-----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, Csn+XxXgYxyyWdCei/t545Vpkwy4FrbBM6NoweE0vAPH3QDfkuu6GmbM5zdUEgMC JsPsc/CmW/WbLlJGiGYKLw== 0000950134-96-003898.txt : 19960808 0000950134-96-003898.hdr.sgml : 19960808 ACCESSION NUMBER: 0000950134-96-003898 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960807 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARTE HANKS COMMUNICATIONS INC CENTRAL INDEX KEY: 0000045919 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS PUBLISHING [2741] IRS NUMBER: 741677284 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07120 FILM NUMBER: 96604868 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 NEWSPAPERS INC DATE OF NAME CHANGE: 19771010 10-Q 1 FORM 10-Q FOR QUARTER ENDED JUNE 30, 1996 1 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 June 30, 1996 - ------ 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 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, 36,491,296 shares as of June 30, 1996. 2 2 HARTE-HANKS COMMUNICATIONS, INC. AND SUBSIDIARIES TABLE OF CONTENTS FORM 10-Q REPORT June 30, 1996
Page ---- Part I. Financial Information Item 1. Interim Condensed Consolidated Financial Statements (Unaudited) Condensed Consolidated Balance Sheets - 3 June 30, 1996 and December 31, 1995 Consolidated Statements of Operations - 4 Three months ended June 30, 1996 and 1995 Consolidated Statements of Operations - 5 Six months ended June 30, 1996 and 1995 Consolidated Statements of Cash Flows - 6 Six months ended June 30, 1996 and 1995 Notes to Interim Condensed Consolidated Financial 7 Statements Item 2. Management's Discussion and Analysis of Financial 9 Condition and Results of Operations Part II. Other Information Item 4. Submission Matters to a Vote of Security Holders 14 Item 6. Exhibits and Reports on Form 8-K 15 (a) Exhibits (b) Reports on Form 8-K Signature 15
3 3 Harte-Hanks Communications, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (in thousands, except per share and share amounts) (Unaudited)
JUNE 30, DECEMBER 31, 1996 1995 ---- ---- Assets Current assets Cash............................................... $ 17,727 $ 18,102 Accounts receivable, net........................... 82,012 80,056 Inventory.......................................... 21,594 24,307 Prepaid expenses................................... 7,379 5,330 Current deferred income tax benefit................ 6,679 7,181 Other current assets............................... 3,739 3,477 --------- --------- Total current assets............................. 139,130 138,453 Property, plant and equipment, net................... 106,019 102,164 Goodwill, net........................................ 293,905 283,149 Other assets......................................... 7,569 5,513 --------- --------- Total assets..................................... $ 546,623 $ 529,279 ========= ========= Liabilities and Stockholders' Equity Current liabilities Accounts payable.................................. $ 38,589 $ 35,768 Accrued payroll and related expenses.............. 14,401 20,677 Customer deposits and unearned revenue............ 16,832 16,174 Income taxes payable.............................. 659 1,593 Other current liabilities......................... 8,336 9,015 --------- --------- Total current liabilities....................... 78,817 83,227 Long term debt...................................... 225,340 220,468 Other long term liabilities......................... 22,628 23,728 --------- --------- Total liabilities............................... 326,785 327,423 --------- --------- Stockholders' equity Common stock, $1 par value, authorized 125,000,000 shares. Issued and outstanding 1996: 36,491,296 shares; 1995: 36,044,228 shares................. 36,491 36,044 Additional paid-in capital........................ 181,202 174,870 Retained earnings (accumulated deficit)........... 2,145 ( 9,058) --------- --------- Total stockholders' equity...................... 219,838 201,856 --------- --------- Total liabilities and stockholders' equity...... $ 546,623 $ 529,279 ========= =========
See Notes to Interim Condensed Consolidated Financial Statements. 4 4 Harte-Hanks Communications, Inc. and Subsidiaries Consolidated Statements of Operations (in thousands, except per share amounts) (Unaudited)
THREE MONTHS ENDED JUNE 30, ----------------------------- 1996 1995 ---- ---- Operating revenues.................................... $159,916 $149,686 -------- -------- Operating expenses Payroll............................................. 55,546 52,091 Production and distribution......................... 57,032 54,134 Advertising, selling, general and administrative.... 14,461 14,797 Depreciation........................................ 4,569 3,957 Goodwill amortization............................... 2,436 2,397 Merger costs........................................ 12,136 -- -------- -------- 146,180 127,376 -------- -------- Operating income...................................... 13,736 22,310 -------- -------- Other expenses (income) Interest expense.................................... 3,436 4,196 Interest income..................................... (96) (142) Other, net.......................................... (48) 298 -------- -------- 3,292 4,352 -------- -------- Income before income tax expense...................... 10,444 17,958 Income tax expense.................................... 6,538 8,257 -------- -------- Net income............................................ $ 3,906 $ 9,701 ======== ======== Primary: Earnings per share.................................. $ 0.10 $ 0.27 ======== ======== Weighted average common and common equivalent shares outstanding................................ 38,551 36,279 ======== ======== Fully diluted: Earnings per share.................................. $ 0.10 $ 0.26 ======== ======== Weighted average common and common equivalent shares outstanding................................ 38,702 37,677 ======== ========
See Notes to Interim Condensed Consolidated Financial Statements. 5 5 Harte-Hanks Communications, Inc. and Subsidiaries Consolidated Statements of Operations (in thousands, except per share amounts) (Unaudited)
SIX MONTHS ENDED JUNE 30, --------------------------- 1996 1995 ---- ---- Operating revenues.................................... $310,527 $298,708 -------- -------- Operating expenses Payroll............................................. 111,234 105,328 Production and distribution......................... 113,059 110,654 Advertising, selling, general and administrative.... 28,646 31,003 Depreciation........................................ 8,941 7,971 Goodwill amortization............................... 4,937 4,919 Merger costs........................................ 12,136 -- -------- -------- 278,953 259,875 -------- -------- Operating income...................................... 31,574 38,833 -------- -------- Other expenses (income) Interest expense.................................... 6,884 9,217 Interest income..................................... (1,107) (352) Other, net.......................................... 504 739 Gain on divestitures................................ -- (12,293) -------- -------- 6,281 (2,689) -------- -------- Income before income tax expense...................... 25,293 41,522 Income tax expense.................................... 13,070 23,398 -------- -------- Net income............................................ $ 12,223 $ 18,124 ======== ======== Primary: Earnings per share.................................. $ .32 $ .51 ======== ======== Weighted average common and common equivalent shares outstanding................................ 38,420 35,673 ======== ======== Fully diluted: Earnings per share.................................. $ .32 $ 0.49 ======== ======== Weighted average common and common equivalent shares outstanding................................ 38,495 37,511 ======== ========
See Notes to Interim Condensed Consolidated Financial Statements. 6 6 Harte-Hanks Communications, Inc. and Subsidiaries Consolidated Statements of Cash Flows (in thousands) (Unaudited)
SIX MONTHS ENDED JUNE 30, -------------------------- 1996 1995 ---- ---- Cash Flows From Operating Activities Net income.......................................... $ 12,223 $ 18,124 Adjustments to reconcile net income to net cash provided by operating activities Depreciation .................................... 8,941 7,971 Goodwill amortization............................ 4,937 4,919 Amortization of option related compensation...... 599 967 Film amortization................................ 694 1,284 Deferred income taxes............................ (383) (1,430) Other, net....................................... 778 242 Gain on divestiture.............................. -- (12,293) Changes in operating assets and liabilities, net of effects from acquisitions and divestitures: Decrease (increase) in accounts receivable, net.. 1,263 1,227 Decrease (increase) in inventory................. 2,713 (5,975) Increase in prepaid expenses and other current assets................................ (2,325) (861) Increase (decrease)in accounts payable........... 2,003 ( 76) Decrease in other accrued expenses and other liabilities......................... (8,036) (1,806) Other, net....................................... (866) (859) -------- -------- Net cash provided by operating activities.................................... 22,541 11,434 -------- -------- Cash Flows From Investing Activities Purchases of property, plant and equipment.......... (12,305) (11,994) Proceeds from the sale of property, plant and equipment and divested assets................. 346 40,194 Acquisitions........................................ (17,139) (5,760) Payments on film contracts.......................... (654) (1,065) -------- -------- Net cash provided by (used in) investing activities.......................... (29,752) 21,375 -------- -------- Cash Flows From Financing Activities Long term debt borrowings........................... 142,000 739,964 Payments on long term debt, including current maturities ...................................... (137,755) (772,187) Issuance of common stock............................ 3,611 2,292 Dividends paid...................................... (1,020) (960) -------- -------- Net cash provided by (used in) financing activities ...................................... 6,836 (30,891) -------- -------- Net increase (decrease) in cash..................... (375) 1,918 Cash at beginning of year........................... 18,102 11,533 Pooling adjustment to beginning of year balance to conform fiscal years.............. -- ( 1,504) -------- -------- Cash at end of period............................... $ 17,727 $ 11,947 ======== ========
See Notes to Interim Condensed Consolidated Financial Statements. 7 7 Harte-Hanks Communications, Inc. and Subsidiaries Notes to Interim Condensed Consolidated Financial Statements (Unaudited) NOTE A - FINANCIAL STATEMENTS The accompanying unaudited Interim Condensed Consolidated Financial Statements include the accounts of Harte-Hanks Communications, 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 six months ended June 30, 1996 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, 1995. NOTE B - ACQUISITION Effective April 30, 1996, DiMark, Inc. ("DiMark") was merged with a wholly-owned subsidiary of the Company, and each outstanding share of DiMark common stock was converted into the right to acquire .656 of a share of common stock of Harte-Hanks. As a result, Harte-Hanks issued approximately 6.1 million shares of Harte-Hanks common stock to the shareholders of DiMark, and DiMark's outstanding stock options were converted into options to acquire 1,509,213 shares of Harte-Hanks common stock. The merger was accounted for on a pooling-of-interests basis. Accordingly, the Company's financial statements have been restated to include the results of DiMark for all periods presented. The combined financial results include reclassifications to conform financial statement preparation. Merger expenses related to the transaction were $12.1 million ($8.7 million, net of income taxes). Combined and separate results of the Company and DiMark during the reporting periods preceding the merger were as follows (in thousands):
THREE MONTHS ENDED MARCH 31, 1996 HARTE-HANKS DIMARK ADJUSTMENTS COMBINED ----------- --------- ----------- ---------- Revenue $124,899 $27,377 $ (1,664) $150,612 Net income 6,385 1,923 -- 8,308 FISCAL YEAR ENDED DEC. 31, 1995 Revenue $532,852 $77,583 $ (6,924) $603,511 Net income 33,985 6,001 $ -- $ 39,986
8 8 Adjustments to revenue consist of elimination of DiMark's postage costs from revenues and cost of sales to conform to Harte-Hanks' accounting classification. NOTE C - INCOME TAXES The Company's quarterly income tax calculation is based on an effective income tax rate that is derived by estimating pretax income and income tax expense for the entire year ended December 31, 1996. Included in the year-to- date income tax provision of $13.1 million is $3.4 million in income tax benefits related to the merger costs. Excluding the taxes related to the merger costs, the estimated annual effective income tax rate of 44.1% for the six months ended June 30, 1996 resulted in $16.5 million in tax expense on income from operations. 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. 9 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS Operating results (excluding the 1996 merger costs and 1995 gain on divestiture) were as follows:
THREE MONTHS ENDED SIX MONTHS ENDED In thousands JUNE 30, 1996 JUNE 30, 1995 CHANGE JUNE 30, 1996 JUNE 30, 1995 CHANGE - ------------ ------------- ------------- ------ ------------- ------------- ------ Revenues $159,916 $149,686 6.8% $310,527 $298,708 4.0% Operating expenses 134,044 127,376 5.2% 266,817 259,875 2.7% -------- -------- -------- -------- Operating income $ 25,872 $ 22,310 16.0% $ 43,710 $ 38,833 12.6% ======== ======== ======== ======== Net income $ 12,628 $ 9,701 30.2% $ 20,945 $ 13,200 58.7% ======== ======== ======== ======== Fully diluted earnings per share $ 0.33 $ 0.26 26.9% $ 0.54 $ 0.35 54.3% ======== ======== ======== ========
(The above results exclude the 1996 one-time merger costs (discussed under "Acquisition") and the 1995 gain on divestiture (discussed under "Gain on Divestiture"). Including these items, net income was $3.9 million, or 10 cents per share, in the second quarter of 1996 compared to net income of $9.7 million, or 26 cents per share, in 1995. For the first six months of 1996, net income was $12.2 million, or 32 cents per share, compared to $18.1 million, or 49 cents per share, in 1995.) Consolidated revenues grew 6.8% to $159.9 million, and operating income grew 16.0% to $25.9 million in the second quarter of 1996 when compared to the second quarter of 1995. The Company's overall growth resulted from acquisitions, increased business with both new and existing customers, new products and services as well as advertising and circulation rate increases. Overall operating expenses increased 5.2% over 1995. Excluding the sale of the Boston newspapers, year-to-date revenues increased $19.2 million, or 6.5%, when compared to the same period in 1995. DIRECT MARKETING Direct marketing operating results were as follows:
THREE MONTHS ENDED SIX MONTHS ENDED In thousands JUNE 30, 1996 JUNE 30, 1995 CHANGE JUNE 30, 1996 JUNE 30, 1995 CHANGE - ------------ ------------- ------------- ------ ------------- ------------- ------ Revenues $73,349 $65,406 12.1% $145,861 $130,022 12.2% Operating expenses 62,893 56,114 12.1% 126,406 112,126 12.7% ------- ------- -------- -------- Operating income $10,456 $ 9,292 12.5% $ 19,455 $ 17,896 8.7% ======= ======= ======== ========
Direct marketing revenues increased $7.9 million, or 12.1%, in the second quarter of 1996 when compared to 1995. Database, response management and outbound telemarketing services experienced significant revenue growth. Database revenues increased due to higher product sales as well as increased database construction, updates and creations. Response management revenues increased primarily due to new customer gains, particularly in the high technology industry, and to a lesser extent due to the May 31, 1996 acquisition of Inquiry Handling Service, a Los Angeles based response management company that serves the high tech and electronics industries. Sales lead management, which includes lead generation and lead qualification through inbound inquiries, experienced significant growth both from new customers and increased 10 10 call volumes from existing customers. Outbound telemarketing revenues increased primarily due to the January 1996 acquisition of PRO Direct Response Corp., a telemarketing company with a strong customer base in the financial services industry. Second quarter revenue growth was also impacted by the September 1995 acquisition of H&R Communications, Inc. These revenue increases were slightly offset by the absence of an outsourced mailing program which the customer now performs in-house and by the sale of a local hand distribution advertising business in July 1995. Overall, revenue growth resulted from acquisitions and increased business with both new and existing customers, particularly in services provided to the high technology, retail, financial services, health care and pharmaceutical industries. Second quarter operating expenses increased $6.8 million, or 12.1%, when compared to 1995. Payroll costs increased $3.6 million due to expanded hiring to support revenue growth. Also contributing to the increased operating expenses were additional production costs of $2.4 million due to increased volumes. Depreciation expense increased $0.6 million due to higher levels of capital investment to support growth. Operating expenses were also impacted by the acquisitions noted above and the sale of the local hand distribution advertising business in July 1995. Direct marketing revenues increased $15.8 million, or 12.2%, in the first six months of 1996 as compared to the comparable 1995 period. Database, response management and outbound telemarketing experienced significant revenue growth. Overall, revenue growth resulted from acquisitions and increased business, particularly in the high technology, banking, financial services, health care and pharmaceutical industries. Year-to-date 1996 operating expenses rose $14.3 million, or 12.7%, when compared to 1995. Payroll costs increased $10.2 million due to expanded hiring to support revenue growth and to the 1995 reversal of executive compensation, which was waived by the executives. In addition, production costs increased $2.6 million due to increased volumes. Depreciation expense increased $1.2 million due to higher levels of capital investment to support growth. The acquisitions also impacted operating expense growth. SHOPPERS Shopper operating results were as follows:
THREEE MONTHS ENDED SIX MONTHS ENDED In thousands JUNE 30, 1996 JUNE 30, 1995 CHANGE JUNE 30, 1996 JUNE 30, 1995 CHANGE - ------------ -------------- ------------- ------ ------------- ------------- ------ Revenues $48,936 $48,285 1.3% $ 91,930 $ 91,931 0.0% Operating expenses 41,550 41,838 -0.7% 81,213 82,542 -1.6% ------- ------- -------- -------- Operating income $ 7,386 $ 6,447 14.6% $ 10,717 $ 9,389 14.1% ======= ======= ======== ========
Shopper revenues increased $0.7 million, or 1.3%, in the second quarter of 1996 when compared to the same period in 1995. The increase was primarily due to increased in-book advertising revenues resulting from higher display advertising volumes as well as increased usage of the Company's print and deliver products. Display advertising volumes increased due to growth in the Company's core business accounts as well as increased in-column display advertisements made possible with pagination technology implemented in 1995. These increases were offset by lower insert revenues as a result of reduced volumes as well as revenue declines related to intentional reductions of marginal circulation in Dallas. 11 11 Shopper operating expenses decreased $0.3 million, or 0.7%, in the second quarter of 1996 when compared to 1995. Postage expense decreased $1.3 million due to less overweight postage associated with the lower insert volumes. In addition, the reduced circulation in the Dallas market contributed to the decreased expense. These decreases were offset by paper cost increases of $0.8 million. These increases were primarily attributable to higher rates. Payroll costs also increased $0.4 million as a result of higher commissions on greater sales volumes. Year-to-date shopper revenues remained constant at $91.9 million when compared to the same period in 1995. Revenue growth was experienced in both the display advertising and print and deliver product categories. These increases were offset by lower insert volumes as well as reduced revenues related to circulation reduction in Dallas. Year-to-date shopper operating expenses decreased $1.3 million, or 1.6%, in 1996 when compared to the same period in 1995. This decline was due to lower postage costs of $2.5 million and to lower operating expenses related to the reduction in marginal circulation in Dallas. These decreases were offset by increased paper costs of $1.8 million, or 21.2%. NEWSPAPERS Newspaper operating results were as follows:
THREE MONTHS ENDED SIX MONTHS ENDED In thousands JUNE 30, 1996 JUNE 30, 1995 CHANGE JUNE 30, 1996 JUNE 30, 1995 CHANGE - ------------ ------------- ------------- ------ ------------- ------------- ------ Revenues $30,803 $29,282 5.2% $60,139 $64,160 -6.3% Operating expenses 23,529 22,338 5.3% 47,004 51,680 -9.0% ------- ------- ------- ------- Operating income $ 7,274 $ 6,944 4.8% $13,135 $12,480 5.2% ======= ======= ======= =======
Newspaper revenues increased $1.5 million, or 5.2%, in the second quarter of 1996 when compared to the same period in 1995. Overall advertising revenues were up $0.6 million, or 2.7%. In particular, classified advertising revenues increased $0.4 million, or 6.3%, as a result of rate increases. Retail advertising revenues were up $0.2 million, or 1.8%, due to increased rates slightly offset by lower volumes. Circulation revenues increased $0.3 million, or 4.9%, due to home delivery rate increases in all markets and a Sunday single-copy rate increase at the Corpus Christi paper. Niche product revenue increased $0.6 million primarily due to the continued growth of existing direct mail programs as well as the launch of new programs in 1996. In addition, new revenue initiatives in community publications, total market coverage products, Internet and audiotext added to second quarter revenue growth. Newspaper operating expenses increased $1.2 million, or 5.3% in the second quarter of 1996 when compared to 1995. Newsprint expense increased $0.9 million, or 21.4%, as a result of higher average newsprint prices offset slightly by reduced volumes. Postage costs also increased slightly due to growth in direct mail volumes. Excluding the sale of the Boston newspapers (discussed under "Gain on Divestiture"), year-to-date newspaper revenues increased $3.3 million, or 5.8%, when compared to the same period in 1995. Overall advertising revenues were up $1.2 million, or 3.2%. In particular, classified advertising revenues increased $1.0 million, or 6.7%, as a result of rate increases. Retail 12 12 advertising revenues were up $0.3 million, or 1.8%, due to increased rates slightly offset by lower volumes. Circulation revenues increased $0.9 million, or 6.5%, due to rate increases. Niche product revenue also increased $1.1 million, primarily due to the continued growth of existing revenue streams as well as the launch of revenue initiatives. Excluding the sale of the Boston newspapers, year-to-date newspaper operating expenses increased $2.8 million, or 6.4%, when compared to 1995. Newsprint expense increased $2.1 million, or 28.2%, as a result of higher average newsprint prices offset slightly by reduced volumes. Postage costs also increased slightly due to growth in direct mail volumes. TELEVISION Television operating results were as follows:
THREE MONTHS ENDED SIX MONTHS ENDED In thousands JUNE 30, 1996 JUNE 30, 1995 CHANGE JUNE 30, 1996 JUNE 30, 1995 CHANGE - ------------ ------------- ------------- ------ ------------- ------------- ------ Revenues $6,828 $ 6,713 1.7% $12,597 $12,595 0.0% Operating expenses 4,267 4,667 -8.6% 8,564 9,124 -6.1% ------ ------- ------- ------- Operating income $2,561 $ 2,046 25.2% $ 4,033 $ 3,471 16.2% ====== ======= ======= =======
Revenues for the television segment increased $0.1 million, or 1.7%, in the second quarter of 1996 when compared to 1995. This increase was primarily attributable to local advertising and an increase in network compensation revenue due to a renegotiated network affiliation agreement. These increases in revenue were partially offset by decreased national advertising demands. Second quarter operating expenses decreased $0.4 million, or 8.6%, when compared to the same period in 1995. The decrease was due primarily to film cost savings, as well as effective management of other production and general and administrative costs. Partially offsetting these cost reductions was an increase in payroll costs due to additional investment in sales and news. Revenues for the television segment remained relatively constant for the first half of 1996 when compared to the same period in 1995. Increased local advertising and network compensation revenues were offset by lower national advertising revenues, reflecting continued weak CBS network performance. First half operating expenses for the television segment decreased $0.6 million, or 6.1%, when compared to the same period in 1995. The decrease was due primarily to lower film costs, which were slightly offset by higher payroll costs. Acquisition As described in Note 2 to the Notes to Interim Condensed Consolidated Financial Statements included herein, on April 30, 1996, DiMark was merged with a wholly-owned subsidiary of the Company, and each outstanding share of DiMark common stock was converted into the right to acquire .656 of a share of common stock of Harte-Hanks. As a result, Harte-Hanks issued approximately 6.1 million shares of Harte-Hanks Common Stock to the shareholders of DiMark, and DiMark's outstanding stock options were converted into options to acquire 1.5 million shares of Harte-Hanks common stock. The merger was accounted for on a pooling-of-interests basis, and all historical information has been restated as if the pooling occurred at the beginning of the periods presented. One-time merger 13 13 expenses of $12.1 million ($8.7 million after-tax) were recognized in the second quarter of 1996. DiMark provides a full range of outsource marketing, database services and telemarketing to clients in the insurance, healthcare, pharmaceutical, financial services and telecommunications industries, as well as direct response printing services. Interest Expense/Interest Income Interest expense decreased $0.8 million in the second quarter of 1996 when compared to the same period in 1995 due to lower effective interest rates and lower debt levels. Year-to-date interest expense declined $2.3 million in the first half of 1996 when compared to 1995, primarily due to lower debt levels and rates. Debt levels decreased due to proceeds from the divestiture described below in "Gain on Divestiture", the 1995 conversion of the Company's 6-1/4% notes to common stock and increased cash flow from operations. Interest income increased $0.8 million in the first half of 1996 when compared to 1995 due to interest income related to an income tax refund that resulted from a favorable tax settlement. Gain on Divestiture In March 1995, the Company sold its suburban Boston community newspapers. As a result of this transaction, the Company recognized a gain on divestiture of $2.3 million, or 7 cents per share, net of $10.0 million of income taxes. Income Taxes Excluding the income taxes related to the 1996 merger costs and the 1995 gain on divestiture, income tax expense in the second quarter and the first six months of 1996 increased due to higher income levels. Liquidity and Capital Resources Cash provided from operating activities for the six months ended June 30, 1996 was $22.5 million as compared to $11.4 million for the same period in 1995. Net cash outflows for investing activities were $29.8 million as compared to inflows of $21.4 million in 1995. Investing activities for the first six months of 1996 included acquisitions of $17.1 million and for the first six months of 1995 included $40.2 million in proceeds from the sale of property, plant and equipment and divested assets. Capital resources are available from and provided through the Company's unsecured credit facility. All borrowings under the revolving credit facility are to be repaid by December 31, 2001. Management believes that its credit facility, together with cash provided from operating activities, will be sufficient to fund operations, anticipated capital and film expenditures, and debt service requirements for the foreseeable future. As of June 30, 1996, the Company had $96 million of unused borrowing capacity under its credit facility. 14 14 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The Company held its annual meeting of stockholders on April 30, 1996. At the meeting the stockholders were requested to vote on the following: 1. To approve the issuance of shares of Harte-Hanks Common Stock to DiMark stockholders pursuant to the Agreement and Plan of Merger dated as of February 4, 1996 by and among Harte-Hanks, HHD Acquisition Corp., a New Jersey corporation and wholly-owned subsidiary of Harte-Hanks ("Newco") and DiMark, Inc., a New Jersey corporation ("DiMark"), providing for the merger of Newco with and into DiMark and the conversion of each outstanding share of DiMark common stock, no par value per share, into .656 of a share of Harte-Hanks common stock, par value $1.00 per share. The result of the vote was as follows:
For Against Abstentions Nonvotes ---------- ---------- ------------ ------------ 24,520,634 19,130 10,847 1,765,101
2. To elect Houston H. Harte, Andrew B. Shelton and Richard M. Hochhauser as Class III directors for a three- year term and David L. Copeland as a Class I director for a one-year term. The result of the vote was as follows:
For Withheld ---------- --------- Houston H. Harte 26,300,727 14,985 Andrew B. Shelton 26,300,733 14,979 Richard M. Hochhauser 26,299,157 16,555 David L. Copeland 26,300,474 15,238
The names of each director whose term of office continued are: Peter T. Flawn, Larry Franklin, Christopher M. Harte, Edward H. Harte and James L. Johnson. 3. To approve an amendment to the Certificate of Incorporation of Harte- Hanks to increase the number of authorized shares of Harte-Hanks Common Stock from 50,000,000 to 125,000,000. The result of the vote was as follows:
For Against Abstentions Nonvotes ---------- ---------- ------------ ----------- 23,058,863 1,485,165 10,847 1,765,101
4. To approve an amendment to the Harte-Hanks Communications, Inc. 1991 Stock Option Plan to increase the aggregate number of shares of Harte- Hanks Common Stock that may be issued under such Plan from 3,000,000 to 4,000,000. The result of the vote was as follows:
For Against Abstentions ---------- ----------- ------------ 25,723,451 570,511 21,750
5. To approve the adoption of the Harte-Hanks Communications, Inc. 1996 Incentive Compensation Plan. The result of the vote was as follows:
For Against Abstentions ----------- ---------- ------------ 26,086,356 219,213 10,143
15 15 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. See index to Exhibits on Page 16. (b) The company filed a report on Form 8-K dated April 30, 1996 relating to the agreement to acquire DiMark, Inc. 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 COMMUNICATIONS, INC. August 7, 1996 /s/ Richard L. Ritchie ----------------------- ----------------------------- Date Richard L. Ritchie Senior Vice President, Finance and Chief Financial and Accounting Officer 16 16
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. 333-2047 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 17 Restated Certificate of Incorporation. *3(d) Amended and Restated Certificate of Incorporation 20 as amended through April 30, 1996. 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. *10(o) Amendment No. 3 to Harte-Hanks Communications 27 (formerly HHC Holding Inc.) 1991 Stock Option Plan. *10(p) Harte-Hanks Communications, Inc. 1996 Incentive 28 Compensation Plan. *11 Statements Regarding Computation of Per 29 Share Earnings *27 Financial Data Schedules 31
- ------------------------------- * Filed herewith. EX-3.C 2 CERTIFICATE OF INCORPORATION 1 EXHIBIT 3(c) CERTIFICATE OF AMENDMENT CERTIFICATE OF INCORPORATION OF HARTE-HANKS COMMUNICATIONS, INC. Harte-Hanks Communications, Inc. a corporation organized and existing under the Delaware General Corporation Law (the "Corporation") DOES HEREBY CERTIFY: FIRST: that at a meeting of the Board of Directors of the Corporation, resolutions were duly adopted setting forth a proposed amendment of the Amended and Restated Certificate of Incorporation of the Corporation, declaring such amendment to be advisable, and directing that the amendment be submitted to the stockholders of the Corporation for their consideration. The resolutions setting forth the proposed amendment are as follows: RESOLVED, that it is in the best interests of the Corporation that the Amended and Restated Certificate of Incorporation of the Corporation be amended to increase the number of authorized shares of Common Stock that may be issued by the Corporation from 50,000,000 to 125,000,000. RESOLVED FURTHER, that the Board of Directors is hereby authorized to submit to the stockholders of the Corporation the proposal to amend the Amended and Restated Certificate of Incorporation of the Corporation to provide for the increase in the number of authorized shares of Common Stock. SECOND: that Article FOURTH of the Amended and Restated Certificate of Incorporation of the Corporation shall be amended to read as follows: FOURTH. The aggregate number of shares of capital stock that the Corporation shall have the authority to issue is one hundred and twenty-six million (126,000,000), of which one hundred twenty-five million (125,000,000) shares shall be Common Stock of the Corporation, par value $1.00 per share, and one million (1,000,000) shares shall be Preferred Stock, par value $1.00 per share. Shares of Preferred Stock may be issued from time to time in one or more series, each such series to have such distinctive designation or title as may be fixed by the Board of Directors prior to the issuance of any shares thereof. Each share of any series of Preferred Stock shall be identical with all other shares of such series, except as to the date from which accumulated preferred dividends, if any, shall be cumulative. Each such series shall have such voting powers, if any, and such preferences and relative, participating, optional or other special rights, with such qualifications, limitations or restrictions of such 17 2 preferences and/or rights, and the benefit of such affirmative or negative covenants as shall be stated in the resolution or resolutions adopted by the Board of Directors providing for the issue of such series of Preferred Stock, including, but without limiting the generality of the foregoing, the following: (a) The rates and times at which, and the terms and conditions on which, dividends on Preferred Stock or series thereof shall be paid; (b) The right, if any, of the holders of Preferred Stock or series thereof to convert the same into, or exchange the same for, shares of other classes or series of stock of the Corporation and the terms and conditions of such conversion or exchange; (c) The redemption price or prices, if any, and the time or times at which, and the terms and condition of which, Preferred Stock or series thereof may be redeemed; (d) The rights of the holders of Preferred Stock or series thereof, if any, upon the voluntary or involuntary liquidation, merger, consolidation, distribution or winding up of the Corporation; (e) The terms of the sinking fund or redemption or purchase account, if any, to be provided for the Preferred Stock or series thereof; and (f) Such other relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof, all as may be stated in a resolution or resolutions providing for the issue of such Preferred Stock. After the requirements with respect to preferential dividends on the Preferred Stock (fixed in accordance with the provisions of this Article FOURTH) shall have been met and after the Corporation shall have complied with all the requirements, if any, with respect to the setting aside of sums as sinking funds or redemption or purchase accounts (fixed in accordance with the provisions of this Article FOURTH), then, and not otherwise, the holders of Common Stock shall be entitled to receive such dividends as may be declared from time to time by the Board of Directors. After distribution in full of the preferential amount (fixed in accordance with the provisions of this Article FOURTH) to be distributed to the holders of Preferred Stock in the event of the voluntary or involuntary liquidation, distribution or sale of assets, dissolution or winding-up, of the Corporation, the holders of the Common Stock shall be entitled to receive ratably all of the remaining assets of the Corporation available for distribution to stockholders. Except as may otherwise be required by law or provided herein, each holder of Common Stock shall have one vote in respect of each share of stock held by such holder on all matters voted upon by stockholders. 18 3 No holder of stock of any class of the Corporation shall be entitled as of right to subscribe or purchase any shares of stock of any class whether now or hereafter authorized, or any bonds, debentures, or other evidences of indebtedness whether or not convertible into or exchangeable for stock. THIRD: the stockholders of the Corporation holding the necessary number of shares as required by statute have duly adopted and approved the above stated amendment pursuant to Section 242 of the Delaware General Corporation Law. IN WITNESS WHEREOF, Harte-Hanks Communications, Inc. has caused this Certificate of Amendment to be executed by the undersigned this 30th day of April 1996. HARTE-HANKS COMMUNICATIONS, INC. By: /s/ Donald R. Crews --------------------------- Donald R. Crews Senior Vice President, Legal and Secretary 19 EX-3.D 3 AMENDED & RESTATED CERTIFICATE OF INCORPORATION 1 EXHIBIT 3(d) AS AMENDED THROUGH 4/30/96 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF HARTE-HANKS COMMUNICATIONS, INC. The undersigned, Larry D. Franklin certifies that he is the President and Chief Executive Officer of Harte- Hanks Communications, Inc., a Delaware corporation (the "Corporation"), and further certifies as follows: 1. The name of the Corporation is Harte-Hanks Communications, Inc. 2. The name under which the Corporation was originally incorporated was Harte-Hanks Newspapers, Inc., and the original certificate of incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on October 1, 1970. This Amended and Restated Certificate of Incorporation was duly adopted by written consent of the holders of not less than a majority of the outstanding stock of the Corporation entitled to vote, and written notice of the Corporation action has been given to the stockholders of the Corporation who have not so consented in writing, all in accordance with the provisions of the Sections 228, 245 and 242 of the Delaware General Corporation Law ("DGCL"). 4. The text of the Restated Certificate of Incorporation of the Corporation as amended hereby is restated to read in its entirety, as follows: FIRST. The name of the Corporation is HARTE-HANKS COMMUNICATIONS, INC. SECOND. The name of its registered agent and the address of its registered office in the State of Delaware are The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. THIRD. The purpose of the Corporation is to engage in any lawful activity for which corporations may be organized under the DGCL. FOURTH. The aggregate number of shares of capital stock that the Company shall have the authority to issue is one hundred twenty six million (126,000,000), of which one hundred twenty five million (125,000,000) shares shall be Common Stock of the Corporation, par value $1.00 per share, and one million (1,000,000) shares shall be Preferred Stock, par value $1.00 per share. Shares of Preferred Stock may be issued from time to time in one or more series, each such series to have such distinctive designation or title as may be fixed by the Board of Directors 20 2 prior to the issuance of any shares thereof. Each share of any series of Preferred Stock shall be identical with all other shares of such series, except as to the date from which accumulated preferred dividends, if any, shall be cumulative. Each such series shall have such voting powers, if any, and such preferences and relative, participating, optional or other special rights, with such qualifications, limitations or restrictions of such preferences and/or rights, and the benefit of such affirmative or negative covenants as shall be stated in the resolution or resolutions adopted by the Board of Directors providing for the issue of such series of Preferred Stock, including, but without limiting the generality of the foregoing, the following: (a) The rates and times at which, and the terms and conditions on which, dividends on Preferred Stock or series thereof shall be paid; (b) The right, if any, of the holders of Preferred Stock or series thereof to convert the same into, or exchange the same for, shares of other classes or series of stock of the Corporation and the terms and conditions of such conversion or exchange; (c) The redemption price or prices, if any, and the time or times at which, and the terms and condition of which, Preferred Stock or series thereof may be redeemed; (d) The rights of the holders of Preferred Stock or series thereof, if any, upon the voluntary or involuntary liquidation, merger, consolidation, distribution or winding up of the Corporation; (e) The terms of the sinking fund or redemption or purchase account, if any, to be provided for the Preferred Stock or series thereof; and (f) Such other relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof, all as may be stated in a resolution or resolutions providing for the issue of such Preferred Stock. After the requirements with respect to preferential dividends on the Preferred Stock (fixed in accordance with the provisions of this Article FOURTH) shall have been met and after the Corporation shall have complied with all the requirements, if any, with respect to the setting aside of sums as sinking funds or redemption or purchase accounts (fixed in accordance with the provisions of this Article FOURTH), then, and not otherwise, the holders of Common Stock shall be entitled to receive such dividends as may be declared from time to time by the Board of Directors. After distribution in full of the preferential amount (fixed in accordance with the provisions of this Article FOURTH) to be distributed to the holders of Preferred Stock in the event of the voluntary or involuntary liquidation, distribution or sale of assets, dissolution or winding-up, of the Corporation, the holders of the Common Stock shall be entitled to receive ratably all of the remaining assets of the Corporation available for distribution to stockholders. 21 3 Except as may otherwise be required by law or provided herein, each holder of Common Stock shall have one vote in respect of each share of stock held by such holder on all matters voted upon by stockholders. No holder of stock of any class of the Corporation shall be entitled as of right to subscribe for or purchase any shares of stock of any class whether now or hereafter authorized, or any bonds, debentures, or other evidences of indebtedness whether or not convertible into or exchangeable for stock. FIFTH. (a) Classified Board of Directors. The number of directors of the Corporation shall be as from time to time fixed by, or in the manner provided in, the By-laws of the Corporation. The directors shall be divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board of Directors. The term of the initial Class I directors shall terminate on the date of the 1994 annual meeting of stockholders; the term of the initial Class II directors shall terminate on the date of the 1995 annual meeting of stockholders; and the term of the initial Class III directors shall terminate on the date of the 1996 annual meeting of stockholders. At each annual meeting of stockholders beginning in 1994, successors to the class of directors whose term expires at that annual meeting shall be elected for a three-year term. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any additional directors of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case will a decrease in the number of directors shorten the term of any incumbent director. A director shall hold office until the annual meeting for the year in which his term expires and until his successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office. Any vacancy on the Board of Directors, however resulting, may be filled by a majority of the directors then in office, even if less than a quorum, or by a sole remaining director. Any director elected to fill a vacancy shall hold office for a term that shall coincide with the term of the class to which such director shall have been elected. Notwithstanding the foregoing, whenever the holders of any one or more classes or series of Preferred Stock issued by the Corporation shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of this Restated Certificate of Incorporation or the resolution or resolutions adopted by the Board of Directors pursuant to Article FOURTH applicable thereto, and such directors so elected shall not be divided into classes pursuant to this Article FIFTH unless expressly provided by such terms. (b) Removal of Directors. Subject to the rights, if any, of the holders of shares of Preferred Stock then outstanding, any or all of the directors of the Corporation may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of a 22 4 majority of votes represented by the outstanding shares of the Corporation then entitled to vote generally in the election of directors, considered for purposes of this Article FIFTH as one class. SIXTH. (a) Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit, or proceeding whether civil, criminal, administrative, or investigative ("proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director or officer of another corporation or as its representative in a partnership, joint venture, trust, or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, representative or in any other capacity while serving as a director, officer, or representative, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expenses, liability and loss (including attorneys' fees, judgments, fines, excise taxes under the Employee Retirement Income Security Act or penalties, and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer or representative and shall inure to the benefit of the indemnitee's heirs, executors and administrators; provided, however, that, except as provided in paragraph (b) hereof with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such person seeking indemnity in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. Such rights shall be contract rights and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the DGCL requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of such proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it should ultimately be determined by final judicial decision from which there is no further right to appeal that such director or officer is not entitled to be indemnified under this paragraph (a) or otherwise. (b) Right of Claimant to Bring Suit. If a claim under paragraph (a) is not paid in full by the Corporation within sixty (60) days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty (20) days, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part in any such suit, or in a suit brought by the Corporation against the claimant to recover an advancement of expenses pursuant to the terms of an undertaking referred to in paragraph (a) hereof, the claimant shall be entitled to be paid also the expense of prosecuting or defending such claim. In any suit brought by the claimant to enforce a right to indemnification hereunder, and in 23 5 any suit by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover any advanced expenses upon a final adjudication that the claimant has not met the standards of conduct that make it permissible under the DGCL for the Corporation to indemnify the claimant for the amount claimed, but the burden of providing such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the DGCL, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant had not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant had not met the applicable standard of conduct. (c) Non-Exclusivity of Rights. The rights conferred on any person by paragraphs (a) and (b) shall not be exclusive of any other right that such person may have or hereafter acquire under any statute, provision of the Amended and Restated Certificate of Incorporation, By-laws, agreement, vote of stockholders or disinterested directors, or otherwise. (d) Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any such director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL. (e) Continuance. Any repeal or modification of the foregoing paragraphs of this Article SIXTH by the stockholders of the Corporation shall not adversely affect any right or protection of an officer, director or representative of the Corporation existing at the time of such repeal or modification. SEVENTH. Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for the Corporation under the provisions of section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for the Corporation under the provisions of section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class 24 6 of creditors, and/or on all the stockholders or class of stockholders, of the Corporation, as the case may be, and also on the Corporation. EIGHTH. The Bylaws of the Corporation may be adopted, repealed, altered, amended, or rescinded by (a) a majority of the authorized number of directors and, if one or more interested stockholders (as defined in Section 203 of the DGCL) exists, by a majority of the directors who are Continuing Directors or (b) the affirmative vote of the holders of not less than 66 2/3% of the voting power of the Company's capital stock and if such adoption, repeal, alteration, amendment, or rescission is proposed by or on behalf of an interested stockholder or a director affiliated with an interested stockholder, by a majority of the disinterested shares. "Continuing Director" means a director of the corporation who (i) was a member of the Board of the Corporation as of September 20, 1993, or (ii) is a beneficial owner, or affiliate of such beneficial owner, of less than 20% of the Common Stock of the Corporation and who became a director of the Corporation subsequent to September 20, 1993 and whose initial election or initial nomination for election was approved by a majority of the Continuing Directors then on the Board of Directors of the Corporation. The provisions of this Amended and Restated Certificate of Incorporation may be altered, amended or repealed by the affirmative vote of the holders a majority of the issued and outstanding stock having voting power provided, that with respect to the provisions of Articles Fifth, Seventh, Eighth, Tenth and Eleventh, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the issued and outstanding stock having voting power shall be required. NINTH. The Corporation may in its Bylaws by amendment thereto make any lawful restriction upon the sale or transfer of stock of the Corporation held by its stockholders; and all persons subscribing for stock of the Corporation or purchasing stock, whether from the Corporation itself or from any stockholder, shall take notice of and be bound by such lawful restrictions, and shall be deemed to agree thereto. TENTH. (a) A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which the director derived any improper personal benefit. If the DGCL is amended after approval by the stockholders of this article to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended. (b) Any repeal of modification of the foregoing paragraph by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. ELEVENTH. Any action required or permitted to be taken at any annual or special meeting of stockholders may be taken only upon the vote of the stockholders at an annual or 25 7 special meeting duly noticed and called, as provided in the By-laws of the Corporation, and may not be taken by a written consent of the stockholders. Special meetings of the stockholders of the Corporation for any purpose or purposes may be called at any time by the chief executive officer or by a majority of the members of the Board of Directors. Special meetings of the stockholders of the Corporation may not be called by any other person or persons. IN WITNESS WHEREOF, Harte-Hanks Communications has caused this Amended and Restated Certificate of Incorporation to be signed by its duly authorized officers, this 30th day of September 1993. HARTE-HANKS COMMUNICATIONS, INC. By: /s/ Larry D. Franklin --------------------------- Larry D. Franklin President [SEAL] ATTEST: By: /s/ Donald R. Crews ---------------------- Donald R. Crews Secretary 26 EX-10.O 4 1991 STOCK OPTION PLAN 1 EXHIBIT 10(o) AMENDMENT NO. 3 TO HARTE-HANKS COMMUNICATIONS, INC. 1991 STOCK OPTION PLAN The undersigned, being a duly authorized officer of Harte-Hanks Communications, Inc., a Delaware corporation (the "Company"), executes this Amendment (the "Amendment") to the Harte-Hanks Communications, Inc. 1991 Stock Option Plan (the "Plan"), at the direction of and on behalf of the Company, for the purpose of restating the number of shares issuable pursuant to the Plan. 1. Paragraph 3 of the Plan is amended and restated in its entirety as follows: "3. Shares Subject to the Plan. Except as otherwise required by the provisions of paragraph 7 hereof, the aggregate number of shares of Common Stock issuable upon the exercise of Options pursuant to the Plan shall not exceed 4,000,000 shares. Such shares may be either authorized but unissued shares or treasury shares. If an Option should expire or become unexercisable for any reason without having been exercised in full, the unpurchased shares which were subject thereto shall, unless the Plan shall have been terminated, be available for the grant of other Options under the Plan." 2. This Amendment No. 3 was approved by the Board of Directors of the Company and by holders of a majority of the shares of capital stock entitled to vote at a meeting of stockholders of the Company of April 30, 1996 and this Amendment will be effective as of April 30, 1996. Dated: April 30, 1996 HARTE-HANKS COMMUNICATIONS, INC. By: /s/ DONALD R. CREWS --------------------------------- Name: Donald R. Crews Title: Senior Vice President, Legal 27 EX-10.P 5 1996 INCENTIVE COMPENSATION PLAN 1 EXHIBIT 10(p) 1996 INCENTIVE COMPENSATION PLAN 1. This Plan continues and confirms the incentive bonus arrangements which have applied to the Senior Management Group for the last several years and which the Board intends to continue until amended or terminated by further action of the Board. 2. The members of the Senior Management Group, and such other officers and key employees of the Company as may be selected from time to time by the Compensation Committee, are entitled to participate in this Plan. 3. For each fiscal year, the Compensation Committee shall establish in writing for each participant specific financial or other business goals against which the participant's performance shall be measured. Those goals may relate to revenues, operating income, debt levels, earnings per share or otherwise, and may apply to the company on a consolidated basis, to a core business or unit thereof, or any combination of the foregoing. 4. The goals shall be established in gradations, and each participant shall have the opportunity to receive each year as a cash bonus pursuant to this Plan an amount up to a percent (not to exceed 100%), determined by the Compensation Committee, of his/her base salary; provided, however, in no event shall a participant receive a bonus of more than $2 million pursuant to the Plan for any year. 5. All determinations of levels of goal achievement shall be based on the Company's audited financial statements or other objective sources. 6. Bonus payments shall be made only after the Compensation Committee has certified the extent to which goals have been attained. 7. The Compensation Committee shall have the authority to interpret this Plan and to adopt such rules as it deems appropriate for administrative purposes. Board approval is required to adopt any material modification to this Plan. 28 EX-11 6 COMPUTATION OF EARNINGS PER SHARE 1 Exhibit 11 HARTE-HANKS COMMUNICATIONS, INC. AND SUBSIDIARIES EARNINGS PER SHARE COMPUTATIONS (in thousands, except per share data) PRIMARY
Three Months Ended June 30, ---------------------------- 1996 1995 ------- ------- Net income................................ $ 3,906 $ 9,701 ======= ======= Shares used in net earnings per share computations...................... 38,551 36,279 ======= ======= Earnings per share........................ $ .10 $ .27 ======= =======
COMPUTATION OF SHARES USED IN NET EARNINGS PER SHARE COMPUTATIONS
Three Months Ended June 30, ---------------------------- 1996 1995 ------- ------- Average outstanding common shares......... 36,333 34,460 Average common equivalent shares -- dilutive effect of option shares........ 2,218 1,819 ------ ------- Shares used in net earnings per share computations.................. 38,551 36,279 ====== =======
FULLY DILUTED
Three Months Ended June 30, ---------------------------- 1996 1995 ------- ------- Net income................................ $ 3,906 $ 9,701 ======= ======= Adjusted net income for interest on convertible note..................... $ 3,906 $ 9,826 ======= ======= Shares used in net earnings per share computations.................. 38,702 37,677 ======= ======= Earnings per share........................ $ .10 $ .26 ======= =======
COMPUTATION OF SHARES USED IN NET EARNINGS PER SHARE COMPUTATIONS
Three Months Ended June 30, ----------------------------- 1996 1995 ------- ------- Average outstanding common shares......... 36,333 34,460 Average common equivalent shares -- dilutive effect of option shares........ 2,369 1,898 Dilutive effect of convertible note....... -- 1,319 ------ ------ Shares used in net earnings per share computations.................. 38,702 37,677 ====== ======
29 2 Exhibit 11 HARTE-HANKS COMMUNICATIONS, INC. AND SUBSIDIARIES EARNINGS PER SHARE COMPUTATIONS (in thousands, except per share data) PRIMARY
Six Months Ended June 30, ---------------------------- 1996 1995 ------- ------- Net income................................ $12,223 $18,124 ======= ======= Shares used in net earnings per share computations...................... 38,420 35,673 ======= ======= Earnings per share........................ $ .32 $ .51 ======= =======
COMPUTATION OF SHARES USED IN NET EARNINGS PER SHARE COMPUTATIONS
Six Months Ended June 30, ---------------------------- 1996 1995 ------ ------- Average outstanding common shares......... 36,207 34,028 Average common equivalent shares -- dilutive effect of option shares........ 2,213 1,645 ------ ------ Shares used in net earnings per share computations.................. 38,420 35,673 ====== ======
FULLY DILUTED
Six Months Ended June 30, ---------------------------- 1996 1995 ------- ------- Net income................................ $12,223 $18,124 ======= ======= Adjusted net income for interest on convertible note..................... $12,223 $18,437 ======= ======= Shares used in net earnings per share computations.................. 38,495 37,511 ======= ======= Earnings per share........................ $ .32 $ .49 ======= =======
COMPUTATION OF SHARES USED IN NET EARNINGS PER SHARE COMPUTATIONS
Six Months Ended June 30, ----------------------------- 1996 1995 ------- ------- Average outstanding common shares......... 36,207 34,028 Average common equivalent shares -- dilutive effect of option shares........ 2,288 1,752 Dilutive effect of convertible note....... -- 1,731 ------ ------ Shares used in net earnings per share computations.................. 38,495 37,511 ====== ======
30 EX-27 7 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1996 JUN-30-1996 17,727 0 84,101 2,089 21,594 139,130 223,548 106,019 546,623 78,817 225,340 36,491 0 0 183,347 546,623 310,527 310,527 224,293 278,953 504 0 6,884 25,293 13,070 12,223 0 0 0 12,223 .32 .32
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