Harte-Hanks Reports Fourth Quarter EPS of $0.32; Full Year 2004 EPS up 14.4% on Revenue Growth of 9.1%.

SAN ANTONIO -- Harte-Hanks, Inc. (NYSE:HHS)

Note: Harte-Hanks will hold a fourth quarter earnings conference call on January 31, 2005 at 9:00 AM CST. The number is 888-730-9136 domestic or 210-234-0005 international. The pass-code for the call is 121693. There will be a replay available shortly after the call through February 5. To access, please visit www.harte-hanks.com/earnings_audio/audio_stream.html or call 888-568-0134. Pass-code for the replay is 121693.

Harte-Hanks, Inc. (NYSE:HHS) today reported fourth quarter 2004 diluted earnings per share of $0.32 on revenues of $277.5 million. These results compare to diluted earnings per share of $0.28 on $255.7 million in revenue for the fourth quarter of 2003.

The following table presents financial highlights of the company's operations for the fourth quarter of 2004. Full financial results are attached.

RESULTS FROM OPERATIONS
(In thousands, except per
 share amounts)                Three Months Ended December 31,
                              ----------------------------------
                                   2004        2003     % Change
                              ----------------------------------
Operating revenues               $277,491   $255,721        8.5%
Operating income                   47,333     41,674       13.6%
Net income                         27,580     24,978       10.4%
Diluted earnings per share           0.32       0.28       14.3%
Diluted shares (weighted
 average common and common
 equivalent shares
 outstanding)                      86,973     88,946       -2.2%

For the year, diluted earnings per share were $1.11, on revenues of $1.03 billion. These 2004 results compare to diluted earnings per share of $0.97, on revenues of $944.6 million in 2003.

The following table presents financial highlights of the company's operations for 2004. Full financial results are attached.

RESULTS FROM OPERATIONS
(In thousands, except per
 share amounts)                Twelve Months Ended December 31,
                              ----------------------------------
                                  2004        2003     % Change
                              ----------------------------------
Operating revenues             $1,030,461   $944,576        9.1%
Operating income                  165,295    146,487       12.8%
Net income                         97,568     87,362       11.7%
Diluted earnings per share           1.11       0.97       14.4%
Diluted shares (weighted
 average common and common
 equivalent shares
 outstanding)                      87,806     89,982       -2.4%

In the discussion below the company intends to provide investors a better understanding of the operating results and underlying trends to measure past and future performance and liquidity. Harte-Hanks evaluates operating performance based on several measures, including the non-GAAP measure of free cash flow, defined as net income plus depreciation and amortization less capital expenditures, as Harte-Hanks believes this is an important measure of the operational strength of its business. Since free cash flow is not a measure calculated in accordance with GAAP, it should not be considered as a substitute for net income as an indicator of operating performance.

Commenting on the fourth quarter 2004 performance, Chief Executive Officer Richard Hochhauser said, "The fourth quarter was a strong finish to a very positive year for Harte-Hanks.

"Direct marketing performance in the fourth quarter was superb, with revenue growth of 11.9% and operating income up 26.9% over the prior year. On a year-over-year basis, operating income margins improved by almost 200 basis points. Four of our five vertical markets -- high tech/telecom, select, retail, and healthcare/pharma -- showed double digit revenue growth in the quarter, with financial services essentially flat.

"Despite the impact of an extra publication week in 2003 (14 weeks in 2003 versus 13 weeks in 2004), Shoppers turned in another superb performance and grew revenue in the fourth quarter by 2.8% and operating income by 3.6%. Shopper growth was driven by strong performances in real estate, financial services, and employment related advertising."

Commenting on full year 2004 performance, Hochhauser said, "2004 was a very satisfying year coming off the challenging three-year period of 2001 - 2003. Our people's hard work and dedication delivered exemplary results in 2004. Diluted earnings per share increased 14.4% on a revenue increase of 9.1%. Our business continues to be a strong generator of cash with $91.2 million of free cash flow in 2004, up from $85.5 million in 2003. We measure free cash flow as net income plus depreciation and amortization less capital expenditures.

"Direct marketing rebounded in 2004, with solid revenue growth of 9.6% and good leverage resulting in operating income growth of 18.5%. Our focus going into 2004 was to improve the profitability of our direct marketing business, and we are pleased with the progress we made in 2004, improving operating income margins by over 100 basis points year-over-year.

"Shoppers had another great year. Operating income for 2004 increased 10.1% on 8.2% revenue growth. Our Shoppers team was able to improve operating income margins even in the face of higher than initially planned geographic expansions of 600,000 circulation, and rising newsprint prices."

Concluding, Hochhauser said, "2004 was a gratifying year. Our people delivered strong operating performance. Each business is performing well, and we have built up momentum going into 2005. We look forward to the challenges of delivering similar growth in 2005 (not including the impact of stock option expensing to begin this year) as we achieved in 2004."

Statements in this release concerning the Company's business outlook or future financial performance and other statements that are not historical facts are "forward-looking statements" as the term is defined under applicable Federal Securities Laws. Forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those statements. Such risks, uncertainties, and factors include, but are not limited to, public concern over consumer privacy issues, which may lead to enactment of legislation restricting or prohibiting the collection and use of information that is currently legally available, competitive pressures, fluctuations in paper prices and postal rates, and general or regional economic conditions, as well as other risks detailed in the Company's filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K.

Highlights of the fourth quarter included:

    --  Harte-Hanks acquired Postfuture, an e-mail service provider
        that provides both e-mail technology and services, among them
        a platform that automates campaign and transactional e-mail
        delivery to support e-commerce, customer service, event
        communication, and lead nurturing. Postfuture's offerings are
        being integrated into several existing Harte-Hanks solution
        offerings, including Allink(R) on Demand, CI Technology
        Database, and Allink(R) Agent, among others.

    --  Harte-Hanks entered into an agreement with a financial
        institution to provide its Allink(R) Daily Deposit Builder
        solution to identify high-value customers that are at risk and
        then communicate with these customers proactively.

    --  Harte-Hanks entered into an agreement with a leading window
        and door manufacturer to provide a range of direct marketing
        services to support the manufacturer's national marketing and
        advertising campaigns.

    --  Harte-Hanks named Charles Weir as its new Managing Director,
        retail market, in charge of all direct marketing sales to
        retail clients. Weir has over 20 years of experience in retail
        markets, holding positions with Acxiom Corporation and IBM
        Corporation.

    --  Harte-Hanks Direct Marketing promoted Kyle Kennedy to Managing
        Director of its Austin facilities, and Randy Wussler to
        Managing Director of the Business Market Intelligence Group.

        --  Kennedy is responsible for the day-to-day operations at
            the Austin facilities. He has been with Harte-Hanks since
            1993.

        --  Wussler is responsible for supervising the Harte-Hanks CI
            Technology Database (CITDB). He has been a key contributor
            to CITDB growth since 1991.

    --  The integration of Harte-Hanks Trillium Software System(R) and
        Siebel Data Quality (SDQ) was validated successfully by Siebel
        Systems, Inc.

    --  Harte-Hanks Shoppers continued the rollout of a four-color
        glossy insert product, Local Living.

    Other highlights for 2004:

    Direct Marketing:

    --  Harte-Hanks signed a contract with a large home and commercial
        appliance manufacturer to handle inbound customer service
        calls for most of the appliance manufacturer's brands. This
        includes scheduling in-home service calls.

    --  Harte-Hanks entered into agreements with a large catalog
        company, a major retailer and an international financial
        services institution to provide service bureau and
        database-marketing services. The Harte-Hanks solutions include
        Allink(R)Retail and Allink(R)Financial -- results-focused
        marketing solutions that optimize customer relationships and
        enable multi-channel marketers to manage, coordinate and
        deliver targeted marketing campaigns across all channels with
        ease and effectiveness.

    --  Harte-Hanks entered into an agreement with a gaming company to
        design, develop and install its Allink(R) database marketing
        solution to help increase the frequency of customer visits,
        the amount of customer spending per visit and ultimately, the
        strength of and participation in this company's loyalty
        program.

    --  Harte-Hanks expanded its relationship with a large business
        services company by signing a three-year agreement to provide
        bundled customer support including handling inbound customer
        service calls and customer surveys.

    --  Harte-Hanks promoted Kathy Calta, Jim Davis, and Bill Goldberg
        to Senior Vice President and Bob Colucci, Frank Harvey, and
        Dave LaGreca to Vice President.

    --  Harte-Hanks Direct Marketing promoted Belinda Casper and Mark
        Picone to Managing Directors of its Jacksonville and Baltimore
        facilities, respectively, and named Bill Bullington as
        Managing Director of its Fullerton facility. They are
        responsible for the day-to-day operations at each of their
        respective facilities.

    --  Harte-Hanks named David Zaritsky as its new Managing Director,
        pharmaceutical market, in charge of all direct marketing sales
        to pharmaceutical and life sciences clients.

    --  Harte-Hanks Direct Marketing promoted Lucy Orme-Smith to
        Managing Director, UK CRM/Database and CRM Services, and Ger
        Schuivens to Managing Director for Harte-Hanks Belgium.

    --  Harte-Hanks acquired Avellino Technologies Ltd., a leading
        provider of data profiling technology. Harte-Hanks has
        integrated Trillium Software System(R) and the Avellino
        Discovery Software solution. Joining these two "best of breed"
        solutions allows organizations, for the first time, to define,
        assess, improve and monitor how well data meets the needs of
        enterprise business processes. Harte-Hanks still offers
        Trillium Software(R) and Avellino Discovery as standalone
        products as well as an integrated solution within the Trillium
        Software System(R). Founded in 1997, Avellino Technologies
        Ltd. is located in Aldermaston, UK.

    --  Harte-Hanks has opened a new customer data solutions facility
        in Stuttgart, Germany to support its growing database business
        in Europe. Among the services that Harte-Hanks offers there
        are marketing data management, as well as analytics and
        campaign management support. Initially, Harte-Hanks will use
        the Stuttgart location to support the business-to-business
        marketing needs of a leading technology company, while using
        the facility to expand business in Europe. Harte-Hanks also
        has facilities in five other European countries: United
        Kingdom, Belgium, Ireland, France and Spain.

    --  Harte-Hanks held its Silver Anniversary (25th) customer Forum,
        selecting two cities for this year's venue: San Francisco
        (June 29-30) and New York (June 22-23). The theme was "Defying
        Gravity: Customer Growth Under Pressure." Combined, 300
        customers and guests participated, attending approximately 45
        sessions covering a range of issues: loyalty marketing,
        database marketing, analytics and data mining, e-marketing,
        print on demand, and public policy among others. Case studies
        and client speakers in high-tech/telecom, retail, financial
        services, pharma/healthcare and automotive markets were
        presented.

    --  Harte-Hanks and its Trillium Software(R) division received a
        number of awards:

        --  Harte-Hanks and Trillium Software(R) both have been named
            top business intelligence providers by the readers of DM
            Review magazine. The DM Review 100 listing appeared in the
            publication's December 2004 issue and recognizes the top
            100 companies serving the business intelligence community.
            This is the fourth consecutive year that Harte-Hanks has
            been named to the list and the seventh consecutive year
            for Trillium Software(R).

        --  Trillium Software(R) received the highest scores awarded
            for customer satisfaction among data quality vendors in
            Customer Relationship Management (CRM) magazine's
            September 2004 edition's ranking of 2004 CRM Market
            Leaders.

        --  Harte-Hanks was named for the third consecutive year to
            the Software Magazine 500, the industry-leading
            publication's annual guide to software companies in the
            industry. Harte-Hanks achieved a ranking of number 69,
            ranking among the leading "customer relationship
            management" providers on this year's list.

        --  Trillium Software(R) was named the winner of Intelligent
            Enterprise magazine's seventh-annual Readers' Choice Award
            for Best Data Quality solutions. The data quality award is
            one in a series of categories that represent which
            information technology (IT) products best enable an
            "intelligent enterprise," as chosen by subscribers to CMP
            Media's Intelligent Enterprise magazine.

    Shoppers:

    --  Harte-Hanks Shoppers expanded circulation by approximately
        600,000 in 2004. This included circulation of 323,500 in
        Northern California, 150,000 in Southern California, and
        129,500 in South Florida.

    --  Harte-Hanks acquired a small, local shopper publication in the
        fast-growing Hemet area in Southern California -- and
        converted it to the PennySaver brand.

    --  Harte-Hanks Shoppers launched "Pensando en Ti," a multi-page
        free-standing insert targeted to Hispanic households.
        "Pensando en Ti," which means "thinking of you," was created
        to market to the rising number of Hispanic consumer
        households. "Pensando en Ti" is designed as a monthly
        publication and appears as an insert inside the PennySaver in
        California and the Flyer in Florida.

    --  Harte-Hanks Shoppers promoted Jamie Delperdang to Vice
        President, National Accounts.

    Corporate:

    --  Harte-Hanks paid a regular cash dividend of 4.0 cents per
        share in every quarter of 2004. On January 27, the company
        announced a 25% increase in the quarterly dividend to 5.0
        cents per share effective with the dividend payable March 15,
        2005 to shareholders of record on March 1, which is the tenth
        dividend increase since the company went public in 1993 for
        the second time.

    --  Harte-Hanks purchased 3.6 million shares of common stock
        during 2004 and 0.5 million in the fourth quarter. This leaves
        approximately 5.6 million shares under its current repurchase
        authorization. Since January 1997 the company has acquired
        39.3 million shares under its repurchase program.

    --  Harte-Hanks named Steve Hacker as Vice President, Legal and
        Secretary.

Harte-Hanks, Inc., San Antonio, TX, is a worldwide, direct and targeted marketing company that provides direct marketing services and shopper advertising opportunities to a wide range of local, regional, national and international consumer and business-to-business marketers. Harte-Hanks Direct Marketing improves the return on its clients' marketing investments with a range of services organized around five solution points: Construct and update the database -- Access the data -- Analyze the data -- Apply the knowledge -- Execute the programs. Experts at each element within this process, Harte-Hanks Direct Marketing is highly skilled at tailoring solutions for each of the vertical markets it serves. Harte-Hanks Shoppers is North America's largest owner, operator and distributor of shopper publications, with shoppers that are zoned into more than 900 separate editions with circulation in excess of 11 million in California and Florida each week.

For more information, contact: Chief Financial Officer Dean Blythe 210-829-9138 or e-mail at [e-mail].

This release and other information about Harte-Hanks can be found on the World Wide Web at http://www.harte-hanks.com

Harte-Hanks, Inc.
Consolidated Statements of Operations (Unaudited)

                      Three months ended     Twelve months ended
                         December 31,           December 31,
-------------------- --------------------- -----------------------
In thousands, except
 per share data         2004       2003         2004        2003
-------------------- ---------- ----------- ----------- -----------

Operating revenues   $277,491    $255,721  $1,030,461    $944,576
Operating expenses:
  Labor               103,242      95,216     394,417     357,811
  Production and
   distribution       100,051      93,087     361,298     334,359
  Advertising,
   selling, general
   and
   administrative      19,611      18,684      80,682      75,886
  Depreciation and
   amortization         7,254       7,060      28,769      30,033
                     --------- ----------- ----------- -----------
                      230,158     214,047     865,166     798,089
                     --------- ----------- ----------- -----------
Operating income       47,333      41,674     165,295     146,487
                     --------- ----------- ----------- -----------
Other expenses
 (income):
  Interest expense        349         205       1,020         855
  Interest income         (19)        (36)       (341)       (168)
  Other, net              720         394       1,648       1,895
                     --------- ----------- ----------- -----------
                        1,050         563       2,327       2,582
                     --------- ----------- ----------- -----------
Income before
 income taxes          46,283      41,111     162,968     143,905
Income tax expense     18,703      16,133      65,400      56,543
                     --------- ----------- ----------- -----------
Net income            $27,580     $24,978     $97,568     $87,362
                     ========= =========== =========== ===========


Basic earnings per
 common share           $0.32       $0.29       $1.13       $0.99
                     ========= =========== =========== ===========

    Weighted-
     average common
     shares
     outstanding       85,276      87,504      86,169      88,541
                     ========= =========== =========== ===========

Diluted earnings
 per common share       $0.32       $0.28       $1.11       $0.97
                     ========= =========== =========== ===========

    Weighted-
     average common
     and common
     equivalent
     shares
     outstanding       86,973      88,946      87,806      89,982
                     ========= =========== =========== ===========


Note: Certain 2003 amounts have been reclassified for comparative
purposes.


Harte-Hanks, Inc.
Business Segment Information (Unaudited)

                      Three months ended
                          December 31,
---------------------------------------------------
In thousands            2004       2003   % Change
---------------------------------------------------

OPERATING REVENUES:
  Direct Marketing   $179,410   $160,331      11.9%
  Shoppers             98,081     95,390       2.8%
                    ---------- ----------
    Total operating
     revenues        $277,491   $255,721       8.5%
                    ---------- ----------

OPERATING INCOME:
  Direct Marketing    $29,639    $23,352      26.9%
  Shoppers             21,056     20,329       3.6%
  General corporate
   expense             (3,362)    (2,007)    -67.5%
                    ---------- ----------
    Total operating
     income           $47,333    $41,674      13.6%
                    ---------- ----------

DEPRECIATION AND
 AMORTIZATION
  Direct Marketing     $5,871     $5,754       2.0%
  Shoppers              1,376      1,298       6.0%
  General corporate
   expense                  7          8     -12.5%
                    ---------- ----------
    Total
     depreciation
     and
     amortization      $7,254     $7,060       2.7%
                    ---------- ----------

                     Twelve months ended
                        December 31,
---------------------------------------------------
In thousands           2004       2003   % Change
---------------------------------------------------

OPERATING REVENUES:
  Direct Marketing   $641,214   $584,804      9.6%
  Shoppers            389,247    359,772      8.2%
                    ----------  ---------
    Total
     operating
     revenues      $1,030,461   $944,576      9.1%
                   -----------  ---------

OPERATING INCOME:
  Direct Marketing    $90,856    $76,641     18.5%
  Shoppers             85,857     78,007     10.1%
  General corporate
   expense            (11,418)    (8,161)   -39.9%
                    ----------  ---------
    Total operating
     income          $165,295   $146,487     12.8%
                    ----------- ---------

DEPRECIATION AND
 AMORTIZATION
  Direct Marketing    $23,118    $24,508     -5.7%
  Shoppers              5,621      5,493      2.3%
  General corporate
   expense                 30         32     -6.3%
                    ----------- ---------
    Total
     depreciation
     and
     amortization     $28,769    $30,033     -4.2%
                    ----------- ---------


Reconciliation of Net Income to Free Cash Flow

                     Three months ended     Twelve months ended
                        December 31,            December 31,
-----------------------------------------  ----------------------
In thousands             2004       2003      2004       2003
-----------------------------------------  ----------------------

Net Income            $27,580    $24,978    $97,568    $87,362
  Add:
   depreciation and
   amortization         7,254      7,060     28,769     30,033
  Less: capital
   expenditures        13,031      6,232     35,146     31,915
                    ---------- ----------   -------    -------
Free cash flow        $21,803    $25,806    $91,191    $85,480
                    ---------- ----------   -------    -------

Harte-Hanks, Inc.
Consolidated Balance Sheets (in thousands, except share amounts)
----------------------------------------------------------------
                                 (Unaudited)
                                 December 31,    December 31,
                                     2004            2003
                                --------------- --------------
Assets
  Current Assets
    Cash and cash equivalents          $38,807        $32,151
    Accounts receivable, net           168,755        152,703
    Inventory                            6,086          5,213
    Prepaid expenses                    16,664         13,816
    Current deferred income tax
     asset                              13,812          7,682
    Other current assets                 6,373          5,732
                                --------------- --------------
        Total current assets           250,497        217,297

    Property, plant and
     equipment, net                    113,770         97,747
    Goodwill, net                      458,171        437,156
    Other intangible assets, net         2,067          2,667
    Other assets                         3,848          4,263
                                --------------- --------------
        Total assets                  $828,353       $759,130
                                =============== ==============

Liabilities and Stockholders'
 Equity
  Current liabilities
    Accounts payable                   $55,632        $47,891
    Accrued payroll and related
     expenses                           36,539         22,808
    Customer deposits and
     unearned revenue                   53,707         48,658
    Current maturities of long-
     term debt                          10,000             --
    Income taxes payable                17,239          7,776
    Other current liabilities            9,075          6,939
                                --------------- --------------
        Total current
         liabilities                   182,192        134,072

  Long-term debt                            --          5,000
  Other long-term liabilities           74,362         64,460
                                --------------- --------------
        Total liabilities              256,554        203,532
                                --------------- --------------

  Stockholders' equity
    Common stock, $1 par value,
     authorized: 250,000,000
     shares
        Issued at December 31,
         2004: 114,505,329
         shares;
        at December 31, 2003:
         113,280,794 shares            114,505        113,281
    Additional paid-in-capital         253,515        235,996
    Accumulated other
     comprehensive loss                (15,192)       (18,790)
    Retained Earnings                  882,750        798,974
    Less treasury stock,
     December 31, 2004:
     29,524,064 shares at cost;
        December 31, 2003:
         25,788,502 shares at
         cost                         (663,779)      (573,863)
                                --------------- --------------
        Total stockholders'
         equity                        571,799        555,598
                                --------------- --------------
        Total liabilities and
         stockholders' equity         $828,353       $759,130
                                =============== ==============