UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended March 31, 2003
| ¨ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to
Commission File Number 1-7120
HARTE-HANKS, INC.
(Exact name of registrant as specified in its charter)
| Delaware |
74-1677284 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer 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 checkmark 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 þ No ¨
Indicate by checkmark whether registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes þ No ¨
Indicate the number of shares outstanding of each of the issuer’s classes of common stock: $1 par value, 88,210,527 shares as of April 30, 2003.
HARTE-HANKS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
FORM 10-Q REPORT
March 31, 2003
| Page | ||||
| Part I. |
Financial Information |
|||
| Item 1. |
Interim Condensed Consolidated Financial Statements (Unaudited) |
|||
| Condensed Consolidated Balance Sheets—March 31, 2003 and December 31, 2002 |
3 | |||
| Consolidated Statements of Operations—Three months ended March 31, 2003 and 2002 |
4 | |||
| Consolidated Statements of Cash Flows—Three months ended March 31, 2003 and 2002 |
5 | |||
| 6 | ||||
| Notes to Unaudited Condensed Consolidated Financial Statements |
7 | |||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
10 | ||
| Item 3. |
13 | |||
| Item 4. |
14 | |||
| Part II. |
Other Information |
|||
| Item 6. |
14 | |||
| (a) Exhibits |
||||
| (b) Reports on Form 8-K |
||||
| Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act |
15 | |||
| Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act |
17 | |||
2
Item 1. Interim Condensed Consolidated Financial Statements (Unaudited)
Harte-Hanks, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (in thousands, except share amounts)
(Unaudited)
| March 31, 2003 |
December 31, 2002 |
|||||||
| Assets |
||||||||
| Current assets |
||||||||
| Cash and cash equivalents |
$ |
31,494 |
|
$ |
25,026 |
| ||
| Accounts receivable, net |
|
127,427 |
|
|
137,679 |
| ||
| Inventory |
|
5,226 |
|
|
5,299 |
| ||
| Prepaid expenses |
|
14,162 |
|
|
14,070 |
| ||
| Current deferred income tax asset |
|
7,525 |
|
|
8,129 |
| ||
| Other current assets |
|
6,840 |
|
|
8,409 |
| ||
| Total current assets |
|
192,674 |
|
|
198,612 |
| ||
| Property, plant and equipment, net |
|
94,298 |
|
|
94,154 |
| ||
| Goodwill, net |
|
437,141 |
|
|
436,800 |
| ||
| Other intangible assets, net |
|
3,117 |
|
|
3,267 |
| ||
| Other assets |
|
3,643 |
|
|
3,899 |
| ||
| Total assets |
$ |
730,873 |
|
$ |
736,732 |
| ||
| Liabilities and Stockholders’ Equity |
||||||||
| Current liabilities |
||||||||
| Accounts payable |
$ |
39,672 |
|
$ |
40,746 |
| ||
| Accrued payroll and related expenses |
|
17,061 |
|
|
21,854 |
| ||
| Customer deposits and unearned revenue |
|
42,629 |
|
|
41,775 |
| ||
| Income taxes payable |
|
11,324 |
|
|
9,338 |
| ||
| Other current liabilities |
|
5,985 |
|
|
8,048 |
| ||
| Total current liabilities |
|
116,671 |
|
|
121,761 |
| ||
| Long-term debt |
|
21,351 |
|
|
16,300 |
| ||
| Other long-term liabilities |
|
69,002 |
|
|
66,138 |
| ||
| Total liabilities |
|
207,024 |
|
|
204,199 |
| ||
| Stockholders’ equity |
||||||||
| Common stock, $1 par value, 375,000,000 shares authorized. 111,882,888 and 111,534,630 shares issued at March 31, 2003 and December 31, 2002 respectively |
|
111,883 |
|
|
111,535 |
| ||
| Additional paid-in capital |
|
219,967 |
|
|
216,149 |
| ||
| Retained earnings |
|
735,908 |
|
|
722,231 |
| ||
| Less treasury stock: 22,343,200 and 21,329,896 shares at cost at March 31, 2003 and December 31, 2002, respectively |
|
(518,874 |
) |
|
(491,793 |
) | ||
| Accumulated other comprehensive loss |
|
(25,035 |
) |
|
(25,589 |
) | ||
| Total stockholders’ equity |
|
523,849 |
|
|
532,533 |
| ||
| Total liabilities and stockholders’ equity |
$ |
730,873 |
|
$ |
736,732 |
| ||
See Notes to Unaudited Condensed Consolidated Financial Statements.
3
Harte-Hanks, Inc. and Subsidiaries
Consolidated Statements of Operations (in thousands, except per share amounts)
(Unaudited)
| Three Months Ended March 31, |
||||||||
| 2003 |
2002 |
|||||||
| Operating revenues |
$ |
216,320 |
|
$ |
214,907 |
| ||
| Operating expenses |
||||||||
| Payroll |
|
82,469 |
|
|
81,405 |
| ||
| Production and distribution |
|
78,704 |
|
|
74,507 |
| ||
| Advertising, selling, general and administrative |
|
19,358 |
|
|
17,023 |
| ||
| Depreciation |
|
7,806 |
|
|
8,361 |
| ||
| Intangible amortization |
|
150 |
|
|
150 |
| ||
| Total operating expenses |
|
188,487 |
|
|
181,446 |
| ||
| Operating income |
|
27,833 |
|
|
33,461 |
| ||
| Other expenses (income) |
||||||||
| Interest expense |
|
209 |
|
|
369 |
| ||
| Interest income |
|
(47 |
) |
|
(50 |
) | ||
| Other, net |
|
581 |
|
|
267 |
| ||
|
|
743 |
|
|
586 |
| |||
| Income before income taxes |
|
27,090 |
|
|
32,875 |
| ||
| Income tax expense |
|
10,712 |
|
|
12,607 |
| ||
| Net income |
$ |
16,378 |
|
$ |
20,268 |
| ||
| Basic earnings per common share |
$ |
0.18 |
|
$ |
0.22 |
| ||
| Weighted-average common shares outstanding |
|
89,833 |
|
|
93,773 |
| ||
| Diluted earnings per common share |
$ |
0.18 |
|
$ |
0.21 |
| ||
| Weighted-average common and common equivalent shares outstanding |
|
91,411 |
|
|
96,325 |
| ||
See Notes to Unaudited Condensed Consolidated Financial Statements.
4
Harte-Hanks, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (in thousands)
(Unaudited)
| Three Months Ended March 31, |
||||||||
| 2003 |
2002 |
|||||||
| Cash Flows from Operating Activities |
||||||||
| Net income |
$ |
16,378 |
|
$ |
20,268 |
| ||
| Adjustments to reconcile net income to cash provided by operating activities: |
||||||||
| Depreciation |
|
7,806 |
|
|
8,361 |
| ||
| Intangible amortization |
|
150 |
|
|
150 |
| ||
| Amortization of option-related compensation |
|
24 |
|
|
46 |
| ||
| Deferred income taxes |
|
1,923 |
|
|
1,823 |
| ||
| Other, net |
|
55 |
|
|
14 |
| ||
| Changes in operating assets and liabilities, net of acquisitions: |
||||||||
| Decrease in accounts receivable, net |
|
10,252 |
|
|
10,460 |
| ||
| Decrease in inventory |
|
73 |
|
|
850 |
| ||
| Decrease in prepaid expenses and other current assets |
|
1,477 |
|
|
754 |
| ||
| Decrease in accounts payable |
|
(1,074 |
) |
|
(4,217 |
) | ||
| Increase (decrease) in other accrued expenses and other liabilities |
|
(3,995 |
) |
|
462 |
| ||
| Other, net |
|
2,531 |
|
|
203 |
| ||
| Net cash provided by operating activities |
|
35,600 |
|
|
39,174 |
| ||
| Cash Flows from Investing Activities |
||||||||
| Acquisitions |
|
(341 |
) |
|
(245 |
) | ||
| Purchases of property, plant and equipment |
||||||||