UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

~~Quarterly report pursuant to Section~~QUARTERLY REPORT PURSUANT TO SECTION 13 orOR 15(d) ~~of the Securities Exchange Act of~~OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~June 30, 2003

~~Transition report pursuant to Section~~TRANSITION REPORT PURSUANT TO SECTION 13 orOR 15(d) ~~of the Securities Exchange Act of~~OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number1-7120

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)

~~200 Concord Plaza Drive, San Antonio, Texas 78216~~

~~(Address of principal executive offices) (Zip Code)~~

Registrant’s telephone number including area ~~code —~~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 þx No ¨

Indicate by checkmark whether registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes þx No ¨

Indicate the number of shares outstanding of each of the issuer’s classes of common stock: $1 par value, ~~88,210,527~~88,754,794 shares as of ~~April 30,~~July 31, 2003.

HARTE-HANKS, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

FORM 10-Q REPORT

~~March 31,~~June 30, 2003

			Page

Part I.	Financial Information

Item 1.		Interim Condensed Consolidated Financial Statements (Unaudited)

		Condensed Consolidated Balance ~~Sheets—March 31,~~Sheets - June 30, 2003 and December 31, 2002	3

		Consolidated Statements of ~~Operations—~~Operations - Three months ended ~~March 31,~~June 30, 2003 and 2002	4

		Consolidated Statements of Operations - Six months ended June 30, 2003 and 2002	5

		Consolidated Statements of Cash ~~Flows—Three~~Flows - Six months ended ~~March 31,~~June 30, 2003 and 2002	5 6

		Consolidated Statements of Stockholders’ Equity and Comprehensive ~~Income—Three~~Income - Six months ended ~~March 31,~~June 30, 2003 and twelve months ended December 31, 2002	6 7

		Notes to Unaudited Condensed Consolidated Financial Statements	7 8

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	10 12

Item 3.		Quantitative and Qualitative Disclosures About Market Risk	13 16

Item 4.4		Controls and Procedures	14 16

Part II.	Other Information

Item 4.		Submission of Matters to a Vote of Security Holders	17

Item 6.		Exhibits and Reports on Form 8-K	14 17

	(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

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			(Unaudited) June 30, 2003			December 31, 2002
Assets
Current assets
Cash and cash equivalents	$	31,494		$	25,026		$	21,601		$	25,026
Accounts receivable, net		127,427			137,679			133,459			137,679
Inventory		5,226			5,299			5,407			5,299
Prepaid expenses		14,162			14,070			13,814			14,070
Current deferred income tax asset		7,525			8,129			7,475			8,129
Other current assets		6,840			8,409			6,785			8,409

Total current assets		192,674			198,612			188,541			198,612

Property, plant and equipment, net		94,298			94,154			95,819			94,154
Goodwill, net		437,141			436,800			437,160			436,800
Other intangible assets, net		3,117			3,267			2,967			3,267
Other assets		3,643			3,899			3,519			3,899

Total assets	$	730,873		$	736,732		$	728,006		$	736,732

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	39,672		$	40,746		$	40,847		$	40,746
Accrued payroll and related expenses		17,061			21,854			17,485			21,854
Customer deposits and unearned revenue		42,629			41,775			42,086			41,775
Income taxes payable		11,324			9,338			4,874			9,338
Other current liabilities		5,985			8,048			6,662			8,048

Total current liabilities		116,671			121,761			111,954			121,761

Long-term debt		21,351			16,300			11,367			16,300
Other long-term liabilities		69,002			66,138			70,782			66,138

Total liabilities		207,024			204,199			194,103			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
Common stock, $1 par value, 375,000,000 shares authorized. 112,664,477 and 111,534,630 shares issued at June 30, 2003 and December 31, 2002, respectively								112,664			111,535
Additional paid-in capital		219,967			216,149			229,132			216,149
Retained earnings		735,908			722,231			756,342			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	)
Less treasury stock: 24,032,684 and 21,329,896 shares at cost at June 30, 2003 and December 31, 2002, respectively								(540,276	)		(491,793	)
Accumulated other comprehensive loss		(25,035	)		(25,589	)		(23,959	)		(25,589	)

Total stockholders’ equity		523,849			532,533			533,903			532,533

Total liabilities and stockholders’ equity	$	730,873		$	736,732		$	728,006		$	736,732

See Notes to Unaudited Condensed Consolidated Financial Statements.

Harte-Hanks, Inc. and Subsidiaries

Consolidated Statements of Operations (in thousands, except per share amounts)

(Unaudited)

	Three Months Ended March 31,						Three Months Ended June 30,
	2003			2002			2003			2002
Operating revenues	$	216,320		$	214,907		$	233,169		$	227,879

Operating expenses
Payroll		82,469			81,405			82,741			80,123
Production and distribution		78,704			74,507			84,866			78,769
Advertising, selling, general and administrative		19,358			17,023			19,319			20,744
Depreciation		7,806			8,361			7,627			8,112
Intangible amortization		150			150			150			150

Total operating expenses		188,487			181,446			194,703			187,898

Operating income		27,833			33,461			38,466			39,981

Other expenses (income)
Interest expense		209			369			242			222
Interest income		(47	)		(50	)		(53	)		(71	)
Other, net		581			267			432			595

		743			586			621			746

Income before income taxes		27,090			32,875			37,845			39,235
Income tax expense		10,712			12,607			14,763			15,145

Net income	$	16,378		$	20,268		$	23,082		$	24,090

Basic earnings per common share	$	0.18		$	0.22		$	0.26		$	0.26

Weighted-average common shares outstanding		89,833			93,773			88,540			93,917

Diluted earnings per common share	$	0.18		$	0.21		$	0.26		$	0.25

Weighted-average common and common equivalent shares outstanding		91,411			96,325			89,999			96,408

See Notes to Unaudited Condensed Consolidated Financial Statements.

Harte-Hanks, Inc. and Subsidiaries

Consolidated Statements of ~~Cash Flows~~Operations (in ~~thousands)~~thousands, except per share amounts)

(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


(8,059
)


(3,566
)
Proceeds from sale of property, plant and equipment


436



96



Net cash used in investing activities


(7,964
)


(3,715
)


Cash Flows from Financing Activities

Proceeds from long-term borrowings


20,000



—

Repayment of long-term borrowings


(15,000
)


(38,000
)
Issuance of common stock


1,736



8,595

Purchase of treasury stock


(25,231
)


(6,866
)
Issuance of treasury stock


28



18

Dividends paid


(2,701
)


(2,187
)


Net cash used in financing activities


(21,168
)


(38,440
)


Net increase (decrease) in cash and cash equivalents


6,468



(2,981
)
Cash and cash equivalents at beginning of period


25,026



30,468



Cash and cash equivalents at end of period

$
31,494


$
27,487

	Six Months Ended June 30,
	2003			2002
Operating revenues	$	449,489		$	442,786

Operating expenses
Payroll		165,210			161,528
Production and distribution		163,570			153,276
Advertising, selling, general and administrative		38,677			37,767
Depreciation		15,433			16,473
Intangible amortization		300			300

Total operating expenses		383,190			369,344

Operating income		66,299			73,442

Other expenses (income)
Interest expense		451			591
Interest income		(100	)		(121	)
Other, net		1,013			862

		1,364			1,332

Income before income taxes		64,935			72,110
Income tax expense		25,475			27,752

Net income	$	39,460		$	44,358

Basic earnings per common share	$	0.44		$	0.47

Weighted-average common shares outstanding		89,187			93,845

Diluted earnings per common share	$	0.44		$	0.46

Weighted-average common and common equivalent shares outstanding		90,705			96,367

See Notes to Unaudited Condensed Consolidated Financial Statements.

Harte-Hanks, Inc. and Subsidiaries

Consolidated Statements of ~~Stockholders’ Equity and Comprehensive Income~~Cash Flows (in thousands)

~~(2003 Unaudited)~~(Unaudited)

Common Stock

Additional Paid-In Capital

Retained Earnings

Treasury Stock

Accumulated Other Comprehensive Income (Loss)

Total Stockholders’ Equity

Balance at January 1, 2002

$
109,352


$
188,158


$
640,635


$
(384,486
)

$
(1,293
)

$
552,366

Common stock issued—employee benefit plans


202



3,131



—



—



—



3,333

Exercise of stock options for cash and by surrender of shares


2,282



13,787



—



(8,498
)


—



7,571

Tax benefit of options exercised


—



10,765



—



—



—



10,765

Dividends paid ($0.098 per share)


—



—



(9,149
)


—



—



(9,149
)
Treasury stock repurchase


(301
)


301



—



(98,912
)


—



(98,912
)
Treasury stock issued


—



7



—



103



—



110

Comprehensive income, net of tax:

Net income


—



—



90,745



—



—



90,745

Adjustment for minimum pension liability
(net of tax of $17,121)


—



—



—



—



(26,169
)


(26,169
)
Foreign currency translation adjustment


—



—



—



—



1,873



1,873


Total comprehensive income
      ��

66,449







Balance at December 31, 2002


111,535



216,149



722,231



(491,793
)


(25,589
)


532,533

Common stock issued—employee benefit plans


56



823



—



—



—



879

Exercise of stock options for cash and by surrender of shares


292



1,367



—



(1,885
)


—



(226
)
Tax benefit of options exercised


—



1,635



—



—



—



1,635

Dividends paid ($0.030 per share)


—



—



(2,701
)


—



—



(2,701
)
Treasury stock repurchase


—



—



—



(25,231
)


—



(25,231
)
Treasury stock issued


—



(7
)


—



35



—



28

Comprehensive income, net of tax:

Net income


—



—



16,378



—



—



16,378

Foreign currency translation adjustment


—



—



—



—



554



554


Total comprehensive income


16,932







Balance at March 31, 2003

$
111,883


$
219,967


$
735,908


$
(518,874
)

$
(25,035
)

$
523,849

	Six Months Ended June 30,
	2003			2002
Cash Flows from Operating Activities
Net income	$	39,460		$	44,358
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		15,433			16,473
Intangible amortization		300			300
Amortization of option-related compensation		48			50
Deferred income taxes		3,348			4,228
Other, net		116			139
Changes in operating assets and liabilities, net of acquisitions:
Decrease in accounts receivable, net		4,220			4,266
Decrease (increase) in inventory		(108	)		203
Decrease (increase) in prepaid expenses and other current assets		1,880			(1,050	)
Increase in accounts payable		101			1,955
Increase (decrease) in other accrued expenses and other current liabilities		(8,367	)		2,131
Other, net		4,019			1,973

Net cash provided by operating activities		60,450			75,026

Cash Flows from Investing Activities
Acquisitions		(343	)		(2,791	)
Purchases of property, plant and equipment		(16,878	)		(6,520	)
Proceeds from sale of property, plant and equipment		444			162

Net cash used in investing activities		(16,777	)		(9,149	)

Cash Flows from Financing Activities
Long-term borrowings		20,000			7,000
Repayment of long-term borrowings		(25,000	)		(45,000	)
Issuance of common stock		7,453			10,872
Purchase of treasury stock		(44,259	)		(47,671	)
Issuance of treasury stock		57			47
Dividends paid		(5,349	)		(4,570	)

Net cash used in financing activities		(47,098	)		(79,322	)

Net decrease in cash and cash equivalents		(3,425	)		(13,445	)
Cash and cash equivalents at beginning of year		25,026			30,468

Cash and cash equivalents at end of period	$	21,601		$	17,023

See Notes to Unaudited Condensed Consolidated Financial Statements.

Harte-Hanks, Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity and Comprehensive Income (in thousands)

(2003 Unaudited)

	Common Stock			Additional Paid-In Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
Balance at January 1, 2002	$	109,352		$	188,158		$	640,635		$	(384,486	)	$	(1,293	)	$	552,366
Common stock issued-employee benefit plans		202			3,131			—			—			—			3,333
Exercise of stock options for cash and by surrender of shares		2,282			13,787			—			(8,498	)		—			7,571
Tax benefit of options exercised		—			10,765			—			—			—			10,765
Dividends paid ($0.098 per share)		—			—			(9,149	)		—			—			(9,149	)
Treasury stock repurchase		(301	)		301			—			(98,912	)		—			(98,912	)
Treasury stock issued		—			7			—			103			—			110
Comprehensive income, net of tax:
Net income		—			—			90,745			—			—			90,745
Adjustmentt for minimum pension liability (net of tax of $17,121)		—			—			—			—			(26,169	)		(26,169	)
Foreign currency translation adjustment		—			—			—			—			1,873			1,873

Total comprehensive income																	66,449

Balance at December 31, 2002		111,535			216,149			722,231			(491,793	)		(25,589	)		532,533

Common stock issued-employee benefit plans		110			1,585			—			—			—			1,695
Exercise of stock options for cash and by surrender of shares		1,019			6,840			—			(4,294	)		—			3,565
Tax benefit of options exercised		—			4,571			—			—			—			4,571
Dividends paid ($0.060 per share)		—			—			(5,349	)		—			—			(5,349	)
Treasury stock repurchase		—			—			—			(44,259	)		—			(44,259	)
Treasury stock issued		—			(13	)		—			70			—			57
Comprehensive income, net of tax:
Net income		—			—			39,460			—			—			39,460
Foreign currency translation adjustment		—			—			—			—			1,630			1,630

Total comprehensive income																	41,090

Balance at June 30, 2003	$	112,664		$	229,132		$	756,342		$	(540,276	)	$	(23,959	)	$	533,903

See Notes to Unaudited Condensed Consolidated Financial Statements.

Harte-Hanks, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

Note A—A – Basis of Presentation

The accompanying unaudited 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 and six months ended ~~March 31,~~June 30, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003. 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, 2002.

Certain prior period amounts have been reclassified for comparative purposes.

Note B—B – Recent Accounting Pronouncements

In December 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (“SFAS”) No. 148 “Accounting for Stock-Based Compensation – Transition and Disclosure”. SFAS No. 148 amends SFAS No. 123, “Accounting for Stock-Based Compensation”, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation prescribed by SFAS No. 123. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The transition guidance and annual disclosure provisions of SFAS No. 148 were effective for the Company’s fiscal year ended December 31, 2002. The interim disclosure provisions are effective for financial reports containing financial statements for interim periods beginning after December 15, 2002 and are included in Note G of this report. At this time the Company does not intend to change to the fair value based method of accounting for stock-based employee compensation prescribed by SFAS No. 123, but instead will continue to account for stock-based compensation under Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees”, as permitted by SFAS No. 123. Therefore the Company’s adoption of SFAS No. 148 did not have a significant impact on its consolidated financial position or results of operations.

Note C—C – Income Taxes

The Company’s quarterly income tax provision of ~~$10.7~~$14.8 million was calculated using an effective income tax rate of approximately ~~39.5%~~39.0%. The Company’s six month income tax provision of $25.5 million, was calculated using an effective income tax rate of approximately 39.2%. The Company’s effective income tax rate is derived by estimating pretax income and income tax expense for the year ending December 31, 2003. 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 ~~which~~that are not deductible for federal income tax purposes.

Note D—D – Stock Split

In May 2002, the Company effected a three-for-two stock split in the form of a 50% stock dividend payable to holders of record on May 20, 2002. All share, per share and average share information in the Consolidated Financial Statements and the Notes thereto have been restated to reflect the stock split.

Note E—E – Earnings Per Share

A reconciliation of basic and diluted earnings per share (EPS) is as follows:

	Three Months Ended March 31,				Three Months Ended June 30,
	2003		2002
	In thousands, except per share amounts
In thousands, except per share amounts					2003		2002
BASIC EPS
Net Income	$	16,378	$	20,268	$	23,082	$	24,090


Weighted-average common shares outstanding used in earnings per share computations		89,833		93,773		88,540		93,917


Earnings per common share	$	0.18	$	0.22	$	0.26	$	0.26


DILUTED EPS
Net Income	$	16,378	$	20,268	$	23,082	$	24,090


Shares used in diluted earnings per share computations		91,411		96,325		89,999		96,408

Earnings per common share	$	0.18	$	0.21	$	0.26	$	0.25

Computation of shares used in earnings per share computations:
Average outstanding common shares						88,540		93,917
Average common equivalent shares - dilutive effect of option shares						1,459		2,491

Shares used in diluted earnings per share computations						89,999		96,408


					Six Months Ended June 30,
In thousands, except per share amounts					2003		2002
BASIC EPS
Net Income					$	39,460	$	44,358

Weighted-average common shares outstanding used in earnings per share computations						89,187		93,845

Earnings per common share					$	0.44	$	0.47

DILUTED EPS
Net Income					$	39,460	$	44,358

Shares used in diluted earnings per share computations						90,705		96,367

Earnings per common share					$	0.44	$	0.46

Computation of shares used in earnings per share computations:
Average outstanding common shares		89,833		93,773		89,187		93,845
Average common equivalent shares—dilutive effect of option shares		1,578		2,552
Average common equivalent shares - dilutive effect of option shares						1,518		2,522

Shares used in diluted earnings per share computations		91,411		96,325
Shares used diluted in earnings per share computations						90,705		96,367

As of ~~March 31,~~June 30, 2003, the Company had ~~778,000~~762,000 antidilutive market price options outstanding which have been excluded from the EPS calculations. As of ~~March 31,~~June 30, 2002 there were no antidilutive market price options outstanding.

Note F—F – Business Segments

Harte-Hanks is a highly focused targeted media company with operations in two segments – Direct Marketing and Shoppers.

Information about the Company’s operations in its two ~~industry~~different business segments follows:

Three Months Ended March 31,

2003

2002

In thousands
Operating revenues

Direct Marketing

$
134,572

$
136,654
Shoppers


81,748


78,253


Total operating revenues

$
216,320

$
214,907

							Three Months Ended June 30
In thousands							2003			2002
Operating revenues
Direct Marketing							$	141,937		$	141,899
Shoppers								91,232			85,980

Total operating revenues							$	233,169		$	227,879

Operating Income
Direct Marketing	$	14,370		$	20,049		$	19,207		$	22,112
Shoppers		15,696			15,509			21,263			20,041
Corporate Activities		(2,233	)		(2,097	)		(2,004	)		(2,172	)

Total operating income	$	27,833		$	33,461		$	38,466		$	39,981


Income before income taxes
Operating income	$	27,833		$	33,461		$	38,466		$	39,981
Interest expense		(209	)		(369	)		(242	)		(222	)
Interest income		47			50			53			71
Other, net		(581	)		(267	)		(432	)		(595	)

Total income before income taxes	$	27,090		$	32,875		$	37,845		$	39,235


							Six Months Ended June 30
In thousands							2003			2002
Operating revenues
Direct Marketing							$	276,509		$	278,553
Shoppers								172,980			164,233

Total operating revenues							$	449,489		$	442,786

Operating Income
Direct Marketing							$	33,577		$	42,161
Shoppers								36,959			35,550
Corporate Activities								(4,237	)		(4,269	)

Total operating income							$	66,299		$	73,442

Income before income taxes
Operating income							$	66,299		$	73,442
Interest expense								(451	)		(591	)
Interest income								100			121
Other, net								(1,013	)		(862	)

Total income before income taxes							$	64,935		$	72,110

Note G—G – Stock-Based Compensation

The Company has adopted the disclosure-only provisions of SFAS No. 123. Accordingly, no compensation expense has been recognized for options granted where the exercise price is equal to the market price of the underlying stock at the date of grant. For options issued with an exercise price below the market price of the underlying stock on the date of grant, the Company recognizes compensation expense under the provisions of APB No. 25, as permitted under SFAS No. 123.

Had compensation expense for the Company’s options been determined based on the fair value at the grant date for awards since January 1, 1995, consistent with the provisions of SFAS No. 123, the Company’s net income and diluted earnings per share would have been reduced to the pro forma amounts indicated below:

Three Months Ended March 31,


2003

2002


In thousands, except per share amounts

Net income—as reported

$
16,378


$
20,268

Stock-based employee compensation expense, included in reported net income, net of related tax effects


15



28

Stock-based employee compensation expense determined under fair value based methods for all awards, net of related tax effects


(1,134
)


(981
)


Net income—pro forma

$
15,259


$
19,315



Basic earnings per share—
as reported

$
0.18


$
0.22

Basic earnings per share—
pro forma

$
0.17


$
0.21

Diluted earnings per share—
as reported

$
0.18


$
0.21

Diluted earnings per share—
pro forma

$
0.17


$
0.20

	Three Months Ended June 30,
In thousands, except per share amounts	2003			2002
Net income – as reported	$	23,082		$	24,090
Stock-based employee compensation expense, included in reported net income, net of related tax effects		14			2
Stock-based employee compensation expense determined under fair value based methods for all awards, net of related tax effects		(719	)		(1,017	)

Net income – pro forma	$	22,377		$	23,075

Basic earnings per share – as reported	$	0.26		$	0.26
Basic earnings per share – pro forma	$	0.25		$	0.25
Diluted earnings per share – as reported	$	0.26		$	0.25
Diluted earnings per share – pro forma	$	0.25		$	0.24

	Six Months Ended June 30,
In thousands, except per share amounts	2003			2002
Net income – as reported	$	39,460		$	44,358
Stock-based employee compensation expense, included in reported net income, net of related tax effects		29			30
Stock-based employee compensation expense determined under fair value based methods for all awards, net of related tax effects		(1,853	)		(1,998	)

Net income – pro forma	$	37,636		$	42,390

Basic earnings per share – as reported	$	0.44		$	0.47
Basic earnings per share – pro forma	$	0.42		$	0.45
Diluted earnings per share – as reported	$	0.44		$	0.46
Diluted earnings per share – pro forma	$	0.41		$	0.44

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants during the ~~three~~six months ended ~~March 31,~~June 30, 2003 and 2002:

	Three Months Ended March 31, 2003	Three Months Ended March 31, 2002	Six Months Ended June 30, 2003		Six Months Ended June 30, 2002
Expected dividend yield.	0.65%	0.50%
Expected dividend yield			0.65	%	0.50	%
Expected stock price volatility	27.4%	27.8%	27.1	%	27.8	%
Risk free interest rate	5.2%	5.4%	3.5	%	5.4	%
Expected life of options	3-10 years	3-10 years
Expected Life of options			3-10 years		3-10 years

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

Results of Operations

Operating results were as follows:

	Three months ended				Change		Three months ended						Six months ended
	March 31, 2003		March 31, 2002		Change
	In thousands
In thousands							June 30, 2003		June 30, 2002		Change		June 30, 2003		June 30, 2002		Change
Revenues	$	216,320	$	214,907	0.7	%	$	233,169	$	227,879	2.3	%	$	449,489	$	442,786	1.5	%
Operating expenses		188,487		181,446	3.9	%		194,703		187,898	3.6	%		383,190		369,344	3.7	%

Operating income	$	27,833	$	33,461	-16.8	%	$	38,466	$	39,981	-3.8	%	$	66,299	$	73,442	-9.7	%

Net income	$	16,378	$	20,268	-19.2	%	$	23,082	$	24,090	-4.2	%	$	39,460	$	44,358	-11.0	%

Diluted earnings per share	$	0.18	$	0.21	-14.3	%	$	0.26	$	0.25	4.0	%	$	0.44	$	0.46	-4.3	%

Consolidated revenues increased ~~0.7%~~2.3% to ~~$216.3~~$233.2 million while operating income declined ~~16.8%~~3.8% to ~~$27.8~~$38.5 million in the ~~first~~second quarter of 2003 when compared to the ~~first~~second quarter of 2002. Overall operating expenses compared to 2002 increased ~~3.9%~~3.6% to ~~$188.5~~$194.7 million.

Net income declined ~~19.2%~~4.2% to ~~$16.4~~$23.1 million while diluted earnings per share ~~declined 14.3%~~grew 4.0% to 1826 cents per share. The net income decline was a result of the decline in operating income.

Direct Marketing

Direct Marketing operating results were as follows:

	Three months ended				Change		Three months ended						Six months ended
	March 31, 2003		March 31, 2002		Change
	In thousands
In thousands							June 30, 2003		June 30, 2002		Change		June 30, 2003		June 30, 2002		Change
Revenues	$	134,572	$	136,654	-1.5	%	$	141,937	$	141,899	0.0	%	$	276,509	$	278,553	-0.7	%
Operating expenses		120,202		116,605	3.1	%		122,730		119,787	2.5	%		242,932		236,392	2.8	%

Operating income	$	14,370	$	20,049	-28.3	%	$	19,207	$	22,112	-13.1	%	$	33,577	$	42,161	-20.4	%

Direct Marketing revenues ~~decreased $2.1 million, or 1.5%,~~were flat in the ~~first~~second quarter of 2003 compared to 2002. These results reflect ~~double-digit declines in the financial services and pharmaceutical/healthcare industry sectors, two of~~mixed results from Direct Marketing’s largest vertical markets. ~~Revenues~~Direct Marketing had increased revenues from high-tech/telecom and pharmaceutical/healthcare industry sectors while revenues from the financial services and retail ~~and high-tech/telecom~~ industries ~~were up slightly~~declined compared to ~~2002.~~the prior year quarter. Direct Marketing’s select markets group had ~~a double-digit increase in~~increased revenues, primarily due to increased revenues from the government/not-for-profit ~~and automotive~~ industries. Direct Marketing experienced revenue declines in ~~data processing,~~ fulfillment, logistics and ~~data~~software sales, partially offset by increased revenues from ~~personalized~~ direct mail ~~technical support, telesales~~ and ~~consulting.~~response management and business-to-business telesales.

Operating expenses increased ~~$3.6~~$2.9 million, or ~~3.1%~~2.5%, in the ~~first~~second quarter of 2003 compared to 2002. Labor costs ~~were flat in the first quarter of 2003 compared~~increased $1.3 million due to ~~2002 as decreased healthcare costs were offset by~~ higher pension ~~expense.~~and healthcare costs. Production and distribution costs increased ~~$2.6~~$4.2 million, ~~due~~ primarily driven by costs related to ~~higher transportation, temporary labor and repairs and maintenance costs.~~project oriented work. General and administrative expense ~~increased $1.6~~decreased $1.9 million due to ~~increased~~decreased bad debt expense and business services, partially offset by ~~decreased insurance costs.~~increased professional services. Depreciation expense decreased ~~$0.6~~$0.7 million due to lower capital expenditures in 2002 than in recent prior years.

Direct Marketing revenues decreased $2.0 million, or 0.7%, in the first six months of 2003 compared to the first six months of 2002. These results reflect declines in most of Direct Marketing’s largest vertical markets, including

declines in financial services, retail, and pharmaceutical/healthcare. These revenue declines were partially offset by increased revenues from the high-tech/telecom industry and Direct Marketing’s select markets group, primarily the government/not-for-profit and automotive industries.

Operating expenses increased $6.5 million, or 2.8%, in the first half of 2003 compared to the first half of 2002. Labor costs increased $1.4 million due to higher pension expense. Production and distribution costs increased $6.8 million, primarily due to higher transportation, repairs and maintenance, and costs related to project oriented work, partially offset by decreased lease expense. General and administrative expense decreased $0.4 million due to decreased business services and insurance expense partially offset by increased professional services. Depreciation expense decreased $1.3 million due to lower capital expenditures in 2002 than in recent prior years.

Shoppers

Shopper operating results were as follows:

	Three months ended				Change		Three months ended						Six months ended
	March 31, 2003		March 31, 2002		Change
	In thousands
In thousands							June 30, 2003		June 30, 2002		Change		June 30, 2003		June 30, 2002		Change
Revenues	$	81,748	$	78,253	4.5	%	$	91,232	$	85,980	6.1	%	$	172,980	$	164,233	5.3	%
Operating expenses		66,052		62,744	5.3	%		69,969		65,939	6.1	%		136,021		128,683	5.7	%

Operating income	$	15,696	$	15,509	1.2	%	$	21,263	$	20,041	6.1	%	$	36,959	$	35,550	4.0	%

Shopper revenues increased ~~$3.5~~$5.3 million, or ~~4.5%~~6.1%, in the ~~first~~second quarter of 2003 compared to 2002. Revenue increases were the result of improved sales in established markets as well as new year-over-year geographic expansions into new neighborhoods in ~~Florida~~.California and Florida. From a product-line perspective, Shoppers had growth in both run-of-press (ROP, or in-book) advertising, primarily core sales and real estate-related advertising and its distribution products. These increases were partially offset by declines in employment and automotive-related ROP ~~advertising.~~advertising and decreased coupon book revenues.

Operating expenses increased ~~$3.3~~$4.0 million, or ~~5.3%~~6.1%, in the ~~first~~second quarter of 2003 compared to 2002. Labor costs increased ~~$1.0~~$1.4 million due to higher benefit costs ~~mainly increased pension expense,~~ and higher volumes. Production costs increased ~~$1.6~~$1.8 million, including ~~increased~~additional postage of ~~$0.8~~$1.0 million due to increased volumes and higher postage rates. General and administrative costs increased $0.6 million due to increased insurance costs and bad debt expense. Depreciation expense increased $0.2 million due to new capital investments to support future growth.

Shopper revenues increased $8.7 million, or 5.3%, in the first six months of 2003 compared to the first six months of 2002. Revenue increases were the result of improved sales in established markets as well as new year-over-year geographic expansions into new neighborhoods in California and Florida. From a product-line perspective, Shoppers had growth in both run-of-press (ROP, or in-book) advertising, primarily core sales and real estate-related advertising and its distribution products. These increases were partially offset by declines in employment and automotive-related ROP advertising and decreased revenues from pre-printed inserts and coupon books.

Operating expenses increased $7.3 million, or 5.7%, in the first half of 2003 compared to the first half of 2002. Labor costs increased $2.4 million during the quarter due to higher benefit costs and higher volumes. Production costs increased $3.4 million, including additional postage of $1.8 million due to increased volumes and higher postage rates. General and administrative costs increased $1.3 million due to increased promotion expense and insurance costs. Depreciation expense increased $0.2 million due to new capital investments to support future growth. Partially offsetting these increased operating expenses were decreased paper ~~costs. General and administrative~~ costs ~~increased $0.7 million~~ due ~~primarily~~ to ~~increased promotion expense. Depreciation expense was flat in the first quarter of 2003 compared to 2002.~~lower rates for newsprint.

Other Income and Expense

Other net expense for the second quarter and first half of 2003 primarily consists of currency losses, balance-based bank charges and stockholders expenses.

Interest Expense/Interest Income

Interest expense ~~decreased $0.2 million~~was flat in the ~~first~~second quarter of 2003 compared to 2002. Interest expense decreased $0.1 million in the first six months of 2003 over the same period in ~~2002~~2002. The decrease was due primarily to lower ~~average~~ debt levels and lower interest rates in the first ~~quarter~~half of 2003.

Interest income was flat in the second quarter and first ~~quarter~~half of 2003 ~~was flat~~ compared to the same ~~period~~periods in ~~2002 as~~2002. These results were due to slightly higher average cash and investment ~~levels were~~balances offset by lower interest rates ~~during~~in the first ~~quarter~~half of 2003.

Income Taxes

The Company’s income tax expense decreased ~~$1.9~~$0.4 million in the second quarter of 2003 and $2.3 million in the first ~~quarter~~half of 2003 compared to the ~~first quarter of~~same periods in 2002. ~~This decrease was~~These changes were due primarily to the ~~lower~~changes in pre-tax income levels. The effective tax rate was ~~39.5%~~39.0% for the ~~first~~second quarter of 2003 and ~~38.3%~~38.6% for the second quarter of 2002. The effective tax rate was 39.2% for the first ~~quarter~~half of 2003 and 38.5% for the first half of 2002.

Liquidity and Capital Resources

Cash provided by operating activities for the ~~three~~six months ended ~~March 31,~~June 30, 2003 was ~~$35.6~~$60.5 million, compared to ~~$39.2~~$75.0 million for the ~~first three~~six months ofended June 30, 2002. Net cash outflows from investing activities were ~~$8.0~~$16.8 million for the first ~~three~~six months of 2003 compared to ~~$3.7~~net cash outflows of $9.1 million for the first ~~three~~six months of 2002. The ~~cash outflow~~increase in ~~both years~~2003 primarily ~~relate~~relates to ~~purchases of fixed assets.~~higher capital expenditures in 2003 than in 2002. Net cash outflows from financing activities were ~~$21.2~~$47.1 million in 2003 compared to ~~$38.4~~net cash outflows of $79.3 million in 2002. The ~~difference between cash outflows~~decrease in 2003 ~~and 2002~~ is attributable primarily to ~~higher~~lower net repayment of borrowings ~~in 2002, partially offset by a higher amount~~and less spent for the repurchase of treasury stock ~~and~~in 2003, partially offset by a lower

amount of cash received from the exercise of stock options in 2003.

Capital resources are available from and provided through the Company’s unsecured credit facility. This credit facility, a three-year $125 million variable-rate, revolving loan commitment, was put in place on October 18, 2002. All borrowings under this credit agreement are to be repaid by October 17, 2005. As of ~~March 31,~~June 30, 2003, the Company had ~~$105~~$115 million of unused borrowing capacity under this credit facility. 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 Marketing business due to the enactment of legislation or industry regulations, including the recent creation of do-not-call lists, 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 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~~ – Although the Company has ~~made a number of~~not completed any acquisitions in 2003 or 2002, it continues to pursue acquisition opportunities, primarily in its Direct Marketing ~~segment, and it expects to pursue additional acquisition opportunities.~~Segment. 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 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. Consequently, the Company’s Direct Marketing business faces competition in all of its ~~offerings.~~offerings and within each of its vertical markets. 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. While dependent on employment levels and general economic conditions, qualified personnel historically have been in great demand and from time to time and in the foreseeable future will likely remain a limited resource.

Postal Rates— – The Company’s Shoppers and Direct Marketing services depend on the United States Postal Service (“USPS”) to deliver products. The Company’s Shoppers are delivered by standard mail, and postage is the second largest expense, behind payroll, in the Company’s Shopper business. Standard postage rates increased at the beginning of the third quarter of 2002. Overall Shopper postage costs ~~are expected to grow~~have grown moderately as a result of this increase and are expected to grow further as ~~well as~~a result of anticipated increases in circulation and insert volumes. Postal rates also influence the demand for the Company’s Direct 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 Marketing revenues are dependent on national and international economics.

Interest Rates— – Interest rate movements in Europe and the United States can affect the amount of interest the Company pays related to its debt and the amount it earns on cash equivalents. The Company’s primary interest rate exposure is to interest rate fluctuations in Europe, specifically EUROLIBOR rates due to their impact on interest related to the Company’s $125 million credit facility. The Company also has exposure to interest rate fluctuations in the United States, specifically money market, commercial paper and overnight time deposit rates as these affect the Company’s earnings on its excess cash.

War— – War or the threat of war involving the United States could have a significant impact on the Company’s operations. War could substantially affect the levels of advertising expenditures by clients in each of the Company’s businesses. In addition each of the Company’s businesses could be affected by operational disruptions and a shortage of supplies and labor related to such a war.

Item ~~3.Quantitative~~3. Quantitative and Qualitative Disclosures About Market Risk

The Company’s earnings are affected by changes in short-term interest rates as a result of its revolving credit ~~agreement,~~agreements, which ~~bears~~bear interest at floating rates. The Company does not believe that it has significant exposure to market risks associated with changing interest rates as of ~~March 31,~~June 30, 2003. The Company does not use derivative financial instruments in its operations.

The Company’s earnings are also affected by fluctuations in foreign exchange rates as a result of its operations in foreign countries. Due to the level of operations in foreign countries, the impact of fluctuations in foreign exchange rates is not significant to the Company’s overall earnings.

Item 4. Controls and Procedures

~~Within~~As of the ~~90-day~~end of the period ~~prior to the filing of~~covered by this report, an evaluation was carried out under the supervision and with the participation of the Company’s management, including its Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule ~~13a-14(c)~~13a-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer concluded that the design and operation of these disclosure controls and procedures were effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic SEC filings. No ~~significant~~ changes were made in the Company’s internal controls over financial reporting during the Company’s most recent fiscal quarter that have materially affected, or ~~in other factors that could significantly~~are reasonably likely to materially affect, ~~these controls subsequent to~~ the ~~date of their evaluation.~~Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 4 Submission of Matters to a Vote of Security Holders

The Company held its annual meeting of stockholders on May 6, 2003. At the meeting the stockholders were requested to vote on the following:

To elect David L. Copeland, Peter T. Flawn and Christopher M. Harte as Class I directors for a three-year term. The result of the vote was as follows:

	For	Withheld
David L. Copeland	79,316,637	1,459,398
Peter T. Flawn	78,993,905	1,782,130
Christopher M. Harte	78,995,706	1,780,329

The names of each director whose term of office continued are: Larry Franklin, William K. Gayden, Houston H. Harte, Richard Hochhauser and James L. Johnson.

Item ~~6.Exhibits~~6. Exhibits and Reports on Form 8-K

(a)

Exhibits. See index to Exhibits on Page ~~19.~~20.

(b)

The Company filed a report on Form 8-K dated ~~April 7, 2003. The report incorporated the Company’s press release titled “Harte-Hanks To Present At Investor Conferences; Comments On Outlook For 2003”.~~

~~The Company filed a report on Form 8-K dated April 24,~~July 23, 2003. The report incorporated the Company’s earnings release for the period ended ~~March 31,~~June 30, 2003.

~~CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002~~Pursuant to the requirements of the Securities Exchange Act of 1934, the Companyhas duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	HARTE-HANKS, INC.

August 14, 2003		/s/ Richard M. Hochhauser
Date		Richard M. Hochhauser
		President and Chief Executive Officer

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~~August 14, 2003		/s/ ~~Richard M. Hochhauser~~Dean H. Blythe
Date		~~Richard M. Hochhauser~~ ~~President and Chief Executive Officer~~ Dean H. Blythe

~~I, Richard M. Hochhauser, President and Chief Executive Officer of Harte-Hanks, Inc. (the “Company”) hereby certify that:~~

~~I have reviewed this quarterly report on Form 10-Q of the Company;~~

Based on my knowledge, this quarterly report does not contain any untrue statements of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in the quarterly report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

~~evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and~~

~~presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;~~

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

~~all significant deficiencies in the design or operation of internal controls which would adversely affect the registrant’s ability to record,~~

~~process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and~~

~~any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and~~

The registrant’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weakness.

~~May 14, 2003~~

~~/s/ Richard M. Hochhauser~~

~~Date~~

~~Richard M. Hochhauser~~

~~President and Chief Executive Officer~~

~~CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002~~

~~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 14, 2003~~		~~/s/ Jacques D. Kerrest~~
~~Date~~		~~Jacques D. Kerrest~~ Senior Vice President ~~Finance~~and ~~and~~ Chief Financial Officer

~~I, Jacques D. Kerrest, Senior Vice President, Finance and Chief Financial Officer of Harte-Hanks, Inc. (the “Company”) hereby certify that:~~

~~I have reviewed this quarterly report on Form 10-Q of the Company;~~

~~evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and~~

~~presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;~~

all significant deficiencies in the design or operation of internal controls which would adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

~~any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and~~

~~May 14, 2003~~

~~/s/ Jacques D. Kerrest~~

~~Date~~

~~Jacques D. Kerrest~~

~~Senior Vice President, Finance~~

~~and Chief Financial Officer~~

Exhibit No.	Description of Exhibit	Page No.

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)	Second Amended and Restated Bylaws (filed as Exhibit 3(b) to the Company’s Form 10-Q for the nine months ended September 30, 2001 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).

~~10(a)~~ *31.1	~~1984 Stock Option Plan (filed as Exhibit 10(d)~~Certification of Chief Executive Officer pursuant to Section 302 of the ~~Company’s Form 10-K for the year ended December 31, 1984 and incorporated herein by reference).~~ Sarbanes-Oxley Act of 2002.	21

~~10(b)~~ *31.2	~~Registration Rights Agreement dated as~~Certification of ~~September 11, 1984 among HHC Holding Inc. and its stockholders (filed as Exhibit 10(b)~~Chief Financial Officer pursuant to Section 302 of the ~~Company’s Form 10-K for the year ended December 31, 1993 and incorporated by reference herein).~~ Sarbanes-Oxley Act of 2002.	22

~~10(c)~~ *32.1	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).

~~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).

~~Exhibit No.~~	~~Description of Exhibit~~	~~Page No.~~

~~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).

~~10(m)~~	Agreement between Harte-Hanks, Inc. and Larry Franklin regarding role of Chairman of the Board of Directors of Harte-Hanks, Inc. dated as of April 1, 2002 (filed as Exhibit 10(m) to the Company’s Form 10-Q for the three months ended March 31, 2002 and Incorporated by reference herein).

~~10(n)~~	Three-Year Credit Agreement dated as of October 18, 2002 between Harte-Hanks, Inc. and the Lenders named therein for $125 million (filed as Exhibit 10(n) to the Company’s form 10-Q for the nine months ended September 30, 2002 and incorporated by reference herein).

~~10(o)~~	~~Harte-Hanks 1994 Employee Stock Purchase Plan As Amended (filed as Exhibit 10(o) to the Company’s form 10-K for the year ended December 31, 2002 and incorporated by reference herein).~~

*21	~~Subsidiaries of the Company.~~	21

*99(a)	Certification of Chief Executive Officer pursuant to 18 ~~U.S.C.~~U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	22 23

*~~99(b)~~ 32.2	Certification of Chief Financial Officer pursuant to 18 ~~U.S.C.~~U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	23 24

Filed herewith

	Common Stock			Additional Paid-In Capital				Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
Balance at January 1, 2002	$	109,352		$	188,158			$	640,635		$	(384,486	)	$	(1,293	)	$	552,366
Common stock issued—employee benefit plans		202			3,131				—			—			—			3,333
Exercise of stock options for cash and by surrender of shares		2,282			13,787				—			(8,498	)		—			7,571
Tax benefit of options exercised		—			10,765				—			—			—			10,765
Dividends paid ($0.098 per share)		—			—				(9,149	)		—			—			(9,149	)
Treasury stock repurchase		(301	)		301				—			(98,912	)		—			(98,912	)
Treasury stock issued		—			7				—			103			—			110
Comprehensive income, net of tax:
Net income		—			—				90,745			—			—			90,745
Adjustment for minimum pension liability (net of tax of $17,121)		—			—				—			—			(26,169	)		(26,169	)
Foreign currency translation adjustment		—			—				—			—			1,873			1,873

Total comprehensive income							��											66,449

Balance at December 31, 2002		111,535			216,149				722,231			(491,793	)		(25,589	)		532,533
Common stock issued—employee benefit plans		56			823				—			—			—			879
Exercise of stock options for cash and by surrender of shares		292			1,367				—			(1,885	)		—			(226	)
Tax benefit of options exercised		—			1,635				—			—			—			1,635
Dividends paid ($0.030 per share)		—			—				(2,701	)		—			—			(2,701	)
Treasury stock repurchase		—			—				—			(25,231	)		—			(25,231	)
Treasury stock issued		—			(7	)			—			35			—			28
Comprehensive income, net of tax:
Net income		—			—				16,378			—			—			16,378
Foreign currency translation adjustment		—			—				—			—			554			554

Total comprehensive income																		16,932

Balance at March 31, 2003	$	111,883		$	219,967			$	735,908		$	(518,874	)	$	(25,035	)	$	523,849