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Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2020

Segment Reporting, Policy [Policy Text Block]

Segment Reporting

The Company operates

three

business segments: Marketing Services; Customer Care; and Fulfillment & Logistics Services. Our Chief Executive Officer (“CEO”) is considered to be our chief operating decision maker. Our CEO reviews our operating results on an aggregate basis for purposes of allocating resources and evaluating financial performance by using the

three

financial measures: revenue, operating income (loss) and EBITDA.

Concentration Risk, Geographic Concentrations, Policy [Policy Text Block]

Geographic Concentrations

Depending on the needs of our clients, our services are provided through an integrated approach through

seventeen

facilities worldwide, of which

four

are located outside of the U.S.

The following table provides information about the operations in different geographic area for the periods indicated:

	Year Ended December 31,
In thousands	2020		2019
Revenue (1)
United States	$	156,688	$	194,230
Other countries		20,212		23,347
Total revenue	$	176,900	$	217,577

	December 31,
In thousands	2020		2019
Property, plant and equipment (2)
United States	$	5,495	$	7,221
Other countries		383		1,102
Total property, plant and equipment	$	5,878	$	8,323

(

)

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

(

)

Property, plant and equipment are based on physical location.

Revenue and Credit Concentration, Policy [Policy Text Block]

Revenue and Credit Concentration

One customer represented

10%

of total accounts receivable as of

December 31, 2020.

There were

customers with a balance greater than

10%

of accounts receivable as of

December 31, 2019.

Another customer comprised

11.2%

of total revenue for the year ended

December 31, 2020.

There were

customers that represented greater than

10%

of total revenue for the year ended

December 31, 2019.

Our largest

customers in terms of revenue comprised

62%

and

64%

of total revenue for the years ended

December 31,

2020

and

2019,

respectively.

Related Party Transactions

From

2016

until

October 2020,

we conducted business with Wipro, whereby Wipro provided us with a variety of technology-related services. We have since terminated all service agreements with Wipro.

Effective

January 30, 2018,

Wipro became a related party when it purchased

9,926

shares of our Series A Preferred Stock (which are convertible at Wipro's option into

1,001,614

shares, or

15%

of our Common Stock as of

December 31, 2020),

for aggregate consideration of

$9.9

million. For information pertaining to the Company's preferred stock, See Note E,

Convertible Preferred Stock

Consolidation, Policy [Policy Text Block]

Consolidation

The accompanying audited consolidated financial statements include the accounts of Harte Hanks, Inc. and subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. As used in this report, the terms “Harte Hanks,” “the Company,” “we,” “us,” or “our”

may

refer to Harte Hanks, Inc.,

one

or more of its consolidated subsidiaries, or all of them taken as a whole, as the context

may

require.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Actual results and outcomes could differ from those estimates and assumptions. Such estimates include, but are

not

limited to, estimates related to lease accounting; pension accounting; fair value for purposes of assessing long-lived assets for impairment; income taxes; stock-based compensation and contingencies. On an ongoing basis, management reviews its estimates based on currently available information. Changes in facts and circumstances could result in revised estimates and assumptions.

Presentation Of Operating Expense In Consolidated Statements of Comprehensive Income [Policy Text Block]

Operating Expense Presentation in Consolidated Statements of Comprehensive Loss

The “Labor” line in the Consolidated Statements of Comprehensive Loss includes all employee payroll and benefits costs, including stock-based compensation, along with temporary labor costs. The “Production and distribution” and “Advertising, selling, general and administrative” lines do

not

include labor, depreciation, or amortization expense.

Revenue from Contract with Customer [Policy Text Block]

Revenue Recognition

We recognize revenue upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to be entitled to receive in exchange for those products or services based on the relevant contract. We apply the following

five

-step revenue recognition model:

•

Identification of the contract, or contracts, with a customer

•

Identification of the performance obligations in the contract

•

Determination of the transaction price

•

Allocation of the transaction price to the performance obligations in the contract

•

Recognition of revenue when (or as) we satisfy the performance obligation

Certain client programs provide for adjustments to billings based upon whether we achieve certain performance criteria. In these circumstances, revenue is recognized when the foregoing conditions are met. We record revenue net of any taxes collected from customers and subsequently remitted to governmental authorities. Any payments received in advance of the performance of services or delivery of the product are recorded as deferred revenue until such time as the services are performed or the product is delivered. Costs incurred for search engine marketing solutions payable to the engine host and postage costs of mailings are billed to our clients and are

not

directly reflected in our revenue.

Revenue from agency and digital services, direct mail, logistics, fulfillment and contact center is recognized as the work is performed. Fees for these services are determined by the terms set forth in each contract. These fees are typically set at a fixed price or rate by transaction occurrence, service provided, time spent, or product delivered.

For arrangements requiring design and build of a database, revenue is

not

recognized until client acceptance occurs. Up-front fees billed during the setup phase for these arrangements are deferred and direct build costs are capitalized. Pricing for these types of arrangements is typically based on a fixed price determined in the contract. Revenue from other database marketing solutions is recognized ratably over the contractual service period. Pricing for these services is typically based on a fixed price per month or per contract.

Fair Value of Financial Instruments, Policy [Policy Text Block]

Fair Value of Financial Instruments

FASB ASC

820,

Fair Value Measurements and Disclosures

, (“ASC

820”

) defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC

820

also establishes a fair value hierarchy that prioritizes the inputs used in valuation methodologies into

three

levels:

Level 1		Quoted prices in active markets for identical assets or liabilities.

Level 2		Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3		Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Because of their maturities and/or variable interest rates, certain financial instruments have fair values approximating their carrying values. These instruments include cash and cash equivalents and restricted cash, accounts receivable, trade payables, and long-term debt. The fair value of the assets in our funded pension plan is disclosed in Note H,

Employee Benefit Plans.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash Equivalents

All highly liquid investments with an original maturity of

days or less at the time of purchase are considered to be cash equivalents. Cash equivalents are carried at cost, which approximates fair value.

Cash and Cash Equivalents, Restricted Cash and Cash Equivalents, Policy [Policy Text Block]

Restricted Cash

In our normal business operation, we receive cash from our customers for certain customer program service funding.

As these programs impose legal restrictions on the commingling of funds, we present this cash as restricted cash.

Receivables, Trade and Other Accounts Receivable, Allowance for Doubtful Accounts, Policy [Policy Text Block]

Allowance for Doubtful Accounts

We maintain our allowance for doubtful accounts adequate to reduce accounts receivable to the amount of cash expected to be collected. The methodology used to determine the minimum allowance is based on our prior collection experience and is generally related to the accounts receivable balance in various aging categories. The balance is also influenced by specific clients' financial strength and circumstance. Accounts that are determined to be uncollectible are written off in the period in which they are determined to be uncollectible. Periodic changes to the allowance balance are recorded as increases or decreases to bad debt expense, which is included in the “Advertising, selling, general, and administrative” line of our Consolidated Statements of Comprehensive Loss. The changes in the allowance for doubtful accounts consisted of the following:

	Year Ended December 31,
In thousands	2020			2019
Balance at beginning of year	$	666		$	430
Net charges to expense		115			351
Amounts recovered against the allowance		(540	)		(115	)
Balance at end of year	$	241		$	666

Inventory, Policy [Policy Text Block]

Inventory

Inventory, consisting primarily of print materials and operating supplies, is stated at the lower of cost (

first

-in,

first

-out method) or net realizable value.

Property, Plant and Equipment, Policy [Policy Text Block]

Property, Plant and Equipment

Property, plant and equipment are stated on the basis of cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The general ranges of estimated useful lives are:

		Years
Buildings and improvements		3 to 40
Software		2 to 10
Equipment and furniture		3 to 20

Long-lived assets such as property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset

may

not

be recoverable. The carrying amount of a long-lived asset group is

not

recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset group. We recorded a

$0.8

million and

$4.7

million impairment of long-lived assets in

2020

and

2019,

respectively.

Lessee, Leases [Policy Text Block]

Leases

We determine if an arrangement is a lease at its inception. Operating and finance leases are included in the lease right-of-use (“ROU”) assets and in the current portion and long-term portion of lease liabilities on our consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date of each lease based on the present value of lease payments over the lease term. As most of our leases do

not

provide an implicit interest rate, we use our incremental borrowing rate based on the information available at commencement date of each lease to determine the present value of lease payments. The operating lease ROU assets also include any lease payments made and exclude lease incentives. Our lease terms

may

include options to extend or terminate the lease, which are included in the lease ROU assets when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. We have lease agreements with lease and non-lease components, which are generally accounted for separately. For certain real estate leases, we account for the lease and non-lease components as a single lease component. See Note B,

Recent Accounting Pronouncements - Recently adopted accounting pronouncements.

Income Tax, Policy [Policy Text Block]

Income Taxes

Income tax expense includes U.S. and international income taxes accounted for under the asset and liability method. Certain income and expenses are

not

reported in tax returns and financial statements in the same year. Such temporary differences are reported as deferred tax. Deferred tax assets are reported net of valuation allowances where we have assessed that it is more likely than

not

that a tax benefit will

not

be realized.

Earnings Per Share, Policy [Policy Text Block]

Loss Per Share

Basic loss per common share is based upon the weighted-average number of common shares outstanding during the period. Diluted loss per common share is based upon the weighted-average number of common shares and dilutive common stock equivalents outstanding during the period. Dilutive common stock equivalents are calculated based on the assumed exercise of stock options and vesting of unvested shares using the treasury stock method.

Share-based Payment Arrangement [Policy Text Block]

Stock-Based Compensation

All share-based awards are recognized as operating expense in the “Labor” line of the Consolidated Statements of Comprehensive Loss. Calculated expense is based on the fair values of the awards on the date of grant and is recognized over the requisite service period or performance period of the awards.

Reserve For Healthcare Workers Compensation, Automobile and General Liability [Policy Text Block]

Reserve for Healthcare, Workers' Compensation, Automobile and General Liability

We are self-insured for the majority of our healthcare insurance. We pay actual medical claims up to a stop loss limit of

$0.3

million. In the

fourth

quarter of

2016,

we moved to a guaranteed cost program for our workers' compensation programs.

The reserve is estimated using current claims activity, historical experience, and claims incurred but

not

reported. We use loss development factors that consider both industry norms and company specific information. Our liability is recorded at the estimate of the ultimate cost of claims at the balance sheet date. At

December 31, 2020

and

2019

, our reserve for healthcare, workers' compensation, net, automobile, and general liability was

$1.4

million and

$2.1

million, respectively. Periodic changes to the reserve for workers' compensation, automobile and general liability are recorded as increases or decreases to insurance expense, which is included in the “Advertising, selling, general and administrative” line of our Consolidated Statements of Comprehensive Loss. Periodic changes to the reserve for healthcare are recorded as increases or decreases to employee benefits expense, which is included in the “Labor” line of our Consolidated Statements of Comprehensive Loss.

Foreign Currency Transactions and Translations Policy [Policy Text Block]

Foreign Currencies

In most instances the functional currencies of our foreign operations are the local currencies. Assets and liabilities recorded in foreign currencies are translated in U.S. dollars at the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates of exchange prevailing during a given month. Adjustments resulting from this translation are charged or credited to other comprehensive loss.