Business Segments

9 Months Ended

Sep. 30, 2014

Business Segments

Business Segments

Note L — Business Segments

During the second quarter of 2014, Harte Hanks initiated a new strategy to optimize our operational structure by organizing into two distinct operating divisions: Customer Interaction and Trillium Software. In accordance with ASC 280, Segment Reporting, we determined that under this new organizational structure, we will report the two operating divisions as two reportable segments — Customer Interaction and Trillium Software.  Our reportable segments are described below.

Customer Interaction

Our Customer Interaction services offer a wide variety of integrated, multi-channel, data-driven marketing service solutions for our customers. We derive revenues by offering a full complement of capabilities and resources to provide these services in media from direct mail to email, including:

· agency and digital services;

· database marketing solutions and business-to-business lead generation;

· direct mail; and

· contact centers.

Customer Interaction’s largest cost components are labor, outsourced costs and mail supply chain costs.  2013 results reflect an impairment loss of $2.8 million related to other intangible assets associated with our Aberdeen business recorded in the third quarter of 2013.

Trillium Software

Trillium Software is a leading enterprise data quality solutions provider.  Our full complement of technologies and services includes global data profiling, data cleansing, enrichment, and data linking for e-business, customer relationship management, data governance, enterprise resource planning, supply chain management, data warehouse, and other enterprise applications. Revenues from the Trillium Software segment are comprised primarily of software, maintenance and professional services.

Trillium Software’s largest cost component is software development, which is comprised primarily of labor. General corporate expense consists primarily of pension and workers compensation expense related to employees from operations we no longer own.

Information about the operations of our two business segments is as follows:

	Three Months Ended September 30,
In thousands	2014			2013
Operating revenues
Customer Interaction	$	121,078		$	121,338
Trillium Software	13,043			13,635
Total operating revenues	$	134,121		$	134,973
Operating income
Customer Interaction	$	7,601		$	5,559
Trillium Software	3,318			3,931
Corporate	(379		)	(1,130		)
Total operating income	$	10,540		$	8,360
Income from continuing operations before income taxes	$	10,540		8,360
Interest expense	716			$	754
Interest income	(75		)	(25		)
Other, net	(581		)	536
Total income from continuing operations before income taxes	$	10,480		$	7,095

	Nine Months Ended September 30,
In thousands	2014			2013
Operating revenues
Customer Interaction	$	367,133		$	367,928
Trillium Software	40,025			39,502
Total operating revenues	$	407,158		$	407,430
Operating income
Customer Interaction	$	18,743		$	22,600
Trillium Software	9,662			10,969
Corporate	(2,299		)	(3,392		)
Total operating income	$	26,106		$	30,177
Income from continuing operations before income taxes	$	26,106		$	30,177
Interest expense	2,153			2,336
Interest income	(204		)	(76		)
Other, net	1,228			(600		)
Total income from continuing operations before income taxes	$	22,929		$	28,517