Harte-Hanks, Inc. (HHS)

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Harte-Hanks, Inc. (HHS)

Q4 2009 Earnings Call

February 2, 2010 11:00 am ET

Executives

Larry D. Franklin - President & CEO

Jessica M. Huff - Vice President of Finance and Controller

Douglas C. Shepard - Executive Vice President, Chief Financial Officer

Analysts

Alexia Quadrani – JP Morgan

Michael Kupinski – Noble Financial

Dan Leben – Robert W. Baird

Ed Atorino - Benchmark Company

Dan Salmon - BMO Capital Market

Presentation

Operator

Welcome and thank you for joining the fourth quarter year end 2009 earnings call. At this time all participants are in listen only mode. (Operator’s instructions). Today’s conference is being recorded. If you have any objections, you may disconnect at this time.

Now I will turn the meeting over to Mr. Larry Franklin, President and CEO of Harte-Hanks.

Larry D. Franklin

Thank you and good morning. On the call with me today is Doug Shepard, our Executive Vice President, Chief Financial Officer and Jessica Huff, Vice President of Finance and Controller. And before I begin my remarks Doug will make a few statements.

Douglas C. Shepard

Thanks, Larry. Our call may include forward looking statements. Examples may include statements about our strategies, initiatives, and business plans, adjustments to our cost structure, financial outlook and capital resources, competitive factors, business and industry expectations, legal settlements, the economic downturn in the US and other economies and other statements that are not historical facts. Actual results may differ materially from those projected or implied in these statements because of various risks and uncertainties, including those described in our most recent Form 10Qs and 10Ks, other documents filed with the Securities and Exchange Commission and in cautionary statement in today’s earnings release.

Our call may also include non-GAAP financial measures. Please refer to today’s earnings release for the required reconciliations and other related disclosures. Earnings release is available on the investors relations site of our website at www.harte-hanks.com.

I’ll now turn the call back over to Larry.

Larry D. Franklin

Okay. Thank you, Doug. We said in this call last quarter that there’s beginning to be signs that the global economy is improving slightly. And while we continue to have revenue declines in the fourth quarter in both businesses we did see some improving trends during the quarter and we’ll provide more detail of those as we go through our comments and then your questions.

Our people throughout the organization continue to do an excellent job in navigating through this difficult environment. I am very pleased with our fourth quarter performance, and for that matter, the year.

Included in the overall Harte-Hanks and Shoppers results is the $6.95 million legal settlement in principle announced January 28, 2010. And as described in the AK filed that same date. The lawsuit was filed in early 2001 by one current and one former Shoppers sales representative.

In the agreement and principle to settle this law suit are the agreement and principle to settle law suit is subject to the entry of an order of the trial court granting preliminary and then following notice to the class members found improvement of the settlement and providing for the dismissible of a law suit, with prejudices against all class members.

Pursuant to the agreement in principle, each member of the class will release all claims against Shoppers, that in anyway arose from or related to the matters which were the subject of the claims alleged in the class action suit.

The judge overseeing the settlement in principle will be involved with the final settlement agreement. So we do not anticipant any material changes.

Because the law suit remains pending, our ability to comment beyond statements made in the AK filing is limited.

Now, with all that said, without the settlement charges, earnings per share for the quarter would have been $0.28 rather than the reported $0.21. And this compares to $0.23 in the fourth quarter of ’08. In last year’s fourth quarter there were $5.4 million of charges. And for the year without the settlement earnings per share would have been $0.81 rather than the reported $0.75 per share.

Quick look at each business, Direct Marketing in the fourth quarter. The revenue declines were less each month. Involved decrease in declines are encouraging, revenue was still down 19% for the quarter. The commitment of our people to manage costs by doing business differently and then tight expense controls continue to allow us to provide more value to our customers and resulted in OI margins of 18.3% in Q4, the highest in 10 years.

While we do not expect margins to remain at that level, we’re well positioned for growth as the economy recovers.

In Doug’s comments he’ll talk more specifically about each protocol.

I want to once again point out that our client list includes many of the best companies in the markets we serve. And most of them have been clients for many years. And while several have reduced their spending during this recession, we continue to win business from them, both from current clients and from new clients.

And details about a few of those are included in the highlights sections of our previous quarterly reports and also in this one.

We believe our real strength is to effectively execute programs through the traditional marketing channels, such as direct mail to man centerfold (inaudible) combined with new channels, like mobile social and digital to provide more and to drive more effective results from our clients. And several of the wins that we’ve reported over the last few quarter have in fact in been additional channels to those existing customers.

Read the rest of this transcript for free on seekingalpha.com