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): November 5, 2013

National Research Corporation

(Exact name of registrant as specified in its charter)

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

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 November 5, 2013, National Research Corporation (the “Company”) issued a press release announcing its earnings for the quarter ended September 30, 2013. A copy of such press release is furnished as Exhibit 99.1 and is incorporated by reference herein.

On November 6, 2013, the Company held a conference call and online Web simulcast in connection with the Company’s announcement of its earnings for the quarter ended September 30, 2013. A copy of the script for such conference call and simulcast is furnished as Exhibit 99.2 and is incorporated by reference herein. An archive of such conference call and simulcast 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 November 5, 2013.
	(99.2)	Script for conference call and online Web simulcast, held November 6, 2013.

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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: November 6, 2013

NATIONAL RESEARCH CORPORATION
By:	/s/ Kevin R. Karas
	Kevin R. Karas
	Senior Vice President Finance, Chief Financial Officer, Treasurer and Secretary

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NATIONAL RESEARCH CORPORATION

Exhibit Index to Current Report on Form 8-K

Dated November 5, 2013

Exhibit
Number

(99.1)     Press Release of National Research Corporation, dated November 5, 2013.

(99.2)     Script for conference call and online Web simulcast, held November 6, 2013.

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EX-99

Exhibit 99.1

1245 “Q” Street Lincoln, NE 68508 Phone: 402-475-2525 Fax: 402-475-9061

Contact:	Kevin R. Karas
	Chief Financial Officer
	402-475-2525

NATIONAL RESEARCH CORPORATION ANNOUNCES

THIRD QUARTER 2013 RESULTS

Company Achieves Record Net New Sales

LINCOLN, Nebraska (November 5, 2013) — National Research Corporation (NASDAQ:NRCIA and NRCIB) today announced results for the third quarter of 2013.

● Net New Sales $6.2 million

● Total Contract Value $100.6 million

● Revenue up 5% to $22.4 million

● Operating Income to $6.0 million, up 7%

Remarking on company performance, Michael D. Hays, chief executive officer of National Research Corporation (NRC), said “Our planned investment in Customer Connect halved our operating income growth rate in the quarter. I anticipate accelerated spending on Customer Connect and similar growth runways in the coming quarters. Consequently, the company reaffirms, as previously announced, the suspension of cash dividends in favor of these investments.”

Revenue for the quarter ended September 30, 2013, was $22.4 million, compared to
$21.4 million for the same quarter in 2012. Net income for the quarter ended September 30, 2013, was $3.8 million, compared to $3.6 million for the quarter ended September 30, 2012. Combined diluted earnings per share increased to $0.16 for the quarter ended September 30, 2013, from $0.15 for the third quarter of 2012.     

Regarding third quarter performance, Kevin Karas, chief financial officer of National Research Corporation, said, “Net new sales increased 32% over the third quarter 2012 to
$6.2 million, setting a new Company record. New contract wins and strong renewals in the quarter drove total contract value of largely subscription-based contracts past the $100 million mark.”

A listen-only simulcast of National Research Corporation’s 2013 third quarter conference call will be available online at http://www.media-server.com/m/p/nzmfokek on

NRC Announces Third Quarter 2013 Results

Page 2

November 5, 2013

November 6, 2013, beginning at 11:00 a.m. Eastern time. The online replay will follow approximately one hour later and continue for 30 days.

For more than 32 years, National Research Corporation has been at the forefront of patient-centered care, helping healthcare providers measure and improve quality and services through analytics that offer a rich understanding of customers’ experiences, preferences, risks and behaviors across the healthcare continuum.

The information discussed within this release includes financial results and projections that are in accordance with accounting principles generally accepted in the United States (GAAP). In addition, certain non-GAAP financial measures have been provided that calculate combined earnings per share based on combined Class A and Class B shares and share equivalents outstanding, respectively. The non-GAAP measures should be read in conjunction with the corresponding GAAP measures and should be considered in addition to, and not as an alternative or substitute for, the measures prepared in accordance with GAAP. Please note that the Company’s non-GAAP measures may be different than those used by other companies. The additional non-GAAP financial information the Company presents should be considered in conjunction with, and not as a substitute for, the Company’s financial information presented in accordance with GAAP. The non-GAAP financial measures are provided in an effort to provide information that investors may deem relevant to evaluate results from the company's core business operations and to compare the company's performance with prior periods. The company uses both GAAP and these non-GAAP financial measures for evaluating comparable financial performance against prior periods.

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.

NRC Announces Third Quarter 2013 Results

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November 5, 2013

NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

Unaudited Condensed Consolidated Statements of Income

(In thousands, except per share data)

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Revenue	$	22,407		$	21,386		$	69,667		$	64,425
Operating expenses:
Direct expenses		9,452			8,769			29,196			26,333
Selling, general and administrative		6,019			5,821			18,903			17,541
Depreciation and amortization		907			1,149			2,788			3,606
Total operating expenses		16,378			15,739			50,887			47,480
Operating income		6,029			5,647			18,780			16,945
Other income (expense):
Interest income		14			8			45			20
Interest expense		(91	)		(134	)		(309	)		(416	)
Other, net		(4	)		(29	)		28			(16	)
Total other expense		(81	)		(155	)		(236	)		(412	)
Income before income taxes		5,948			5,492			18,544			16,533
Provision for income taxes		2,135			1,915			6,827			5,168
Net income	$	3,813		$	3,577		$	11,717		$	11,365
Earnings Per Share of Common Stock:
Basic Earnings Per Share:
Class A	$	0.09		$	0.09		$	0.28		$	0.28
Class B	$	0.55		$	0.53		$	1.70		$	1.68
Diluted Earnings Per Share:
Class A	$	0.09		$	0.09		$	0.28		$	0.27
Class B	$	0.54		$	0.51		$	1.67		$	1.64
Weighted average shares and share equivalents outstanding
Class A - basic		20,672			20,373			20,671			20,262
Class B - basic		3,445			3,395			3,445			3,377
Class A - diluted		21,111			20,883			21,087			20,823
Class B - diluted		3,514			3,480			3,513			3,470
Combined Earnings Per Share (non-GAAP)
Basic Earnings Per Share	$	0.16		$	0.15		$	0.49		$	0.48
Diluted Earnings Per Share	$	0.16		$	0.15		$	0.48		$	0.47
Combined weighted average shares and share equivalents outstanding (non-GAAP)
Combined - Basic		24,117			23,768			24,116			23,639
Combined - Diluted		24,625			24,363			24,600			24,293

NRC Announces Third Quarter 2013 Results

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November 5, 2013

NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

Unaudited Condensed Consolidated Balance Sheets

(Dollars in thousands, except per share amounts and par value)

	Sep. 30,			Dec. 31,
	2013			2012
ASSETS
Current Assets:
Cash and cash equivalents	$	18,934		$	8,286
Accounts receivable, net		11,377			12,119
Income taxes receivable		334			158
Other current assets		4,263			3,252
Total current assets		34,908			23,815
Property and equipment, net		12,040			12,493
Goodwill		57,698			57,799
Other, net		5,268			5,939
Total Assets	$	109,914		$	100,046
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and accrued expenses	$	3,416		$	2,658
Deferred revenue		16,516			15,812
Accrued compensation		3,937			4,392
Deferred Income Taxes		20			--
Notes payable		2,238			12,436
Total current liabilities		26,127			35,298
Non-current liabilities		16,249			8,006
Total Liabilities		42,376			43,304
Shareholders’ Equity:
Preferred stock, $0.01 par value, authorized 2,000,000 shares, none issued		--			--
Class A Common stock, $0.001 par value; authorized 60,000,000 shares, issued 25,249,029 in 2013      and 25,129,776 in 2012, outstanding 20,732,784 in 2013 and 20,624,976 in 2012		25			25
Class B Common stock, $0.001 par value; authorized 80,000,000 shares, issued 4,208,118 in 2013      and 4,188,296 in 2012, outstanding 3,455,411 in 2013 and 3,437,496 in 2012		4			4
Additional paid-in capital		41,298			39,493
Retained earnings		54,275			44,700
Accumulated other comprehensive income		746			1,124
Treasury stock		(28,810	)		(28,604	)
Total shareholder’s equity		67,538			56,742
Total liabilities and shareholders’ equity	$	109,914		$	100,046

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EX-99

Exhibit 99.2

Mike:

Thank you, ___________, and welcome everyone to National Research Corporation’s 2013 third quarter conference call. My name is Mike Hays, the Company’s CEO. Joining me on the call today is Kevin Karas, our Chief Financial Officer.

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

Kevin :

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.

Mike:

Thank you, Kevin. And again, welcome everyone.

Two of the noteworthy achievements this past quarter were record net new sales of $6.2 million and surpassing the $100 million mark in Total Contract Value.

Of equal importance was the performance of our post-acute product group which returned to positive growth in contract value through robust new sales in the quarter.

With that, Kevin, I will turn the call over to you to review our financial performance.  

Kevin

Thank you, Mike.

As we mentioned on the earnings call last quarter, we will be reviewing our results each quarter both in terms of our consolidated financial performance, as well as the impact on our performance from the Customer Connect subsidiary that was created in June of this year.

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Net new sales of $6.2 million were added in the third quarter of 2013 which helped increase Total Contract Value for the third quarter to $100.6 million. Subscription-based agreements continue to represent 83% of our total recurring contract value. Third quarter Total Contract Value includes approximately $400,000 from new Customer Connect contracts, 100% of which are subscription-based agreements.

Revenue for the third quarter was $22.4 million, an increase of 5% over the second quarter of 2012. Revenue growth for the quarter is comprised entirely from organic growth, which was driven by a combination of continued gains in market share and vertical growth from cross-selling, and increasing contract value in our existing client base. Third quarter results include $20,000 of revenue from Customer Connect.

Consolidated operating income for the third quarter of 2013 was $6.0 million, or 27% of revenue, compared to $5.6 million, or 26% of revenue, for the same period last year. The third quarter consolidated operating income includes $471,000 in operating losses from Customer Connect. Operating income for the third quarter without Customer Connect was $6.4 million, which represents a 29% operating income margin and an increase in operating income of 14% over the third quarter of 2012.

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Total operating expenses for the third quarter increased by 4%, from $15.7 million in 2012 to $16.4 million in 2013.

Direct expenses increased to $9.5 million for the third quarter, compared to $8.6 million for the same period in 2012. This is the result of increased variable costs related to revenue growth and higher survey volumes for subscription-based products. Direct expenses as a percent of revenue were 42% for the third quarter 2013 and are expected to be 41% of revenue for the full year of 2013.

Selling, general and administrative expenses increased to $6.0 million, or 27% of revenue, for the three-month period ended September 30, 2013, compared to $5.8 million, or 27% of revenue, for the same period in 2012. SG&A expense for the third quarter without Customer Connect was $5.7 million in 2013, or 25% of revenue.

With the incremental expenses that are projected to be incurred for Customer Connect resources, consolidated SG&A expense is expected to be at 28% of revenue for the full year of 2013.

Depreciation and amortization expense for the third quarter 2013 was $907,000, compared to $1.1 million in the third quarter of 2012. The decrease was attributed to declining intangible asset amortization expenses. Depreciation and amortization expense was 4% of revenue for the third quarter and is expected to also be 4% of revenue for the full year 2013.

4

The provision for income taxes totaled $2.1 million for the three-month period ended September 30, 2013, compared to $1.9 million for the same period in 2012. The effective tax rate was 35.9% for the second quarter of 2013, compared to the effective tax rate of 34.9% for the same period last year. The effective tax rate is expected to average 36.5% for the full year in 2013.

Net income for the third quarter of 2013 increased by 7% to

$3.8 million, compared to $3.6 million in 2012. For the third quarter of 2013, our combined non-GAAP diluted earnings per share increased by 6% to $0.16, compared to $0.15 for the third quarter of 2012.

With that I’ll turn the call back to Mike.

Mike:

Thank you, Kevin.

5

I would like to make just a few remarks before opening the call for your questions.

As I mentioned, our post-acute product group turned the corner in the third quarter with positive growth in contract value driven by strong new sales. This reverses what had been a negative six-quarter trend which contributed to the company’s top-line growth being far less than desired. As the post-acute group’s increasing contract value is recognized as revenue, the growth rate of the company overall will be greatly enhanced.

As a point of reference, acute-care products have generated an 18% revenue growth rate over the past four quarters, clearly in line with growth rates desired for the entire company.

The fastest growing products, all of which are in excess of 25% revenue growth, are Market Insights, CG-CAHPS, and what is now known as Customer Connect. Our plan is to pour more gas on what is currently working in addition to new offerings which represent great growth runways.

One of these important new growth runways is the Picker Institute. The announcement to launch the Picker Institute was made at our annual client conference and received overwhelming support. The Picker Institute will be modeled after our very successful Governance Institute. Plans are being set to commence selling membership the first of the year.

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As we invest in enhancing current product offerings and launching new products, shareholders should expect a few changes. We have announced that we are, and we will continue, spending cash on new product development which would have otherwise funded dividend payments to shareholders. You should also expect slower growth rate in net income, as was the case this quarter, as a direct result of the investments.

And as important, you should also expect greater organic and inorganic top-line growth as these investments take hold.

_______________, I would now like to open the call to questions.

Closing Statement – Mike:

Thank you for your time today. We look forward to reporting our progress next quarter.

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