8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

_________________

Date of Report
(Date of earliest
event reported):	February 13, 2007

National Research Corporation
(Exact name of registrant as specified in its charter)

Wisconsin	0-29466	47-0634000
(State or other	(Commission File	(IRS Employer
jurisdiction of	Number)	Identification No.)
incorporation)

1245 Q Street, Lincoln, Nebraska 68508
(Address of principal executive offices, including zip code)

(402) 475-2525
(Registrant’s telephone number)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[   ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[   ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[   ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[   ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.      Results of Operations and Financial Condition.

        On February 13, 2007, National Research Corporation (the “Company”) issued a press release announcing its earnings for the quarter and year ended December 31, 2006. A copy of such press release is furnished as Exhibit 99.1 and is incorporated by reference herein.

        On February 14, 2007, the Company held a conference call in connection with the Company’s announcement of its earnings for the quarter and year ended December 31, 2006. A copy of the script for such conference call is furnished as Exhibit 99.2 and is incorporated by reference herein. An archive of such conference call and the related question and answer session will be available online at www.earnings.com.

Item 9.01.      Financial Statements and Exhibits.

(a) Not applicable.

(b) Not applicable.

(c) Not applicable.

(d) Exhibits. The following exhibits are being furnished herewith:

(99.1) Press Release of National Research Corporation, dated February 13, 2007.

(99.2) Script for conference call, held February 14, 2007.

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SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: February 14, 2007

NATIONAL RESEARCH CORPORATION

By:  /s/ Patrick E. Beans

        Patrick E. Beans

        Vice President, Treasurer, Secretary and Chief

        Financial Officer

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NATIONAL RESEARCH CORPORATION

Exhibit Index to Current Report on Form 8-K
Dated February 13, 2007

Exhibit
Number

(99.1) Press Release of National Research Corporation, dated February 13, 2007.

(99.2) Script for conference call, held February 14, 2007.

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EX-99.1

Contact: Patrick E. Beans
Chief Financial Officer
402-475-2525

NATIONAL RESEARCH CORPORATION ANNOUNCES
FOURTH QUARTER AND YEAR-END 2006 RESULTS

2006 Revenues Jump 35% — Quarterly Dividend Increase Approved

LINCOLN, Nebraska (February 13, 2007) — National Research Corporation (NASDAQ/NM:NRCI), a leader in healthcare performance measurement, today announced results for the fourth quarter and year ended December 31, 2006.

• 2006 revenues increased by 35%

• 2006 net new contracts reached $11.9 million, up 81% over 2005

• 2006 earnings per share up 15%; up 23% without the impact of share-based expenses

• Quarterly dividend increase of 20% to $0.12 per share

        Revenues for the quarter ended December 31, 2006, were $10.3 million, compared with revenues of $8.6 million for the same period in 2005, an increase of 21%. Net income for the quarter ended December 31, 2006, was $1.0 million, or $0.15 per basic and $0.14 per diluted share, compared with net income of $1.5 million, or $0.22 per basic and diluted share, in the prior year period. Earnings per share for the quarter ended December 31, 2006, were negatively impacted by $0.02 per share as a result of the adoption of Statement of Financial Accounting Standards (“SFAS”) No. 123R in the first quarter 2006.

        Revenues for the year ending December 31, 2006, were $43.8 million, compared with revenues of $32.4 million for the year ended 2005. Net income for 2006 was $5.9 million, or $0.86 per basic and $0.85 per diluted share, compared with $5.2 million, or $0.74 per basic and diluted share, in the prior year 2005. Earnings per share for the twelve months ended December 31, 2006, were negatively impacted by $0.08 per share as a result of the Company’s adoption of SFAS No. 123R. Had it been adopted in 2005, the earnings per share would have been $0.70 per basic and $0.69 per diluted share for the year 2005, compared to $0.86 per basic and $0.85 per diluted share in 2006. Excluding the impact of SFAS 123R results in an increase in diluted earnings per share on a comparable basis of 23% for 2006 over 2005. The company believes that this non-GAAP measure provides a better comparison for the current year on earnings per share.

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NRCI Announces Fourth Quarter and Year-End 2006 Results
Page 2
February 13, 2007

        Commenting on the results, Michael D. Hays, chief executive officer of National Research Corporation, remarked, “We started the year focused on achieving strong revenue growth in 2006, and I’m very pleased to report that we achieved our targeted rate in the core business and exceeded our growth target when including TGI.”

        Mr. Hays continued, “Sales growth throughout the entire year has been strong and with fourth quarter sales up 174% alone, proves our strategies for top-line growth remain highly effective into 2007. This, along with a full year of TGI’s revenue which is growing in its own right will, I believe, result in 2007 being another robust growth year.”

        The Company also announced that its Board of Directors has declared a regular quarterly cash dividend of $0.12 (twelve cents) per share, an increase of 20% over the prior quarter, payable March 30, 2007, to shareholders of record as of the close of business on March 9, 2007.

        In closing, Patrick E. Beans, chief financial officer of National Research Corporation, said, “Even with some added expenses in the fourth quarter which lowered our overall margins, we had a record year in 2006. For 2007, we anticipate continued top-line growth will drive expanded margins by leveraging our expense structure and should result in strong growth of our net income and earnings per share.”

        A listen-only simulcast of National Research Corporation’s year-end conference call will be available online at www.earnings.com on February 14, 2007, beginning at 11:00 a.m. Eastern time. The online replay will follow approximately an hour later and continue for 30 days.

        National Research Corporation, headquartered in Lincoln, Nebraska, is a leading provider of performance measurement, improvement services, and governance education to the healthcare industry in the United States and Canada.

        This press release includes “forward-looking” statements related to the Company that can generally be identified as describing the Company’s future plans, objectives or goals. Such forward-looking statements are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those currently anticipated. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. For further information about the factors that could affect the Company’s future results, please see the Company’s filings with the Securities and Exchange Commission.

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NRCI Announces Fourth Quarter and Year-End 2006 Results
Page 3
February 13, 2007

NATIONAL RESEARCH CORPORATION
Unaudited Consolidated Statements of Operations
(In thousands, except per share data)

	Three Months Ended December 31,						Twelve Months Ended December 31,
	2006			2005			2006			2005
Revenues	$	10,318		$	8,558		$	43,771		$	32,436
Operating expenses:
Direct expenses		4,605			3,801			19,445			13,642
Selling, general and administrative		3,150			2,012			12,158			8,617
Depreciation and amortization		689			428			2,260			1,762
Total operating expenses		8,444			6,241			33,863			24,021
Operating income		1,874			2,317			9,908			8,415
Other income (expense):
Interest income		15			120			171			488
Interest expense		(201	)		(76	)		(517	)		(379	)
Other, net		(38	)		0			(56	)		(10	)
Total other income (expense)		(224	)		44			(402	)		99
Income before income taxes		1,650			2,361			9,506			8,514
Provision for income taxes		644			827			3,622			3,278
Net income	$	1,006		$	1,534		$	5,884		$	5,236
Net income per share, basic	$	0.15		$	0.22		$	0.86		$	0.74
Net income per share, diluted	$	0.14		$	0.22		$	0.85		$	0.74
Weighted average shares outstanding:
Basic		6,838			6,921			6,836			7,038
Diluted		6,976			7,012			6,954			7,118

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NRCI Announces Fourth Quarter and Year-End 2006 Results
Page 3
February 13, 2007

NATIONAL RESEARCH CORPORATION
Consolidated Condensed Balance Sheets
(Dollars in thousands)

	Dec. 31, 2006			Dec. 31, 2005
ASSETS	(Unaudited)			(Audited)
Current Assets:
Cash and cash equivalents	$	876		$	844
Short-term investments		1,110			9,452
Accounts receivable, net		6,734			5,495
Income taxes recoverable		898			184
Other current assets		3,379			2,243
Total current assets		12,997			18,218
Net property and equipment		11,716			11,891
Other, net		36,819			14,566
Total Assets	$	61,532		$	44,675
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and accrued expenses	$	1,511		$	2,007
Deferred revenue		8,264			5,434
Accrued compensation		1,594			1,248
Notes payable		3,110			1,471
Total current liabilities		14,479			10,160
Non-current liabilities		10,303			1,922
Total Liabilities		24,782			12,082
Shareholders’ Equity:
Common stock, $0.001 par value; 20,000,000 shares authorized;
issued 7,837,848 in 2006 and 7,740,571 in 2005;
outstanding 6,890,631 in 2006 and 6,845,571 in 2005		8			8
Additional paid-in capital		21,820			20,046
Retained earnings		26,488			23,360
Unearned compensation		--			(433	)
Accumulated other comprehensive income		358			300
Treasury stock		(11,924	)		(10,688	)
Total shareholders’ equity		36,750			32,593
Total liabilities and shareholders’ equity	$	61,532		$	44,675

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EX-99.2

Mike:

Thank you ___________, and welcome everyone to National Research Corporation’s fourth quarter and year-end 2006 conference call. My name is Mike Hays, the Company’s CEO, and joining me on the call today is Pat Beans our CFO.

Before we commence our remarks, I would ask Pat to review conditions related to any forward-looking statements that may be made as part of today’s call. Pat.

Pat:

Thank you, Mike. This conference call includes forward-looking statements related to the Company that involve risks and uncertainties that could cause actual results or outcomes to differ materially from those currently anticipated. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. For further information about the facts that could affect the company’s future results, please see the company’s filings with the Securities and Exchange Commission. With that, I’ll turn it back to you, Mike.

1

Mike:

Thank you, Pat.

I want to begin the call by saying I was not pleased with our fourth quarter performance. That said, the reasons are simple and understandable. Revenue from new contracts, all of which should have been incremental, had to first make up for the lost contract we reported in the third quarter. This lowered our revenue growth and was compounded by the fact we got a little ahead of ourselves in expenses. Both of these factors drove fourth quarter margins below our 15% net income target. At year end, that revenue had been more than replaced and our expense structure is now at plan. Nevertheless, the fourth quarter dampened our annual performance.

Interestingly, even with the fourth quarter below plan, our 2006 annual performance was very good. Our 24% revenue growth in the core business surpassed NRC’s revenue growth rate in all but one of the past ten years. When TGI’s contribution was added in, revenue grew 35% in 2006, far surpassing the growth rate of any other year in the past decade. Before I touch on my additional thoughts regarding 2006 and, more importantly, our focus going forward, let me ask Pat to review the quarterly and year-end 2006 financials. Pat.

2

Pat:

Thanks, Mike.

Company revenues for the three months ended December 31, 2006, were $10.3 million, compared to $8.6 million during the same period in 2005, a 21% increase. For the twelve months ended December 31, 2006, the Company achieved revenues of $43.8 million, compared to $32.4 million during the same period in 2005, a 35% increase.

For the three months ended December 31, 2006, net income for the Company was $1.0 million or $0.15 per share basic and $0.14 per diluted share, compared to $1.5 million or $0.22 per basic and diluted share for the same period in 2005. The net income margin for the fourth quarter 2006 was 10% which, as Mike highlighted, was far below our model of 15%.

For the twelve months ended December 31, 2006, net income for the company was $5.9 million or $0.86 per share basic and $0.85 per diluted share, compared to $5.2 million or $0.74 per basic and diluted share for the same period in 2005, a 15% increase in earnings per share. The net income margin was 13% for 2006.

Had the company adopted the Statement of Financial Accounting Standards No. 123R on January 1, 2005, earnings per diluted share for 2005 would have been $0.69 compared to $0.85 for 2006, a 23% increase.

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During the fourth quarter 2006, direct expenses as a percentage of revenue were 45% which is at the highest end of our model of 43 to 45%. For the year 2006, direct expenses ended at 44% of revenue.

During the fourth quarter 2006, selling, general and administrative costs represented 31% of revenue compared to 24% in the fourth quarter 2005. For the year 2006, we were outside our model of 23 to 25% with selling, general and administrative expense at 28%. Looking at 2007, we should see SG&A expenses being leveraged against higher revenue.

Depreciation and amortization was 7% of revenue during the fourth quarter 2006, compared to 5% during the fourth quarter 2005, due to the acquisition of The Governance Institute. For 2007, we expect the annualized depreciation and amortization expenses as a percentage of total revenues to be at the lower end of our model of 4.5% to 6% given continued revenue growth.

In 2007, we also expect continued lower interest income and higher interest expense than historical benchmarks due to the TGI acquisition. The increase in interest expense should be offset by TGI’s earnings.

Cash flow from operations for 2006 was $6.3 million, compared to $8.2 million for the year 2005. Cash flow was lower year over year due to the timing of billings, collections, and estimated tax payments. Cash and short-term investments as of December 31, 2006, were $2.0 million

I will now turn the call back over to Mike for additional discussion.

4

Mike:

Thank you, Pat.

Let me now report on the various metrics we routinely provide during our earnings calls.

The first metric is Total Recurring Contract Value which, as of December 31, 2006, was $46.6 million, a 24% increase over the year ending 2005.

The second matrix is Net New Sales which, for the fourth quarter 2006, were $3.4 million, representing the second highest quarter since the sales expansion commenced three years ago. By comparison, in the fourth quarter 2005, Net New Sales were $1.3 million. Net new sales for the entire year 2006 reached $11.9 million, up 81% over 2005.

Clearly the sales strategies we have in place are continuing to produce and at an increasing rate resulting in growing our market share and current client contract value.

I base this observation on the following trend.

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In 2004, we averaged $290,000 in net new sales per month, compared to $550,000 per month in 2005 and $990,000 per month in 2006. In addition, January 2007 net new sales were very strong, far surpassing 2006‘s monthly averages. Given this trend, we anticipate new sales of current and new products to continue to be the material driver of our growth in 2007.

Our third and final metric breaks out new sales for our syndicated Healthcare Market Guide product which were $679,000 in the fourth quarter 2006, compared to $271,000 in the fourth quarter 2005. For the year 2006, Healthcare Market Guide new sales were $2.1 million, compared to $881,000 in 2005. As you can see, the Healthcare Market Guide team did a great job in 2006.

For the year 2007, NRC will focus even more resources towards our sales strategies and capitalizing on what we continue to see as expanding opportunities in the markets we serve.

The Governance Institute had a good year as well. New members signed up during 2006 reached a record 98, and member retention increased to 88%. We have now doubled the sales staff at TGI and are hopeful the expansion within this business unit has a similar impact to what we have witnessed in other business units. TGI’s contribution to overall company growth goes far beyond just being a great growing business. The relationship TGI has with its member CEOs will also prove to be instrumental in greater penetration of existing accounts, as well as become a growing influence in capturing new clients for NRC as a whole.

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It is also important to note that all I have said regarding sales may suggest more feet on the street is solely responsible for 100% of our momentum, and that is not accurate. In 2006, we also materially increased our product development activities. As one example, additional Healthcare Market Guide product rolled out in 2006 directly contributed to one-third or more of that unit’s new sales.

We are also mirroring TGI’s membership model for additional new products for NRC to slowly evolve our product mix to be more subscription based. We are benefiting from less volatility, enhanced visibility and leverage provided for by these subscription-based revenue streams and, as you can imagine, that is highly attractive. Into 2007 and beyond, our objective is to have an increasing percentage of our revenues in subscription products. Today we estimate 20% of our revenues are subscription-based.

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Before I open the call to your questions, let me briefly touch on two additional elements of our focus for 2007. Our GHS business unit, now known as Payer Solutions, represents our portfolio of offerings for the payer market and is generating increased opportunity for the company. We are clearly benefiting from the increased interest by health plans to enter the Medicare Advantage market which directly drives the revenue of core Payer Solutions products. We are also uncovering cross-selling opportunities among payer clients for the balance of NRC offerings.

A final note before Q&A.

As you can tell from my comments, we believe 2007 will be a good year for the company. That said, we also clearly understand that throughout any given year, performance will not be equal across all units of business or across all units of time.

_____, I would now like to open the question and answer portion of the call.

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Closing statement.

Thank you for your time today. Pat and I looking forward to talking to you again next quarter.

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