-----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, LiAxYJivALTN04mAF6C1Xz7VJi0LLu0TMPZZNDDDXl546+nLNVSOkqF6xUmuMcS7 +frqS5IRLwITngdIQHa2xg== 0000897069-03-000591.txt : 20030515 0000897069-03-000591.hdr.sgml : 20030515 20030515163117 ACCESSION NUMBER: 0000897069-03-000591 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030515 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: 1934 Act SEC FILE NUMBER: 000-29466 FILM NUMBER: 03705183 BUSINESS ADDRESS: STREET 1: 1245 Q STREET CITY: LINCOLN STATE: NE ZIP: 68508 BUSINESS PHONE: 4024752525 MAIL ADDRESS: STREET 1: 1245 Q STREET CITY: LINCOLN STATE: NE ZIP: 68508 10-Q 1 irm340.txt 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, 2003 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.) 1245 "Q" 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 by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes No X --- --- 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 May 1, 2003: 7,254,802 shares - ------------------------------------------------------------------------------ NATIONAL RESEARCH CORPORATION FORM 10-Q INDEX For the Quarter Ended March 31, 2003 Page No. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Condensed Balance Sheets 3 Consolidated Condensed Statements of Income 4 Consolidated Condensed Statements of Cash Flows 5 Notes to Consolidated Condensed Financial Statements 6-9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-12 Item 3. Quantitative and Qualitative Disclosures About Market Risk 12 Item 4. Controls and Procedures 12 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 13 Signatures 14 Certifications 15-16 Exhibit Index 17 -2- PART I - Financial Information ITEM 1. Financial Statements --------------------
NATIONAL RESEARCH CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS March 31, December 31, 2003 2002 ---------------------- -------------------- (unaudited) Assets Current assets: Cash and cash equivalents $ 1,257,424 $ 991,217 Investments in marketable debt securities 10,857,783 9,986,677 Trade accounts receivable, less allowance for doubtful accounts of $73,320 and $67,320 in 2003 and 2002, respectively 5,089,655 4,579,439 Unbilled revenues 1,460,793 1,933,415 Prepaid expenses and other 608,675 274,112 Income taxes recoverable 8,777 --- Deferred income taxes 213,133 183,575 ---------------------- -------------------- Total current assets 19,496,240 17,948,434 ---------------------- -------------------- Net property and equipment 12,418,733 12,345,896 ---------------------- -------------------- Customer lists, net of accumulated amortization 806,686 607,004 Goodwill, net of accumulated amortization 9,079,734 7,888,714 Other 46,946 41,923 ---------------------- -------------------- Total assets $ 1,848,339 $ 38,831,971 ====================== ==================== Liabilities and Shareholders' Equity Current liabilities: Current portion of notes payable $ 133,484 $ 131,907 Accounts payable 590,878 565,540 Accrued wages, bonuses and profit sharing 757,092 632,837 Accrued expenses 435,281 366,943 Income taxes payable 431,525 55,558 Billings in excess of revenues earned 4,281,924 3,276,813 ---------------------- -------------------- Total current liabilities 6,630,184 5,029,598 Notes payable, net of current portion 5,008,967 5,044,090 Deferred income taxes 818,198 740,008 Other long-term liabilities 407,820 --- ---------------------- -------------------- Total liabilities 12,865,169 10,813,696 ---------------------- -------------------- Shareholders' equity: Preferred stock, $.01 par value; authorized 2,000,000 shares, no shares issued and outstanding --- --- Common stock, $.001 par value; authorized 20,000,000 shares, issued 7,570,302 in 2003 and 7,560,610 in 2002, outstanding 7,254,802 in 2003 and 7,245,110 in 2002 7,570 7,561 Additional paid-in capital 18,171,188 18,123,603 Retained earnings 12,368,038 11,447,443 Accumulated other comprehensive income, net of taxes 32,077 35,371 Treasury stock, at cost; 315,500 shares in 2003 and 2002 (1,595,703) (1,595,703) ---------------------- -------------------- Total shareholders' equity 28,983,170 28,018,275 ---------------------- -------------------- Total liabilities and shareholders' equity $ 41,848,339 $ 38,831,971 ====================== ==================== See accompanying notes to consolidated condensed financial statements.
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NATIONAL RESEARCH CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited) Three months ended March 31, --------------------------------------- 2003 2002 ----------------- ------------------ Revenues $ 6,057,867 $ 4,048,627 ---------------- ------------------ Operating expenses: Direct expenses 2,815,695 1,794,604 Selling, general and administrative 1,284,183 1,273,541 Depreciation and amortization 445,696 404,678 ----------------- ------------------ Total operating expenses 4,545,574 3,472,823 ----------------- ------------------ Operating income 1,512,293 575,804 Other income (expense): Interest income 68,828 63,790 Interest expense (106,525) (105,509) Other, net 4,196 (66,443) ----------------- ------------------ Total other income (expense) (33,501) (108,162) ----------------- ------------------ Income before income taxes 1,478,792 467,642 Provision for income taxes 558,197 173,242 ----------------- ------------------ Net income $ 920,595 $ 294,400 ================= ================== Net income per share--basic and diluted $ 0.13 $ 0.04 ================= ================== Weighted average shares and share equivalents outstanding--basic 7,249,017 7,099,436 ================= ================== Weighted average shares and share equivalents outstanding--diluted 7,296,034 7,165,989 ================= ================== See accompanying notes to consolidated condensed financial statements.
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NATIONAL RESEARCH CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) Three months ended March 31, ------------------------------ 2003 2002 -------------- -------------- Cash flows from operating activities: Net income $ 920,595 $ 294,400 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 445,696 404,678 Deferred income taxes 52,747 93,235 Loss on sale of other investments -- (18) Net changes in assets and liabilities: Trade accounts receivable (398,881) (147,771) Unbilled revenues 472,622 (8,835) Prepaid expenses and other (325,001) 57,392 Accounts payable (22,178) 53,906 Accrued expenses, wages, bonuses and profit sharing 63,271 158,216 Income taxes recoverable and payable 366,915 75,660 Billings in excess of revenues earned 1,019,268 (64,410) -------------- -------------- Net cash provided by operating activities 2,595,054 916,453 -------------- -------------- Cash flows from investing activities: Purchases of property and equipment (505,440) (265,528) Acquisition, net of cash acquired (961,634) -- Purchases of securities available-for-sale (2,694,863) (1,729,310) Proceeds from the maturities of securities available-for-sale 1,819,042 1,212,769 -------------- -------------- Net cash used in investing activities (2,342,895) (782,069) -------------- -------------- Cash flows from financing activities: Payments on notes payable (33,546) (26,036) Proceeds from exercise of stock options 47,594 44,167 -------------- -------------- Net cash provided by financing activities 14,048 18,131 -------------- -------------- Net increase in cash and cash equivalents 266,207 152,515 Cash and cash equivalents at beginning of period 991,217 1,080,053 -------------- -------------- Cash and cash equivalents at end of period $ 1,257,424 $ 1,232,568 ============== ============== Supplemental disclosure of cash paid for: Interest expense $ 106,525 $ 71,573 ============== ============== Income taxes $ 141,931 $ 2,953 ============== ============= Supplemental disclosures of noncash activities: Accounts payable included $210,335 in 2002 for purchases of property and equipment. In connection with the Company's acquisition of a business in March 2003, the Company acquired current assets of $165,769 and assumed current liabilities of $162,956 See accompanying notes to consolidated condensed financial statements.
-5- NATIONAL RESEARCH CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1. INTERIM FINANCIAL REPORTING The consolidated condensed balance sheet of National Research Corporation (the "Company") at December 31, 2002 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 accounting principles generally accepted in the United States of America. Information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These consolidated 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, 2002, filed with the Securities and Exchange Commission in March 2003. The consolidated condensed financial statements include the accounts of National Research Corporation, and its wholly-owned subsidiaries National Research Corporation Canada and Smaller World Communications Inc. All significant intercompany transactions and balances have been eliminated. The functional currency of the Company's foreign subsidiaries are those subsidiaries' local currencies. The Company translates the assets and liabilities of foreign subsidiaries at the period-end rate of exchange, and income statement items at the average rate prevailing during the period. The Company records the resulting translation adjustment as a component of shareholders' equity. 2. COMPREHENSIVE INCOME Other than its net income, the Company's other sources of comprehensive income (loss) are unrealized gains or losses on marketable debt securities and foreign currency translation adjustments. Other comprehensive loss from marketable debt securities and foreign currency translation adjustments was $3,294 and $20,071 for the three-month periods ended March 31, 2003 and 2002, respectively. 3. ACQUISITION On March 17, 2003, the Company acquired 100% of the outstanding common shares of Smaller World Communications Inc. ("SWC"), based in Toronto, Canada. The results of SWC's operations have been included in the consolidated condensed financial statements since the effective date of March 1, 2003. SWC is a provider of performance measurement services for healthcare organizations in Canada. As a result of the acquisition, the Company is expected to be able to accelerate its expansion in Canada. The aggregate minimum purchase price was $1,357,000, of which $950,000 was paid at closing. The purchase price also includes two additional scheduled payments in 2006 and 2008. The minimum aggregate payments of $408,000 have been recorded -6- as other long-term liabilities, and the maximum aggregate payments could be $1,171,000, based upon certain revenue goals. The Company estimates it direct acquisition costs to be $54,000. The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition. The Company is still in process of finalizing the valuations of certain assets; thus, the allocation of the purchase price is subject to refinement: Fair Value ---------- Current assets $ 165,769 Customer list 217,863 Goodwill 1,191,020 ---------- Total acquired assets 1,574,652 Less total liabilities 162,956 ---------- Net assets acquired $1,411,696 ---------- The customer list is being amortized over 5 years. The results of operations from this acquisition have been included in the consolidated condensed statements of income from the date of the acquisition. The following unaudited pro forma information for the Company has been prepared as if this acquisition had occurred on January 1, 2002. The information is based on the historical results of the separate companies, and may not necessarily be indicative of the results that could have been achieved, or of results that may occur in the future. Three months ended March 31, ---------------------------- 2003 2002 ---- ---- (dollars in thousands, except per share amounts) Revenues $6,321 $4,243 Net income $927 $282 Net income per share - basic and diluted $0.13 $0.04 4. STOCK OPTION PLANS The Company recognizes stock-based compensation expense for its stock option plans using the intrinsic value method prescribed by Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations to account for its fixed-plan stock options. Under this method, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation, established accounting and disclosure requirements using a fair-value-based method of accounting for stock-based employee compensation plans. As allowed by SFAS No. 123, the Company has elected to continue to apply the intrinsic-value-based method of accounting. In December 2002, the Financial Accounting Standards Board issued SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure, an amendment of FASB Statement No. -7- 123. SFAS No. 148 amends SFAS No. 123 to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements. The following table illustrates the effect on net income if the fair-value-based method had been applied to all outstanding and unvested awards in each period:
For three months ended March 31 ------------------------------- 2003 2002 ---- ---- (in thousands, except per share amounts) Pro forma: Net income, as reported $921 $294 Net income, adjusted for the fair value method $901 $280 Income per share, as reported (1) $0.13 $0.04 Income per share, adjusted for the fair value method (1) $0.12 $0.04
(1) Amounts are the same for both basic and diluted income per share. 5. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill and other intangible assets consist of the following at March 31, 2003 and December 31, 2002:
2003 2002 ---- ---- Customer lists $ 1,004,911 $ 787,048 Less accumulated amortization 198,225 180,044 ------------- ------------- Net customer lists 806,686 607,004 ------------- ------------- Goodwill 10,252,000 9,060,980 Less accumulated amortization 1,172,266 1,172,266 ------------- ------------- Net goodwill 9,079,734 7,888,714 ------------- ------------- Total net goodwill and intangible assets $ 9,886,420 $ 8,495,718 ============= =============
The following represents a summary of changes in the Company's carrying amount of goodwill for the three months ended March 31, 2003: Balance as of January 1, 2003 $ 7,888,714 Impairment loss -- Additions 1,191,020 ----------- Balance as of March 31, 2003 $ 9,079,734 =========== -8- 6. SUBSEQUENT EVENT In May 2003, the Company increased its reserve for bad debts by $100,000 to reflect the current instability at, and changing payment practices of, one of its customers. The Company is currently in the process of evaluating its relationship with the customer, including taking steps so that the Company will receive upfront payment for its services going forward. 7. EARNINGS PER SHARE Net income per share has been calculated and presented for "basic" and "diluted" data. "Basic" net income per share is computed by dividing net income by the weighted average number of common shares outstanding, whereas "diluted" net income per share is computed by dividing net income by the weighted average number of common shares outstanding adjusted for the dilutive effects of options and common equivalent shares outstanding. At March 31, 2003 and 2002, -0- and 43,109 options, respectively, have been excluded from the diluted net income per share computation because their exercise price exceeds the fair market value. 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 consolidated 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 consolidated condensed financial statements.
Percentage of Total Revenues -------------------------------------- Three months ended March 31, ------------------------------------- 2003 2002 ------------------------------------- Revenues: 100.0% 100.0% ------------------------------------- Operating expenses: Direct expenses 46.4 44.3 Selling, general and administrative 21.2 31.4 Depreciation and amortization 7.4 10.0 ------------------------------------- Total operating expenses: 75.0 85.7 ------------------------------------- Operating income 25.0% 14.3% =====================================
-9- THREE MONTHS ENDED MARCH 31, 2003 COMPARED TO THREE MONTHS ENDED MARCH 31, 2002 Total revenues. Total revenues for the three-month period ended March 31, 2003 were $6,058,000 compared to $4,049,000 in the three month period ended March 31, 2002. The first quarter revenue increased 49.6% compared to the prior year. The increase was primarily due to the addition of new clients, including a major contract signed in January 2002 with the U.S. Department of Veteran Affairs, which had minimal effect on revenue during the first quarter of 2002 but added revenue of over $900,000 during 2003. The balance of the increase is a number of annual contracts signed over the last twelve months. Direct expenses. Direct expenses increased 56.8% to $2,816,000 in the three-month period ended March 31, 2003 from $1,795,000 in the same period during 2002. The increase in direct expenses in the 2003 period was primarily due the increase in revenue to serve additional customers. The increases were in printing and postage expenses of $553,000, fieldwork and fees of $347,000, and in labor and payroll expenses of $116,000. Direct expenses increased as a percentage of total revenues to 46.4% in the three month period ended March 31, 2003 from 44.3% during the same period of 2002 due partially to the increase in fieldwork expenses. For the balance of 2003, direct expenses as a percentage of total revenues are expected to remain at levels similar to 2002. Selling, general and administrative expenses. Selling, general and administrative expenses remained flat at $1,284,000 for the three-month period ended March 31, 2003 compared to $1,274,000 for the same period in 2002. The net increase was primarily due to increases in marketing expenses of $134,000, salary and benefit expenses of $37,000, and utilities of $17,000. These increases were partially offset by a decrease in legal and consulting fees of $184,000 relating to the resolution of a lawsuit in the first quarter of 2002. Selling, general, and administrative expenses decreased as a percentage of total revenues to 21.2% for the three month period ended March 31, 2003 from 31.4% for the same period in 2002 due mainly to the reduction in legal and consulting fees. For the balance of 2003, selling, general, and administrative expenses as a percentage of total revenues are expected to remain at similar levels to the first quarter of 2003, which are consistent with the results for the full year of 2002. Depreciation and amortization. Depreciation and amortization expenses increased to $446,000 in the three-month period ended March 31, 2003 from $405,000 in the same period of 2002. Depreciation and amortization expenses as a percentage of total revenues decreased to 7.4% in the three-month period ended March 31, 2003, from 10.0% in the same period of 2002. The depreciation as a percentage of revenue should decrease slightly during 2003. Other income (expense). Other income (expense) was ($34,000) in the three-month period ended March 31, 2003 compared to ($108,000) in the same period of 2002. The change was due to the recording in 2002 of $64,000 of prejudgment interest related to the lawsuit resolved during the first quarter of 2002. Other income (expense) should trend to the first quarter of 2003 amounts for the balance of the year. Provision for income taxes. The provision for income taxes totaled $558,000 (37.7% effective tax rate) for the three-month period ended March 31, 2003 as compared to $173,000 (37.0% effective tax rate) for the same period in 2002. The effective tax rate was lower in 2002 due to differences -10- in state income taxes. The effective tax rate for the rest of 2003 is expected to remain at a level similar to its first quarter 2003 level. 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, other than expenditures related to the Company's building, which were paid, in part, from the proceeds of borrowings and the sale of securities available-for-sale. As of March 31, 2003, the Company had cash and cash equivalents of $1.3 million and working capital of $12.9 million. During the three months ended March 31, 2003, the Company generated $2.6 million of net cash from operating activities as compared to $916,000 of net cash generated during the same period in the prior year. The increase in cash flow was mainly due to a higher net income and partially due to increases in billings in excess of revenues earned and decreases in unbilled revenues, totaling $1.5 million, offset by net increases in trade accounts receivables. Also, the increase in cash flows was partially generated by an increase in accounts payable and accrued expenses, offset by increases in prepaid expenses. For the three months ended March 31, 2003, net cash used in investing activities was $2.3 million as compared to $782,000 during the same period in the prior year. The 2003 increase in cash used in investing activities was primarily due to the $962,000 acquisition in March 2003 of Smaller World Communications Inc., a Toronto, Canada based company. In addition, cash used in investing activities increased due to an increase of purchases of property and equipment by $240,000 and by an increase of the net of purchases of securities available-for-sale over the proceeds from the maturities of securities of $359,000. Net cash provided by financing activities was $14,000 for the three months ended March 31, 2003, as compared to $18,000 for the three months ended March 31, 2002. The decrease in cash provided by financing activities during 2003 was primarily due to an increase in the amount of payments on notes payable. The Company typically bills clients for performance tracking and custom research projects before they have been completed. Billed amounts are recorded as billings in excess of revenues earned or deferred revenue on the Company's financial statements and are recognized as income when earned. As of March 31, 2003 and December 31, 2002, the Company had $4.3 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 revenues earned in excess of billings, or unbilled revenue. At March 31, 2003 and December 31, 2002, the Company had $1.5 million and $1.9 million of unbilled revenue, respectively. Substantially all deferred revenues earned and unbilled revenues will be earned and billed, respectively, within 12 months of the respective period ends. -11- STOCK REPURCHASE PROGRAM In April 1999, the Board of Directors of the Company authorized the repurchase of 150,000 shares of Common Stock in the open market or in privately negotiated transactions. As of May 1, 2003, 70,500 shares have been repurchased under that authorization. ACCOUNTING PRONOUNCEMENTS In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities" (SFAS No. 149). SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133). Except for the provisions of SFAS No. 149 that relate to SFAS No. 133 implementation issues that have been effective for fiscal quarters that began prior to June 15, 2003, SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The adoption of SFAS No. 149 is not expected to have a material effect on the Company's financial statements. RECENT DEVELOPMENT In May 2003, the Company increased its reserve for bad debts by $100,000 to reflect the current instability at, and changing payment practices of, one of its customers. The Company is currently in the process of evaluating its relationship with the customer, including taking steps so that the Company will receive upfront payment for its services going forward. 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, 2002. ITEM 4. Controls and Procedures ----------------------- (a) Based on their evaluation as of a date within 90 days of the filing of this Quarterly Report on Form 10-Q, the Company's principal executive officer and principal financial officer have concluded that the Company's disclosure controls and procedures (as defined in Rules 13a-14(c) and 15 d-14 (c) under the Securities Exchange Act of 1934 (the "Exchange Act")) are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. (b) No significant changes were made in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. -12- PART II - Other Information ITEM 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits -------- (99.1) Certification of the President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350 (99.2) Certification of the Vice President, Treasurer, Secretary and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (b) Reports on Form 8-K ------------------- The Company filed a Current Report on Form 8-K, dated March 19, 2003, reporting (under Items 7 and 9) that it issued a press release announcing its acquisition of Smaller World Communications Inc. on March 17, 2003. -13- 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 15, 2003 By: /s/ Michael D. Hays ------------------------------------- Michael D. Hays President and Chief Executive Officer Date: May 15, 2003 By: /s/ Patrick E. Beans ------------------------------------- Patrick E. Beans Vice President, Treasurer, Secretary and Chief Financial Officer (Principal Financial and Accounting Officer) -14- Certifications I, Michael D. Hays, certify that: 1. I have reviewed this quarterly report on Form 10-Q of National Research Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 15, 2003 /s/ Michael D. Hays ----------------------------------------- Michael D. Hays President and Chief Executive Officer -15- I, Patrick E. Beans, certify that: 1. I have reviewed this quarterly report on Form 10-Q of National Research Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 15, 2003 /s/ Patrick E. Beans ------------------------------------------ Patrick E. Beans Vice President, Treasurer, Secretary and Chief Financial Officer -16- NATIONAL RESEARCH CORPORATION EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-Q For the Quarterly Period ended March 31, 2003 Exhibit ------- (99.1) Certification of the President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350 (99.2) Certification of the Vice President, Treasurer, Secretary and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 -17- EX-99.1 3 irm340a.txt CERTIFICATION OF THE PRESIDENT AND CHIEF Written Statement of the President and Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 Solely for the purposes of complying with 18 U.S.C. Section 1350, I, the undersigned President and Chief Executive Officer of National Research Corporation (the "Company"), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2003 (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Michael D. Hays - ---------------------------------- Michael D. Hays May 15, 2003 A signed original of this written statement required by Section 1350 has been provided to National Research Corporation and will be retained by National Research Corporation and furnished to the Securities and Exchange Commission or its staff upon request. EX-99.2 4 irm340b.txt CERTIFICATION OF THE VICE PRESIDENT Written Statement of the Vice President, Treasurer, Secretary, and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 Solely for the purposes of complying with 18 U.S.C. Section 1350, I, the undersigned Vice President, Treasurer, Secretary, and Chief Financial Officer of National Research Corporation (the "Company"), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2003 (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Patrick E. Beans - ---------------------------------- Patrick E. Beans May 15, 2003 A signed original of this written statement required by Section 1350 has been provided to National Research Corporation and will be retained by National Research Corporation and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----