-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MdLsbfTFDi1ykWaEBkfrxSdV7g8DDLn1Juf01eyE7IL1B9B3SHC9e7K8RpNhQIhA zTl4sbeKE839HAJtpQ4I/w== 0000897069-00-000298.txt : 20000516 0000897069-00-000298.hdr.sgml : 20000516 ACCESSION NUMBER: 0000897069-00-000298 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL RESEARCH CORP CENTRAL INDEX KEY: 0000070487 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-TESTING LABORATORIES [8734] IRS NUMBER: 470634000 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-29466 FILM NUMBER: 631644 BUSINESS ADDRESS: STREET 1: 1033 O ST CITY: LINCOLN STATE: NE ZIP: 68508 BUSINESS PHONE: 4024752525 MAIL ADDRESS: STREET 1: 1033 O ST CITY: LINCOLN STATE: NE ZIP: 68508 10-Q 1 NATIONAL RESEARCH CORPORATION FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File Number 0-29466 National Research Corporation ------------------------------------------------------ (Exact name of Registrant as specified in its charter) Wisconsin 47-0634000 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1033 "O" Street, Lincoln Nebraska 68508 -------------------------------------------------- (Address of principal executive offices) (Zip Code) (402) 475-2525 ---------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark 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 _X_ No __ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $.001 par value, outstanding as of April 30, 2000: 7,009,985 - -------------------------------------------------------------------------- shares - ------ NATIONAL RESEARCH CORPORATION FORM 10-Q INDEX For the Quarter Ended March 31, 2000 Page No. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Balance Sheets 3 Condensed Statements of Income 4 Condensed Statements of Cash Flows 5 Notes to Condensed Financial Statements 6 Item 2. Management's Discussion and Analysis of 7-9 Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures About 9 Market Risk PART II. OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds 10 Item 6. Exhibits and Reports on Form 8-K 10 Signatures 11 Exhibit Index 12 -2- PART I - Financial Information ITEM 1 Financial Statements NATIONAL RESEARCH CORPORATION CONDENSED BALANCE SHEETS
March 31, December 31, 2000 1999 ----------------- ------------------- (unaudited) Assets Current assets: Cash and cash equivalents $ 330,404 $ 1,149,587 Investments in marketable debt securities 11,753,386 10,876,608 Trade accounts receivable, less allowance for doubtful accounts of $79,198 and $63,098 in 2000 and 1999, respectively 1,874,410 2,918,124 Unbilled revenues 873,827 622,610 Prepaid expenses and other 347,725 53,727 Deferred income taxes 210,766 215,018 ----------------- ------------------- Total current assets 15,390,518 15,835,674 ----------------- ------------------- Net property and equipment 9,354,106 7,525,943 ----------------- ------------------- Deferred income taxes 408,855 438,136 Goodwill and other intangible assets, net of accumulated amortization 5,358,241 5,440,252 Other 15,592 15,592 ----------------- ------------------- Total assets $ 30,527,312 $ 29,255,597 ================= =================== Liabilities and Shareholders' Equity Current liabilities: Construction financing line of credit $ 4,004,000 $ 3,544,000 Current portion - notes payable 54,332 54,332 Accounts payable 2,551,821 1,680,385 Accrued wages, bonuses and profit sharing 592,125 669,900 Accrued expenses 931,500 1,132,934 Income taxes payable 126,033 234,533 Billings in excess of revenues earned 3,109,703 3,273,577 ----------------- ------------------- Total current liabilities 11,369,514 10,589,661 Notes payable, net of current portion 12,176 20,324 Bonuses, profit sharing accruals and other accrued expenses 79,245 79,245 ----------------- ------------------- Total liabilities 11,460,935 10,689,230 ----------------- ------------------- Shareholders' equity: Preferred stock, $.01 per value; authorized 2,000,000 shares, no shares issued and outstanding --- --- Common stock, $.001 par value; authorized 20,000,000 shares, issued 7,306,492 in 2000 and 7,305,000 in 1999, outstanding 7,007,792 in 2000 and 7,006,300 in 1999 7,306 7,305 Additional paid-in capital 16,846,086 16,839,839 Retained earnings 3,704,054 3,210,292 Treasury stock, at cost; 298,700 shares in 2000 and 1999 (1,491,069) (1,491,069) ----------------- ------------------- Total shareholders' equity 19,066,377 18,566,367 ----------------- ------------------- Total liabilities and shareholders' equity $ 30,527,312 $ 29,255,597 ================= =================== See accompanying notes to condensed financial statements.
-3- NATIONAL RESEARCH CORPORATION CONDENSED STATEMENTS OF INCOME (Unaudited)
Three months ended March 31, ------------------------------------ 2000 1999 ---------------- ---------------- Revenues $ 4,454,823 $ 3,662,923 --------------- --------------- Operating expenses: Direct expenses 2,566,911 2,577,301 Selling, general and administrative 1,051,553 904,494 Depreciation and amortization 263,734 169,111 --------------- --------------- Total operating expenses 3,882,198 3,650,906 --------------- --------------- Operating income 572,625 12,017 Other income: Interest income 168,154 150,694 Other, net (17,084) 5,491 --------------- --------------- Total other income 151,070 156,185 --------------- --------------- Income before income taxes 723,695 168,202 Provision for income taxes 229,933 67,280 --------------- --------------- Net income $ 493,762 $ 100,922 =============== =============== Net income per share--basic and diluted $ 0.07 $ 0.01 =============== =============== Weighted average shares and share equivalents outstanding--basic 7,006,317 7,077,056 =============== =============== Weighted average shares and share equivalents outstanding--diluted 7,036,575 7,084,549 =============== ===============
See accompanying notes to condensed financial statements. -4- NATIONAL RESEARCH CORPORATION CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
Three months ended March 31, ---------------------------------------- 2000 1999 ----------------- ------------------- Cash flows from operating activities: Net income $ 493,762 $ 100,922 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 273,188 169,111 Deferred income taxes 33,533 33,619 Loss on sale of property and equipment 23,417 --- Loss on sale of other investments 59 144 Changes in assets and liabilities, net of acquisition: Trade accounts receivable 1,043,714 123,462 Unbilled revenues (251,217) 276,087 Prepaid expenses and other (293,999) (249,650) Accounts payable 38,056 310,073 Accrued expenses, wages, bonuses and profit sharing (279,209) (267,947) Income taxes payable (108,500) 7,494 Billings in excess of revenues earned (163,874) 815,526 ----------------- ------------------- Net cash provided by operating activities 808,930 1,318,841 ----------------- ------------------- Cash flows from investing activities: Purchases of property and equipment (1,215,876) (2,097,776) Proceeds from sale of property and equipment 6,500 --- Purchases of securities available-for-sale (8,247,504) (4,967,115) Proceeds from the maturities of securities available-for-sale 7,370,667 4,319,000 ----------------- ------------------- Net cash used in investing activities (2,086,213) (2,745,891) ----------------- ------------------- Cash flows from financing activities: Borrowings under line of credit 460,000 --- Payments on notes payable (8,148) (7,458) Proceeds from exercise of stock options 6,248 --- Payment of purchase price payable --- (1,150,000) Purchase of treasury stock --- (138,250) ----------------- ------------------- Net cash provided by (used in) financing activities 458,100 (1,295,708) ----------------- ------------------- Net decrease in cash and cash equivalents (819,183) (2,722,758) Cash and cash equivalents at beginning of period 1,149,587 4,887,712 ----------------- ------------------- Cash and cash equivalents at end of period $ 330,404 $ 2,164,954 ================= =================== Supplemental disclosure of cash paid for: Interest, including capitalized interest of $71,911 in 2000 $ 73,478 $ 2,258 ================= =================== Taxes $ 304,900 $ 23,277 ================= ===================
See accompanying notes to condensed financial statements. -5- NATIONAL RESEARCH CORPORATION Notes to Condensed Financial Statements 1. INTERIM FINANCIAL REPORTING The condensed balance sheet of National Research Corporation (the "Company") at December 31, 1999 was derived from the Company's audited balance sheet as of that date. All other financial statements contained herein are unaudited and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) the Company considers necessary for a fair presentation of financial position, results of operations and cash flows in accordance with generally accepted accounting principles. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These condensed financial statements should be read in conjunction with the financial statements and notes thereto that are included in the Company's Form 10-K for the fiscal year ended December 31, 1999, filed with the Securities and Exchange Commission in March 2000. Other than its net income, the Company's only other source of comprehensive income is unrealized gains or losses on marketable debt securities. However, other comprehensive income from marketable debt securities is not significant for the three-month periods ended March 31, 2000 and 1999, respectively. -6- ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations The following table sets forth, for the periods indicated, selected financial information derived from the Company's condensed financial statements, expressed as a percentage of total revenues. The trends illustrated in the following table may not necessarily be indicative of future results. The discussion that follows the table should be read in conjunction with the condensed financial statements. Percentage of Total Revenues ------------------------------ Three months ended March 31, ------------------------------ 2000 1999 ------------------------------ Revenues: 100.0% 100.0% ============================== Operating expenses: Direct expenses 57.6 70.4 Selling, general and administrative 23.6 24.7 Depreciation and amortization 5.9 4.6 ------------------------------ Total operating expenses: 87.1 99.7 ------------------------------ Operating income 12.9% 0.3% ============================== Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999 Total revenues. Total revenues increased 21.6% in the three-month period ended March 31, 2000 to $4.5 million from $3.7 million in the three month period ended March 31, 1999. The increase was primarily due to an increase in scope of work from existing clients and to a lesser extent, the addition of new clients. Direct expenses. Direct expenses decreased 0.4% to $2,567,000 in the three-month period ended March 31, 2000 from $2,577,000 in the same period during 1999. The decrease in direct expenses in the 2000 period was due to decreases in software conversion costs of $105,000, labor and payroll expenses of $54,000, printing of $42,000 and telephone expense of $19,000; which were offset by an increase in fieldwork and fees of $210,000. Direct expenses decreased as a percentage of total revenues to 57.6% in the three month period ended March 31, 2000 from 70.4% during the same period of 1999. Direct expenses as a percentage of total revenues for the balance of 2000 are expected to rise some but remain at levels lower than 1999. Selling, general and administrative expenses. Selling, general and administrative expenses increased 16.3% to $1.1 million for the three-month period ended March 31, 2000 from $904,000 for the same period in 1999. This increase was primarily due to an increase in salaries and benefits expense of $103,000, legal and accounting expenses of $40,000, recruiting expenses of $39,000, computer support, license and equipment expenses of $36,000, and travel and meal expenses of $16,000. These increases were offset by decreases of $35,000 in contract services, telephone costs of $20,000, marketing costs of $20,000, and rent and repair expenses of $18,000. Selling, general, and administrative expenses decreased as a percentage of total revenues to 23.6% for the three month period ended March 31, 2000 from 24.7% for the same period in 1999 due to the increase in revenue without a related increase in selling, general and administrative expenses. -7- Depreciation and amortization. Depreciation and amortization expenses increased 56.0% to $264,000 in the three-month period ended March 31, 2000 from $169,000 in the same period of 1999. The increase in is primarily due to the amortization of the internal development of software and the purchase of computer equipment. Depreciation and amortization expenses as a percentage of total revenues increased to 5.9% in the three-month period ended March 31, 2000, from 4.6% in the same period of 1999. Provision for income taxes. The provision for income taxes totaled $230,000 (31.7% effective tax rate) for the three-month period ended March 31, 2000 as compared to $67,000 (40.0% effective tax rate) for the same period in 1999. The increase in expense is due to the higher profit for the period. The effective tax rate was lower in 2000 due to certain federal income tax credits. The effective tax rate for 2000 is expected to remain at a similar level due to anticipated federal tax credits. Liquidity and Capital Resources The Company's principal source of funds historically has been cash flow from its operations. The Company's cash flow has been sufficient to provide funds for working capital and capital expenditures, with the exception of the renovation of the new office building. As of March 31, 2000, the Company had cash and cash equivalents of $330,000 and working capital of $4.0 million. During the three months ended March 31, 2000, the Company generated $809,000 of net cash from operating activities as compared to $1.3 million of net cash generated during the same period in the prior year. The decrease in cash flow was mainly due to the timing of collections of accounts receivables and the timing of costs incurred in advance of billings on certain projects. For the three months ended March 31, 2000, net cash used in investing activities was $2.1 million as compared to $2.7 million during the same period in the prior year. The 2000 decrease in cash used was primarily due to the purchase of property and equipment of $1.2 million (primarily related to the new office building) and the net of purchase of securities available-for-sale over the proceeds from the maturities of securities of $877,000. The Company plans to spend an additional $1.8 million during the remainder of 2000 to renovate its new building. Following renovation, the Company intends to move its headquarters to such building in July 2000. The Company expects to secure long-term financing on the building for approximately $5.8 million. The 1999 net cash used was primarily due to the purchase of the new building for $1,475,000 and an investment of $627,000 in furniture, computer equipment, software and production equipment to meet the expansion of the Company's business. This was partially offset by the proceeds of maturities of securities available-for-sale of $4.3 million. Net cash provided by financing activities was $458,000 for the three months ended March 31, 2000, as compared to $1.3 million used for the three months ended March 31, 1999. The increase in cash provided by financing activities during 2000 was due to the construction financing and the net purchase price payable related to the acquisition of Healthcare Research Systems paid in 1999. The Company typically bills clients for projects before they have been completed. Billed amounts are recorded as billings in excess of costs or deferred revenue on the Company's financial statements and are recognized as income when earned. As of March 31, 2000 and as of December 31, 1999, the Company had $3.1 million and $3.3 million of deferred revenues, respectively. In addition, when work is performed in advance of billing, the Company records this work as a cost in excess of billings or unbilled revenue. At March 31, 2000 and December 31, 1999, the Company had $874,000 and $623,000 of unbilled revenues, respectively. -8- Substantially all deferred and unbilled revenues will be earned and billed, respectively, within 12 months of the respective period ends. In October 1998, the Company announced plans to repurchase up to 245,000 shares of common stock in the open market or in privately negotiated transitions. The Company repurchased 245,000 shares between October 1998 and March 1999. In April 1999, the Board of Directors of the Company authorized the repurchase of an additional 150,000 shares. As of May 12, 2000, 53,700 shares have been repurchased under the new authorization. Accounting Pronouncements In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"). SFAS 133 requires that all derivatives be recognized as either assets or liabilities in the balance sheet and measured at their fair value. If certain conditions are met, a derivative may be specifically designated as (i) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment, (ii) a hedge of the exposure to variable cash flows of a forecasted transaction or (iii) a hedge of the foreign currency exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available-for-sale security or a foreign currency denominated forecasted transaction. SFAS 133, as amended by Statement of Financial Accounting Standards No. 137, is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. The Company does not expect the effect of SFAS 133 to be significant to its financial reporting. ITEM 3 Quantitative and Qualitative Disclosures About Market Risk ---------------------------------------------------------- The Company has not experienced any material changes in its market risk exposures since December 31, 1999. -9- PART II - Other Information ITEM 2 Changes in Securities and Use of Proceeds ----------------------------------------- (a) Not applicable. (b) Not applicable. (c) Not applicable. (d) The Company's Registration Statement on Form S-1 (Registration No. 333-33273) (the "Registration Statement") relating to the offer and sale (the "Offering") of an aggregate of 2,415,000 shares of Common Stock was declared effective by the Securities and Exchange Commission on October 9, 1997. Of the 2,415,000 shares of Common Stock registered under the Registration Statement, 1,250,000 shares were sold by the Company and 1,165,000 shares (including 315,000 shares sold pursuant to the exercise of an over-allotment option granted to the underwriters) were sold by a certain shareholder of the Company, Michael D. Hays (the "Selling Shareholder"). During the fourth quarter of 1997, all of the shares of Common Stock registered were sold in the Offering at a price of $15.00 per share, for an aggregate price of $18,750,000 and $17,475,000 for the shares of Common Stock sold by the Company and the Selling Shareholder, respectively. After deducting the underwriting discount of $1.05 per share, the Selling Shareholder received net proceeds equal to $16,251,750 and the Company received net proceeds equal to $17,437,500 less expenses of $596,411 incurred in connection with the Offering. The net proceeds to the Company are reasonably estimated to be applied as follows: 1. Temporary investments of United States government securities with maturities of two years or less $920,145 2. Acquisition of HRS and related acquisition costs 8,549,588 3. The acquisition of a new headquarters building 5,880,287 4. The repurchase of treasury stock 1,491,069 --------- Total proceeds to the Company $16,841,089 =========== ITEM 6 Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibit Number Description -------------- ----------- (27) Financial Data Schedule (EDGAR version only) (b) Reports on Form 8-K ------------------- There were no reports on Form 8-K filed during the quarter ended March 31, 2000. -10- 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 thereunto duly authorized. NATIONAL RESEARCH CORPORATION Date: May 12, 2000 By: /s/ Michael D. Hays ---------------------------------------- Michael D. Hays President and Chief Executive Officer Date: May 12, 2000 By: /s/ Patrick E. Beans ---------------------------------------- Patrick E. Beans Vice President, Treasurer, Secretary and Chief Financial Officer (Principal Financial and Accounting Officer) -11- NATIONAL RESEARCH CORPORATION EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-Q For the Quarterly Period ended March 31, 2000 Exhibit ------- (27) Financial Data Schedule (EDGAR version only) -12- EX-27 2 FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE NATIONAL RESEARCH CORPORATION'S FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 330 11,753 1,954 79 0 15,391 10,746 1,392 30,527 11,370 4,071 0 0 7 19,059 30,527 0 4,455 0 2,567 1,315 20 2 724 230 494 0 0 0 494 .07 .07
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