Business Segments

12 Months Ended

Dec. 31, 2012

Business Segments

Business Segments

Note O — Business Segments

Harte-Hanks is a worldwide direct and targeted marketing company with operations in two segments — Direct Marketing and Shoppers.

Harte-Hanks Direct Marketing uses various capabilities and technologies to enable our clients to capture, analyze and disseminate customer and prospect data across all points of customer contact.  Direct Marketing services are targeted to specific industries or markets with services and software products tailored to each industry or market.  Currently, our Direct Marketing business services various vertical markets including retail, high-tech/telecom, financial services, pharmaceutical/healthcare, and a wide range of selected markets.  We believe that we are generally able to provide services to new industries and markets by modifying our services and applications as opportunities are presented.  Depending on the needs of our clients, our Direct Marketing capabilities are provided in an integrated approach through more than 30 facilities worldwide, more than 10 of which are located outside of the United States.  Each of these centers possesses some specialization and is linked with others to support the needs of our clients.

Harte-Hanks Shoppers is North America’s largest owner, operator and distributor of shopper publications, based on weekly circulation and revenues.  Shoppers are weekly advertising publications delivered free by Standard Mail to households and businesses in a particular geographic area.  Shoppers offer advertisers a targeted, cost-effective local advertising system, with virtually 100% penetration in their area of distribution.  Shoppers are particularly effective in large markets with high media fragmentation in which major metropolitan newspapers generally have low penetration.  Our Shoppers segment also provides online advertising and other services online through our website, PennySaverUSA.com.  Our Shoppers clients range from large national companies to local neighborhood businesses to individuals with a single item for sale.  The segment’s core clients are local service businesses and small retailers.  Shoppers’ client base is entirely domestic.

On December 31, 2012 we sold the assets of our Florida Shoppers operations, The Flyer®, for gross proceeds of $2.0 million in the form of a secured promissory note, subject to working capital adjustments.  This transaction resulted in an after-tax loss of $2.7 million, including reserving the full amount of the promissory note.  After this sale, Harte-Hanks Shoppers no longer has any operations or circulation in the state of Florida.  At December 31, 2012, our Shoppers publications were zoned into approximately 780 separate editions with total circulation of approximately 9.1 million shopper packages in California each week.

Included in Corporate Activities are general corporate expenses.  Assets of Corporate Activities primarily include unallocated cash, investments and deferred income taxes.

Information about our operations in different business segments is set forth below based on the nature of the products and services offered. We evaluate performance based on several factors, of which the primary financial measures are segment revenues and operating income. The accounting policies of the business segments are the same as those described in Note A, Significant Accounting Policies.

	Year Ended December 31,
In thousands	2012			2011			2010
Revenues
Direct Marketing	$	581,091		$	614,270		$	601,283
Shoppers	186,618			197,366			219,437
Total revenues	$	767,709		$	811,636		$	820,720
Operating income (loss)
Direct Marketing	$	75,398		$	83,490		$	86,748
Shoppers	(152,610		)	5,839			17,795
Corporate Activities	(12,728		)	(11,231		)	(11,297		)
Total operating income (loss)	$	(89,940	)	$	78,098		$	93,246
Income (loss) from continuing operations before income taxes
Operating income (loss)	$	(89,940	)	$	78,098		$	93,246
Interest expense	(3,574		)	(3,184		)	(2,824		)
Interest income	91			249			200
Other, net	(2,863		)	1,505			(2,136		)
Income (loss) from continuing operations before income taxes	$	(96,286	)	$	76,668		$	88,486
Depreciation
Direct Marketing	$	15,659		$	15,195		$	16,792
Shoppers	4,498			4,409			4,638
Corporate Activities	19			18			13
Total depreciation	$	20,176		$	19,622		$	21,443
Other intangible amortization
Direct Marketing	$	245		$	229		$	290
Shoppers	0			0			0
Total intangible amortization	$	245		$	229		$	290
Capital expenditures
Direct Marketing	$	13,461		$	19,378		$	15,992
Shoppers	395			1,580			1,140
Corporate Activities	0			12			69
Total capital expenditures	$	13,856		$	20,970		$	17,201

	December 31,
In thousands	2012		2011
Total assets
Direct Marketing	$	609,673	$	674,776
Shoppers	49,001		153,679
Corporate Activities	47,538		87,870
Total assets	$	706,212	$	916,325

Information about the operations in different geographic areas:

	Year Ended December 31,
In thousands	2012		2011		2010
Revenues (a)
United States	$	678,736	$	720,747	$	728,205
Other countries	88,973		90,889		92,515
Total revenues	$	767,709	$	811,636	$	820,720

	December 31,
In thousands	2012		2011
Property, plant and equipment (b)
United States	$	55,467	$	62,538
Other countries	6,504		6,354
Total property, plant and equipment	$	61,971	$	68,892

(a) Geographic revenues are based on the location of the service being performed.

(b) Property, plant and equipment are based on physical location.