formed a Year 2000 Compliance Council in June 1998 to monitor the status of compliance efforts and to ensure that all compliance issues are consistently addressed. The Company's Year 2000 remediation plan consists of four key phases: Inventory/Assessment, Repair/Replacement, Testing and Compliance/Internal Certification. As related to the Company's products and services, the Company is 100%, 80%, 60% and 60% completed, respectively. With regards to business operation support systems, the Company is 100%, 60%, 40%, and 40% completed, respectively. Finally, suppliers, facilities and equipment are 70%, 40%, 20% and 20% completed, respectively. It is anticipated that all reprogramming and testing efforts will be completed by March 31, 1999; however, the Company can provide no assurance in this regard. The Company has expensed $1.5 million of cost incurred to date related to the Year 2000 Issue. The total remaining cost of the Year 2000 project is presently estimated at $2.5 million, which will be expensed as incurred. The costs of the project and the date on which the Company believes it will complete the Year 2000 modifications are based on management's best estimates, which were derived utilizing numerous assumptions of future events, including the continued availability of certain resources. However, there can be no guarantee that these estimates will be achieved and actual results could differ materially from those anticipated. Specific factors that might cause such material differences include, but are not limited to, the availability and cost of personnel trained in this areas and the ability to locate and correct all relevant computer codes. The Company presently believes that with modifications to existing software and, in certain instances, conversions to new software, the Year 2000 Issue can be mitigated. As noted above, the Company has not yet completed all necessary phases of the Year 2000 remediation program. In the event that the Company does not complete any additional phases, it could experience disruptions in its operations, including among other things, a temporary inability to fulfill 17 17 customer direct marketing requests (such as sales leads and personalized mailings), process financial transactions, or engage in similar normal business activities. In addition, disruptions in the economy generally resulting from the Year 2000 Issues could also materially adversely affect the Company. The Company could be subject to litigation for computer systems failures, equipment shutdowns or failure to properly date business records. The amount of potential liability and lost revenue cannot be reasonably estimated at this time. Contingency plans are currently being developed and are anticipated to be completed by March 31, 1999. This includes developing contingency plans for products and services, as well as business operation support systems. Contingency plans already in the development process include identifying alternate providers in case the primary providers cannot meet delivery requirements, and providing specific 100-year interval windowing techniques to customers in the event their applications could not be made Year 2000 compliant. 18 18 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. See index to Exhibits on Page 20. (b) No Form 8-K has been filed during the three months ended September 30, 1998. 19 19 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. HARTE-HANKS, INC. November 13, 1998 /s/ Jacques D. Kerrest ----------------- ---------------------------------- Date Jacques D. Kerrest Senior Vice President, Finance and Chief Financial and Accounting Officer 20 20
Exhibit No. Description of Exhibit Page No. - - ------- ------------------------------------------------------------------- ------------- 2(a) Certificate of Ownership and Merger (filed as Exhibit 2(a) to the Company's Registration Statement No. 33-69202 and incorporated by reference herein). 2(b) Agreement and Plan of Merger dated as of February 4, 1996 among Harte-Hanks Communications, Inc., HHD Acquisition Corp. and DiMark, Inc. (filed as Appendix A to the Company's Registration Statement No. 333-02047 and incorporated by reference herein). 2(c) Agreement and Plan of Merger and Reorganization, dated as of May 16, 1997, by and between The E.W. Scripps Company and Harte-Hanks Communications, Inc. (filed as Exhibit 2.1 to the Company's Form 8-K dated May 22, 1997 and incorporated by reference herein). 2(d) Acquisition Agreement, dated as of May 16, 1997, by and between The E.W. Scripps Company and Harte-Hanks Communications, Inc. (filed as Exhibit 2.2 to the Company's Form 8-K dated May 22, 1997 and incorporated by reference herein). 2(e) Stock Purchase Agreement dated as of July 26, 1997 between ABC, Inc. and Harte-Hanks Communications, Inc. (filed as Exhibit 2(e) to the Company's Form 10-Q for the nine months ended September 30, 1997 and incorporated by reference herein). 3(a) Amended and Restated Certificate of Incorporation (filed as Exhibit 3(a) to the Company's Form 10-K for the year ended December 31, 1993 and incorporated by reference herein). 3(b) Amended and Restated Bylaws (filed as Exhibit 3(b) to the Company's Registration Statement No. 33-69202 and incorporated by reference herein). 3(c) Amendment dated April 30, 1996 to Amended and Restated Certificate of Incorporation (filed as Exhibit 3(c) to the Company's Form 10-Q for the nine months ended September 30, 1996 and incorporated by reference herein). 3(d) Amendment dated May 5, 1998 to Amended and Restated Certificate of Incorporation (filed as Exhibit 3(d) to the Company's Form 10-Q for the six months ended June 30, 1998 and incorporated by reference herein). 3(e) Amended and Restated Certificate of Incorporation as amended through May 5, 1998 (filed as Exhibit 3(e) to the Company's Form 10-Q for the six months ended June 30, 1998 and incorporated by reference herein). 4(a) Long term debt instruments are not being filed pursuant to Section (b)(4)(iii) of Item 601 of Regulation S-K. Copies of such instruments will be furnished to the Commission upon request.
21 21
Exhibit No. Description of Exhibit Page No. - - ------- ------------------------------------------------------------------- ------------- 10(a) 1984 Stock Option Plan (filed as Exhibit 10(d) to the Company's Form 10-K for the year ended December 31, 1984 and incorporated herein by reference). 10(b) Registration Rights Agreement dated as of September 11, 1984 among HHC Holding Inc. and its stockholders (filed as Exhibit 10(b) to the Company's Form 10-K for the year ended December 31, 1993 and incorporated by reference herein). 10(c) Severance Agreement between Harte-Hanks Communications, Inc. and Larry Franklin, dated as of July 23, 1993 (filed as Exhibit 10(f) to the Company's Registration Statement No. 33-69202 and incorporated by reference herein). 10(d) Form of Severance Agreement between Harte-Hanks Communications, Inc. and certain Executive Officers of the Company, dated as of July 7 or December 28,1997 (filed as Exhibit 10(f) to the Company's Form 10-K for the year ended December 31, 1997 and incorporated by reference herein). 10(e) Harte-Hanks, Inc. Pension Restoration Plan (filed as Exhibit 10(j) to the Company's Registration Statement No. 33-69202 and incorporated by reference herein). 10(f) Harte-Hanks Communications, Inc. 1996 Incentive Compensation Plan (filed as Exhibit 10(p) to the Company's Form 10-Q for the nine months ended September 30, 1996 and incorporated by reference herein). 10(g) Harte-Hanks, Inc. Amended and Restated 1991 Stock Option Plan (filed as Exhibit 10(g) to the Company's Form 10-Q for the six months ended June 30, 1998 and incorporated by reference herein). 10(h) Harte-Hanks, Inc. 1998 Director Stock Plan (filed as Exhibit 10(h) to the Company's Form 10-Q for the six months ended June 30, 1998 and incorporated by reference herein). *11 Statement Regarding Computation of Net Income (Loss) Per Common Share 22 *21 Subsidiaries of the Company. 23 *27 Financial Data Schedule. 24
- - --------------------- *Filed herewith 22 EXHIBIT INDEX Exhibit No. Description - - ----------- ---------------- 11 Statement Regarding Computation of Net Income (Loss) Per Common Share 21 Subsidiaries of the Company. 27 Financial Data Schedule. EX-11 2 STATEMENT RE: COMPUTATION OF NET INCOME 1 Exhibit 11 HARTE-HANKS, INC. AND SUBSIDIARIES EARNINGS PER SHARE COMPUTATIONS (in thousands, except per share data)
Three Months Ended September 30, In thousands, except per share amount 1998 1997 - - ------------------------------------------------------------------------------------------------------------------------- BASIC EPS Income from continuing operations......................... $ 16,920 $ 10,470 Income from discontinued operations....................... -- 5,079 -------------- ------------- Net Income................................................ $ 16,920 $ 15,549 ============== ============= Weighted-average common shares outstanding used in net earnings per share computations............ 72,667 74,058 ============== ============= Basic earnings per common share: Continuing operations.................................. $ 0.23 $ 0.14 Discontinued operations................................ -- 0.07 -------------- ------------- Net income............................................. $ 0.23 $ 0.21 ============== ============= DILUTED EPS Income from continuing operations......................... $ 16,920 $ 10,470 Income from discontinued operations....................... -- 5,079 -------------- ------------- Net Income................................................ $ 16,920 $ 15,549 ============== ============= Shares used in net earnings per share computations....... 76,192 77,184 ============== ============= Diluted earnings per common share: Continuing operations.................................. $ 0.22 $ 0.13 Discontinued operations................................ -- 0.07 -------------- ------------- Net income............................................. $ 0.22 $ 0.20 ============== ============= Computation of shares used in net earnings per share computations: Average outstanding common shares......................... 72,667 74,058 Average common equivalent shares - dilutive effect of option shares....................... 3,525 3,126 -------------- ------------- Shares used in net earnings per share computations........ 76,192 77,184 ============== =============
Nine months ended September 30, In thousands, except per share amount 1998 1997 - - ------------------------------------------------------------------------------------------------------------------------- BASIC EPS Income from continuing operations......................... $ 48,035 $ 27,078 Income from discontinued operations....................... -- 14,833 -------------- ------------- Net Income................................................ $ 48,035 $ 41,911 ============== ============= Weighted-average common shares outstanding used in net earnings per share computations............ 73,230 74,293 ============== ============= Basic earnings per common share: Continuing operations.................................. $ 0.66 $ 0.36 Discontinued operations................................ -- 0.20 -------------- ------------- Net income............................................. $ 0.66 $ 0.56 ============== ============= DILUTED EPS Income from continuing operations......................... $ 48,035 $ 27,078 Income from discontinued operations....................... -- 14,833 -------------- ------------- Net Income................................................ $ 48,035 $ 41,911 ============== ============= Shares used in net earnings per share computations....... 76,844 77,438 ============== ============= Diluted earnings per common share: Continuing operations.................................. $ 0.63 $ 0.35 Discontinued operations................................ -- 0.19 -------------- ------------- Net income............................................. $ 0.63 $ 0.54 ============== ============= Computation of shares used in net earnings per share computations: Average outstanding common shares......................... 73,230 74,293 Average common equivalent shares - dilutive effect of option shares....................... 3,614 3,145 -------------- ------------- Shares used in net earnings per share computations........ 76,844 77,438 ============== =============
EX-21 3 SUBSIDIARIES OF THE COMPANY 1 Exhibit 21 RESTRICTED SUBSIDIARIES OF HARTE-HANKS , INC. As of September 30, 1998
State of % of Stock Name of Corporation Incorporation Owned - - ------------------- -------------- ---------- DiMark, Inc. New Jersey 100% DiMark Marketing, Inc. Pennsylvania 100%(1) Direct Market Concepts, Inc. Florida 100% DMK, Inc. Delaware 100%(2) The Flyer Publishing Corporation Florida 100% Harte-Hanks Data Technologies, Inc. Massachusetts 100% Harte-Hanks Delaware, Inc. Delaware 100% Harte-Hanks Direct, Inc. Delaware 100% Harte-Hanks Direct Marketing/Baltimore, Inc. Maryland 100% Harte-Hanks Direct Marketing/Cincinnati, Inc. Ohio 100% Harte-Hanks Direct Marketing/Dallas, Inc. Delaware 100% Harte-Hanks Direct Marketing/Fullerton, Inc. California 100% Harte-Hanks do Brazil Consultoria e Servicos Ltda. Brazil 100%(3) Harte-Hanks Limited England 100%(3) Harte-Hanks Market Research, Inc. New Jersey 100% Harte-Hanks Partnership, Ltd. Texas 100%(7) Harte-Hanks Pty. Limited Australia 100%(3) Harte-Hanks Response Management/Boston, Inc. Massachusetts 100% Harte-Hanks Response Management Call Centers, Inc. Delaware 100% Harte-Hanks Response Management Europe Belgium 100% Harte-Hanks Shoppers, Inc. California 100% Harte-Hanks Stock Plan, Inc. Delaware 100% H&R Communications, Inc. New Jersey 100%(2) HTS, Inc. Connecticut 100% Information for Marketing Limited (shell corporation) England 100%(5) Marketing Communications, Inc. Missouri 100% Mars Graphic Services, Inc. New Jersey 100%(4) Mercantile Software Systems, Inc. New Jersey 100% Northern Comprint Co. California 100% NSO, Inc. Ohio 100% 1-800 Service Partners, Inc. Texas 100% Potpourri Shopper, Inc. California 100% PRO Direct Response Corp. New Jersey 100%(2) PSP&D, Inc. Delaware 100%(6) Select Marketing, Inc. Texas 100% Southern Comprint Co. California 100% Sutton Industries, Inc. Delaware 100%
(1) Owned by Mars Graphic Services, Inc. (2) Owned by DiMark Marketing, Inc. (3) Owned by Harte-Hanks Data Technologies, Inc. (4) Owned by DiMark, Inc. (5) Owned by Harte-Hanks Limited (6) Owned by Sutton Industries, Inc. (7) 99.5% Owned by Harte-Hanks Delaware, Inc. .5% Owned by Harte-Hanks , Inc. EX-27.1 4 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1998 SEP-30-1998 59,285 128,865 116,307 3,354 5,436 332,973 188,965 96,275 682,780 108,769 0 0 0 75,638 477,785 682,780 547,888 547,888 406,034 454,125 10,153 0 151 82,278 32,243 48,035 0 0 0 48,035 .66 .63
EX-27.2 5 RESTATED FINANCIAL DATA SCHEDULE
5 THE FOLLOWING IS A RESTATED FINANCIAL DATA SCHEDULE AS A RESULT OF ADOPTION OF STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 128 AND CERTAIN INCOME STATEMENT RECLASSIFICATIONS. THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FORM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1997 SEP-30-1997 14,074 0 116,563 3,990 12,710 167,031 171,124 86,816 705,667 109,917 311,400 0 0 37,947 230,246 705,667 444,499 444,499 334,326 376,247 (144) 0 5,619 47,007 19,929 27,078 14,833 0 0 41,911 0.56 0.54
EX-27.3 6 RESTATED FINANCIAL DATA SCHEDULE
5 THE FOLLOWING IS A RESTATED FINANCIAL DATA SCHEDULE AS A RESULT OF ADOPTION STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 128. THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1997 JUN-30-1997 14,156 0 101,731 2,337 12,175 148,273 153,786 76,328 581,220 92,066 192,400 0 0 37,830 242,516 581,220 289,388 289,388 219,231 246,884 (371) 0 3,765 28,864 12,256 16,608 9,754 0 0 26,362 .35 .34
EX-27.4 7 RESTATED FINANCIAL DATA SCHEDULE
5 THE FOLLOWING IS A RESTATED FINANCIAL DATA SCHEDULE AS A RESULT OF ADOPTION STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 128 AND CERTAIN INCOME STATEMENT RECLASSIFICATIONS. THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1997 MAR-31-1997 11,088 0 97,965 2,477 12,455 141,385 241,349 126,224 583,673 87,763 208,440 0 0 37,724 224,380 583,673 174,835 174,835 127,545 145,684 185 0 3,293 17,784 7,767 10,017 0 0 0 10,017 .13 .13
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