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 11, 2014

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 February 11, 2014, National Research Corporation (the “Company”) issued a press release announcing its earnings for the quarter ended December 31, 2013. A copy of such press release is furnished as Exhibit 99.1 and is incorporated by reference herein.

On February 12, 2014, the Company held a conference call and online Web simulcast in connection with the Company’s announcement of its earnings for the quarter ended December 31, 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 February 11, 2014.

(99.2) Script for conference call and online Web simulcast, held February 12, 2014.

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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 12, 2014

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 February 11, 2014

Exhibit
Number

(99.1)     Press Release of National Research Corporation, dated February 11, 2014.

(99.2)     Script for conference call and online Web simulcast, held February 12, 2014.

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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

FOURTH QUARTER AND YEAR-END 2013 RESULTS

Company Achieves Record Net New Sales

LINCOLN, Nebraska (February 11, 2014) — National Research Corporation (NASDAQ: NRCIA and NRCIB) today announced results for the fourth quarter and year-end 2013.

Fourth Quarter 

● Net new sales of $6.4 million

● Revenue up 4% to $22.9 million

● Operating income up 4% to $6.0 million

Year-End 2013

● Total contract value of $102.3 million

● Revenue up 7% to $92.6 million

● Operating income up 9% to $24.8 million

● Combined diluted earnings per share of $0.63, up 2%

Remarking on Company performance, Michael D. Hays, chief executive officer of National Research Corporation said “Net new sales were at record levels for the second quarter in a row. In fact, the last half of 2013 registered a 36% increase in net new sales over the first half of 2013. While this positive sales performance will grow revenue in 2014, given our subscription-based business model, such performance did little to drive revenue growth in 2013 which ended the year at 7%.”

Revenue for the quarter ended December 31, 2013, was $22.9 million, compared to $22.0 million for the same quarter in 2012. Net income for the quarter ended December 31, 2013, was $3.8 million, compared to $3.7 million for the quarter ended December 31, 2012. Combined diluted earnings per share was $0.15 for both quarters ended December 31, 2013, and 2012.

Revenue for the year ended December 31, 2013, increased to $92.6 million, compared to $86.4 million for the same period in 2012. Net income for the year ended December 31, 2013, was $15.5 million, compared to $15.1 million for the year ended December 31, 2012. Combined diluted earnings per share increased to $0.63 for the year ended December 31, 2013, from $0.62 for the year ended 2012.

NRC Announces Fourth Quarter and Year-End 2013 Results

Page 2

February 11, 2014

Regarding the Company’s annual performance, Kevin Karas, chief financial officer of National Research Corporation, said, “We continued to increase our operating income margin during 2013, to 27% of revenue for the full year. With our growth in total contract value to $102.3 million, we expect to realize continued leverage of our revenue growth and margin expansion in 2014.”

A listen-only simulcast of National Research Corporation’s 2013 fourth quarter and year-end conference call will be available online on the Street Events network February 12, 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 Fourth Quarter and Year-End 2013 Results

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February 11, 2014 

NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

Unaudited Condensed Consolidated Statements of Income

(In thousands, except per share data)

	Three months ended December 31,						Twelve months ended December 31,
	2013			2012			2013			2012
Revenue	$	22,923		$	21,996		$	92,590		$	86,421
Operating expenses:
Direct		9,648			9,128			38,844			35,461
Selling, general and administrative		6,304			6,001			25,208			23,542
Depreciation and amortization		944			1,093			3,732			4,699
Total operating expenses		16,896			16,222			67,784			63,702
Operating income		6,027			5,774			24,806			22,719
Other income (expense):
Interest income		17			12			63			32
Interest expense		(88	)		(125	)		(397	)		(541	)
Other, net		(11	)		13			16			(3	)
Total other expense		(82	)		(100	)		(318	)		(512	)
Income before income taxes		5,945			5,674			24,488			22,207
Provision for income taxes		2,178			1,971			9,004			7,139
Net income	$	3,767		$	3,703		$	15,484		$	15,068
Earnings Per Share of Common Stock:
Basic Earnings Per Share:
Class A	$	0.09		$	0.09		$	0.37		$	0.37
Class B	$	0.55		$	0.54		$	2.25		$	2.22
Diluted Earnings Per Share:
Class A	$	0.09		$	0.09		$	0.37		$	0.36
Class B	$	0.54		$	0.53		$	2.20		$	2.17
Weighted average shares and share equivalents outstanding
Class A - basic		20,692			20,513			20,677			20,325
Class B - basic		3,452			3,419			3,447			3,387
Class A - diluted		21,137			20,959			21,099			20,854
Class B - diluted		3,514			3,493			3,514			3,476
Combined Earnings Per Share (non-GAAP)
Basic Earnings Per Share	$	0.16		$	0.15		$	0.64		$	0.64
Diluted Earnings Per Share	$	0.15		$	0.15		$	0.63		$	0.62
Combined weighted average shares and share equivalents outstanding (non-GAAP)
Combined - Basic		24,144			23,932			24,124			23,712
Combined - Diluted		24,651			24,452			24,613			24,330

NRC Announces Fourth Quarter and Year-End 2013 Results

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February 11, 2014 

NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

Unaudited Condensed Consolidated Balance Sheets

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

	December 31, 2013			December 31, 2012
ASSETS
Current Assets:
Cash and cash equivalents	$	22,092		$	8,286
Accounts receivable, net		11,043			12,119
Income taxes receivable		265			158
Other current assets		3,074			3,252
Total current assets		36,474			23,815
Property and equipment, net		11,898			12,493
Goodwill		57,592			57,799
Other, net		5,032			5,939
Total Assets	$	110,996		$	100,046
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and accrued expenses	$	3,231		$	2,658
Deferred revenue		13,885			15,812
Accrued compensation		4,318			4,392
Notes payable		2,256			12,436
Total current liabilities		23,690			35,298
Non-current liabilities		15,551			8,006
Total Liabilities		39,241			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 25,285,029 in 2013 and 25,129,776 in 2012, outstanding 20,768,784 in 2013 and 20,624,976 in 2012		25			25
Class B Common stock, $0.001 par value; authorized 80,000,000 shares, issued 4,220,118 in 2013 and 4,188,296 in 2012, outstanding 3,467,410 in 2013 and 3,437,496 in 2012		4			4
Additional paid-in capital		42,192			39,493
Retained earnings		58,042			44,700
Accumulated other comprehensive income		302			1,124
Treasury stock		(28,810	)		(28,604	)
Total shareholder’s equity		71,755			56,742
Total liabilities and shareholders’ equity	$	110,996		$	100,046

--END--

EX-99

Exhibit 99.2

Mike:

Thank you, ___________, and welcome everyone to National Research Corporation’s 2013 fourth quarter and year-end conference call. My name is Mike Hays, the Company’s CEO. Joining me on the call today is Susan Henricks, President and Chief Operating Officer, and 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.

1

Mike:

Thank you, Kevin. And again, welcome everyone.

As referenced in the earnings release, we set a record in the fourth quarter 2013 for new sales at $6.4 million which was on the heels of a record $6.2 million in new sales in the third quarter 2013. The last half of the year set us up nicely for the year 2014.

I’ll return to what is driving recent sales momentum after Kevin provides a review of our financial performance.

Kevin

Thank you, Mike.

Net new sales of $6.4 million were added in the fourth quarter of 2013 which helped increase Total Contract Value for the year to $102.3 million. Subscription-based agreements now represent 85% of our total Recurring Contract Value and 85% of total revenue for the fourth quarter. Also, fourth quarter Total Contract Value includes approximately $657,000 from new Customer Connect contracts--100% of which are subscription-based agreements.

2

Revenue for the fourth quarter 2013 was $22.9 million, an increase of 4% over the fourth 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. Fourth quarter 2013 results include $91,000 of revenue from Customer Connect.

Consolidated operating income for the fourth quarter of 2013 was $6.0 million or 26% of revenue, compared to $5.8 million or 26% of revenue, for the same period last year. The 2013 fourth quarter consolidated operating income includes $366,000 in operating losses from Customer Connect. Operating income for the fourth quarter 2013 without Customer Connect was $6.4 million, which represents a 28% operating income margin and an increase in operating income of 11% over the fourth quarter of 2012.

Total operating expenses for the fourth quarter increased by 4%, from $16.2 million in 2012 to $16.9 million in 2013.

3

Direct expenses increased to $9.6 million for the fourth quarter, compared to $9.1 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 fourth quarter 2013 and are expected to continue at 42% of revenue for the full year in 2014.

Selling, general and administrative expenses increased to $6.3 million, or 28% of revenue, for the three-month period ended December 31, 2013, compared to $6.0 million or 27% of revenue for the same period in 2012. SG&A expense for the fourth quarter of 2013 without Customer Connect was $6.0 million or 26% of revenue.

Including the incremental expenses that are projected to be incurred for Customer Connect resources, consolidated SG&A expense is expected to be at 26% of revenue for the full year of 2014.

Depreciation and amortization expense for the fourth quarter 2013 was $944,000 compared to $1.1 million in the fourth quarter of 2012. The decrease was attributed to declining intangible asset amortization expenses. Depreciation and amortization expense was 4% of revenue for the fourth quarter and is expected to also be 4% of revenue for the full year in 2014.

4

The provision for income taxes totaled $2.2 million for the three-month period ended December 31, 2013, compared to $2.0 million for the same period in 2012. The effective tax rate was 36.6% for the fourth quarter of 2013, compared to the effective tax rate of 34.8% for the same period last year. The effective tax rate is expected to decrease to an average effective rate 35% for the full year in 2014 as a result of reduced expense from state income taxes.

Net income for the fourth quarter of 2013 increased by 2% to $3.8 million, compared to $3.7 million in 2012. For the fourth quarter of 2013, our combined non-GAAP diluted earnings per share was $0.15, compared to $0.15 for the fourth quarter of 2012.

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

Mike:

Thank you, Kevin.

At the opening of the call today, I mentioned our strong sales in the last half of 2013 which were up 36% over the first half. All of this is great for top-line growth in 2014, but was too little too late for 2013—ending the year with a bleak 7% top line growth.

5

The drivers of sales in the last half of the year and the resulting growth in Recurring Contract Value coming into 2014 was the Picker patient experience product portfolio across the entire care continuum, from physician office and ambulatory visits to emergency department to hospital inpatient and also post-acute care settings.

The Picker brand is the strongest in the business, bar any competitor, and we have simply failed to capitalize on this asset. But when we do, the results are compelling.

In addition, Customer Connect contributed to sales growth in the last half of the year and is likely to increase its sales growth trajectory in 2014 as it staffs up its sales force. In fact, Connect is now the largest database of discharged patients in the United States which is building higher barriers to entry with each new client.

In addition to Connect, our resources and focus for 2014 is all about The Picker Institute patient experience measurement and improvement across the continuum in the United States and Canada.

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

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Closing Statement – Mike:

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

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