1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q X Quarterly report pursuant to Section 13 or 15(d) of the Securities - ----- Exchange Act of 1934 For the quarterly period ended March 31, 2001 -------------- 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 (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, 63,545,162 shares as of April 30, 2001.
2 2 HARTE-HANKS, INC. AND SUBSIDIARIES TABLE OF CONTENTS FORM 10-Q REPORT March 31, 2001 <TABLE> <CAPTION> Page ---- <S> <C> Part I. Financial Information Item 1. Interim Condensed Consolidated Financial Statements (Unaudited) Condensed Consolidated Balance Sheets - 3 March 31, 2001 and December 31, 2000 Consolidated Statements of Operations - 4 Three months ended March 31, 2001 and 2000 Consolidated Statements of Cash Flows - 5 Three months ended March 31, 2001 and 2000 Consolidated Statements of Stockholders' Equity - 6 Three months ended March 31, 2001 and 2000 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 6. Exhibits and Reports on Form 8-K 13 (a) Exhibits (b) Reports on Form 8-K Signature 14 </TABLE>
3 3 Harte-Hanks, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (in thousands, except share amounts) - -------------------------------------------------------------------------------- (Unaudited) <TABLE> <CAPTION> March 31, December 31, 2001 2000 ---------- ------------ <S> <C> <C> Assets Current assets Cash and cash equivalents ........................... $ 21,504 $ 22,928 Accounts receivable, net ............................ 150,551 179,838 Inventory ........................................... 6,933 6,260 Prepaid expenses .................................... 15,007 14,072 Current deferred income tax asset ................... 7,120 7,648 Other current assets ................................ 4,552 5,127 ---------- ---------- Total current assets ............................. 205,667 235,873 Property, plant and equipment, net ..................... 113,362 112,065 Goodwill and other intangibles, net .................... 434,983 439,148 Other assets ........................................... 19,588 20,019 ---------- ---------- Total assets ..................................... $ 773,600 $ 807,105 ========== ========== Liabilities and Stockholders' Equity Current liabilities Accounts payable .................................... $ 70,473 $ 60,069 Accrued payroll and related expenses ................ 19,357 31,429 Customer deposits and unearned revenue .............. 44,395 42,712 Income taxes payable ................................ 10,059 5,135 Other current liabilities ........................... 7,479 10,619 ---------- ---------- Total current liabilities ........................ 151,763 149,964 Long-term debt ......................................... 33,912 65,370 Other long-term liabilities ............................ 41,425 40,768 ---------- ---------- Total liabilities ................................ 227,100 256,102 ---------- ---------- Stockholders' equity Common stock, $1 par value, 250,000,000 shares authorized. 77,796,862 and 76,916,339 shares issued at March 31, 2001 and December 31, 2000, respectively ............................... 77,797 76,916 Additional paid-in capital .......................... 211,811 202,222 Accumulated other comprehensive income (loss) ....... (2,785) (2,105) Retained earnings ................................... 584,940 568,512 ---------- ---------- 871,763 845,545 Less treasury stock: 13,560,879 and 12,230,388 shares at cost at March 31, 2001 and December 31, 2000, respectively .................. (325,263) (294,542) ---------- ---------- Total stockholders' equity ....................... 546,500 551,003 ---------- ---------- Total liabilities and stockholders' equity ....... $ 773,600 $ 807,105 ========== ========== </TABLE> See Notes to Interim Condensed Consolidated Financial Statements.
4 4 Harte-Hanks, Inc. and Subsidiaries Consolidated Statements of Operations (in thousands, except per share amounts) - -------------------------------------------------------------------------------- (Unaudited) <TABLE> <CAPTION> Three Months Ended March 31, ---------------------------- 2001 2000 ---- ---- <S> <C> <C> Operating revenues ......................................... $ 232,120 $ 226,057 ---------- ---------- Operating expenses Payroll ................................................ 90,788 87,068 Production and distribution ............................ 77,256 76,003 Advertising, selling, general and administrative ....... 20,299 22,461 Depreciation ........................................... 7,703 6,730 Goodwill and intangible amortization ................... 4,222 3,644 ---------- ---------- 200,268 195,906 ---------- ---------- Operating income ........................................... 31,852 30,151 ---------- ---------- Other expenses (income) Interest expense ....................................... 987 254 Interest income ........................................ (161) (412) Other, net ............................................. 472 483 ---------- ---------- 1,298 325 ---------- ---------- Income before income taxes ................................. 30,554 29,826 Income tax expense ......................................... 12,191 12,072 ---------- ---------- Net income ................................................. $ 18,363 $ 17,754 ========== ========== Basic: Earnings per common share .............................. $ 0.28 $ 0.26 ========== ========== Weighted-average common shares outstanding ............. 64,660 68,263 ========== ========== Diluted: Earnings per common share .............................. $ 0.28 $ 0.25 ========== ========== Weighted-average common and common equivalent shares outstanding .................................. 66,381 70,301 ========== ========== </TABLE> See Notes to Interim Condensed Consolidated Financial Statements.
5 5 Harte-Hanks, Inc. and Subsidiaries Consolidated Statements of Cash Flows (in thousands) - -------------------------------------------------------------------------------- (Unaudited) <TABLE> <CAPTION> Three Months Ended March 31, ---------------------------- 2001 2000 ---- ---- <S> <C> <C> Operating Activities Net income ....................................................................... $ 18,363 $ 17,754 Adjustments to reconcile net income to cash provided by operating activities: Depreciation .................................................................. 7,703 6,730 Goodwill and intangible amortization .......................................... 4,222 3,644 Amortization of option-related compensation ................................... 93 138 Deferred income taxes ......................................................... 1,178 1,373 Other, net .................................................................... 604 262 Changes in operating assets and liabilities, net of acquisitions: Decrease in accounts receivable, net .......................................... 29,287 5,687 Decrease (increase) in inventory .............................................. (673) 1,376 Increase in prepaid expenses and other current assets ............................................................. (360) (1,896) Increase (decrease)in accounts payable ........................................ 10,404 (2,700) Increase (decrease) in other accrued expenses and other liabilities ...................................................... (6,660) 76 Other, net .................................................................... (1,185) 16 ---------- ---------- Net cash provided by operating activities .................................. 62,976 32,460 ---------- ---------- Investing Activities Acquisitions ..................................................................... - (8,681) Purchases of property, plant and equipment ....................................... (8,963) (10,300) Proceeds from sale of property, plant and equipment .............................. 154 - ---------- ---------- Net cash used in investing activities ...................................... (8,809) (18,981) ---------- ---------- Financing Activities Long-term borrowings ............................................................. 112,000 1,032 Repayment of long-term borrowings ................................................ (143,000) (5,000) Issuance of common stock ......................................................... 3,820 1,736 Purchase of treasury stock ....................................................... (26,497) (12) Issuance of treasury stock ....................................................... 21 20 Dividends paid ................................................................... (1,935) (1,708) ---------- ---------- Net cash used in financing activities ...................................... (55,591) (3,932) ---------- ---------- Net increase (decrease) in cash .................................................. (1,424) 9,547 Cash and cash equivalents at beginning of year ................................... 22,928 35,196 ---------- ---------- Cash and cash equivalents at end of period ....................................... $ 21,504 $ 44,743 ========== ========== </TABLE> See Notes to Interim Condensed Consolidated Financial Statements.
6 6 Harte-Hanks, Inc. and Subsidiaries Consolidated Statements of Stockholders' Equity (in thousands) - -------------------------------------------------------------------------------- (Unaudited) <TABLE> <CAPTION> Accumulated Additional Other Total Common Paid-In Retained Treasury Comprehensive Stockholders' Stock Capital Earnings Stock Income (Loss) Equity ----------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> Balance at January 1, 2000 .......... $ 76,392 $ 197,454 $ 493,362 $(201,906) $ 12,316 $ 577,618 Common stock issued- employee benefit plans ......... 50 948 - - - 998 Exercise of stock options ........... 152 586 - - - 738 Tax benefit of options exercised ...................... - 288 - - - 288 Dividends paid ($0.025 per share) ......................... - - (1,708) - - (1,708) Treasury stock repurchase ........... - - - (12) - (12) Treasury stock issued ............... - 1 - 19 - 20 Comprehensive income, net of tax: Net income ..................... - - 17,754 - - 17,754 Foreign currency translation adjustment ..... - - - - 381 381 Change in net unrealized gain (loss) on long-term investments, net of reclassification adjustments (net of tax of $1,057) ............. - - - - 1,964 1,964 --------- Total comprehensive income .......... 20,099 --------------------------------------------------------------------------------------- Balance at March 31, 2000 ........... $ 76,594 $ 199,277 $ 509,408 $(201,899) $ 14,661 $ 598,041 ======================================================================================= Balance at January 1, 2001 .......... $ 76,916 $ 202,222 $ 568,512 $(294,542) $ (2,105) $ 551,003 Common stock issued- employee benefit plans ......... 51 923 - - - 974 Exercise of stock options for cash and by surrender of shares ............ 830 3,383 - (4,243) - (30) Tax benefit of options exercised ...................... - 5,281 - - - 5,281 Dividends paid ($0.03 per share) ......................... - - (1,935) - - (1,935) Treasury stock repurchase ........... - - - (26,497) - (26,497) Treasury stock issued ............... - 2 - 19 - 21 Comprehensive income, net of tax: Net income ..................... - - 18,363 - - 18,363 Foreign currency translation adjustment ..... - - - - (351) (351) Change in net unrealized gain (loss) on long-term investments (net of tax of $177) ....... - - - - (329) (329) --------- Total comprehensive income .......... 17,683 --------------------------------------------------------------------------------------- Balance at March 31, 2001 ........... $ 77,797 $ 211,811 $ 584,940 $(325,263) $ (2,785) $ 546,500 ======================================================================================= </TABLE> See Notes to Interim Condensed Consolidated Financial Statements.
7 7 Harte-Hanks, Inc. and Subsidiaries Notes to Interim Condensed Consolidated Financial Statements (Unaudited) NOTE A - BASIS OF PRESENTATION The accompanying unaudited Interim Condensed Consolidated Financial Statements include the accounts of Harte-Hanks, Inc. and subsidiaries (the "Company"). The statements have been prepared in accordance with accounting principles generally accepted in the United States of America 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 accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. 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, 2000. Certain prior period amounts have been reclassified for comparative purposes. NOTE B - INCOME TAXES The Company's quarterly income tax provision of $12.2 million was calculated using an effective income tax rate of approximately 39.9%. The Company's effective income tax rate is derived by estimating pretax income and income tax expense for the year ending December 31, 2001. The effective income tax rate calculated is higher than the federal statutory rate of 35% due to the addition of state taxes and to certain expenses recorded for financial reporting purposes (primarily goodwill amortization) which are not deductible for federal income tax purposes. NOTE C - EARNINGS PER SHARE A reconciliation of basic and diluted earnings per share is as follows: <TABLE> <CAPTION> Three Months Ended March 31, In thousands, except per share amounts 2001 2000 - ------------------------------------------------------------------------------------------------------- <S> <C> <C> BASIC EPS Net Income ........................................................ $ 18,363 $ 17,754 ======== ======== Weighted-average common shares outstanding used in earnings per share computations ......................... 64,660 68,263 ======== ======== Earnings per common share ......................................... $ 0.28 $ 0.26 ======== ======== DILUTED EPS Net Income ........................................................ $ 18,363 $ 17,754 ======== ======== Shares used in earnings per share computations .................... 66,381 70,301 ======== ======== Earnings per common share ......................................... $ 0.28 $ 0.25 ======== ======== Computation of shares used in earnings per share computations: Average outstanding common shares ................................. 64,660 68,263 Average common equivalent shares - dilutive effect of option shares ................................ 1,721 2,038 -------- -------- Shares used in earnings per share computations .................... 66,381 70,301 ======== ======== </TABLE> As of March 31, 2001 the Company had 1,037,700 antidilutive market price options
8 8 outstanding. NOTE D - BUSINESS SEGMENTS Harte-Hanks is a highly focused targeted media company with operations in two segments - direct and interactive marketing and shoppers. Information about the Company's operations in different industry segments: <TABLE> <CAPTION> Three Months Ended March 31 In thousands 2001 2000 - ----------------------------------------------------------------------------------- <S> <C> <C> Operating revenues Direct Marketing ........................ $ 157,793 $ 156,191 Shoppers ................................ 74,327 69,866 --------- --------- Total operating revenues ............ $ 232,120 $ 226,057 ========= ========= Operating Income Direct Marketing ........................ $ 21,418 $ 21,359 Shoppers ................................ 12,782 11,087 Corporate Activities .................... (2,348) (2,295) --------- --------- Total operating income .............. $ 31,852 $ 30,151 ========= ========= Income before income taxes Operating income ........................ $ 31,852 $ 30,151 Interest expense ........................ (987) (254) Interest income ......................... 161 412 Other, net .............................. (472) (483) --------- --------- Total income before income taxes .... $ 30,554 $ 29,826 ========= ========= </TABLE> NOTE E - RECENT ACCOUNTING PRONOUNCEMENT Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," issued in June 1998, establishes accounting and reporting standards for derivative instruments and hedging activities. This statement requires than an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The Company adopted SFAS No. 133 in the first quarter of 2001. The adoption of SFAS No. 133 did not have a material impact on the Company's financial position or results of operations.
9 9 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - -------------------------------------------------------------------------------- RESULTS OF OPERATIONS Operating results were as follows: <TABLE> <CAPTION> THREE MONTHS ENDED In thousands MARCH 31, 2001 MARCH 31, 2000 CHANGE - ------------ -------------- -------------- ------ <S> <C> <C> <C> Revenues $ 232,120 $ 226,057 2.7% Operating expenses 200,268 195,906 2.2% ----------- ----------- Operating income $ 31,852 $ 30,151 5.6% =========== =========== Net income $ 18,363 $ 17,754 3.4% =========== =========== Diluted earnings per share $ 0.28 $ 0.25 12.0% =========== =========== </TABLE> Consolidated revenues grew 2.7% to $232.1 million and operating income grew 5.6% to $31.9 million in the first quarter of 2001 when compared to the first quarter of 2000. The Company's overall growth resulted from acquisitions and increased business with both new and existing customers. Overall operating expenses compared to 2000 increased 2.2% to $200.3 million. Net income grew 3.4% to $18.4 million, or 28 cents per share, compared to 25 cents per share on a diluted basis. The net income growth resulted from the growth in operating income partially offset by $1.0 million in higher interest expense and lower interest income. Increased interest cost was the result of higher debt levels in 2001, the proceeds of which were primarily used to repurchase the Company's stock. DIRECT MARKETING Direct and interactive marketing operating results were as follows: <TABLE> <CAPTION> THREE MONTHS ENDED In thousands MARCH 31, 2001 MARCH 31, 2000 CHANGE - ------------ -------------- -------------- ------ <S> <C> <C> <C> Revenues $ 157,793 $ 156,191 1.0% Operating expenses 136,375 134,832 1.1% ----------- ----------- Operating income $ 21,418 $ 21,359 0.3% =========== =========== </TABLE> Direct and interactive marketing revenues increased $1.6 million, or 1.0%, in the first quarter of 2001 compared to 2000. These results reflect a decline in the retail industry sector, direct and interactive marketing's largest vertical market, and slowdowns in the high tech/telecom and financial services industry sectors. These results were offset by excellent revenue growth in the pharmaceutical, healthcare and automotive industry sectors. Customer Relationship Management (CRM) experienced moderate growth while Marketing Services revenues declined slightly from the prior year. CRM revenues increased due to acquisitions, new customer gains and increased software revenue and internet business with existing customers, partially offset by decreased revenues from lead generation, telesales and fulfillment business. The traditional business-to-business activities of CRM continued to have steady growth in the first quarter, but were partially offset by declines in revenues from business-to-consumer activities. Marketing Services experienced revenue declines in its targeted mail operations and softness in its logistics and personalized direct mail operations. The remainder of fiscal year 2001 results could be affected by the recent economic uncertainty and continued softness in many of the direct and interactive marketing segment's largest industry sectors. Operating expenses increased $1.5 million, or 1.1%, in the first quarter of 2001 compared to 2000. Payroll costs increased $3.0 million, primarily due to
10 10 acquisitions and increased wages. Also contributing to the increased operating expenses was additional depreciation and amortization expense of $1.6 million due to goodwill associated with acquisitions and higher levels of capital investment to support growth. Partially offsetting these increased operating expenses were decreased general and administrative expenses, primarily professional services, resulting from the Company's effort to control discretionary costs. Operating expenses were also impacted by prior year acquisitions. SHOPPERS Shopper operating results were as follows: <TABLE> <CAPTION> THREE MONTHS ENDED In thousands MARCH 31, 2001 MARCH 31, 2000 CHANGE - ------------ -------------- -------------- ------ <S> <C> <C> <C> Revenues $ 74,327 $ 69,866 6.4% Operating expenses 61,545 58,779 4.7% ----------- ----------- Operating income $ 12,782 $ 11,087 15.3% =========== =========== </TABLE> Shopper revenues increased $4.5 million, or 6.4%, in the first quarter of 2001 compared to 2000. Revenue increases were the result of improved sales in established markets as well as year-over-year geographic expansions into new neighborhoods in both California and Florida. From a product-line perspective, Shoppers had growth in both its distribution products, primarily pre-printed inserts and 4-color glossy heatset flyers, and its in-book products, primarily core sales and employment related advertising. Shoppers also continued to experience success in up-selling ads onto its web-site. Shoppers experienced decreases in its real-estate and automotive related advertising sectors. Operating expenses increased $2.8 million, or 4.7%, in the first quarter of 2001 compared to 2000. The increase in operating expenses was primarily due to increases in labor costs of $0.8 million and additional production costs of $2.2 million, including increased postage of $1.6 million due to increased volumes and higher postage rates. Partially offsetting these increased operating expenses were decreased general and administrative expenses, resulting from the Company's effort to control discretionary costs. Other Income and Expense The Company recorded a loss of approximately $0.5 million in the first quarter 2001 on the write-down of an investment which was being accounted for under the cost method. Interest Expense/Interest Income Interest expense increased $0.7 million in the first quarter of 2001 over 2000 due primarily to higher debt levels in 2001, the proceeds of which were used to repurchase the Company's stock. Interest income decreased $0.3 million in the first quarter of 2001 over the same period in 2000 due to lower cash balances and lower interest rates during the first quarter of 2001. Income Taxes The Company's income tax expense increased $0.1 million in the first quarter of 2001 compared to the first quarter of 2000. This increase was due primarily to the higher pre-tax income levels. The effective tax rate was 39.9% for the first quarter of 2001 and 40.5% for the first quarter of 2000.
11 11 Liquidity and Capital Resources Cash provided by operating activities for the three months ended March 31, 2001 was $63.0 million, compared to $32.5 million for the first three months of 2000. The increase in 2001 primarily related to increased collections of a higher accounts receivable balance at December 31, 2000 than at December 13, 1999. Net cash outflows from investing activities were $8.8 million for the first three months of 2001, compared to $19.0 million for the first three months of 2000. The cash outflow in 2001 primarily relates to purchases of fixed assets, while the outflow in 2000 relates to both purchases of fixed assets and acquisitions. Net cash outflows from financing activities were $55.6 million in 2001 compared to $3.9 million in 2000. The cash outflow in 2001 is attributable primarily to the net repayment of long-term borrowings and the repurchase of treasury stock. Capital resources are available from and provided through the Company's two unsecured credit facilities. These credit facilities, two $100 million variable rate, revolving loan commitments, were put in place on November 4, 1999. All borrowings under the $100 million revolving Three-Year Credit Agreement are to be repaid by November 4, 2002. On November 2, 2000 the Company was granted a 364-day extension to its $100 million revolving 364-Day Credit Agreement. All borrowings under the $100 million revolving 364-Day Credit Agreement are to be repaid by November 1, 2001. As of March 31, 2001, the Company had $176 million of unused borrowing capacity under these two credit facilities. Management believes that its credit facilities, together with cash provided from operating activities, will be sufficient to fund operations and anticipated acquisitions and capital expenditures needs for the foreseeable future. Factors That May Affect Future Results and Financial Condition From time to time, in both written reports and oral statements by senior management, the Company may express its expectations regarding its future performance. These "forward-looking statements" are inherently uncertain, and investors should realize that events could turn out to be other than what senior management expected. Set forth below are some key factors which could affect the Company's future performance, including its revenues, net income and earnings per share; however, the risks described below are not the only ones the Company faces. Additional risks and uncertainties that are not presently known, or that the Company currently considers immaterial, could also impair the Company's business operations. Legislation -- There could be a material adverse impact on the Company's direct and interactive marketing business due to the enactment of legislation or industry regulations arising from public concern over consumer privacy issues. Restrictions or prohibitions could be placed upon the collection and use of information that is currently legally available. Data Suppliers - There could be a material adverse impact on the Company's direct and interactive marketing business if owners of the data the Company uses were to withdraw the data. Data providers could withdraw their data if there is a competitive reason to do so or if legislation is passed restricting the use of the data. Acquisitions -- In recent years the Company has made a number of acquisitions in its direct and interactive marketing segment, and it expects to pursue additional acquisition opportunities. Acquisition activities, even if not consummated, require substantial amounts of management time and can distract from normal operations. In addition, there can be no assurance that the synergies and other objectives sought in acquisitions will be achieved. Competition -- Direct and interactive marketing is a rapidly evolving business, subject to periodic technological advancements, high turnover of customer personnel who make buying decisions, and changing customer needs and preferences.
12 12 Consequently, the Company's direct and interactive marketing business faces competition in both of its sectors -- CRM and Marketing Services. The Company's shopper business competes for advertising, as well as for readers, with other print and electronic media. Competition comes from local and regional newspapers, magazines, radio, broadcast and cable television, shoppers and other communications media that operate in the Company's markets. The extent and nature of such competition are, in large part, determined by the location and demographics of the markets targeted by a particular advertiser, and the number of media alternatives in those markets. Failure to continually improve the Company's current processes and to develop new products and services could result in the loss of the Company's customers to current or future competitors. In addition, failure to gain market acceptance of new products and services could adversely affect the Company's growth. Qualified Personnel -- The Company believes that its future prospects will depend in large part upon its ability to attract, train and retain highly skilled technical, client services and administrative personnel. Qualified personnel are in great demand and are likely to remain a limited resource for the foreseeable future. Postal Rates -- The Company's shoppers are delivered by standard mail, and postage is the second largest expense, behind payroll, in the Company's shopper business. The present standard postage rates went into effect in January 2001 and are expected to increase in the third quarter of 2001. Overall shopper postage costs are expected to grow moderately as a result of this increase as well as anticipated increases in circulation and insert volumes. Postal rates also influence the demand for the Company's direct and interactive marketing services even though the cost of mailings is borne by the Company's customers and is not directly reflected in the Company's revenues or expenses. Paper Prices -- Paper represents a substantial expense in the Company's shopper operations. In recent years newsprint prices have fluctuated widely, and such fluctuations can materially affect the results of the Company's operations. Economic Conditions -- Changes in national economic conditions can affect levels of advertising expenditures generally, and such changes can affect each of the Company's businesses. In addition, revenues from the Company's shopper business are dependent to a large extent on local advertising expenditures in the markets in which they operate. Such expenditures are substantially affected by the strength of the local economies in those markets. Direct and interactive marketing revenues are dependent on national and international economics.
13 13 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. See index to Exhibits on Page 15. (b) No Form 8-K has been filed during the three months ended March 31, 2001.
14 14 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. HARTE-HANKS, INC. May 15, 2001 /s/ Jacques D. Kerrest ------------ ---------------------------------- Date Jacques D. Kerrest Senior Vice President, Finance and Chief Financial Officer
15 15 <TABLE> <CAPTION> Exhibit No. Description of Exhibit Page No. - -------- ----------------------------------------------------------------------- -------- <S> <C> <C> 3(a) Amended and Restated Certificate of Incorporation (filed as Exhibit 3(a) to the Company's Form 10-K for the year ended December 31, 1993 and incorporated by reference herein). 3(b) Amended and Restated Bylaws (filed as Exhibit 3(b) to the Company's Registration Statement No. 33-69202 and incorporated by reference herein). 3(c) Amendment dated April 30, 1996 to Amended and Restated Certificate of Incorporation (filed as Exhibit 3(c) to the Company's Form 10-Q for the nine months ended September 30, 1996 and incorporated by reference herein). 3(d) Amendment dated May 5, 1998 to Amended and Restated Certificate of Incorporation (filed as Exhibit 3(d) to the Company's Form 10-Q for the six months ended June 30, 1998 and incorporated by reference herein). 3(e) Amended and Restated Certificate of Incorporation as amended through May 5, 1998 (filed as Exhibit 3(e) to the Company's Form 10-Q for the six months ended June 30, 1998 and incorporated by reference herein). 4(a) 364-Day Credit Agreement dated as of November 4, 1999 between Harte-Hanks, Inc. and the Lenders named therein [$100 million] (filed as Exhibit 4(a) to the Company's form 10-Q for the nine months ended September 30, 1999 and incorporated by reference herein). 4(b) Three-Year Credit Agreement dated as of November 4, 1999 between Harte-Hanks, Inc. and the Lenders named therein [$100 million] (filed as Exhibit 4(b) to the Company's form 10-Q for the nine months ended September 30, 1999 and incorporated by reference herein). 4(c) Amendment No. 2 dated October 30, 2000 to 364-Day Credit Agreement [$100 million] (filed as Exhibit 4(c) to the Company's Form 10-Q for the nine months ended September 30, 2000 and incorporated by reference herein). 4(d) Other long term debt instruments are not being filed pursuant to Section (b)(4)(ii) of Item 601 of Regulation S-K. Copies of such instruments will be furnished to the Commission upon request. 10(a) 1984 Stock Option Plan (filed as Exhibit 10(d) to the Company's Form 10-K for the year ended December 31, 1984 and incorporated herein by reference). 10(b) Registration Rights Agreement dated as of September 11, 1984 among HHC Holding Inc. and its stockholders (filed as Exhibit 10(b) to the Company's Form 10-K for the year ended December 31, 1993 and incorporated by reference herein). 10(c) Severance Agreement between Harte-Hanks, Inc. and Larry Franklin, dated as of December 15, 2000 (filed as Exhibit 10(c) to the Company's Form 10-K for the year ended December 31, 2000 and incorporated by reference herein). </TABLE>
16 16 <TABLE> <CAPTION> Exhibit No. Description of Exhibit Page No. - -------- ----------------------------------------------------------------------- -------- <S> <C> <C> 10(d) Severance Agreement between Harte-Hanks, Inc. and Richard M. Hochhauser dated as of December 15, 2000 (filed as Exhibit 10(d) to the Company's Form 10-K for the year ended December 31, 2000 and incorporated by reference herein). 10(e) Form 1 of Severance Agreement between Harte-Hanks, Inc. and certain Executive Officers of the Company, dated as of December 15, 2000 (filed as Exhibit 10(e) to the Company's Form 10-K for the year ended December 31, 2000 and incorporated by reference herein). 10(f) Form 2 of Severance Agreement between Harte-Hanks, Inc. and certain Executive Officers of the Company, dated as of December 15, 2000 (filed as Exhibit 10(f) to the Company's Form 10-K for the year ended December 31, 2000 and incorporated by reference herein). 10(g) Harte-Hanks, Inc. Amended and Restated Restoration Pension Plan dated as of January 1, 2000 (filed as Exhibit 10(f) to the Company's Form 10-K for the year ended December 31, 1999 and Incorporated by reference herein). 10(h) Harte-Hanks Communications, Inc. 1996 Incentive Compensation Plan (filed as Exhibit 10(p) to the Company's Form 10-Q for the nine months ended September 30, 1996 and incorporated by reference herein). 10(i) Harte-Hanks, Inc. Amended and Restated 1991 Stock Option Plan (filed as Exhibit 10(g) to the Company's Form 10-Q for the six months ended June 30, 1998 and incorporated by reference herein). 10(j) Harte-Hanks, Inc. 1998 Director Stock Plan (filed as Exhibit 10(h) to the Company's Form 10-Q for the six months ended June 30, 1998 and incorporated by reference herein). 10(k) Harte-Hanks, Inc. Deferred Compensation Plan (filed as Exhibit 10(i) to the Company's Form 10-K for the year ended December 31, 1998 and incorporated by reference herein). 10(l) Amendment One to Harte-Hanks, Inc. Amended and Restated Restoration Plan dated December 18, 2000 (filed as Exhibit 10(l) to the Company's Form 10-K for the year ended December 31, 2000 and incorporated by reference herein). *21 Subsidiaries of the Company. 17 </TABLE> - --------------------- *Filed herewith