*Readers Digest Bucks Trend, Posts Increases

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Four publicly traded direct marketing companies that focus on ongoing operations reported positive results for the fourth quarter ended Dec. 31, while two companies that engaged in restructuring posted losses.


Reader's Digest, Pleasantville, NY, bucked the trend by posting increases in the midst of a cost reduction program. Quarterly operating profits increased 14 percent to $98.9 million while adjusted earnings per share increased 10 percent to 56 cents on revenues that decreased 4 percent to $781 million.


Chairman/CEO Thomas Ryder attributed the lower revenues to a reduction in mailings and elimination of unprofitable businesses and said the company's restructuring plans are ahead of schedule.


Database and direct marketing services provider Harte-Hanks, San Antonio, TX, saw earnings increase 54 percent in 1998 to $67.1 million or 88 cents per share on revenue increases of 17.3 percent to $748.5 million. For the quarter, net income was up 10.6 percent and EPS 13 percent to 26 cents on revenue growth of 3.5 percent to $200.7 million.


President/CEO Larry Franklin said its direct marketing business segment had annual revenue growth of 16.1 percent to $493.9 million and quarterly growth of 9.6 percent to $136.3 million. Within the direct marketing area, database marketing and marketing services also experienced solid growth, he said.


Shared mail marketer Advo, Windsor, CT, reported growth across the board for the quarter ended Dec. 26 with earnings up 25 percent to 45 cents per share, operating income up 16.8 percent to $20.1 million and revenues up 2.5 percent to $268.6 million.


While total packages mailed was down 0.9 percent, pieces per package and revenue per thousand were up 0.9 percent and 0.6 percent respectively. These numbers contributed to an increase in gross margin of 2 percent to 27.6 percent.


Fair, Isaac, San Rafael, CA, which provides customer relationship management and decision support to the direct marketing and other industries, reported earnings rose 75 percent to $7 million or 49 cents per share for the quarter while revenue was up 27 percent to $68 million.


President/CEO Larry Rosenberger attributed the increases to better than 50 percent revenue growth from the company's DynaMark and Credit & Risk Management Associates units and revenues from new products. Rosenberger expects slow growth of its software products this year due to Y2K concerns.


Deluxe Corp., St. Paul, MN, reported earnings grew 11 percent to $56.8 million or 70 cents per share in the fourth quarter while adjusted earnings rose 9.3 percent to $2.34 per share for 1998. Revenues were flat for both the quarter and the year.


Chairman/CEO J.A. Blanchard said the completed divestiture of noncore businesses will lower expenses and improve operating efficiency. Deluxe has revised upward its EPS growth projections for 1999 and 2000 to between 11 percent and 15 percent.


As it warned last month, Damark International, Minneapolis, reported a net loss for 1998 due to decreased revenue from its catalog operations and costs related to its transition into a membership-based organization.


Damark reported a net loss of $19.6 million or $2.71 per share for the year with catalog revenues down 25.5 percent to $395 million and membership revenue up 39 percent to $89.4 million. For the quarter, the company had a net loss of $9.5 million or $1.50 per share with catalog revenue down 33.2 percent to $110.7 million and membership revenue up 61.5 percent to $29 million.


Membership increased 127 percent to 796,000 for the quarter and stood at 1.73 million at year end. The Damark Web site, relaunched in December, recorded sales of $4.5 million, up 67 percent from the same period in 1997.


Data provider InfoUSA, Omaha, NE, reported net sales increases of 4 percent to $56.1 million for the quarter and 18 percent to $228.7 million for the year, but saw its earnings drop 64 percent for the quarter to $1.3 million or 3 cents per share and reported a net loss of $2.9 million for the year. That loss compares to a net loss of $39.8 million for 1997. All results are preliminary pending the review of an accounting write-off related to its acquisition of list firm Walter Karl.


Chairman/CEO Vin Gupta said the firm began to realize the benefits of its cost reduction program -- which cut its workforce by 14 percent -- in the fourth quarter. Going forward, Gupta expects the growth of its new Internet division, VideoYellowPagesUSA.com, to increase shareholder value.


For companies issuing earnings warnings, MySoftware, Palo Alto, CA, expects EPS will grow from a loss of 38 cents in 1997 to a gain 7 cents to 8 cents, while Banta expects EPS will drop 15 percent from the 50 cents it reported a year ago.

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