10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2013     

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                    (State or other jurisdiction of incorporation or organization)	47-0634000      (I.R.S. Employer Identification No.)
1245 Q Street                  Lincoln, Nebraska                  (Address of principal executive offices)	68508    (Zip code)

Registrant’s telephone number, including area code: (402) 475-2525

Securities registered pursuant to Section 12(b) of the Act:

Title of Class	Name of Each Exchange on Which Registered
Class A Common Stock, $.001 par value	The NASDAQ Stock Market
Class B Common Stock, $.001 par value	The NASDAQ Stock Market
Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐    No  ☒ 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes ☐    No  ☒ 

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  ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ☒  No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  

Large accelerated filer ☐     Accelerated filer ☒     Non-accelerated filer ☐     Smaller reporting company ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.) Yes ☐    No  ☒ 

Aggregate market value of the class A common stock and the class B common stock held by non-affiliates of the registrant at June 28, 2013: $201,088,365.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class A Common Stock, $0.001 par value, outstanding as of February 21, 2014: 20,795,772 shares

Class B Common Stock, $0.001 par value, outstanding as of February 21, 2014: 3,478,128 shares

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the 2014 Annual Meeting of Shareholders are incorporated by reference into Part III.

          TABLE OF CONTENTS

		Page
	PART I
Item 1.	Business	1
Item 1A.	Risk Factors	9
Item 1B.	Unresolved Staff Comments	13
Item 2.	Properties	13
Item 3.	Legal Proceedings	13
Item 4.	Mine Safety Disclosures	13
	PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	14
Item 6.	Selected Financial Data	16
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 7A.	Quantitative and Qualitative Disclosure About Market Risk	27
Item 8.	Financial Statements and Supplementary Data	28
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	55
Item 9A.	Controls and Procedures	55
Item 9B.	Other Information	55
	PART III
Item 10.	Directors and Executive Officers of the Registrant	57
Item 11.	Executive Compensation	57
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	57
Item 13.	Certain Relationships and Related Transactions	58
Item 14.	Principal Accountant Fees and Services	58
	PART IV
Item 15.	Exhibits and Financial Statement Schedules	59
Signatures		62

i

PART I

Item 1.     Business

Special Note Regarding Forward-Looking Statements

Certain matters discussed in this Annual Report on Form 10-K are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements can generally be identified as such because the context of the statement includes phrases such as National Research Corporation (“NRC,” the “Company,” “we,” “our,” “us” or similar terms) “believes,” “expects,” or other words of similar import. Similarly, statements that describe the Company’s future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which could cause actual results or outcomes to differ materially from those currently anticipated. Factors that could affect actual results or outcomes include, without limitation, the following factors:

● The possibility of non-renewal of the Company’s client service contracts;

● The Company’s ability to compete in its markets, which are highly competitive, and the possibility of increased price pressure and expenses;

● The effects of an economic downturn;

● The impact of consolidation in the healthcare industry;

● The impact of federal healthcare reform legislation or other regulatory changes;

● The Company’s ability to retain its limited number of key clients;

● The Company’s ability to attract and retain key managers and other personnel;

● The possibility that the Company’s intellectual property and other proprietary information technology could be copied or independently developed by its competitors;

● Regulatory developments; and

● The factors set forth under the caption “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K.

Shareholders, potential investors and other readers are urged to consider these and other factors in evaluating the forward-looking statements, and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included are only made as of the date of this Annual Report on Form 10-K and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

General

The Company is a leading provider of analytics and insights that facilitate revenue growth, patient, employee and customer retention and patient engagement for healthcare providers, payers and other healthcare organizations. The Company’s solutions support the improvement of business and clinical outcomes, while facilitating regulatory compliance and the shift to population-based health management for its clients. The Company’s ability to systematically capture, analyze and deliver to its clients self-reported information from patients, families and consumers is critical in today’s healthcare market. NRC believes that access to and analysis of its extensive consumer-driven information will become even more valuable in the future as healthcare providers increasingly need to more deeply understand and engage patients and consumers in an effort towards effective population-based health management.

1

The Company’s portfolio of subscription-based solutions provide actionable information and analysis to healthcare organizations and payers across a range of mission-critical, constituent-related elements, including patient experience and satisfaction, community population health risks, workforce engagement, community perceptions, and physician engagement. NRC partners with clients across the continuum of healthcare services. The Company’s clients range from acute care hospitals and post-acute providers, such as home health, long term care and hospice, to numerous payer organizations. The Company believes this cross-continuum positioning is a unique and an increasingly important capability as evolving payment models drive healthcare providers and payers towards a more collaborative and interactive healthcare system.

NRC’s expertise includes the efficient capture, interpretation, transmittal and benchmarking of critical data elements from millions of healthcare consumers. Using its portfolio of solutions through internet-based business intelligence tools, the Company’s clients gain insights into best practices to drive improvements across key performance metrics. The Company’s clients are also able to access networking groups, on-line education and an extensive library of performance improvement material that can be tailored to each of their unique needs.

NRC has achieved a market leadership position through its more than 32 years of industry innovation and experience, as well as its long-term, recurring revenue relationships (solutions that are used or required by a client each year) with many of the healthcare industry’s largest organizations. Since its founding in 1981, the Company has focused on meeting the evolving information needs of the healthcare industry through internal product development, as well as select acquisitions. The Company is a Wisconsin corporation headquartered in Lincoln, Nebraska.

Industry and Market Opportunity

According to the Kaiser Foundation, health expenditures in the United States were approximately $2.6 trillion in 2010, over ten times the $256 billion spent in 1980. In total, health spending accounted for 17.9% of the nation’s Gross Domestic Product in 2010. Addressing this growing expenditure burden continues to be a major policy priority at both federal and state levels. In addition, continued high unemployment rates and lower incomes for many Americans coupled with increased co-pays and deductibles in healthcare plans have focused even more consumer attention on health spending and affordability. In the public sector, Medicare provides health coverage for individuals aged 65 and older, while Medicaid provides coverage for low income families and other individuals in need. Both programs are administered by the Centers for Medicare & Medicaid Services (“CMS”). With the aging of the U.S. population, Medicare enrollment has increased significantly.  In addition, longer life spans and greater prevalence of chronic illnesses among both the Medicare and Medicaid populations have placed tremendous demands on the health care system.

Driven by escalating costs and a growing recognition of the challenges of chronic care and unnecessary hospitalizations, Medicare reimbursement for healthcare providers is shifting from a volume-based approach (fees paid for each element of service rendered, independent of outcome) to a more value-based model, where reimbursement is based on the value (or quality) of the healthcare service delivered. This shift has been enabled, in part, by the establishment of standardized quality-focused datasets and the requirement that providers capture and transmit these data to CMS.

2

An increasing percentage of Medicare reimbursement (and, in all likelihood, reimbursement from commercial payers as well) will be at risk for hospitals, based on factors such as patient readmission rates and provider adherence to certain quality-related protocols. At the same time, many hospitals and other providers are creating new models of care delivery and reimbursement to reduce cost and enable more effective delivery of care. These new models are based on sharing financial risk and managing the health and behaviors of large populations of patients and consumers. Certain of these new models are known as accountable care organizations, or ACOs, and medical homes, in which multiple provider organizations are coordinated in providing care and bearing shared financial risk in serving a defined patient population. This transformation towards population-based health management, value-based purchasing, and an increased engagement of healthcare consumers is resulting in a greater need for providers to deliver more customer-centric healthcare.

NRC believes that its current portfolio of solutions is aligned to address this evolving market opportunity. The Company provides tools and solutions to capture, interpret and improve the data required by CMS as well as enhanced capabilities that capture insights about patient health risks, behaviors and perspectives. The information and analytics provided through these solutions enable payers and providers to better tailor offerings to the populations they serve. Meanwhile, the Company’s portfolio of engagement solutions helps providers address and impact the types of behaviors that could result in reduced hospital re-admission rates, resulting in a direct and measurable impact on providers’ revenue.

Finally, the Company believes that its ability to offer these insights across the entire care continuum is particularly relevant as new reimbursement models force collaboration amongst different types of providers. Bundled payments, medical home, ACOs and other models of reimbursement for population-based health management all require an understanding of healthcare both within and outside of the traditional acute care setting.

NRC’s Solutions

NRC’s portfolio of solutions address specific market needs around growth, retention, engagement and thought leadership for healthcare providers, payers and other healthcare organizations. While each distinct solution provides discernible value on a stand-alone basis, the Company believes that in combination, its solutions provide a comprehensive view of healthcare consumers both within healthcare settings and outside of those settings—creating a differentiated solution set to address the emerging needs for population-based health management.

Growth Solutions - NRC’s growth solutions are subscription-based services that include measurement of community perception (Market Insights), brand tracking (BrandArc) and advertising testing (AdVoice). Market Insights is the largest online U.S. healthcare survey, measuring the opinions and behaviors of 270,000 healthcare consumers in the top 250 markets across the country annually. Market Insights is a syndicated survey that provides clients with an independent third-party source of information that is used to understand consumer preferences and optimize marketing strategies. BrandArc is a solution that enables clients to measure brand value and build brand equity in their markets. AdVoice is a solution that helps NRC’s clients evaluate and optimize advertising efficiency and consumer recall. The Company’s growth solutions have historically been marketed under the Healthcare Market Guide and Ticker brands.

Retention Solutions - NRC’s retention solutions include patient and resident experience, physician engagement and employee experience measurement and improvement tools. These solutions enable clients to comply with regulatory requirements and to improve their reimbursement under value-based purchasing models. Additionally, clients use these applications to positively impact patient experience through utilization of the Company’s prescriptive analytics to enable improvement planning and implementation of best practices. Finally, with a growing body of research linking employee and physician satisfaction levels to provide quality and patient experience, NRC’s retention solutions also measure satisfaction from those constituents and integrate that data into prescriptive analytics for improvement.

3

The Company’s retention solutions are marketed under the NRC Picker, My InnerView (“MIV”), and NRC Canada brands and are provided on a subscription basis via a cross-continuum platform that collects and measures data and then delivers business intelligence that the Company’s clients utilize to improve retention, experience and reimbursement. NRC provides these performance results and prescriptive analytics to its clients via the Company’s Catalyst improvement planning and business intelligence portal. In addition, clients have an option of more immediate feedback via the Company’s real-time mobile data collection platform.

Engagement Solutions - NRC’s engagement solutions include its health risk assessments (Payer Solutions), patient outreach and discharge call program (Connect Transitions) and post-acute analytics (Outcome Concept Systems, or OCS). These solutions enable the Company’s clients to understand the health risks associated with populations of patients, analyze and address readmission risks and efficiently reach out to patients to impact their behaviors outside of the healthcare provider settings. The Company’s health risk assessment solutions enable its clients to effectively stratify and manage care for those who are most at-risk, engage individuals, increase preventative care and manage wellness programs to improve patient experience and outcomes. NRC’s patient outreach and discharge call solutions are provided to healthcare organizations on a subscription basis. Through preference-based communications and real time alerts, these solutions enable organizations to identify and manage high risk patients to reduce readmissions, increase patient satisfaction and support safe care transitions. NRC’s post-acute analytics solutions provide business intelligence for home health and hospice providers that enable the improvement of patient experience, operational performance and clinical outcomes.

The Connect Transitions solution is provided by Customer-Connect LLC (doing business as Connect). Connect was formed in June 2013 to develop and provide patient outreach and discharge call solutions. NRC has a 49% ownership interest in Connect, NG Customer-Connect, LLC holds 25% interest and the remaining 26% is held by Illuminate Health, LLC.

The key proprietary components of NRC’s engagement solutions include a real-time electronic medical records integration platform; a portfolio of risk assessments for individual patient populations and care settings; and post-acute predictive models and algorithms based on proprietary datasets.

Thought Leadership Solutions – NRC’s thought leadership solutions include national conferences, publications and an on-line portal, and are integrated at various levels into NRC’s growth, retention and engagement solutions. NRC also offers a specific thought leadership service branded as The Governance Institute (“TGI”). TGI is a membership organization that offers subscription-based governance information solutions and educational conferences designed to improve the effectiveness of hospital and healthcare systems by continually strengthening their boards, medical leadership and management performance. TGI conducts conferences, produces publications, videos, white papers and research studies, and tracks industry trends showcasing emerging healthcare trends and best practice solutions of healthcare boards across the country.

NRC’s Competitive Strengths

The Company believes that its competitive strengths include the following:

A leading provider of patient experience solutions for healthcare providers, payers and other healthcare organizations. The Company’s history is based capturing the voice of the consumer in healthcare markets. With survey solutions that span the healthcare continuum, in 2013 and 2012 the Company was recognized by Modern Healthcare as one of the nation’s largest patient experience survey providers. Its solutions build on the “Eight Dimensions of Patient-Centered Care,” a philosophy developed by noted patient advocate Harvey Picker, who believed patients’ experiences are integral to quality healthcare. NRC has extended this philosophy to include families, caregivers, employees and other stakeholders.

4

Premier client portfolio across the care continuum. NRC’s client portfolio encompasses leading healthcare organizations across the healthcare continuum, from acute care hospitals and post-acute providers to healthcare payers. The Company’s client base is diverse, with its top ten clients representing approximately 19% of total revenue for the year ended December 31, 2013 and no single client representing more than 5% of the Company’s revenue.

Highly scalable and visible revenue model. The Company’s solutions are offered to healthcare providers, payers and other healthcare organizations primarily through subscription-based service agreements. The solutions NRC provides are also recurring in nature, which enables an ongoing relationship with its clients. This combination of subscription-based revenue, a base of ongoing client renewals and automated platforms creates a highly visible and scalable revenue model for the Company.

Comprehensive portfolio of solutions. Since NRC offers solutions encompassing growth, retention, engagement and thought leadership, its clients can engage with the Company at multiple levels and, over time, increase their commitment and spend.

Exclusive focus on healthcare. The Company focuses exclusively on healthcare and serving the unique needs of healthcare organizations across the continuum, which NRC believes gives it a distinct competitive advantage compared to other survey and analytics software providers. The Company’s platform includes features and capabilities built specifically for healthcare providers, including a library of performance improvement content which can be tailored to the provider based on their specific customer feedback profile.

Experienced senior management team led by NRC’s founder. NRC’s senior management team has extensive industry and leadership experience. Michael D. Hays, the Company’s Chief Executive Officer, founded NRC in 1981. Prior to launching the Company, Mr. Hays served as Vice President and as a Director of SRI Research Center, Inc. (now known as the Gallup Organization). The Chief Financial Officer, Kevin Karas, CPA, has extensive financial experience having served as CFO at two previous companies, along with healthcare experience at Rehab Designs of America, Inc. and NovaCare, Inc. NRC’s President and Chief Operating Officer, Susan Henricks, has extensive leadership experience in high volume data and analytics businesses, having served asPresident of Financial Institution Services for First Data Corporation, the largest processor of credit card, debit card, and merchant transactions in the U.S. She also served as President for printing and marketing services organizations, in addition to various other leadership positions.

Competition

The healthcare information and market research services industry is highly competitive. The Company has traditionally competed with healthcare organizations’ internal marketing, market research and/or quality improvement departments which create their own performance measurement tools, and with relatively small specialty research firms which provide survey-based healthcare market research and/or performance assessment. The Company’s primary competitors among such specialty firms include Press Ganey, which NRC believes has significantly higher annual revenue than the Company, and three or four other firms that NRC believes have less annual revenue than the Company. The Company, to a certain degree, currently competes with, and anticipates that in the future it may increasingly compete with, (1) traditional market research firms which are significant providers of survey-based, general market research and (2) firms which provide services or products that complement healthcare performance assessments such as healthcare software or information systems. Although only a few of these competitors have offered specific services that compete directly with the Company’s solutions, many of these competitors have substantially greater financial, information gathering, and marketing resources than the Company and could decide to increase their resource commitments to the Company’s market. There are relatively few barriers to entry into the Company’s market, and the Company expects increased competition in its market which could adversely affect the Company’s operating results through pricing pressure, increased marketing expenditures, and market share losses, among other factors. There can be no assurance that the Company will continue to compete successfully against existing or new competitors.

5

The Company believes the primary competitive factors within its market include quality of service, timeliness of delivery, unique service capabilities, credibility of provider, industry experience, and price. NRC believes that its industry leadership position, exclusive focus on the healthcare industry, cross-continuum presence, comprehensive portfolio of solutions and relationships with leading healthcare payers and providers position the Company to compete in this market.

Growth Strategy

NRC believes that the value proposition of its current solutions, combined with the favorable alignment of its solutions with emerging market demand, positions the Company to benefit from multiple growth opportunities. The Company believes that it can accelerate its growth through (1) increasing sales of its existing solutions to its existing clients (or cross-selling), (2) winning additional new clients through market share growth in existing market segments, (3) developing and introducing new solutions to new and existing clients, and (4) pursuing acquisitions of, or investments in, firms providing products, solutions or technologies which complement those of the Company.

Selling additional solutions to existing clients. Less than 25% of the Company’s existing clients purchase more than one of its solutions. NRC’s sales organization actively identifies and pursues these cross-sell opportunities in order to accelerate the growth of the Company.

Adding new clients. NRC believes that there is an opportunity to add new clients in each of the acute care, post-acute care and health plan market segments. The Company’s sales organization is actively identifying and engaging new client prospects in each of the segments noted above, with a focus on featuring its comprehensive cross continuum portfolio of solutions.

Adding new solutions. The need for growth, retention and engagement solutions in the market segments that NRC serves is evolving to align with emerging healthcare regulatory and reimbursement trends. The evolving market creates an opportunity for the Company to introduce new solutions that leverage its existing core competencies. The Company believes that there is an opportunity to drive sales growth with both existing and new clients, across all of the market segments that it serves, through the introduction of new solutions.

Pursue Strategic Acquisitions. The Company has historically complemented its organic growth with strategic acquisitions, having completed six such transactions over the past twelve years. These transactions have added new capabilities and access to market segments that are adjacent and complementary to the Company’s existing solutions and market segments. NRC believes that additional strategic acquisition opportunities exist for the Company to complement its organic growth by further expanding its service capabilities, technology offerings and end markets.

Sales and Marketing

The Company generates the majority of its revenue from the renewal of subscription-based client service agreements, supplemented by sales of other solutions to existing clients and the addition of new clients. NRC sales activities are carried out by a direct sales organization staffed with professional, trained sales associates. As compared to the typical industry practice of compensating sales associates with relatively high base pay and a relatively small sales commission, NRC compensates its sales staff with relatively low base pay and a relatively high commission component. The Company believes this compensation structure provides incentives to its sales associates to surpass sales goals and increases the Company’s ability to attract top-quality sales associates.

6

In addition to prospect leads generated by direct sales associates, the Company’s integrated marketing activities facilitate its ongoing receipt of prospect request-for-proposals. NRC uses lead generation mechanisms to add generated leads to its database of current and potential client contacts. The Company also maintains an active public relations program which includes (1) an ongoing presence in leading industry trade press and in the mainstream press, (2) public speaking at strategic industry conferences, (3) fostering relationships with key industry constituencies, and (4) the annual Consumer Choice Award program recognizing top-ranking healthcare organizations.

Clients

NRC’s clients include many of the nation’s largest healthcare systems. The Company serves over 2,400 acute care facilities. It also provides solutions to over 80 payer health plans and 7,700 post-acute facilities. These clients utilize NRC’s reporting platforms that capture, self-reported customer data from over 15 million unique healthcare episodes annually.

The Company’s ten largest clients accounted for 19%, 22%, and 20% of the Company’s total revenue in 2013, 2012 and 2011, respectively. Approximately 7% of the Company’s revenue was derived from foreign customers in 2013, and 8% in 2012 and 2011.

For financial information by geographic area, see Note 12 to the Company’s consolidated financial statements.

Intellectual Property and Other Proprietary Rights

The Company’s success depends in part upon its data collection processes, research methods, data analysis techniques and internal systems, and procedures that it has developed specifically to serve clients in the healthcare industry. The Company has no patents. Consequently, it relies on a combination of copyright and trade secret laws and associate nondisclosure agreements to protect its systems, survey instruments and procedures. There can be no assurance that the steps taken by the Company to protect its rights will be adequate to prevent misappropriation of such rights or that third parties will not independently develop functionally equivalent or superior systems or procedures. The Company believes that its systems and procedures and other proprietary rights do not infringe upon the proprietary rights of third parties. There can be no assurance, however, that third parties will not assert infringement claims against the Company in the future or that any such claims will not result in protracted and costly litigation, regardless of the merits of such claims or whether the Company is ultimately successful in defending against such claims.

Associates

As of December 31, 2013, the Company employed a total of 352 persons on a full-time basis. In addition, as of such date, the Company had 36 part-time associates primarily in its survey operations, representing approximately 18 full-time equivalent associates. None of the Company’s associates are represented by a collective bargaining unit. The Company considers its relationship with its associates to be good.

7

Executive Officers of the Company

The following table sets forth certain information as of February 1, 2014, regarding the executive officers of the Company:

Name	Age		Position
Michael D. Hays		59	Chief Executive Officer
Susan L. Henricks		63	President and Chief Operating Officer
Kevin R. Karas		56	Senior Vice President Finance, Chief Financial Officer, Treasurer and Secretary

Michael D. Hays has served as Chief Executive Officer and a director since he founded the Company in 1981. He also served as President of the Company from 1981 to 2004 and from July 2008 to July 2011. Prior to founding the Company, Mr. Hays served for seven years as a Vice President and a director of SRI Research Center, Inc. (n/k/a the Gallup Organization).

Susan L. Henricks has served as President and Chief Operating Officer of the Company since she joined the Company in July 2011.  From 2008 until joining the Company, she served as Managing Partner and Co-Founder of Arbor Capital, LLC, a private equity firm focused primarily on companies in the marketing and information services, payments technology and business process outsourcing sectors.  Prior to starting Arbor Capital, Ms. Henricks served as President of the Financial Institution Services business of First Data Corporation, the largest processor of credit card, debit card and merchant transactions in the U.S., from 2006 to 2008, President of RRD Direct and then the directories business of RR Donnelley, a global leader in printing and print services, from 2000 to 2006, President of Donnelley Marketing, a direct marketing services company, from 1999 to 2000, and President of First Data Enterprises, the credit card issuing business of First Data Corporation, from 1997 to 1999.  Ms. Henricks also held various leadership positions with Metromail Corporation, a direct marketing services company, from 1985 to 1997, including President and CEO from 1993 to 1997.

Kevin R. Karas has served as Chief Financial Officer, Treasurer and Secretary of the Company since September 2011, and as Senior Vice President Finance since he joined the Company in December 2010. From 2005 to 2010, he served as Vice President of Finance for Lifetouch Portrait Studios, Inc., a national retail photography company.  Mr. Karas also previously served as Chief Financial Officer at CARSTAR, Inc., an automobile collision repair franchise business, from 2000 to 2005, Chief Financial Officer at Rehab Designs of America, Inc., a provider of orthotic and prosthetic services, from 1993 to 2000, and as a regional Vice President of Finance and Vice President of Operations at Novacare, Inc., a provider of physical rehabilitation services, from 1988 to 1993.  He began his career as a Certified Public Accountant at Ernst & Young.

Executive officers of the Company are elected by and serve at the discretion of the Company’s Board of Directors. There are no family relationships between any directors or executive officers of NRC.

Available Information

More information regarding NRC is available on the Company's website at www.nationalresearch.com. NRC is not including the information contained on or available through its website as part of, or incorporating such information by reference into, this Annual Report on Form 10-K. The Company's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports are made available to the public at no charge through a link appearing on the Company's website. NRC provides access to such materials through its website as soon as reasonably practicable after electronically filing such material with, or furnishing it to, the Securities and Exchange Commission. Reports and amendments posted on the Company’s website do not include access to exhibits and supplemental schedules electronically filed with the reports or amendments.

8

Item 1A.     Risk Factors

You should carefully consider each of the risks described below, together with all of the other information contained in this Annual Report on Form 10-K, before making an investment decision with respect to our securities. If any of the following risks develop into actual events, our business, financial condition or results of operations could be materially and adversely affected and you may lose all or part of your investment.

We depend on contract renewals for a large share of our revenue and our operating results could be adversely affected.

We expect that a substantial portion of our revenue for the foreseeable future will continue to be derived from renewable service contracts. Substantially all contracts are renewable annually at the option of our clients, although a client generally has no minimum purchase commitment under a contract and the contracts are generally cancelable on short or no notice without penalty. To the extent that clients fail to renew or defer their renewals, we anticipate our results may be materially adversely affected. Our ability to secure renewals depends on, among other things, our ability to gather and analyze performance data in a consistent, high-quality, and timely fashion. In addition, the service needs of our clients are affected by accreditation requirements, enrollment in managed care plans, the level of use of satisfaction measures in healthcare organizations’ overall management and compensation programs, the size of operating budgets, clients’ operating performance, industry and economic conditions, and changes in management or ownership. As these factors are beyond our control, we cannot ensure that we will be able to maintain our renewal rates. Any material decline in renewal rates from existing levels would have an adverse effect on our revenue and a corresponding effect on our operating and net income.

Our operating results may fluctuate and this may cause our stock price to decline.

Our overall operating results may fluctuate as a result of a variety of factors, including the size and timing of orders from clients, client demand for our services (which, in turn, is affected by factors such as accreditation requirements, enrollment in managed care plans, operating budgets and clients’ operating performance), the hiring and training of additional staff, expense increases, and industry and general economic conditions. Because a significant portion of our overhead is fixed in the short-term, particularly some costs associated with owning and occupying our building and full-time personnel expenses, our results of operations may be materially adversely affected in any particular period if revenue falls below our expectations. These factors, among others, make it possible that in some future period our operating results may be below the expectations of securities analysts and investors which would have a material adverse effect on the market price of our class A common stock and/or our class B common stock.

We operate in a highly competitive market and could experience increased price pressure and expenses as a result.

The healthcare information and market research services industry is highly competitive. We have traditionally competed with healthcare organizations’ internal marketing, market research and/or quality improvement departments that create their own performance measurement tools, and with relatively small specialty research firms that provide survey-based healthcare market research and/or performance assessment. The Company’s primary competitors among such specialty firms include Press Ganey, which we believe has significantly higher annual revenue than us, and three or four other firms that we believe have lower annual revenue than us. To a certain degree, we currently compete with, and anticipate that in the future we may increasingly compete with, (1) traditional market research firms which are significant providers of survey-based, general market research, and (2) firms which provide services or products that complement healthcare performance assessments, such as healthcare software or information systems. Although only a few of these competitors have offered specific services that compete directly with our services, many of these competitors have substantially greater financial, information gathering, and marketing resources than the Company and could decide to increase their resource commitments to our market. There are relatively few barriers to entry into the Company’s market, and we expect increased competition in our market which could adversely affect our operating results through pricing pressure, increased marketing expenditures, and market share losses, among other factors. There can be no assurance that the Company will continue to compete successfully against existing or new competitors.

9

Because our clients are concentrated in the healthcare industry, our revenue and operating results may be adversely affected by changes in regulations, a business downturn or consolidation with respect to the healthcare industry.

Substantially all of our revenue is derived from clients in the healthcare industry. As a result, our business, financial condition and results of operations are influenced by conditions affecting this industry, including changing political, economic, competitive and regulatory influences that may affect the procurement practices and operation of healthcare providers and payers. The 2010 Federal comprehensive healthcare reform plan, which includes provisions to control healthcare costs, improve healthcare quality and expand access to affordable health insurance, could result in lower reimbursement rates and otherwise change the environment in which providers and payers operate. In addition, large private purchasers of healthcare services are placing increasing cost pressure on providers. Healthcare providers may react to these cost pressures and other uncertainties by curtailing or deferring purchases, including purchases of our services. Moreover, there has been consolidation of companies in the healthcare industry, a trend which we believe will continue to grow. Consolidation in this industry, including the potential acquisition of certain of our clients, could adversely affect aggregate client budgets for our services or could result in the termination of a client’s relationship with us. The impact of these developments on the healthcare industry is difficult to predict and could have an adverse effect on our revenue and a corresponding effect on our operating and net income.

In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010. The legislation makes extensive changes to the current system of healthcare insurance and benefits that includes changes in Medicare and Medicaid payment policies and other healthcare delivery reforms aimed at improving quality and decreasing costs, comparative effectiveness research, and independent payment advisory boards, among other provisions. These provisions could negatively impact our health care clients and could impact the services we provide our clients, the demand for the services we provide and the Company’s business. At this time, it is difficult to estimate the impact of this legislation on the Company but there can be no assurances that health care reform will not adversely impact either our operating results or the manner in which we operate our business.

We rely on a limited number of key clients and a loss of one or more of these key clients will adversely affect our operating results.

We rely on a limited number of key clients for a substantial portion of our revenue. The Company’s ten largest clients accounted for 19%, 22%, and 20% of the Company’s total revenue in 2013, 2012, and 2011, respectively.

We cannot assure you that we will maintain our existing client base, maintain or increase the level of revenue or profits generated by our existing clients, or be able to attract new clients. Furthermore, the healthcare industry continues to undergo consolidation and we cannot assure you that such consolidation will not cause us to lose clients. The loss of one or more of our large clients or a significant reduction in business from such clients, regardless of the reason, may have a negative effect on our revenue and a corresponding effect on our operating and net income. See “Risk Factors — Because our clients are concentrated in the healthcare industry, our revenue and operating results may be adversely affected by changes in regulations, a business downturn or consolidation with respect to the healthcare industry.”

10

We face several risks relating to our ability to collect the data on which our business relies.

Our ability to provide timely and accurate performance measurement and improvement services to our clients depends on our ability to collect large quantities of high-quality data through surveys and interviews. If receptivity to our survey and interview methods by respondents declines, or, for some other reason, their willingness to complete and return surveys declines, or if we, for any reason, cannot rely on the integrity of the data we receive, then our revenue could be adversely affected with a corresponding effect on our operating and net income. We also rely on third-party panels of pre-recruited consumer households to produce Ticker in a timely manner. If we are not able to continue to use these panels, or the time period in which we use these panels is altered and we cannot find alternative panels on a timely, cost-competitive basis, we could face an increase in our costs or an inability to effectively produce Market Insights (formerly Ticker). In either case, our operating and net income could be negatively affected.

Our principal shareholder effectively controls the Company, and holders of class A common stock are not able to independently elect directors of NRC or control any of the Company's management policies or business decisions because the holders of class A common stock have substantially less voting power than the holders of the Company's class B common stock, a majority of which is beneficially owned by our principal shareholder.

The Company's outstanding stock is divided into two classes of common stock: class A common stock and class B common stock. The class B common stock has one vote per share on all matters and the class A common stock has one-one-hundredth (1/100^th) of one vote per share. As of February 21, 2014, the class B common stock constitutes approximately 94% of NRC's total voting power. As a result, holders of class B common stock are able to exercise a controlling influence over the Company's business, have the power to elect its directors and indirectly control decisions such as whether to issue additional shares, declare and pay dividends or enter into significant corporate transactions. A majority of the class B common stock is owned by Michael D. Hays, our Chief Executive Officer.

As of February 21, 2014, approximately 54% of the outstanding class B common stock and approximately 26% of the outstanding class A common stock was beneficially owned by Mr. Hays, and that collectively constitutes approximately 52% of the Company's total voting power. As a result, Mr. Hays can control matters requiring shareholder approval, including the election of directors and the approval of significant corporate matters such as change of control transactions. The effects of such influence could be to delay or prevent a change of control of the Company unless the terms are approved by Mr. Hays.

Our business and operating results could be adversely affected if we are unable to attract or retain key managers and other personnel.

Our future performance may depend, to a significant extent, upon the efforts and ability of our key personnel who have expertise in gathering, interpreting and marketing survey-based performance information for healthcare markets. Although client relationships are managed at many levels within our company, the loss of the services of Michael D. Hays, our Chief Executive Officer, or one or more of our other senior managers, could have a material adverse effect, at least in the short to medium term, on most significant aspects of our business, including strategic planning, product development, and sales and customer relations. As of December 31, 2013, we maintained $500,000 of key officer life insurance on Mr. Hays. Our success will also depend on our ability to hire, train and retain skilled personnel in all areas of our business. Currently, we do not have employment agreements with our officers or our other key personnel. Competition for qualified personnel in our industry is intense, and many of the companies that compete with us for qualified personnel have substantially greater financial and other resources than us. Furthermore, we expect competition for qualified personnel to become more intense as competition in our industry increases. We cannot assure you that we will be able to recruit, retain and motivate a sufficient number of qualified personnel to compete successfully.

11

If intellectual property and other proprietary information technology were copied or independently developed by our competitors, our operating results could be negatively affected.

Our success depends in part upon our data collection process, research methods, data analysis techniques, and internal systems and procedures that we have developed specifically to serve clients in the healthcare industry. We have no patents. Consequently, we rely on a combination of copyright, trade secret laws and associate nondisclosure agreements to protect our systems, survey instruments and procedures. We cannot assure you that the steps we have taken to protect our rights will be adequate to prevent misappropriation of such rights, or that third parties will not independently develop functionally equivalent or superior systems or procedures. We believe that our systems and procedures and other proprietary rights do not infringe upon the proprietary rights of third parties. We cannot assure you, however, that third parties will not assert infringement claims against us in the future, or that any such claims will not result in protracted and costly litigation, regardless of the merits of such claims, or whether we are ultimately successful in defending against such claims.

Our business and operating results could be adversely affected if we experience business interruptions or failure of our information technology and communication systems.

Our ability to provide timely and accurate performance measurement and improvement services to our clients depends on the efficient and uninterrupted operation of our information technology and communication systems, and those of our external service providers. Our systems and those of our external service providers, could be exposed to damage or interruption from fire, natural disasters, energy loss, telecommunication failure, security breach and computer viruses. An operational failure or outage in our information technology and communication systems or those of our external service providers, could result in loss of customers, damage to customer relationships, reduced revenue and profits, refunds of customer charges and damage our reputation and may result in additional expense to repair or replace damaged equipment and recover data loss resulting from the interruption. Although we have taken steps to prevent system failures and have back-up systems and procedures to prevent or reduce disruptions, such steps may not prevent an interruption of services and our disaster recovery planning may not account for all contingencies. Additionally, our insurance may not adequately compensate us for all losses or failures that may occur. Any one of the above situations could have a material adverse effect on our business, financial condition, results of operations and reputation.

Security breaches or computer viruses could harm our business.

In connection with our client services, we receive, process, store and transmit sensitive business information electronically over the Internet. Computer viruses could spread throughout our systems and disrupt operations and service delivery. Unauthorized access to our computer systems or databases could result in the theft or publication of confidential information or the deletion or modification of records or could otherwise cause interruption in our operations. We cannot be certain that the technology protecting our networks and information will successfully prevent computer viruses, data thefts, release of confidential information or security breaches. A compromise in our data security systems that results in inappropriate disclosure of our associates', customers' or vendors' confidential information, could harm our reputation and expose us to regulatory action and claims. Changes in privacy and information security laws and standards may require we incur significant expense to ensure compliance due to increased technology investment and operational procedures. An inability to prevent security breaches or computer viruses or failure to comply with privacy and information security laws could result in litigation and regulatory risk, loss of customers, damage to customer relationships, reduced revenue and profits, refunds of customer charges and damage our reputation, which could adversely affect our business, financial condition, results of operations and reputation.

12

Our growth strategy includes future acquisitions which involve inherent risk.

In order to expand services or technologies to existing clients and increase our client base, we may make strategic business acquisitions that we believe complement our business. Acquisitions have inherent risks which may have a material adverse effect on our business, financial condition, or results of operations, including, among other things: (1) failure to successfully integrate the purchased operations, technologies, products or services and maintain uniform standard controls, policies and procedures; (2) substantial unanticipated integration costs; (3) loss of key associates including those of the acquired business; (4) diversion of management’s attention from other operations; (5) failure to retain the customers of the acquired business; (6) failure to achieve any projected synergies and performance targets; (7) additional debt and/or assumption of known or unknown liabilities; (8) dilutive issuances of equity securities; and (9) a write-off of goodwill, software development costs, client lists, other intangibles and amortization of expenses. If we fail to successfully complete acquisitions or integrate acquired businesses, we may not achieve projected results and there may be a material adverse effect on our business, financial condition and results of operations.

Item 1B.     Unresolved Staff Comments

The Company has no unresolved staff comments to report pursuant to this item.

Item 2.       Properties

The Company’s headquarters is located in an owned office building in Lincoln, Nebraska, of which 62,000 square feet are used for the Company’s operations. This facility houses all the capabilities necessary for NRC’s survey programming, printing and distribution, data processing, analysis and report generation, marketing, and corporate administration. The Company’s term note is secured by this property, among other things.

The Company is leasing 4,000 square feet of office space in Markham, Ontario, 5,100 square feet of office space in San Diego, California, 3,300 square feet of office space in Lincoln, Nebraska, and 8,100 square feet of office space in Seattle, Washington.

Item 3.       Legal Proceedings

The Company is not subject to any material pending litigation.

Item 4.       Mine Safety Disclosures

Not applicable.

13

PART II

Item 5.     Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

In May 2013, the Company consummated a recapitalization (the “May 2013 Recapitalization”) pursuant to which the Company established two classes of common stock (class A common stock and class B common stock), issued a dividend of three shares of class A common stock for each share of the Company’s then existing common stock and reclassified each then existing share of common stock as one-half of one share of class B common stock. Following the May 2013 Recapitalization, the Company’s class A common stock and the Company’s class B common stock are traded on the NASDAQ Global Market under the symbols “NRCIA” and “NRCIB,” respectively.

The following table sets forth the range of high and low sales prices for, and dividends declared on, the Company’s pre-May 2013 Recapitalization common stock and the post-May 2013 Recapitalization class A common stock and class B common stock for the period from January 1, 2012, through December 31, 2013:

Pre –May 2013 Recapitalization (a):	High		Low		Dividends Declared Per Prior Common Share
2012 Quarter Ended:
March 31	$	43.98	$	36.58	$	0.26
June 30	$	53.00	$	41.00	$	0.26
September 30	$	52.71	$	46.19	$	0.26
December 31	$	58.23	$	49.51	$	1.76
2013 Quarter Ended:
March 31	$	61.58	$	50.00	$	0.31
April 1 to May 22	$	64.36	$	53.45		--

	Class A						Class B
Post –May 2013 Recapitalization:	High		Low		Dividends Declared Per   Common Share		High		Low		Dividends Declared Per Common Share
2013 Quarter Ended:
May 23 to June 30	$	21.31	$	12.36		--	$	46.52	$	18.24		--
September 30	$	18.84	$	15.36		--	$	42.48	$	26.61		--
December 31	$	19.00	$	15.69		--	$	36.88	$	27.25		--

(a) Sales prices and dividends have not been adjusted to give effect to the May 2013 Recapitalization described above.

Cash dividends of $2.1 million and $17.4 million in the aggregate were declared and paid during the twelve-month periods ended December 31, 2013 and 2012, respectively. In August 2013, the Company’s Board of Directors decided to suspend the payment of cash dividends through the year 2014. The payment and amount of future dividends, if any, is at the discretion of the Company’s Board of Directors and will depend on the Company’s future earnings, financial condition, general business conditions, alternative uses of the Company’s earnings and other factors.

On February 21, 2014, there were approximately 25 shareholders of record and approximately 1,015 beneficial owners of the class A common stock and approximately 17 shareholders of record and approximately 1,197 beneficial owners of the class B common stock.

In February 2006, the Board of Directors of the Company authorized the repurchase of 2,250,000 shares of class A common stock and 375,000 shares of class B common stock (on a post-May 2013 Recapitalization basis) in the open market or in privately negotiated transactions. Unless terminated earlier by resolution of the Company’s Board of Directors, the repurchase program will expire when the Company has repurchased all shares authorized for repurchase thereunder. As of February 21, 2014, 610,417 shares of the Company’s prior common stock (now equivalent to 1,831,251 shares of class A common stock and 305,208 shares of class B common stock) have been repurchased under that authorization. No stock was repurchased during the three-month period ended December 31, 2013.

14

The following graph compares the cumulative 5-year total return provided shareholders on the Company’s common stock relative to the cumulative total returns of the NASDAQ Composite Index and the Russell 2000 Index. An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our common stock and in each of the indexes on December 31, 2008 (or on May 23, 2013 for our class A common stock which was the first day it was traded), and its relative performance is tracked through December 31, 2013. In accordance with Securities and Exchange Commission guidance, in calculating the cumulative 5-year total return on our class B common stock, we gave retroactive effect to the May 2013 Recapitalization (i.e., as if it had occurred on December 31, 2008).

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN DATA

The stock price performance included in this graph is not necessarily indicative of future stock price performance.

	12/08		12/09		12/10		12/11		12/12		5/23/2013		12/13
National Research Corporation- Class A		---		---		---		---		---		100.00		94.10
National Research Corporation- Class B		100.00		73.46		125.23		145.69		214.12		---		250.71
NASDAQ Composite		100.00		144.88		170.58		171.30		199.99		---		283.39
Russell 2000		100.00		127.17		161.32		154.59		179.86		---		249.69

15

Item 6.     Selected Financial Data

The selected statement of income data for the years ended December 31, 2013, 2012, and 2011, and the selected balance sheet data at December 31, 2013 and 2012, are derived from, and are qualified by reference to, the audited consolidated financial statements of the Company included elsewhere in this Annual Report on Form 10-K. The selected statement of income data for the year ended December 31, 2010 and 2009, and the balance sheet data at December 31, 2011, 2010 and 2009, are derived from audited consolidated financial statements not included herein. The Company acquired Outcome Concept Systems on August 3, 2010, and My InnerView (“MIV”) on December 19, 2009.

	Year Ended December 31, (a)
	2013			2012			2011			2010			2009
	(In thousands, except per share data)
Statement of Income Data:
Revenue	$	92,590		$	86,421		$	75,767		$	63,398		$	57,692
Operating expenses:
Direct		38,844			35,461			28,667			24,635			24,148
Selling, general and administrative		25,208			23,542			23,300			20,202			16,016
Depreciation and amortization		3,732			4,699			5,065			4,704			3,831
Total operating expenses		67,784			63,702			57,032			49,541			43,995
Operating income		24,806			22,719			18,735			13,857			13,697
Other expense		(318	)		(512	)		(575	)		(542	)		(580	)
Income before income taxes		24,488			22,207			18,160			13,315			13,117
Provision for income taxes		9,004			7,139			6,596			4,816			4,626
Net income	$	15,484		$	15,068		$	11,564		$	8,499		$	8,491
Earnings per share common stock:
Basic Earnings per share:
Class A	$	0.37		$	0.37		$	0.29		$	0.21		$	0.21
Class B	$	2.25		$	2.22		$	1.73		$	1.28		$	1.28
Diluted Earnings per share:
Class A	$	0.37		$	0.36		$	0.28		$	0.21		$	0.21
Class B	$	2.20		$	2.17		$	1.69		$	1.26		$	1.26
Weighted average share and share equivalents outstanding:
Class A - basic		20,677			20,325			20,016			19,912			19,910
Class B - basic		3,447			3,388			3,336			3,319			3,318
Class A - diluted		21,099			20,854			20,526			20,207			20,170
Class B - diluted		3,514			3,476			3,421			3,368			3,362

	December 31,
	2013		2012			2011			2010			2009
	(In thousands)
Balance Sheet Data:
Working capital surplus (deficiency)	$	12,784	$	(11,483	)	$	(2,262	)	$	(8,809	)	$	(4,432	)
Total assets		110,996		100,046			100,676			95,770			72,499
Total debt and capital lease obligations, including current portion		10,546		12,763			14,912			16,599			7,719
Total shareholders’ equity	$	71,755	$	56,742		$	55,554		$	48,584		$	44,171

(a) All share and per share data have been retroactively adjusted to give effect to the May 2013 Recapitalization as further described in Note 1 to the accompanying consolidated financial statements.

16

Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

The Company is a leading provider of analytics and insights that facilitate revenue growth, patient, employee and customer retention and patient engagement for healthcare providers, payers and other healthcare organizations. The Company’s solutions support the improvement of business and clinical outcomes, while facilitating regulatory compliance and the shift to population-based health management for its clients. The Company’s ability to systematically capture, analyze and deliver to its clients self-reported information from patients, families and consumers is critical in today’s healthcare market. NRC believes that access to and analysis of its extensive consumer-driven information will become even more valuable in the future as healthcare providers increasingly need to more deeply understand and engage patients and consumers in an effort towards effective population-based health management.

The Company’s portfolio of subscription-based solutions provide actionable information and analysis to healthcare organizations and payers across a range of mission-critical, constituent-related elements, including patient experience and satisfaction, community population health risks, workforce engagement, community perceptions, and physician engagement. NRC partners with clients across the continuum of healthcare services. The Company’s clients range from acute care hospitals and post-acute providers, such as home health, long-term care and hospice, to numerous payer organizations. The Company believes this cross-continuum positioning is a unique and an increasingly important capability as evolving payment models drive healthcare providers and payers towards a more collaborative and interactive healthcare system.

Critical Accounting Policies and Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect amounts reported therein. The most significant of these areas involving difficult or complex judgments made by management with respect to the preparation of the Company’s consolidated financial statements for fiscal year 2013 include:

●  Revenue recognition;

● Valuation of goodwill and identifiable intangible assets; and

● Income taxes.

Revenue Recognition

The Company derives a majority of its operating revenue from its annually renewable services, which include performance measurement and improvement services, healthcare analytics and governance education services. The Company provides these services to its clients under annual client service contracts, although such contracts are generally cancelable on short or no notice without penalty. The Company also derives some revenue from its custom and other research projects.

Services are provided under subscription-based service agreements. The Company recognizes subscription-based service revenue over the period of time the service is provided. Generally, the subscription periods are for twelve months and revenue is recognized equally over the subscription period.

Certain contracts are fixed-fee arrangements with a portion of the project fee billed in advance and the remainder billed periodically over the duration of the project. Revenue and direct expenses for services provided under these contracts are recognized under the proportional performance method. Under the proportional performance method, the Company recognizes revenue based on output measures or key milestones such as survey set-up, survey mailings, survey returns and reporting. The Company measures its progress based on the level of completion of these output measures and recognizes revenue accordingly. Management judgments and estimates must be made and used in connection with revenue recognized using the proportional performance method. If management made different judgments and estimates, then the amount and timing of revenue for any period could differ materially from the reported revenue.

17

The Company also derives revenue from hosting arrangements where our propriety software is offered as a service to our customers through our data processing facilities. The Company’s revenue also includes software-related revenue for software license revenue, installation services, post-contract support (maintenance) and training. Software-related revenue is recognized in accordance with the provisions of Accounting Standards Codification (“ASC”) 985-605, Software-Revenue Recognition.

Hosting arrangements to provide customers with access to the Company’s propriety software are marketed under long-term arrangements generally over periods of one to three years. Under these arrangements, the customer is not provided the contractual right to take possession of the licensed software at any time during the hosting period without significant penalty, and the customer is not provided the right to run the software on their own hardware or contract with another party unrelated to us to host the software. Upfront fees for setup services are typically billed for our hosting arrangements, however, these arrangements do not qualify for separation from the ongoing hosting services due to the absence of standalone value for the set-up services. Therefore, we account for these arrangements as service contracts and recognize revenue ratably over the hosting service period when all other conditions to revenue are met. Other conditions that must be met before the commencement of revenue recognition include achieving evidence of an arrangement, determining that the collection of the revenue is probable, and determining that fees are fixed and determinable.

The Company’s software arrangements typically involve the sale of a time-based license bundled with installation services, post-contract support (“PCS”) and training. License terms range from one year to three years, and require an annual fee for bundled elements of the arrangement. PCS is also contractually provided for a period that is co-terminus with the term of the time-based license. The Company’s installation services are not considered to be essential to the functionality of the software license. The Company does not achieve vendor-specific objective evidence (“VSOE”) of the fair value of the undelivered elements of its software arrangements (primarily PCS) and, therefore, these arrangements are accounted for as a single unit of accounting with revenue recognized ratably over the minimum bundled PCS period.

The Company’s revenue arrangements (not involving software elements) with a client may include combinations of performance measurement and improvement services, healthcare analytics or governance education services which may be executed at the same time, or within close proximity of one another (referred to as a multiple-element arrangement). Each element of a multiple-element arrangement is accounted for as a separate unit of accounting provided each delivered element is sold separately by the Company or another vendor; and for an arrangement that includes a general right of return relative to the undelivered elements, delivery or performance of the undelivered services are considered probable and substantially in the control of the Company. The Company’s arrangements generally do not include a general right of return related to the delivered services. If these criteria are not met, the arrangement is accounted for as a single unit of accounting with revenue generally recognized equally over the subscription period or recognized under the proportional performance method.

Revenue is allocated to each separate unit of accounting based on relative selling price using a selling price hierarchy: VSOE, if available, third-party evidence (“TPE”) if VSOE is not available, or estimated selling price if VSOE nor TPE is available. VSOE is established based on the services normal selling price and discounts for the specific services when sold separately. TPE is established by evaluating similar competitor services in standalone arrangements. If neither exists for a deliverable, the best estimate of the selling price (“ESP”) is used for that deliverable based on list price, representing a component of management’s market strategy, and an analysis of historical prices for bundled and standalone arrangements. Revenue allocated to an element is limited to revenue that is not subject to refund or otherwise represents contingent revenue. VSOE, TPE, and ESP are periodically adjusted to reflect current market conditions. These adjustments are not expected to differ significantly from historical results.

18

Valuation of Goodwill and Identifiable Intangible Assets

Intangible assets include customer relationships, trade names, non-compete agreements and goodwill. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company reviews intangible assets with indefinite lives for impairment annually as of October 1 and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

When performing the impairment assessment, the Company first assesses qualitative factors to determine whether it is necessary to recalculate the fair value of our intangible assets with indefinite lives. If the Company believes, as a result of the qualitative assessment, that it is more likely than not that the fair value of the indefinite-lived intangibles is less than their carrying amount, the Company calculates the fair value using a market approach. If the carrying value of an intangible asset with an indefinite life exceeds its fair value, then the intangible asset is written-down to their fair values. The Company did not recognize any impairment related to our indefinite-lived intangible assets during 2013, 2012, or 2011.

Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. All of the Company’s goodwill is allocated to its reporting units, which are the same as its operating segments. Goodwill is reviewed for impairment at least annually as of October 1 and whenever events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable.

The Company reviews for goodwill impairment by first assessing qualitative factors to determine whether any impairment may exist. If we believe, as a result of the qualitative assessment that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a quantitative two-step test is required; otherwise, no further testing is required. Under the first step of the quantitative test, the fair value of the reporting unit is compared with its carrying value (including goodwill). If the fair value of the reporting unit exceeds its carrying value, step two is not performed. If the fair value of the reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit and the Company performs step two of the impairment test (measurement). Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the fair value of that goodwill. The fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation and the residual fair value after this allocation is the fair value of the reporting unit goodwill.

In instances when a step two is required, the fair value of the reporting unit is determined using an income approach and comparable market multiples. Under the income approach, there are a number of inputs used to calculate the fair value using a discounted cash flow model, including operating results, business plans, projected cash flows and a discount rate. Discount rates, growth rates and cash flow projections are the most sensitive and susceptible to change as they require significant management judgment. Discount rates are determined by using a weighted average cost of capital, which considers market and industry data. Management develops growth rates and cash flow projections for each reporting unit considering industry and Company-specific historical and projected information. Terminal value rate determination follows common methodology of capturing the present value of perpetual cash flow estimates beyond the last projected period assuming a constant weighted average cost of capital and low long-term growth rates. Under the market approach, the Company considers its market capitalization, comparisons to other public companies’ data, and recent transactions of similar businesses within the Company’s industry.

19

The Company performed a qualitative analysis as of October 1, 2013, which did not indicate that it was more likely than not that the carrying values of the reporting units exceeded fair value. No impairments were recorded during the years ended December 31, 2013, 2012 or 2011.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Under that method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases using enacted tax rates. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances, if any, are established when necessary to reduce deferred tax assets to the amount that is more likely than not to be realized. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. Management judgment is required to determine the provision for income taxes and to determine whether deferred income taxes will be realized in full or in part. Such judgments include, but are not limited to, the likelihood we would realize the benefits of net operating loss carryforwards, the adequacy of valuation allowances, the election to capitalize or expense costs incurred, and the probability of outcomes of uncertain tax positions. It is possible that the various taxing authorities could challenge those judgments or positions and reach conclusions that would cause us to incur tax liabilities in excess of, or realize benefits less than, those currently recorded. In addition, changes in the geographical mix or estimated amount of annual pretax income could impact our overall effective tax rate.

Results of Operations

The following table sets forth, for the periods indicated, selected financial information derived from the Company’s consolidated financial statements, expressed as a percentage of total revenue and the percentage change in such items versus the prior comparable period (please note that all columns may not add up to 100% due to rounding). 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 Company’s consolidated financial statements.

20

	Percentage of Total Revenue Year Ended December 31,									Percentage Increase (Decrease)
	2013			2012			2011			2013 over 2012			2012 over 2011
Revenue		100.0	%		100.0	%		100.0	%		7.1	%		14.1	%
Operating expenses:
Direct		42.0			41.0			37.8			9.5			23.7
Selling, general and administrative		27.2			27.2			30.8			7.1			1.0
Depreciation and amortization		4.0			5.4			6.7			(20.6	)		(7.2	)
Total operating expenses		73.2			73.7			75.3			6.4			11.7
Operating income		26.8	%		26.3	%		24.7	%		9.2	%		21.3	%

Year Ended December 31, 2013, Compared to Year Ended December 31, 2012

Revenue. Revenue increased 7.1% in 2013 to $92.6 million from $86.4 million in 2012 which was driven by a combination of continued gains in market share and vertical growth in our existing client base. Revenue from subscription-based agreements comprised 81.9% of the total revenue for the year ended December 31, 2013 compared to 76.0% of the total revenue for the year ended December 31, 2012.

Direct expenses. Direct expenses increased 9.5% to $38.8 million in 2013 from $35.5 million in 2012. Direct variable expenses are costs that vary with volumes and consist mainly of printing, postage, hourly labor, and contracted survey work. Direct fixed expenses consist mainly of salaries and benefits, and contracted services for client service, analytical, research, and information technology development functions. The increase included postage and contracted survey-related costs to service the higher volume of business, and an increase in fixed expenses of $1.8 million from additional investments in technology, research and service resources. Direct expenses increased as a percentage of revenue to 42.0% in the year ended December 31, 2013, from 41.0% during the same period of 2012. Variable expenses as percentage of revenue were 0.2% of the change due to higher survey volumes for the subscription-based products, and fixed expenses were 0.8% of the change due to investments in technology, research and service resources. The Company expects this percentage to continue at a similar rate for 2014.

Selling, general and administrative expenses.Selling, general and administrative expenses increased 7.1% to $25.2 million in 2013 from $23.5 million in 2012 mainly due to additional expense in share based compensation, increases in annual software license fees and costs from the May 2013 Recapitalization, which were partially offset by decreased incentive payments and marketing costs. Selling, general, and administrative expenses remained constant as a percentage of revenue at 27.2% for each of the years ended December 31, 2013 and 2012 due to the leveraging of selling, general and administrative expenses against increased revenue. This percentage is projected to be approximately 26% of revenue in 2014.

Depreciation and amortization. Depreciation and amortization expenses decreased 20.6% to $3.7 million in 2013 from $4.7 million in 2012. This decrease was a result of a large software development project becoming fully depreciated and intangibles associated with an acquisition becoming fully amortized. Depreciation and amortization expenses as a percentage of revenue decreased to 4.0% in 2013 from 5.4% in 2012. The Company expects this percentage to continue at a similar rate for 2014.

Provision for income taxes. The provision for income taxes totaled $9.0 million (36.8% effective tax rate) for 2013, compared to $7.1 million (32.1% effective tax rate) for 2012. The effective tax rate for the year ended December 31, 2013, is higher than the rate in the same period of 2012 primarily due to an adjustment to income taxes of $575,000 for decreases in deferred state tax rates resulting from legislative changes in 2012 and nondeductible fees associated with the May 2013 Recapitalization that are part of the annualized effective rate.

21

Year Ended December 31, 2012, Compared to Year Ended December 31, 2011

Revenue. Revenue increased 14.1% in 2012 to $86.4 million from $75.8 million in 2011. The increase was due to market share growth and vertical growth in the existing client base. Revenue from subscription-based agreements comprised 76.0% of the total revenue for the year ended December 31, 2012 compared to 63.0% of the total revenue for the year ended December 31, 2011.

Direct expenses. Direct expenses increased 23.7% to $35.5 million in 2012 from $28.7 million in 2011. Direct variable expenses are costs that vary with volumes and consist mainly of printing, postage, hourly labor, and contracted survey work. Direct fixed expenses consist mainly of salaries and benefits, and contracted services for client service, analytical, research, and information technology development functions. The increase in variable expenses of $4.1 million included increased postage, labor costs, contracted survey-related costs to service the higher volume of business and conference-related expenses. The increase in fixed expenses of $2.7 million was due to additional staffing and related expenses in information technology development and client service functions. Direct expenses increased as a percentage of revenue to 41.0% in the year ended December 31, 2012, from 37.8% during the same period of 2011. Variable expenses as percentage of revenue were 2.2% of the change due to higher survey volumes for the subscription-based products, and fixed expenses were 1.0% of the change due to investments in technology, research and service resources.

Selling, general and administrative expenses. Selling, general and administrative expenses increased 1.0% to $23.5 million in 2012 from $23.3 million in 2011. Selling, general, and administrative expenses decreased as a percentage of revenue to 27.2% for the year ended December 31, 2012, from 30.8% for the same period in 2011 due to the leveraging of selling, general and administrative expenses against increased revenue.

Depreciation and amortization. Depreciation and amortization expenses decreased 7.2% to $4.7 million in 2012 from $5.1 million in 2011. This decrease was attributed to declining intangible asset amortization expenses. Depreciation and amortization expenses as a percentage of revenue decreased to 5.4% in 2012 from 6.7% in 2011.

Provision for income taxes. The provision for income taxes totaled $7.1 million (32.1% effective tax rate) for 2012, compared to $6.6 million (36.3% effective tax rate) for 2011. The effective tax rate for the year ended December 31, 2012, is lower than the rate in the same period of 2011 primarily due to an adjustment to income taxes of $661,000 for decreases in deferred state tax rates resulting from legislative changes. The Company also recorded federal tax credits of $198,000, and recognized an additional $73,000 in tax benefits over the same period in 2011 due to the expiration of the U.S. federal statute of limitations associated with certain tax positions.

Inflation and Changing Prices

Inflation and changing prices have not had a material impact on revenue or net income in the last three years.

Liquidity and Capital Resources

The Company believes that its existing sources of liquidity, including cash and cash equivalents, borrowing availability, and operating cash flow will be sufficient to meet its projected needs for the foreseeable future.

22

The Company will make capital contributions up to $2.5 million on an as-needed basis as determined by the Board of Directors of Connect. Additionally, the Company has a future obligation to purchase the other equity units in Connect when certain targeted events have been achieved. If, at any time, Connect has at least $12.5 million of annual recurring contract value, including the NRC contracts being serviced, and the members have approved a financial statement showing a pro forma minimum 35% EBITDA margin for revenue on a going-forward basis, then within 90 days thereafter NRC is required to purchase from the other members, and the other members shall be required to sell to NRC, all of their equity units not owned by NRC. As of December 31, 2013, the price at which the other members had the obligation to sell their equity units to NRC was $0.

As of December 31, 2013, our principal sources of liquidity included $22.1 million of cash and cash equivalents and up to $6.5 million of unused borrowings under our revolving credit note. Of this cash, $7.5 million was held in Canada. All of the amounts held in Canada are intended to be indefinitely reinvested in foreign operations. The amounts held outside of the U.S. are eligible for repatriation, but under current law, would be subject to U.S. federal income taxes less applicable foreign tax credits. The Company estimated at December 31, 2013, that an additional tax liability of $705,000 would become due if repatriation of undistributed earnings would occur. The amount of unused borrowings actually available under the revolving credit note varies in accordance with the terms of the agreement.

Working Capital

The Company had a working capital surplus of $12.8 million on December 31, 2013, compared to a $11.5 million working capital deficiency on December 31, 2012. The change in the working capital balance was primarily due to the refinancing of the Company’s term notes in May 2013, which now have the final term note payments in April 2018. Additionally, the Company has not declared cash dividends since March 2013, and has temporarily suspended dividend payments in order maximize cash for possible investment opportunities. One such investment was made in Connect in June 2013. The deferred revenue balances as of December 31, 2013 and December 31, 2012, were $13.9 million and $15.8 million, respectively.

The deferred revenue balance is primarily due to timing of initial billings on new and renewal contracts. The Company typically invoices clients for performance tracking services and custom research projects before they have been completed. Billed amounts are recorded as billings in excess of revenue earned, or deferred revenue, on the Company’s consolidated financial statements, and are recognized as income when earned. In addition, when work is performed in advance of billing, the Company records this work as revenue earned in excess of billings, or unbilled revenue. Substantially all deferred revenue and all unbilled revenue will be earned and billed respectively, within 12 months of the respective period ends.

Cash Flow Analysis

A summary of operating, investing, and financing activities are shown in the following table:

	For the Year Ended December 31,
	2013			2012			2011
	(In thousands)
Provided by operating activities	$	19,315		$	19,132		$	18,481
Used in investing activities		(2,188	)		(2,348	)		(6,927	)
Used in financing activities		(2,824	)		(16,687	)		(6,886	)
Effect of exchange rate changes on cash		(497	)		107			(105	)
Net increase in cash and cash equivalents		13,806			204			4,563
Cash and cash equivalents at end of period	$	22,092		$	8,286		$	8,082

23

Cash Flows from Operating Activities

Cash flows from operating activities consist of net income adjusted for non-cash items including depreciation and amortization, deferred taxes, and the effect of working capital changes.

Net cash provided by operating activities was $19.3 million for the year ended December 31, 2013, which included net income of $15.5 million, plus non-cash charges (benefits) for deferred tax expense, depreciation and amortization, tax benefit from exercise of stock options, and non-cash stock compensation totaling $4.8 million. Changes in working capital decreased 2013 cash flows from operating activities by $1.0 million, primarily due to timing of billings on new or renewal contracts decreasing cash flows provided from deferred revenue and unbilled revenue offset by increases in trade accounts receivable. The cash flows decrease was partially offset by timing of payments on accounts payable and accrued expenses, wages, bonus and profit sharing.

Net cash provided by operating activities was $19.1 million for the year ended December 31, 2012, which included net income of $15.1 million, plus non-cash charges (benefits) for deferred tax expense, depreciation and amortization, tax benefit from exercise of stock options, and non-cash stock compensation totaling $5.3 million. Changes in working capital decreased 2012 cash flows from operating activities by $1.2 million, primarily due to timing of initial billings on new or renewal contracts decreasing cash flows provided from trade accounts receivable and deferred revenue and timing of payments on accounts payable and prepaid expenses, partially offset by increases and timing in payments of accrued expenses, wages, and bonus and profit sharing.

Net cash provided by operating activities was $18.5 million for the year ended December 31, 2011, which included net income of $11.6 million, plus non-cash charges (benefits) for deferred tax expense, depreciation and amortization, tax benefit from exercise of stock options and non-cash stock compensation totaling $7.2 million. Changes in working capital decreased 2011 cash flows from operating activities by $273,000, primarily due to timing of initial billings on new or renewal contracts decreasing cash flows provided from trade accounts receivable and deferred revenue, partially offset by timing of payments on accrued expenses and income taxes.

Cash Flows from Investing Activities

Net cash of $2.2 million was used for investing activities in the year ended December 31, 2013. Purchases of property and equipment totaled the $2.2 million.

Net cash of $2.3 million was used for investing activities in the year ended December 31, 2012. Purchases of property and equipment totaled the $2.3 million.

Net cash of $6.9 million was used for investing activities in the year ended December 31, 2011. Earn-out payments related to the MIV acquisition approximated $4.1 million, and purchases of property and equipment totaled $2.8 million.

Cash Flows from Financing Activities

Net cash used in financing activities was $2.8 million in the year ended December 31, 2013. Proceeds from the exercise of stock options and the excess tax benefit of share-based compensation provided cash of $840,000 and $755,000, respectively, partially offset by repurchases of shares for payroll tax withholdings related to share-based compensation of $55,000. Cash was used to pay dividends of $2.1 million. Cash was also used to repay borrowings under the term note totaling $2.1 million and capital lease obligations of $110,000.

24

Net cash used in financing activities was $16.7 million in the year ended December 31, 2012. Proceeds from the exercise of stock options and the excess tax benefit of share-based compensation provided cash of $1.3 million and $2.1 million, respectively, partially offset by repurchases of shares for payroll tax withholdings related to share-based compensation of $527,000. Cash was used to pay dividends of $17.4 million, including a special dividend of $10.3 million in the fourth quarter of 2012. Cash was also used to repay borrowings under the term note totaling $2.1 million and capital lease obligations of $108,000.

Net cash used in financing activities was $6.9 million in the year ended December 31, 2011. Cash was generated from borrowings under the Company’s term note and revolving credit note totaling $4.5 million. Proceeds from the exercise of stock options and the excess tax benefit of share-based compensation provided cash of $568,000 and $407,000, respectively, partially offset by repurchases of shares for payroll tax withholdings related to share-based compensation of $146,000. Cash was used to pay dividends of $5.9 million, repay borrowings under the term note and revolving credit note totaling $6.2 million, and repay capital lease obligations of $130,000.

The effect of changes in foreign exchange rates increased (decreased) cash and cash equivalents by ($497,000), $107,000, and ($105,000) in the years ended December 31, 2013, 2012, and 2011, respectively.

Capital Expenditures

Capital expenditures for the year ended December 31, 2013, were $2.2 million. These expenditures consisted mainly of computer software, computer hardware, furniture and other equipment. The Company expects similar capital expenditure purchases in 2014 consisting primarily of computer software and hardware and other equipment, to be funded through cash generated from operations.

Debt and Equity

The Company had two term notes, which were used to partially finance acquisitions in 2008 and 2010. Borrowings under the term notes bore interest at an annual rate of 3.79%. The Company refinanced these two term notes on May 9, 2013, and combined them into one new term note. The new term note is payable in 60 monthly installments of $212,468. Borrowings under the new term note bear interest at an annual rate of 3.12%. The outstanding balance of the new term note at December 31, 2013, was $10.3 million.

The Company also has a revolving credit note that was renewed in May 2013 to extend the term to June 30, 2014. The Company may borrow, repay and re-borrow amounts under the revolving credit note from time to time until its maturity on June 30, 2014. This revolving credit note provides for the maximum aggregate borrowings of $6.5 million, subject to a borrowing base equal to 75.0% of the Company’s eligible accounts receivable. Borrowings under the renewed revolving credit note bear interest at a variable annual rate, with three rate options at the discretion of management as follows: (1) 2.5% plus the daily reset one-month London Interbank Offered Rate (“LIBOR”) or (2) 2.2% plus the one-, two-, three-, six- or twelve-month LIBOR rate, or (3) the bank’s one-, two-, three-, six- or twelve-month Money Market Loan Rate. The rate at December 31, 2013 was 2.67%. As of December 31, 2013, the revolving credit note did not have a balance. According to borrowing base requirements, the Company had the capacity to borrow $6.5 million as of December 31, 2013. The Company expects to renew the revolving credit note prior to June 30, 2014. If, however, the revolving credit note cannot be renewed, the Company believes it has adequate cash from operations to meet its debt and capital needs.

The term note and revolving credit note are secured by certain of the Company’s assets, including the Company’s land, building, accounts receivable and intangible assets. The term note and the revolving credit note contain various restrictions and covenants applicable to the Company, including requirements that the Company maintain certain financial ratios at prescribed levels and restrictions on the ability of the Company to consolidate or merge, create liens, incur additional indebtedness or dispose of assets. As of December 31, 2013, the Company was in compliance with these restrictions and covenants.

25

The Company has capital leases for computer equipment, office equipment, and inserting equipment. The balance of the capital leases as of December 31, 2013 was $222,000.

Contractual Obligations

The Company had contractual obligations to make payments in the following amounts in the future as of December 31, 2013:

Contractual Obligations(1)	Total Payments		Less than One Year		One to Three Years		Three to Five Years		After Five Years
(In thousands)
Operating leases	$	2,582	$	782	$	1,260	$	526	$	14
Capital leases		250		137		113		--		--
Uncertain tax positions(2)		--		--		--		--		--
Long-term debt		11,017		2,505		7,649		863		--
Total	$	13,849	$	3,424	$	9,022	$	1,389	$	14

⁽¹⁾ Amounts are inclusive of interest payments, where applicable.
⁽²⁾ We have $193,000 in liabilities associated with uncertain tax positions. We are unable to reasonably estimate the expected cash settlement dates of these uncertain tax positions with the taxing authorities.

The Company generally does not make unconditional, non-cancelable purchase commitments. The Company enters into purchase orders in the normal course of business, but these purchase obligations do not exceed one year.

Shareholders’ equity increased $15.0 million to $71.8 million in 2013, from $56.7 million in 2012. The increase was primarily due to net income of $15.5 million, $1.7 million of related share-based compensation, and $1.0 million from the exercise of options partially offset by dividends paid of $2.1 million.

Stock Repurchase Program

In February 2006, the Board of Directors of the Company authorized the repurchase of 2,250,000 shares of class A common stock and 375,000 shares of class B common stock (on a post-May 2013 Recapitalization basis) in the open market or in privately negotiated transactions. As of December 31, 2013, the remaining number of shares that could be purchased under this authorization was 418,749 shares of class A common stock and 69,791 shares of class B common stock.

Off-Balance Sheet Obligations

The Company has no significant off-balance sheet obligations other than the operating lease commitments disclosed in “Liquidity and Capital Resources.”

Recent Accounting Pronouncements

There have been no new accounting pronouncements not yet effective or adopted that have significance or potential significance to the consolidated financial statements at December 31, 2013. 

26

Item 7A.     Quantitative and Qualitative Disclosure About Market Risk

The Company’s primary market risk exposure is changes in foreign currency exchange rates and interest rates.

The Company’s Canadian subsidiary uses as its functional currency the local currency of the country in which it operates. It translates its assets and liabilities into U.S. dollars at the exchange rate in effect at the balance sheet date. It translates its revenue and expenses at the average exchange rate during the period. The Company includes translation gains and losses in accumulated other comprehensive income (loss), a component of shareholders’ equity. Foreign currency translation gains (losses) were ($822,000), $217,000, and ($201,000) in 2013, 2012, and 2011, respectively. Gains and losses related to transactions denominated in a currency other than the functional currency of the countries in which the Company operates and short-term intercompany accounts are included in other income (expense) in the consolidated statements of income. A portion of our cash in our Canadian subsidiary is denominated in foreign currencies, where fluctuations in exchange rates will impact our cash balances in U.S. dollar terms. A sensitivity analysis assuming a hypothetical 100 basis point movement in the value of the U.S. dollar would impact our reported cash balance by approximately $0.8 million. We have not entered into any foreign currency hedging transactions. We do not purchase or hold any derivative financial instruments for the purpose of speculation or arbitrage.

We are exposed to interest rate risk with both our fixed-rate term debt and variable rate revolving line of credit facility. Interest rate changes for borrowings under our fixed-rate term debt would impact the fair value of such debt, but do not impact earnings or cash flow. At December 31, 2013, our fixed-rate term debt totaled $10.3 million. Based on a sensitivity analysis, a one percent change in market interest rates as of December 31, 2013, would not have a material effect on the estimated fair value of our fixed-rate debt outstanding at December 31, 2013.

Borrowings under our revolving credit note bear interest at a variable annual rate, with three rate options at the discretion of management. Borrowings under the revolving credit note may not exceed the lesser of a calculated borrowing base or $6.5 million. There were no borrowings outstanding under our revolving credit note at December 31, 2013, or at any time during 2013. A sensitivity analysis assuming a hypothetical 100 basis point movement in interest rates applied to the average daily borrowings and the maximum borrowings available under the revolving credit note indicated that such a movement would not have a material impact on our consolidated financial position, results of operations or cash flows.

27

Item 8.     Financial Statements and Supplementary Data

Quarterly Financial Data (Unaudited)

The following table sets forth selected financial information for each of the eight quarters in the two-year period ended December 31, 2013. This unaudited information has been prepared by the Company on the same basis as the consolidated financial statements and includes all normal recurring adjustments necessary to present fairly this information when read in conjunction with the Company’s audited consolidated financial statements and the notes thereto.

	(In thousands, except per share data) (1)
	Quarter Ended
	Dec. 31, 2013			Sept 30, 2013			June 30, 2013			Mar. 31, 2013			Dec. 31, 2012			Sept 30, 2012			June 30, 2012			Mar. 31, 2012
Revenue	$	22,923		$	22,407		$	22,354		$	24,906		$	21,996		$	21,386		$	20,632		$	22,407
Direct expenses		9,648			9,452			9,498			10,246			9,128			8,769			8,633			8,931
Selling, general and administrative expenses		6,305			6,019			6,391			6,493			6,001			5,821			5,569			6,151
Depreciation and amortization		944			907			931			950			1,093			1,149			1,214			1,243
Operating income		6,026			6,029			5,534			7,217			5,774			5,647			5,216			6,082
Other expense		(82	)		(81	)		(71	)		(84	)		(100	)		(155	)		(105	)		(152	)
Provision for income taxes		2,177			2,135			2,029			2,663			1,971			1,915			1,172			2,081
Net income	$	3,767		$	3,813		$	3,434		$	4,470		$	3,703		$	3,577		$	3,939		$	3,849
Earnings per share of common stock:
Basic earnings per share
Class A	$	0.09		$	0.09		$	0.08		$	0.11		$	0.09		$	0.09		$	0.10		$	0.10
Class B	$	0.55		$	0.55		$	0.50		$	0.65		$	0.54		$	0.53		$	0.58		$	0.57
Dilutive earnings per share
Class A	$	0.09		$	0.09		$	0.08		$	0.11		$	0.09		$	0.09		$	0.09		$	0.09
Class B	$	0.54		$	0.54		$	0.49		$	0.64		$	0.53		$	0.51		$	0.57		$	0.56
Weighted average shares outstanding – basic
Class A		20,692			20,672			20,672			20,669			20,513			20,373			20,254			20,157
Class B		3,452			3,445			3,445			3,445			3,419			3,395			3,376			3,360
Weighted average shares outstanding - diluted
Class A		21,137			21,111			21,085			21,063			20,959			20,883			20,829			20,721
Class B		3,514			3,514			3,516			3,511			3,493			3,480			3,471			3,454

(1) All share and per share data have been retroactively adjusted to give effect to the May 2013 Recapitalization as further described in Note 1 to the accompanying consolidated financial statements.

28

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

National Research Corporation:

We have audited the accompanying consolidated balance sheets of National Research Corporation and subsidiary (the Company) as of December 31, 2013 and 2012, and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2013. In connection with our audits of the consolidated financial statements, we also have audited financial statement schedule listed in Item 15(2) of this Form 10-K. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of National Research Corporation and subsidiary as of December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2013, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control – Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 4, 2014 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ KPMG LLP

Lincoln, Nebraska
March 4, 2014

29

NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

Consolidated Balance Sheets
(In thousands, except share amounts)

Assets	2013			2012
Current assets:
Cash and cash equivalents	$	22,092		$	8,286
Trade accounts receivable, less allowance for doubtful accounts of $183 and $244, respectively		11,043			12,119
Unbilled revenue		1,282			932
Prepaid expenses		1,310			1,269
Income taxes receivable		265			158
Deferred income taxes		53			547
Other current assets		429			504
Total current assets		36,474			23,815
Net property and equipment		11,898			12,493
Intangible assets, net		4,840			5,794
Goodwill		57,593			57,799
Other		191			145
Total assets	$	110,996		$	100,046
Liabilities and Shareholders’ Equity
Current liabilities:
Current portion of notes payable	$	2,256		$	12,436
Accounts payable		654			291
Accrued wages, bonus and profit sharing		4,319			4,392
Accrued expenses		2,462			2,265
Current portion of capital lease obligations		114			102
Deferred revenue		13,885			15,812
Total current liabilities		23,690			35,298
Notes payable, net of current portion		8,068			-
Deferred income taxes		7,132			7,527
Deferred revenue		243			254
Capital lease obligations, net of current portion		108			225
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 4,220,117 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, foreign currency translation adjustment		302			1,124
Treasury stock, at cost; 4,516,245 Class A shares, 752,707 Class B shares in 2013 and 4,504,800 Class A shares, 750,800 Class B shares in 2012		(28,810	)		(28,604	)
Total shareholders’ equity		71,755			56,742
Total liabilities and shareholders’ equity	$	110,996		$	100,046

See accompanying notes to consolidated financial statements.

30

NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

Consolidated Statements of Income
(In thousands, except for per share amounts)

	2013			2012			2011
Revenue	$	92,590		$	86,421		$	75,767
Operating expenses:
Direct		38,844			35,461			28,667
Selling, general and administrative		25,208			23,542			23,300
Depreciation and amortization		3,732			4,699			5,065
Total operating expenses		67,784			63,702			57,032
Operating income		24,806			22,719			18,735
Other income (expense):
Interest income		63			32			13
Interest expense		(397	)		(541	)		(629	)
Other, net		16			(3	)		41
Total other expense		(318	)		(512	)		(575	)
Income before income taxes		24,488			22,207			18,160
Provision for income taxes		9,004			7,139			6,596
Net income	$	15,484		$	15,068		$	11,564
Earnings per share of common stock:
Basic earnings per share:
Class A	$	0.37		$	0.37		$	0.29
Class B	$	2.25		$	2.22		$	1.73
Diluted earnings per share:
Class A	$	0.37		$	0.36		$	0.28
Class B	$	2.20		$	2.17		$	1.69
Weighted average shares and share equivalents outstanding
Class A - basic		20,677			20,325			20,016
Class B - basic		3,447			3,388			3,336
Class A - diluted		21,099			20,854			20,526
Class B - diluted		3,514			3,476			3,421

See accompanying notes to consolidated financial statements.

31

NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

Consolidated Statements of comprehensive income
(In thousands)

	2013			2012		2011
Net Income	$	15,484		$	15,068	$	11,564
Other comprehensive income (loss):
Cumulative translation adjustment	$	(822	)	$	217	$	(201	)
Other comprehensive income (loss)	$	(822	)	$	217	$	(201	)
Comprehensive Income	$	14,662		$	15,285	$	11,363

See accompanying notes to consolidated financial statements.

32

NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

Consolidated Statements of Shareholders’ Equity
(In thousands except share and per share amounts)

	Common Stock A		Common Stock B		Additional Paid-in Capital			Retained  Earnings			Accumulated Other Comprehensive    Income			Treasury Stock			Total
Balances at December 31, 2010	$	24	$	4	$	28,950		$	41,343		$	1,108		$	(22,845	)	$	48,584
Purchase of 51,864 A and 8,644 B shares of treasury stock		--		--		--			--			--			(591	)		(591	)
Issuance of 176,013 A and 29,336 B common shares for the exercise of stock options		--		--		940			--			--			--			940
Tax benefit from the exercise of options and vested restricted stock		--		--		407			--			--			--			407
Issuance of 42,969 A and 7,162 B restricted common shares, net of forfeitures		--		--		--			--			--			--			--
Non-cash stock compensation expense		--		--		763			--			--			--			763
Dividends declared of $0.15 and $.0.88 per A and B common share, respectively		--		--		--			(5,912	)		--			--			(5,912	)
Other comprehensive loss, foreign currency translation adjustment		--		--		--			--			(201	)		--			(201	)
Net income		--		--		--			11,564			--			--			11,564
Balances at December 31, 2011	$	24	$	4	$	31,060		$	46,995		$	907		$	(23,436	)	$	55,554
Purchase of 324,093 A and 54,015 B shares of treasury stock		--		--		--			--			--			(5,168	)		(5,168	)
Issuance of 786,303 class A common shares and 131,051 class B shares for the exercise of stock options		1		--		5,967			--			--			--			5,968
Tax benefit from the exercise of options and vested restricted stock		--		--		2,078			--			--			--			2,078
Issuance of restricted common shares, net of forfeitures (10,074 class A and 1,679 class B)		--		--		--			--			--			--			--
Non-cash stock compensation expense		--		--		388			--			--			--			388
Dividends declared of $0.42 and $2.54 per A and B common share, respectively		--		--		--			(17,363	)		--			--			(17,363	)
Other comprehensive income, foreign currency translation adjustment		--		--		--			--			217			--			217
Net income		--		--		--			15,068			--			--			15,068
Balances at December 31, 2012	$	25	$	4	$	39,493		$	44,700		$	1,124		$	(28,604	)	$	56,742
Purchase of 11,445 shares of class A and 1908 B shares of class B treasury stock		--		--		--			--			--			(206	)		(206	)
Issuance of 155,253 class A common shares and 31,876 class B shares for the exercise of stock options		--		--		990			--			--			--			990
Tax benefit from the exercise of options and vested restricted stock		--		--		755			--			--			--			755
Issuance of restricted common shares, net of forfeitures		--		--		--			--			--			--			--
Non-cash stock compensation expense		--		--		955			--			--			--			955
Fractional share cashed out		--		--		(1	)		--			--			--			(1	)
Dividends declared of $0.05 and $0.31 per A and B common share, respectively		--		--		--			(2,142	)		--			--			(2,142	)
Other comprehensive loss, foreign currency translation adjustment		--		--		--			--			(822	)		--			(822	)
Net income		--		--		--			15,484			--			--			15,484
Balances at December 31, 2013	$	25	$	4	$	42,192		$	58,042		$	302		$	(28,810	)	$	71,755

See accompanying notes to consolidated financial statements.

33

NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

Consolidated Statements of Cash Flows
(In thousands)

	2013			2012			2011
Cash flows from operating activities:
Net income	$	15,484		$	15,068		$	11,564
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,732			4,699			5,065
Deferred income taxes		16			(421	)		1,297
(Gain) Loss on sale of property and equipment		23			4			(1	)
Tax benefit from exercise of stock options		84			601			66
Non-cash stock compensation expense		955			388			763
Change in assets and liabilities:
Trade accounts receivable		970			(879	)		(2,064	)
Unbilled revenue		(386	)		(11	)		194
Prepaid expenses		(166	)		(357	)		253
Other current assets		76			(106	)		(121	)
Accounts payable		331			(516	)		52
Accrued expenses, wages, bonus and profit sharing		212			1,602			1,176
Income taxes payable and recoverable		(100	)		(303	)		1,420
Deferred revenue		(1,916	)		(637	)		(1,183	)
Net cash provided by operating activities		19,315			19,132			18,481
Cash flows from investing activities:
Purchases of property and equipment		(2,188	)		(2,348	)		(2,812	)
Earn-out related to acquisitions		--			--			(4,115	)
Net cash used in investing activities		(2,188	)		(2,348	)		(6,927	)
Cash flows from financing activities:
Proceeds from notes payable		--			--			4,545
Payments on notes payable		(2,112	)		(2,050	)		(6,218	)
Payments on capital lease obligations		(110	)		(108	)		(130	)
Proceeds from exercise of stock options		840			1,283			568
Excess tax benefit from share-based compensation		755			2,078			407
Repurchase of shares for payroll tax withholdings related to share-based compensation		(55	)		(527	)		(146	)
Payment of dividends on common stock		(2,142	)		(17,363	)		(5,912	)
Net cash used in financing activities		(2,824	)		(16,687	)		(6,886	)
Effect of exchange rate changes on cash		(497	)		107			(105	)
Net increase in cash and cash equivalents		13,806			204			4,563
Cash and cash equivalents at beginning of period		8,286			8,082			3,519
Cash and cash equivalents at end of period	$	22,092		$	8,286		$	8,082
Supplemental disclosure of cash paid for:
Interest expense, net of capitalized amounts	$	368		$	554		$	542
Income taxes	$	8,181		$	5,108		$	3,383

Supplemental disclosures of non-cash investing and financing activities:

Capital lease obligations for property and equipment originating during the years ended December 31, 2013, 2012 and 2011 was $5,000, $9,000 and $115,000, respectively.

In connection with the Company’s equity incentive plans, certain optionees tendered to the Company previously owned shares to pay for the option strike price. The total non-cash stock options exercised was $150,000, $4.6 million and $445,000 for the years ended December 31, 2013, 2012, and 2011, respectively.

See accompanying notes to consolidated financial statements.

34

NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

Notes to Consolidated Financial Statements

(1)     Summary of Significant Accounting Policies

Description of Business and Basis of Presentation

National Research Corporation (“NRC” or the “Company”) is a leading provider of analytics and insights that facilitate revenue growth, patient, employee and customer retention and patient engagement for healthcare providers, payers and other healthcare organizations in the United States and Canada. The Company’s ten largest clients accounted for 19%, 22%, and 20% of the Company’s total revenue in 2013, 2012, and 2011, respectively.

Recapitalization

In May 2013, the Company consummated a recapitalization (the “May 2013 Recapitalization”) pursuant to which the Company established two classes of common stock (class A common stock and class B common stock), issued a dividend of three shares of class A common stock for each share of the Company’s then existing common stock and reclassified each then existing share of common stock as one-half of one share of class B common stock. All previously reported share and per share amounts in the accompanying financial statements and related notes have been restated to reflect the May 2013 Recapitalization.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiary, National Research Corporation Canada, and a variable interest entity, Customer-Connect LLC (“Connect”), which NRC has been deemed the primary beneficiary. All significant intercompany transactions and balances have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Translation of Foreign Currencies

The Company’s Canadian subsidiary uses as its functional currency the local currency of the country in which it operates. It translates its assets and liabilities into U.S. dollars at the exchange rate in effect at the balance sheet date. It translates its revenue and expenses at the average exchange rate during the period. The Company includes translation gains and losses in accumulated other comprehensive income (loss), a component of shareholders’ equity. Gains and losses related to transactions denominated in a currency other than the functional currency of the countries in which the Company operates and short-term intercompany accounts are included in other income (expense) in the consolidated statements of income. Since the undistributed earnings of the Company’s foreign subsidiaries are considered to be indefinitely reinvested, the components of accumulated other comprehensive income (loss) have not been tax effected.

35

Revenue Recognition

The Company derives a majority of its operating revenue from its annually renewable services, which include performance measurement and improvement services, healthcare analytics and governance education services. The Company provides these services to its clients under annual client service contracts, although such contracts are generally cancelable on short or no notice without penalty. The Company also derives some revenue from its custom and other research projects. 

Services are provided under subscription-based service agreements. The Company recognizes subscription-based service revenue over the period of time the service is provided. Generally, the subscription periods are for twelve months and revenue is recognized equally over the subscription period.

Certain contracts are fixed-fee arrangements with a portion of the project fee billed in advance and the remainder billed periodically over the duration of the project. Revenue and direct expenses for services provided under these contracts are recognized under the proportional performance method. Under the proportional performance method, the Company recognizes revenue based on output measures or key milestones such as survey set-up, survey mailings, survey returns and reporting. The Company measures its progress based on the level of completion of these output measures and recognizes revenue accordingly. Management judgments and estimates must be made and used in connection with revenue recognized using the proportional performance method. If management made different judgments and estimates, then the amount and timing of revenue for any period could differ materially from the reported revenue.

The Company also derives revenue from hosting arrangements where our propriety software is offered as a service to our customers through our data processing facilities. The Company’s revenue also includes software-related revenue for software license revenue, installation services, post-contract support (maintenance) and training. Software-related revenue is recognized in accordance with the provisions of Accounting Standards Codification (“ASC”) 985-605, Software-Revenue Recognition.

Hosting arrangements to provide customers with access to the Company’s propriety software are marketed under long-term arrangements generally over periods of one to three years. Under these arrangements, the customer is not provided the contractual right to take possession of the licensed software at any time during the hosting period without significant penalty, and the customer is not provided the right to run the software on their own hardware or contract with another party unrelated to us to host the software. Upfront fees for setup services are typically billed for our hosting arrangements, however, these arrangements do not qualify for separation from the ongoing hosting services due to the absence of standalone value for the set-up services. Therefore, we account for these arrangements as service contracts and recognize revenue ratably over the hosting service period when all other conditions to revenue are met. Other conditions that must be met before the commencement of revenue recognition include achieving evidence of an arrangement, determining that the collection of the revenue is probable, and determining that fees are fixed and determinable.

The Company’s software arrangements typically involve the sale of a time-based license bundled with installation services, post-contract support (“PCS”) and training. License terms range from one year to three years, and require an annual fee for bundled elements of the arrangement. PCS is also contractually provided for a period that is co-terminus with the term of the time-based license. The Company’s installation services are not considered to be essential to the functionality of the software license. The Company does not achieve vendor-specific objective evidence (“VSOE”) of the fair value of the undelivered elements of its software arrangements (primarily PCS) and, therefore, these arrangements are accounted for as a single unit of accounting with revenue recognized ratably over the minimum bundled PCS period.

36

The Company’s revenue arrangements (not involving software elements) with a client may include combinations of performance measurement and improvement services, healthcare analytics or governance education services which may be executed at the same time, or within close proximity of one another (referred to as a multiple-element arrangement). Each element of a multiple-element arrangement is accounted for as a separate unit of accounting provided each delivered element is sold separately by the Company or another vendor; and for an arrangement that includes a general right of return relative to the undelivered elements, delivery or performance of the undelivered services are considered probable and substantially in the control of the Company. The Company’s arrangements generally do not include a general right of return related to the delivered services. If these criteria are not met, the arrangement is accounted for as a single unit of accounting with revenue generally recognized equally over the subscription period or recognized under the proportional performance method.

Revenue is allocated to each separate unit of accounting based on relative selling price using a selling price hierarchy: VSOE, if available, third-party evidence (“TPE”) if VSOE is not available, or estimated selling price if VSOE nor TPE is available. VSOE is established based on the services normal selling price and discounts for the specific services when sold separately. TPE is established by evaluating similar competitor services in standalone arrangements. If neither exists for a deliverable, the best estimate of the selling price (“ESP”) is used for that deliverable based on list price, representing a component of management’s market strategy, and an analysis of historical prices for bundled and standalone arrangements. Revenue allocated to an element is limited to revenue that is not subject to refund or otherwise represents contingent revenue. VSOE, TPE and ESP are periodically adjusted to reflect current market conditions. These adjustments are not expected to differ significantly from historical results.

Trade Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance based on specific account analysis and on the Company’s historical write-off experience. The Company reviews the allowance for doubtful accounts monthly. Past due balances over 90 days and over a specified amount are reviewed individually for collectability and provisions are made for accounts not specifically reviewed. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Property and Equipment

Property and equipment is stated at cost. Major expenditures to purchase property or to substantially increase useful lives of property are capitalized. Maintenance, repairs and minor renewals are expensed as incurred. When assets are retired or otherwise disposed of, their costs and related accumulated depreciation are removed from the accounts and resulting gains or losses are included in income.

For costs of software developed for internal use, the Company expenses computer software costs as incurred in the preliminary project stage, which involves the conceptual formulation, evaluation and selection of technology alternatives. Costs incurred related to the design, coding, installation and testing of software during the application project stage are capitalized. Costs for training and application maintenance are expensed as incurred. The Company has capitalized approximately $1.7 million and $636,000 of internal and external costs incurred for the development of internal-use software for the years ended December 31, 2013 and 2012, respectively, with such costs classified as property and equipment.

37

The Company provides for depreciation and amortization of property and equipment using annual rates which are sufficient to amortize the cost of depreciable assets over their estimated useful lives. The Company uses the straight-line method of depreciation and amortization over estimated useful lives of three to ten years for furniture and equipment, three to five years for computer equipment, three to five years for capitalized software, and seven to forty years for the Company’s office building and related improvements.

Leases are categorized as operating or capital at the inception of the lease. Assets under capital lease obligations are reported at the lower of fair value or the present value of the aggregate future minimum lease payments at the beginning of the lease term. The Company depreciates capital lease assets without transfer-of-ownership or bargain-purchase-options using the straight-line method over the lease terms, excluding any lease renewals, unless the lease renewals are reasonably assured. Capital lease assets with transfer-of-ownership or bargain-purchase-options are depreciated using the straight-line method over the assets’ estimated useful lives.

Impairment of Long-Lived Assets and Amortizing Intangible Assets

Long-lived assets, such as property and equipment and purchased intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. No impairments were recorded during the years ended December 31, 2013, 2012, or 2011.

Among others, management believes the following circumstances are important indicators of potential impairment of such assets and as a result may trigger an impairment review:

● Significant underperformance in comparison to historical or projected operating results;

● Significant changes in the manner or use of acquired assets or the Company’s overall strategy;

● Significant negative trends in the Company’s industry or the overall economy;

● A significant decline in the market price for the Company’s common stock for a sustained period; and

● The Company’s market capitalization falling below the book value of the Company’s net assets.

Goodwill and Intangible Assets

Intangible assets include customer relationships, trade names, non-compete agreements and goodwill. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company reviews intangible assets with indefinite lives for impairment annually as of October 1 and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

38

When performing the impairment assessment, the Company will first assess qualitative factors to determine whether it is necessary to recalculate the fair value of the intangible assets with indefinite lives. If the Company believes, as a result of the qualitative assessment, that it is more likely than not that the fair value of the indefinite-lived intangibles is less than their carrying amount, the Company calculates the fair value using a market approach. If the carrying value of intangible assets with indefinite lives exceeds their fair value, then the intangible assets are written-down to their fair values. The Company did not recognize any impairments related to indefinite-lived intangibles during 2013, 2012 or 2011.

Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. All of the Company’s goodwill is allocated to its reporting units, which are the same as its operating segments. Goodwill is reviewed for impairment at least annually, as of October 1, and whenever events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable.

The Company reviews for goodwill impairment by first assessing qualitative factors to determine whether any impairment may exist. If the Company believes, as a result of the qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a quantitative two-step test is required; otherwise, no further testing is required. Under the first step of the quantitative test, the fair value of the reporting unit is compared with its carrying value (including goodwill). If the fair value of the reporting unit exceeds its carrying value, step two is not performed. If the fair value of the reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit and the Company performs step two of the impairment test (measurement). Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the fair value of that goodwill. The fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation and the residual fair value after this allocation is the fair value of the reporting unit goodwill.

In instances when a step two is required, the fair value of the reporting unit is determined using an income approach and comparable market multiples. Under the income approach, there are a number of inputs used to calculate the fair value using a discounted cash flow model, including operating results, business plans, projected cash flows and a discount rate. Discount rates, growth rates and cash flow projections are the most sensitive and susceptible to change as they require significant management judgment. Discount rates are determined by using a weighted average cost of capital, which considers market and industry data. Management develops growth rates and cash flow projections for each reporting unit considering industry and Company-specific historical and projected information. Terminal value rate determination follows common methodology of capturing the present value of perpetual cash flow estimates beyond the last projected period assuming a constant weighted average cost of capital and low long-term growth rates. Under the market approach, the Company considers its market capitalization, comparisons to other public companies’ data, and recent transactions of similar businesses within the Company’s industry.

The Company performed a qualitative analysis as of October 1, 2013 which did not indicate that it was more likely than not that the carrying values of the reporting units exceeded fair value. No impairments were recorded during the years ended December 31, 2013, 2012 or 2011.

Segment Information

During the first quarter of 2013, due to the Company change in operating structure (or strategy), the Company condensed its eight operating segments into two operating segments that are aggregated into one reporting segment because they have similar economic characteristics and meet the other aggregation criteria guidance on segment disclosure.  The two operating segments, organized by geographic area, are National Research Corporation (United States) and National Research Corporation Canada, which each offer a portfolio of solutions to address specific market needs around growth, retention, engagement and thought leadership for healthcare organizations.

39

Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Under that method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis using enacted tax rates. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances, if any, are established when necessary to reduce deferred tax assets to the amount that is more likely than not to be realized. The Company uses the deferral method of accounting for its investment tax credits related to state tax incentives. During the years ended December 31, 2013, 2012 and 2011, the Company recorded income tax benefits relating to these tax credits of $290,000, $289,000, and $229,000, respectively.

The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

The Company had an unrecognized tax benefit at December 31, 2013 and 2012, of $188,000 and $224,000, respectively, excluding interest of $5,000 and $11,000, respectively, and no penalties. Of this amount, $188,000 and $224,000 at December 31, 2013 and 2012, respectively, represents the net unrecognized tax benefits that, if recognized, would favorably impact the effective income tax rate. The Company accrues interest and penalties related to uncertain tax position in the statements of income as income tax expense. The Company is not subject to tax examinations for years prior to 2010 in the U.S. and 2009 in Canada.

Share-Based Compensation

The Company measures and recognizes compensation expense for all share-based payments. The compensation expense is recognized based on the grant-date fair value of those awards. All of the Company’s existing stock option awards and non-vested stock awards have been determined to be equity-classified awards.

Amounts recognized in the financial statements with respect to these plans:

	2013		2012		2011
	(In thousands)
Amounts charged against income, before income tax benefit	$	955	$	388	$	763
Amount of related income tax benefit		377		153		302
Total impact to net income	$	578	$	235	$	461

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash equivalents were $21.2 million and $7.5 million as of December 31, 2013, and 2012, respectively, consisting primarily of money market accounts and funds invested in commercial paper. At certain times, cash equivalent balances may exceed federally insured limits.

40

Fair Value Measurements

The Company’s valuation techniques are based on maximizing observable inputs and minimizing the use of unobservable inputs when measuring fair value. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect the Company’s market assumptions. The inputs are then classified into the following hierarchy: (1) Level 1 Inputs—quoted prices in active markets for identical assets and liabilities; (2) Level 2 Inputs—observable market-based inputs other than Level 1 inputs, such as quoted prices for similar assets or liabilities in active markets, quoted prices for similar or identical assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data; (3) Level 3 Inputs—unobservable inputs.

The following details the Company’s financial assets and liabilities within the fair value hierarchy at December 31, 2013 and 2012:

	Level 1		Level 2		Level 3		Total
			(In thousands)
As of December 31, 2013
Money Market Funds	$	7,266	$	--	$	--	$	7,266
Commercial Paper	$	13,976	$	--	$	--	$	13,976
Total	$	21,242	$	--	$	--	$	21,242
As of December 31, 2012
Money Market Funds	$	5,245	$	--	$	--	$	5,245
Commercial Paper	$	2,242	$	--	$	--	$	2,242
Total	$	7,487	$	--	$	--	$	7,487

The Company's long-term debt described in Note 6 is recorded at historical cost. The fair value of long-term debt is classified in Level 2 of the fair value hierarchy and was estimated based primarily on estimated current rates available for debt of the same remaining duration and adjusted for nonperformance and credit. The following are the carrying amount and estimated fair values of long-term debt:

	December 31, 2013		December 31, 2012
	(In thousands)
Total carrying amount of long-term debt	$	10,324	$	12,436
Estimated fair value of long-term debt	$	10,156	$	12,490

The Company believes that the carrying amounts of accounts receivable, accounts payable, and accrued expenses approximate their fair value. All non-financial assets that are not recognized or disclosed at fair value in the financial statements on a recurring basis, which includes goodwill and non-financial long-lived assets, are measured at fair value in certain circumstances (for example, when there is evidence of impairment). As of December 31, 2013 and 2012, there was no impairment related to property and equipment, goodwill and other intangible assets.

41

Contingencies
From time to time, the Company is involved in certain claims and litigation arising in the normal course of business. Management assesses the probability of loss for such contingencies and recognizes a liability when a loss is probable and estimable. At December 31, 2013, the Company was not engaged in any legal proceedings that are expected, individually or in the aggregate, to have a material effect on the Company.

Earnings Per Share

Net income per share of class A common stock and class B common stock is computed using the two-class method. Basic net income per share is computed by allocating undistributed earnings to common shares and using the weighted-average number of common shares outstanding during the period.

Diluted net income per share is computed using the weighted-average number of common shares and, if dilutive, the potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options and vesting of restricted stock. The dilutive effect of outstanding stock options is reflected in diluted earnings per share by application of the treasury stock method.

The liquidation rights and the rights upon the consummation of an extraordinary transaction are the same for the holders of class A common stock and class B common stock. Other than share distributions and liquidation rights, the amount of any dividend or other distribution payable on each share of class A common stock will be equal to one-sixth (1/6^th) of the amount of any such dividend or other distribution payable on each share of class B common stock. As a result, the undistributed earnings for each year are allocated based on the contractual participation rights of the class A and class B common stock as if the earnings for the year had been distributed.

At December 31, 2013, 2012, and 2011, the Company had 99,562, 92,460 and 358,707 options of class A shares and 6,407, 15,410, and 59,785 options of class B shares, respectively, which have been excluded from the diluted net income per share computation because the exercise price exceeds the fair market value.

42

	2013				2012						2011
	Class A		Class B		Class A			Class B			Class A		Class B
	(In thousands, except per share data)
Numerator for net income per share - basic:
Allocation of distributed earnings	$	1,071	$	1,071	$	8,681		$	8,681		$	2,956	$	2,956
Allocation of undistributed earnings		6,670		6,672		(1,147	)		(1,147	)		2,826		2,826
Net income attributable to common shareholders	$	7,741	$	7,743	$	7,534		$	7,534		$	5,782	$	5,782
Denominator for net income per share - basic:
Weighted average common shares outstanding - basic		20,677		3,447		20,325			3,388			20,016		3,336
Net income per share - basic	$	0.37	$	2.25	$	0.37		$	2.22		$	0.29	$	1.73
Numerator for net income per share - diluted:
Net income attributable to common shareholders for basic computation	$	7,741	$	7,743	$	7,534		$	7,534		$	5,782	$	5,782
Denominator for net income per share - diluted:
Weighted average common shares outstanding - basic		20,677		3,447		20,325			3,388			20,016		3,336
Weighted average effect of dilutive securities:
Stock Options		388		61		492			82			474		79
Restricted Stock		34		6		37			6			36		6
Weighted average common shares outstanding - diluted		21,099		3,514		20,854			3,476			20,526		3,421
Net income per share - diluted	$	0.37	$	2.20	$	0.36		$	2.17		$	0.28	$	1.69

Recent Accounting Pronouncements

There have been no new accounting pronouncements not yet effective or adopted that have significance or potential significance to the consolidated financial statements in 2013. 

(2)     Variable Interest Entity

Connect was formed in June 2013 to develop and commercialize the Connect programs. Connect programs provide healthcare organizations the technology to engage patients through real-time identification and management of individual patient needs, preferences, risks, and experiences.  The platform ensures that organizations have access to a longitudinal view of the patient to more effectively manage patient engagement across the continuum of care. NRC has a 49% ownership interest in Connect. NG Customer-Connect, LLC holds 25% interest, and the remaining 26% is held by Illuminate Health, LLC. NRC has agreed to lease certain employees to Connect. In return for a fee, Connect will service the Company’s discharge call program clients. NRC will make capital contributions of up to $2.5 million on an as-needed basis as determined by the Board of Directors of Connect. Profits and losses are allocated under the hypothetical liquidation at book value approach.

43

NRC has a future obligation to purchase the other equity units in Connect when certain targeted events have been achieved. If, at any time, there is at least $12.5 million of annual recurring contract value, including the NRC contracts being serviced, and the members have approved a financial statement showing a pro forma minimum 35% EBITDA margin for revenue on a going-forward basis, then within 90 days thereafter NRC is required to purchase from the other members, and the other members shall be required to sell to NRC, all of their equity units not owned by NRC. As of December 31, 2013, the price at which NG Customer-Connect, LLC and Illuminate Health LLC had the obligation to sell their equity units to NRC was $0.

NRC is deemed the primary beneficiary of the variable interest entity and has a 49% ownership interest in Connect. An entity is considered the primary beneficiary of a variable interest entity if it has both the power to direct the activities of the variable interest entity that most significantly impact the variable interest entity’s economic performance and an obligation to absorb losses or the right to receive benefits that could potentially be significant to the variable interest entity. Connect is thinly capitalized and relies on NRC advances and reimbursements to fund its operations. Together, NRC and NRC associates hold a majority of the voting rights on Connect board of directors and have the ability to direct the majority of Connect operations.

Included in the Company’s consolidated financial statements for the year ended December 31, 2013, was Connect’s net operating loss of $837,000. The net operating loss of Connect during 2013 was attributable to NRC. Connect had total assets of $649,000 and total liabilities of $186,000 as of December 31, 2013.

(3)     Property and Equipment

At December 31, 2013, and 2012, property and equipment consisted of the following:

	2013		2012
	(In thousands)
Furniture and equipment	$	4,015	$	3,797
Computer equipment and software		18,569		17,647
Building		9,322		9,322
Land		425		425
		32,331		31,191
Less accumulated depreciation and amortization		20,433		18,698
Net property and equipment	$	11,898	$	12,493

Depreciation and amortization expense related to property and equipment, including assets under capital lease, for the years ended December 31, 2013, 2012, and 2011 was $2.8 million, $3.4 million, and $3.5 million, respectively.

44

Property and equipment included the following amounts under capital lease:

	2013		2012
	(In thousands)
Furniture and equipment	$	519	$	514
Computer equipment and software		47		47
		566		561
Less accumulated amortization		294		196
Net assets under capital lease	$	272	$	365

(4)     Goodwill and Intangible Assets

Goodwill and intangible assets consisted of the following at December 31, 2013:

	Useful Life					Gross	Accumulated Amortization			Net
		(In years)					(In thousands)
Goodwill					$	57,593			$	57,593
Non-amortizing intangible assets:
Indefinite trade name						1,191				1,191
Amortizing intangible assets:
Customer related		5	-	15		10,499		7,334		3,165
Non-compete agreements			3			430		430		-
Trade names		5	-	10		1,902		1,418		484
Total amortizing intangible assets						12,831		9,182		3,649
Total intangible assets other than goodwill					$	14,022	$	9,182	$	4,840

Goodwill and intangible assets consisted of the following at December 31, 2012:

	Useful Life				Gross		Accumulated Amortization		Net
	(In years)						(In thousands)
Goodwill					$	57,799			$	57,799
Non-amortizing intangible assets:
Indefinite trade name						1,191				1,191
Amortizing intangible assets:
Customer related		5	-	15		10,521		6,709		3,812
Non-compete agreements			3			430		346		84
Trade names		5	-	10		1,902		1,195		707
Total amortizing intangible assets						12,853		8,250		4,603
Total intangible assets other than goodwill					$	14,044	$	8,250	$	5,794

45

The following represents a summary of changes in the Company’s carrying amount of goodwill for the years ended December 31, 2013, and 2012 (in thousands):

Balance as of December 31, 2011	$	57,730
Foreign currency translation		69
Balance as of December 31, 2012	$	57,799
Foreign currency translation		(206	)
Balance as of December 31, 2013	$	57,593

Aggregate amortization expense for customer related intangibles, trade names and non-competes for the years ended December 31, 2013, 2012 and 2011 was $954,000, $1.3 million, and $1.6 million, respectively. Estimated amortization expense for the next five years is: 2014—$842,000; 2015—$789,000; 2016—$597,000; 2017—$531,000: 2018—$522,000: thereafter $369,000.

(5)      Income Taxes

For the years ended December 31, 2013, 2012, and 2011, income before income taxes consists of the following:

	2013		2012		2011
	(In thousands)
U.S. Operations	$	21,882	$	19,836	$	16,017
Foreign Operations		2,606		2,371		2,143
	$	24,488	$	22,207	$	18,160

Income tax expense consisted of the following components:

	2013			2012			2011
	(In thousands)
Federal:
Current	$	7,169		$	5,488		$	4,018
Deferred		195			1,140			1,170
Total	$	7,364		$	6,628		$	5,188
Foreign:
Current	$	716		$	684		$	606
Deferred		(7	)		(6	)		(1	)
Total	$	709		$	678		$	605
State:
Current	$	1,020		$	787		$	609
Deferred		(89	)		(954	)		194
Total	$	931		$	(167	)	$	803
Total	$	9,004		$	7,139		$	6,596

46

The difference between the Company’s income tax expense as reported in the accompanying consolidated financial statements and the income tax expense that would be calculated applying the U.S. federal income tax rate of 35% for 2013, 2012, and 2011 on pretax income was as follows:

	2013			2012			2011
	(In thousands)
Expected federal income taxes	$	8,571		$	7,772		$	6,356
Foreign tax rate differential		(226	)		(203	)		(145	)
U.S. tax graduated rates		--			11			(99	)
State income taxes, net of federal benefit and state tax credits		605			552			522
Federal tax credits		(217	)		(282	)		(132	)
Uncertain tax positions		(43	)		(73	)		9
Deferred tax adjustment due to change in state tax law		--			(661	)		--
Recapitalization expenses		182			--			--
Other		132			23			85
Total	$	9,004		$	7,139		$	6,596

Deferred tax assets and liabilities at December 31, 2013 and 2012, were comprised of the following:

	2013			2012
	(In thousands)
Deferred tax assets:
Allowance for doubtful accounts	$	63		$	86
Accrued expenses		497			356
Share based compensation		1,113			859
Capital loss carryforward		1,124			1,132
Net operating loss		--			170
Tax credit carryforward		--			319
Other		39			--
Gross deferred tax assets		2,836			2,922
Less Valuation Allowance		(1,124	)		(1,138	)
Deferred tax assets		1,712			1,784
Deferred tax liabilities:
Prepaid expenses		286			324
Property and equipment		1,426			1,790
Intangible assets		6,879			6,415
Other		200			235
Deferred tax liabilities		8,791			8,764
Net deferred tax liabilities	$	(7,079	)	$	(6,980	)

At December 31, 2013 and 2012, net deferred tax assets of $53,000 and $547,000 respectively, were included in current deferred income taxes. At December 31, 2013 and 2012, net deferred tax liabilities of $7.1 million and $7.5 million, respectively, were included in long term deferred income taxes.

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers projected future taxable income, carry-back opportunities, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, the Company believes it is more likely than not that it will realize the benefits of these deductible differences, net of the valuation allowance recorded. The net impact on income tax expense related to changes in the valuation allowance for 2013, 2012, and 2011, were $14,000, $214,000 and $0, respectively.

47

The Company has domestic capital loss carryforwards of $3.1 million at December 31, 2013. The total $3.1 million of the capital loss carryforwards relate to the pre-acquisition periods of acquired companies and are due to expire in 2014. The Company has provided a $1.1 million valuation allowance against the tax benefit associated with the capital loss carryforwards.

The undistributed foreign earnings of the Company’s foreign subsidiary of approximately $10.7 million are considered to be indefinitely reinvested. Accordingly, no provision for U.S. federal and state income taxes or foreign withholding taxes has been provided for such undistributed earnings. The Company estimated at December 31, 2013, that an additional tax liability of $705,000 would become due if repatriation of undistributed earnings would occur.

The unrecognized tax benefit at December 31, 2013, was $188,000, excluding interest of $5,000 and no penalties. The full unrecognized tax benefits, if recognized, would favorably impact the effective income tax rate. The Company believes it is reasonably possible that the total amount of unrecognized tax benefits could continue to decrease during the next 12 months due to the expiration of the U.S. federal statute of limitations associated with certain other tax positions. The Company accrues interest and penalties related to uncertain tax position in the statements of income as income tax expense.

The change in the unrecognized tax benefits for 2013 and 2012 is as follows:

	(In thousands)
Balance of unrecognized tax benefits at December 31, 2011	$	266
Reductions due to lapse of applicable statute of limitations		(117	)
Additions based on tax positions of prior years		84
Additions based on tax positions related to the current year		(9	)
Balance of unrecognized tax benefits at December 31, 2012	$	224
Reductions due to lapse of applicable statute of limitations		(91	)
Additions based on tax positions of prior years		27
Additions based on tax positions related to the current year		28
Balance of unrecognized tax benefits at December 31, 2013	$	188

The Company files a U.S. federal income tax return, various state jurisdictions and a Canada federal and provincial income tax return. The 2010 to 2013 U.S. federal and state returns remain open to examination. The 2009 to 2013 Canada federal and provincial income tax returns remain open to examination.

48

(6)     Notes Payable

Notes payable consisted of the following:

	2013		2012
	(In thousands)
Revolving credit note with U.S. Bank, maximum available $6.5 million subject to borrowing base, matures June 30, 2014	$	--	$	--
Note payable to U.S. Bank for $11.8 million, interest at a 3.12% fixed rate, 60 monthly principal and interest payments of $212,468 through April 2018		10,324		--
Notes payable to U.S. Bank, interest at a 3.79% fixed rate, monthly principal and interest payments of $201,294, with final balloon payment due July 31, 2013		--		12,436
Total notes payable		10,324		12,436
Less current portion		2,256		12,436
Note payable, net of current portion	$	8,068	$	--

The Company had two term notes, which were used to partially finance acquisitions in 2008 and 2010. Borrowings under the term notes bore interest at an annual rate of 3.79%. The Company refinanced these two term notes on May 9, 2013, and combined them into one new term note. The new term note is payable in 60 monthly installments of $212,468. Borrowings under the new term note bear interest at an annual rate of 3.12%.

The Company also has a revolving credit note that was renewed in May 2013 to extend the term to June 30, 2014. The Company may borrow, repay and re-borrow amounts under the revolving credit note from time to time until its maturity on June 30, 2014. The maximum aggregate amount available under the revolving credit note of $6.5 million is subject to a borrowing base equal to 75.0% of the Company’s eligible accounts receivable. Borrowings under the renewed revolving credit note bear interest at a variable annual rate, with three rate options at the discretion of management as follows: (1) 2.5% plus the daily reset one-month LIBOR rate or (2) 2.2% plus the one-, two-, three-, six- or twelve-month London Interbank Offered Rate (“LIBOR”) rate, or (3) the bank’s one-, two-, three-, six- or twelve-month Money Market Loan Rate. The rate at December 31, 2013 was 2.67%. As of December 31, 2013, the revolving credit note did not have a balance. According to borrowing base requirements, the Company had the capacity to borrow $6.5 million as of December 31, 2013. 

The term note and revolving credit note are secured by certain of the Company’s assets, including the Company’s land, building, accounts receivable and intangible assets. The term note and the revolving credit note contain various restrictions and covenants applicable to the Company, including requirements that the Company maintain certain financial ratios at prescribed levels and restrictions on the ability of the Company to consolidate or merge, create liens, incur additional indebtedness or dispose of assets. As of December 31, 2013, the Company was in compliance with the financial covenants.

The remaining note payable maturities for each year subsequent to December 31, 2013, are as follows:

	Total Payments		2014		2015		2016		2017		2018
	(In thousands)
Notes payable	$	10,324	$	2,256	$	2,328	$	2,402	$	2,480	$	858

49

(7)     Share-Based Compensation

The Company measures and recognizes compensation expense for all share-based payments based on the grant-date fair value of those awards. All of the Company’s existing stock option awards and non-vested stock awards have been determined to be equity-classified awards.

In August 2001, the Board of Directors adopted, and on May 1, 2002, the Company’s shareholders approved, the National Research Corporation 2001 Equity Incentive Plan (“2001 Equity Incentive Plan”). The 2001 Equity Incentive Plan provides for the granting of stock options, stock appreciation rights, restricted stock, performance shares and other share-based awards and benefits up to an aggregate of 1,800,000 shares of class A common stock and 300,000 shares of class B common stock. Stock options granted may be either nonqualified or incentive stock options. Stock options vest over one to five years following the date of grant and option terms are generally five to ten years following the date of grant. Due to the expiration of the 2001 Equity Incentive plan, at December 31, 2013, there were no shares of stock available for future grants. The Company has accounted for grants of 1,683,309 class A and 280,552 class B options and restricted stock under the 2001 Equity Incentive Plan using the date of grant as the measurement date for financial accounting purposes.

The Company’s 2004 Non-Employee Director Stock Plan (the “2004 Director Plan”) is a nonqualified plan that provides for the granting of options with respect to 1,650,000 shares of class A common stock and 275,000 shares of class B common stock. The 2004 Director Plan provides for grants of nonqualified stock options to each director of the Company who is not employed by the Company. On the date of each annual meeting of shareholders of the Company, options to purchase 36,000 shares of class A common stock and 6,000 shares of class B common stock are granted to directors that are re-elected or retained as a director at such meeting. Stock options vest one year following the date of grant and option terms are generally ten years following the date of grant, or three years in the case of termination of the outside director’s service. At December 31, 2013, there were 255,000 shares of class A common stock and 42,500 shares of class B common stock available for issuance pursuant to future grants under the 2004 Director Plan. The Company has accounted for grants of 1,395,000 class A and 232,500 class B options under the 2004 Director Plan using the date of grant as the measurement date for financial accounting purposes.

In February 2006, the Board of Directors adopted, and on May 4, 2006, the Company’s shareholders approved the National Research Corporation 2006 Equity Incentive Plan (the “2006 Equity Incentive Plan”). The 2006 Equity Incentive Plan provides for the granting of stock options, stock appreciation rights, restricted stock, performance shares and other share-based awards and benefits up to an aggregate of 1,800,000 shares of class A common stock and 300,000 shares of class B common stock. Stock options granted may be either incentive stock options or nonqualified stock options. Vesting terms vary with each grant and option terms are generally five to ten years following the date of grant. At December 31, 2013, there were 1,033,455 shares of class A common stock and 172,242 shares of class B common stock available for issuance pursuant to future grants under the 2006 Equity Incentive Plan. The Company has accounted for grants of 766,545 class A and 127,758 class B options and restricted stock under the 2006 Equity Incentive Plan using the date of grant as the measurement date for financial accounting purposes.

50

The Company granted options to purchase 232,344 shares of the Company’s class A common stock and 38,718 shares of the class B common stock during the twelve-month period ended December 31, 2013. During the same period in 2012, the Company granted options to purchase 238,890 shares of class A common stock and 39,815 shares of class B common stock, and during 2011 granted options to purchase 498,024 shares of class A common stock and 83,004 shares of class B common stock. Options to purchase shares of common stock are typically granted with exercise prices equal to the fair value of the common stock on the date of grant. The Company does, in certain limited situations, grant options with exercise prices that exceed the fair value of the common shares on the date of grant. The fair value of stock options granted (pre-May 2013 Recapitalization) was estimated using a Black-Scholes valuation model with the following assumptions:

	2013				2012				2011
Expected dividend yield at date of grant		2.26	to	3.46%		2.63	to	3.98%		2.00	to	2.55%
Expected stock price volatility		30.34	to	30.51%		29.10	to	31.70%		28.70	to	32.00%
Risk-free interest rate		0.55	to	1.07%		0.56	to	1.15%		1.70	to	2.14%
Expected life of options (in years)		4	to	6		4	to	6		4	to	6

The risk-free interest rate assumptions were based on the U.S. Treasury yield curve in effect at the time of the grant. The expected volatility was based on historical monthly price changes of the Company’s stock based on the expected life of the options at the date of grant. The expected life of options is the average number of years the Company estimates that options will be outstanding. The Company considers groups of associates that have similar historical exercise behavior separately for valuation purposes.

The following table summarizes stock option activity under the 2001 and 2006 Equity Incentive Plans and the 2004 Director Plan for the year ended December 31, 2013:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Terms (Years)		Aggregate Intrinsic Value (In thousands)
Class A
Outstanding at December 31, 2012		1,367,754		$	8.45
Granted		232,344		$	15.98
Exercised		(155,253	)	$	3.36			$	1,126
Forfeited		--			--
Outstanding at December 31, 2013		1,444,845		$	10.21		6.48	$	12,438
Exercisable at December 31, 2013		693,975		$	8.96		5.37	$	6,846
Class B
Outstanding at December 31, 2012		227,959		$	18.45
Granted		38,718		$	29.35
Exercised		(31,875	)	$	14.69			$	992
Forfeited		--			--
Outstanding at December 31, 2013		234,802		$	20.76		6.54	$	3,276
Exercisable at December 31, 2013		109,662		$	18.85		5.43	$	1,739

The weighted average grant date fair value of stock options granted during the years ended December 31, 2013, 2012, and 2011, was $3.24, $2.43 and $2.12, respectively, for both class A and class B common stock. The total intrinsic value of stock options exercised during the years ended December 31, 2013, was $1.1 million for the shares of class A common stock and $992,000 for the shares of class B common stock. The total intrinsic value of stock options exercised was $5.6 million for the shares of class A common stock and $941,000 for the shares of class B common stock for the year ended December 31, 2012, and $900,000 for the shares of class A common stock and $150,000 for the shares of class B common stock for the year ended December 31, 2011. The total intrinsic value of stock options vested during the years ended December 31, 2013, was $1.5 million for the shares of class A common stock and $0.5 million for the shares of class B common stock. The total intrinsic value of stock options vested was $2.3 million for the shares of class A common stock and $376,000 for the shares of class B common stock for the year ended December 31, 2012, and $1.3 million for the shares of class A common stock and $224,000 for the shares of class B common stock for the year ended December 31, 2011. As of December 31, 2013, the total unrecognized compensation cost related to non-vested stock option awards was approximately $729,000 and $122,000 for class A and class B common stock shares, respectively, which was expected to be recognized over a weighted average period of 2.38 years for each class of stock.

51

Cash received from stock options exercised for the years ended December 31, 2013, 2012, and 2011 was $840,000, $1.3 million, and $568,000, respectively. The actual tax benefit realized for the tax deduction from stock options exercised was $753,000, $2.0 million and $350,000, for the years ended December 31, 2013, 2012, and 2011, respectively.

During 2012, the Company granted 23,469 and 3,912 non-vested shares of class A and class B common stock, respectively, under the 2006 Equity Incentive Plan. During 2011, the Company granted 118,503 and 19,751 non-vested shares of class A and class B common stock, respectively, under the 2006 Equity Incentive Plan. No non-vested shares of common stock were granted during 2013. As of December 31, 2013, the Company had 60,609 and 10,101 non-vested shares of class A and class B common stock, respectively, outstanding under the 2006 Equity Incentive Plan. These shares vest over one to five years following the date of grant and holders thereof are entitled to receive dividends from the date of grant, whether or not vested. The fair value of the awards is calculated as the fair market value of the shares on the date of grant. The Company recognized $140,000, $74,000 and $143,000 of non-cash compensation for the years ended December 31, 2013, 2012, and 2011, respectively, related to this non-vested stock.

The following table summarizes information regarding non-vested stock granted to associates under the 2001 and 2006 Equity Incentive Plans for the year ended December 31, 2013:

	Class A Shares Outstanding		Class A Weighted Average Grant Date Fair Value Per Share		Class B Shares Outstanding		Class B Weighted Average Grant Date Fair Value Per Share
Outstanding at December 31, 2012		60,609	$	5.77		10,101	$	34.65
Granted		--		--		--		--
Vested		--		--		--		--
Forfeited		--		--		--		--
Outstanding at December 31, 2013		60,609	$	5.77		10,101	$	34.65

As of December 31, 2013, the total unrecognized compensation cost related to non-vested stock awards was approximately $340,000 and is expected to be recognized over a weighted average period of 2.53 years.

(8)     Restructuring and Severance Costs

The Company records restructuring liabilities that represent charges incurred in connection with consolidations, including operations from acquisitions. These charges consist primarily of severance costs. Severance charges are based on various factors including the employee’s length of service, contract provisions, and salary levels. Expense for one-time termination benefits are accrued over each individual’s service period. The Company records the expense using its best estimate based upon detailed analysis. Although significant changes are not expected, actual costs may differ from these estimates.

In 2011, the Company vacated its office in Wausau, Wisconsin, and reached agreements to terminate the operating lease for its Wausau office and other services. As a result, the Company made lump-sum payments totaling $280,000, which were included in selling, general and administrative expenses in 2011.

52

(9)     Leases

The Company leases printing equipment in the United States, and office space in Canada, California, Nebraska and Washington. The Company recorded rent expense in connection with its operating leases of $720,000, $715,000, and $986,000 in 2013, 2012, and 2011, respectively. The Company also has capital leases for production, mailing and computer equipment.

Payments under non-cancelable operating leases and capital leases at December 31, 2013 are:

Year Ending December 31,	Capital Leases		Operating Leases
	(In thousands)
2014	$	137	$	782
2015		104		753
2016		9		507
2017		--		324
2018		--		202
Thereafter		--		14
Total minimum lease payments		250
Less: Amount representing interest		28
Present value of minimum lease payments		222
Less: Current maturities		114
Capital lease obligations, net of current portion	$	108

(10)     Related Party

A Board member of the Company also serves as an officer of Ameritas Life Insurance Corp. In connection with the Company’s regular assessment of its insurance-based associate benefits and the costs associated therewith, in 2007 the Company began purchasing dental insurance for certain of its associates from Ameritas Life Insurance Corp. and, in 2009, the Company also began purchasing vision insurance for certain of its associates from Ameritas Life Insurance Corp. The total value of these purchases was $212,000, $198,000 and $166,000 in 2013, 2012 and 2011 respectively.

The Company leased office space for OCS from EPIC Property Management LLC from August 2010 through June 2011.  A former owner of OCS and an associate of the Company during the lease term was a co-owner of EPIC Property Management LLC. The total of the rental and utility payments under the lease for the year ended December 31, 2011, was $103,000.

Michael Hays, our Chief Executive Officer, is a director and owner of 14% of the equity interests of Nebraska Global Investment Company LLC. In 2012, the Company purchased certain technology consulting and software development services from Nebraska Global Investment Company LLC. The total value of these purchases was $57,000 and $55,000 in 2013 and 2012 respectively. The Company did not have any transactions with Nebraska Global Investment Company LLC during 2011 or 2010.

(11)     Associate Benefits

The Company sponsors a qualified 401(k) plan covering substantially all associates with no eligibility service requirement. Under the 401(k) plan, the Company matches 25.0% of the first 6.0% of compensation contributed by each associate. Employer contributions, which are discretionary, vest to participants at a rate of 20% per year. The Company contributed $252,000, $236,000 and $182,000 in 2013, 2012 and 2011, respectively, as a matching percentage of associate 401(k) contributions.

53

(12)     Segment Information

During the first quarter of 2013, the Company condensed its eight operating segments into two operating segments that are aggregated into one reporting segment because they have similar economic characteristics and meet the other aggregation criteria for guidance on segment disclosure.  The two operating segments, organized by geographic area, are National Research Corporation (United States) and National Research Corporation Canada, which each offer a portfolio of solutions to address specific market needs around growth, retention, engagement and thought leadership for healthcare organizations. The table below presents entity-wide information regarding the Company’s revenue and assets by geographic area:

	2013		2012		2011
	(In thousands)
Revenue:
United States	$	85,863	$	79,895	$	70,074
Canada		6,727		6,526		5,693
Total	$	92,590	$	86,421	$	75,767
Long-lived assets:
United States	$	71,139	$	72,817
Canada		3,383		3,414
Total	$	74,522	$	76,231
Total assets:
United States	$	97,982	$	87,670
Canada		13,014		12,376
Total	$	110,996	$	100,046

54

Item 9.     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A.     Controls and Procedures

Evaluation of Disclosure Controls and Procedures

In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), the Company’s management evaluated, with the participation of the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2013. Based upon their evaluation of these disclosure controls and procedures, the Chief Executive Officer and the Chief Financial Officer concluded that the disclosure controls and procedures were effective as of December 31, 2013.

Management’s Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act). The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, however, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies of procedures may deteriorate.

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s internal control over financial reporting using the framework in Internal Control – Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on such evaluation, the Company’s management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2013.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2013, has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report, a copy of which is included in this Annual Report on Form 10-K.

Changes in Internal Control over Financial Reporting

There was no change in the Company’s internal control over financial reporting that occurred during the quarter ended December 31, 2013, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B.     Other Information

The Company has no other information to report pursuant to this item.

55

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

National Research Corporation:

We have audited National Research Corporation and subsidiary’s (the Company) internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control – Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, National Research Corporation and subsidiary maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control – Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of December 31, 2013 and 2012, and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2013, and our report dated March 4, 2014 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Lincoln, Nebraska
March 4, 2014

56

PART III

Item 10.     Directors, Executive Officers and Corporate Governance

The information required by this Item with respect to directors and Section 16 compliance is included under the captions “Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance,” respectively, in the Company’s definitive Proxy Statement for its 2014 Annual Meeting of Shareholders (“Proxy Statement”) and is hereby incorporated herein by reference. Information with respect to the executive officers of the Company appears in Item 1 of this Annual Report on Form 10-K. The information required by this Item with respect to audit committees and audit committee financial experts is included under the caption “Corporate Governance” in the Proxy Statement and is incorporated herein by reference.

The Company has adopted a Code of Business Conduct and Ethics that applies to all of the Company’s associates, including the Company’s Chief Executive Officer, Chief Financial Officer, Vice President of Finance and other persons performing similar functions. The Company has posted a copy of the Code of Business Conduct and Ethics on its website at www.nationalresearch.com, and such Code of Business Conduct and Ethics is available, in print, without change, to any shareholder who requests it from the Company’s Secretary. The Company intends to satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding amendments to, or waivers from, the Code of Business Conduct and Ethics by posting such information on its website at www.nationalresearch.com. The Company is not including the information contained on its website as part of, or incorporating it by reference into, this report.

Item 11.     Executive Compensation

The information required by this Item is included under the captions “Compensation Discussion and Analysis,” “2013 Summary Compensation Table,” “Grants of Plan-Based Awards in 2013,” “Outstanding Equity Awards at December 31, 2013,” “2013 Director Compensation,” “Compensation Committee Report” and “Corporate Governance-Transactions with Related Persons” in the Proxy Statement and is hereby incorporated herein by reference.

Item 12.     Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

The information required by this Item with respect to security ownership of certain beneficial owners and management is included under the caption “Principal Shareholders” in the Proxy Statement and is hereby incorporated by reference.

The following table sets forth information with respect to compensation plans under which equity securities of the Company are authorized for issuance as of December 31, 2013.

57

Plan Category Class A shares	Number of securities to be issued upon the exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column)
Equity compensation plans approved by security holders (1)		1,444,845	$	10.21		1,288,455	(2)
Equity compensation plans not approved by security holders		--		--		--
Total		1,444,845	$	10.21		1,288,455

Plan Category Class B shares	Number of securities to be issued upon the exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column)
Equity compensation plans approved by security holders (1)		234,802	$	20.76		212,742	(2)
Equity compensation plans not approved by security holders		--		--		--
Total		234,802	$	20.76		212,742

(1) Includes the Company’s 2006 Equity Incentive Plan, 2004 Director Plan, and the 2001 Equity Incentive Plan.

(2) Under the 2006 Equity Incentive Plan, the Company had authority to award up to 443,046 additional shares of restricted class A common stock and 73,842 additional shares of restricted class B common stock to participants, provided that the total of such shares awarded may not exceed the total number of shares remaining available for issuance under the 2006 Equity Incentive Plan, which totaled 1,033,455 shares of class A common stock and 172, 242 shares of class B common stock as of December 31, 2013.

Item 13.     Certain Relationships and Realted Transactions, and Director Independence

The information required by this Item is included under the caption “Corporate Governance” in the Proxy Statement and is hereby incorporated by reference.

Item 14.     Principal Accountant Fees and Services

The information required by this Item is included under the caption “Miscellaneous — Independent Registered Public Accounting Firm” in the Proxy Statement and is hereby incorporated by reference.

58

PART IV

Item 15.     Exhibits, Financial Statement Schedules

1. Consolidated financial statements. The consolidated financial statements listed in the accompanying index to the consolidated financial statements and financial statement schedule are filed as part of this Annual Report on Form 10-K.

2. Financial statement schedule. The financial statement schedule listed in the accompanying index to the consolidated financial statements and financial statement schedule is filed as part of this Annual Report on Form 10-K.

3. Exhibits. The exhibits listed in the accompanying exhibit index are filed as part of this Annual Report on Form 10-K.

59

NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

Schedule II — Valuation and Qualifying Accounts

(In thousands)

	Balance at Beginning of Year		Bad Debt Expense		Write-offs Net of Recoveries		Balance at End of Year
Allowance for doubtful accounts:
Year Ended December 31, 2011		337		80		128		289
Year Ended December 31, 2012		289		173		218		244
Year Ended December 31, 2013		244		145		206		183

See accompanying report of independent registered public accounting firm.

60

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE

	Page in this Form 10-K
Report of Independent Registered Public Accounting Firm	29

Consolidated Balance Sheets as of December 31, 2013 and 2012 30

Consolidated Statements of Income for the Three Years Ended December 31, 2013 31

Consolidated Statements of Comprehensive Income for the Three Years Ended December 31, 2013 32

Consolidated Statements of Shareholders’ Equity for the Three Years Ended December 31, 2013 33

Consolidated Statements of Cash Flows for the Three Years Ended December 31, 2013 34

Notes to Consolidated Financial Statements 35

Schedule II — Valuation and Qualifying Accounts 60

All other financial statement schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedules, or because the information required is included in the consolidated financial statements and notes thereto.

61

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, on this 4th day of March 2014.

NATIONAL RESEARCH CORPORATION
By:	/s/ Michael D. Hays
	Michael D. Hays
	Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Michael D. Hays Michael D. Hays	Chief Executive Officer and Director (Principal Executive Officer)	March 4, 2014
/s/ Kevin R. Karas Kevin R. Karas	Senior Vice President Finance, Chief Financial Officer, Treasurer and Secretary (Principal Financial and Accounting Officer)	March 4, 2014
/s/ JoAnn M. Martin JoAnn M. Martin	Director	March 4, 2014
/s/ John N. Nunnelly John N. Nunnelly	Director	March 4, 2014
/s/ Paul C. Schorr III Paul C. Schorr III	Director	March 4, 2014
/s/ Gail L. Warden Gail L. Warden	Director	March 4, 2014

62

EXHIBIT INDEX

Exhibit Number	Exhibit Description
(3.1)	Amended and Restated Articles of Incorporation of National Research Corporation, effective May 22, 2013, [Incorporated by reference to Exhibit (3.2) to National Research Corporation’s Current Report on Form 8-K dated May 22, 2013 and filed May 24, 2013 (File No. 0-29466)
(3.2)	By-Laws of National Research Corporation, as amended to date [Incorporated by reference to Exhibit (3.2) to National Research Corporation’s Current Report on Form 8-K dated May 9, 2013 and filed on May 13, 2013 (File No. 0-29466)]
(4.1)	Installment Note, dated as of May 9, 2013, from National Research Corporation to U.S. Bank National Association [Incorporated by reference to Exhibit (4) to National Research Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (File No. 0-29466)]
(10.1)*	National Research Corporation 2001 Equity Incentive Plan [Incorporated by reference to Appendix A to National Research Corporation’s Proxy Statement for the 2002 Annual Meeting of Shareholders, filed with the Securities and Exchange Commission on April 3, 2002 (File No. 0-29466)]
(10.2)*	National Research Corporation 2006 Equity Incentive Plan, as amended [Incorporated by reference to Exhibit (4.3) to National Research Corporation’s Registration Statement on Form S-8 (Registration No. 333-189141) filed on June 6, 2013]
(10.3)*	National Research Corporation 2004 Non-Employee Director Stock Plan, as amended [Incorporated by reference to Exhibit (4.3) to National Research Corporation’s Registration Statement on Form S-8 (Registration No. 333-189140) filed on June 6, 2013)]
(10.4)*	Form of Nonqualified Stock Option Agreement (for new associates) used in connection with the 2001 Equity Incentive Plan [Incorporated by reference to Exhibit 4.4 to National Research Corporation’s Registration Statement on Form S-8 (Registration No. 333-120530)]
(10.5)*	Form of Nonqualified Stock Option Agreement (for officers) used in connection with the 2001 Equity Incentive Plan [Incorporated by reference to Exhibit 4.5 to National Research Corporation’s Registration Statement on Form S-8 (Registration No. 333-120530)]
(10.6)*	Form of Restricted Stock Agreement for executive officers used in connection with the 2001 Equity Incentive Plan [Incorporated by reference to Exhibit 10.2 to National Research Corporation’s Current Report on Form 8-K dated March 19, 2005 (File No. 0-29466)]
(10.7)*	Form of Restricted Stock Agreement (one year vesting) used in connection with the 2001 Equity Incentive Plan [Incorporated by reference to Exhibit 4.6 to National Research Corporation’s Registration Statement on Form S-8 (Registration No. 333-120530)]
(10.8)*	Form of Restricted Stock Agreement (five year vesting) used in connection with the 2001 Equity Incentive Plan [Incorporated by reference to Exhibit 4.7 to National Research Corporation’s Registration Statement on Form S-8 (Registration No. 333-120530)]
(10.9)*	Form of Nonqualified Stock Option Agreement used in connection with the 2006 Equity Incentive Plan [Incorporated by reference to Exhibit (10.14) to National Research Corporation’s Annual Report on Form 10-K for the year ended December 31, 2006 (File No. 0-29466)]
(10.10)*	Form of Restricted Stock Agreement used in connection with the 2006 Equity Incentive Plan [Incorporated by reference to Exhibit (10.15) to National Research Corporation’s Annual Report on Form 10-K for the year ended December 31, 2006 (File No. 0-29466)]

63

Exhibit Number	Exhibit Description
	[Incorporated by reference to Exhibit (10.15) to National Research Corporation’s Annual Report on Form 10-K for the year ended December 31, 2006 (File No. 0-29466)]
(21)	Subsidiary of National Research Corporation
(23)	Consent of Independent Registered Public Accounting Firm
(31.1)	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(31.2)	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(32)	Certification of Periodic Financial Report by the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(99)	Proxy Statement for the 2014 Annual Meeting of Shareholders [To be filed with the Securities and Exchange Commission under Regulation 14A within 120 days after December 31, 2013; except to the extent specifically incorporated by reference, the Proxy Statement for the 2014 Annual Meeting of Shareholders shall not be deemed to be filed with the Securities and Exchange Commission as part of this Annual Report on Form 10-K]
(101)**	Financial statements from the Annual Report on Form 10-K of National Research Corporation for the year ended December 31, 2013, formatted in eXtensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Shareholders’ Equity, (v) the Consolidated Statements of Cash Flows, (vi) the Notes to the Consolidated Financial Statements, and (vii) document and entity information.

____________________

* A management contract or compensatory plan or arrangement.

** In accordance with Rule 406T of Regulation S-T, the information in these exhibits shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1034, as amended, or otherwise subject to liability under that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.

64

EX-21

Exhibit 21

Subsidiary of National Research Corp.

National Research Corporation’s subsidiary as of December 31, 2013 is listed below:

Subsidiary	Jurisdiction of organization
National Research Corporation Canada	Ontario

EX-23

Exhibit 23

Consent of Independent Registered Public Accounting Firm

The Board of Directors

National Research Corporation:

We consent to the incorporation by reference in the registration statements (File Nos. 333-120530, 333-137763, 333-137769, 333-173097, 333-189139, 333-189140 and 333-189141) on Forms S-8 and (File Nos. 333-120529 and 333-187597) on Forms S-3 of National Research Corporation of our reports dated March 4, 2014, with respect to the consolidated balance sheets of National Research Corporation and subsidiary as of December 31, 2013 and 2012, and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2013, and the related financial statement schedule, and the effectiveness of internal control over financial reporting as of December 31, 2013, which reports appear in the December 31, 2013 annual report on Form 10-K of National Research Corporation.

/s/ KPMG LLP

Lincoln, Nebraska

March 4, 2014

EX-31

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934

I, Michael D. Hays, certify that:

1. I have reviewed this Annual Report on Form 10-K of National Research Corporation;

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 4, 2014 /s/ Michael D. Hays Michael D. Hays Chief Executive Officer

EX-31

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934

I, Kevin R. Karas, certify that:

1. I have reviewed this Annual Report on Form 10-K of National Research Corporation;

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 4, 2014 /s/ Kevin R. Karas Kevin R. Karas Chief Financial Officer

EX-32

Exhibit 32

Certification Pursuant to 18 U.S.C. Section 1350
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the accompanying Annual Report on Form 10-K of National Research Corporation (the “Company”) for the year ended December 31, 2013 (the “Report”), I, Michael D. Hays, Chief Executive Officer of the Company, and I, Kevin Karas, Chief Financial Officer, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, based on my knowledge, that:

1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2) The 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

Chief Executive Officer

/s/ Kevin R. Karas

Kevin R. Karas

Chief Financial Officer

Date: March 4, 2014

A signed original of this written statement required by Section 906 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.

XML

Note 3 - Property and Equipment (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Note 3 - Property and Equipment (Details) [Line Items]
Depreciation, Depletion and Amortization	$ 3,732	$ 4,699	$ 5,065
Property and Equipment [Member]
Note 3 - Property and Equipment (Details) [Line Items]
Depreciation, Depletion and Amortization	$ 2,800	$ 3,400	$ 3,500

XML

Note 7 - Share-Based Compensation (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Note 7 - Share-Based Compensation (Details) [Line Items]
Proceeds from Stock Options Exercised (in Dollars)	$ 840,000	$ 1,283,000	$ 568,000
Employee Service Share-based Compensation, Tax Benefit Realized from Exercise of Stock Options (in Dollars)	753,000	2,000,000	350,000
Employee Stock Option [Member] | Common Class A [Member]
Note 7 - Share-Based Compensation (Details) [Line Items]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized (in Dollars)	729,000
Employee Stock Option [Member] | Common Class B [Member]
Note 7 - Share-Based Compensation (Details) [Line Items]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized (in Dollars)	122,000
Employee Stock Option [Member] | Common Class A and Class B [Member]
Note 7 - Share-Based Compensation (Details) [Line Items]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	2 years 138 days
Employee Stock Option [Member] | The 2001 Equity Incentive Plan [Member] | Minimum [Member]
Note 7 - Share-Based Compensation (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	1 year
Employee Stock Option [Member] | The 2001 Equity Incentive Plan [Member] | Maximum [Member]
Note 7 - Share-Based Compensation (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	5 years
Employee Stock Option [Member] | 2004 Director Plan [Member]
Note 7 - Share-Based Compensation (Details) [Line Items]
Share-based Goods and Nonemployee Services Transaction Vesting Period	1 year
Nonvested [Member] | Common Class A [Member] | The 2006 Equity Incentive Plan [Member]
Note 7 - Share-Based Compensation (Details) [Line Items]
Stock Issued During Period, Shares, Restricted Stock Award, Gross			118,503
Share Based Compensation Arrangement By Share Based Payment Award, Nonvested Restricted Stock, Outstanding, Number	60,609
Nonvested [Member] | Common Class A [Member]
Note 7 - Share-Based Compensation (Details) [Line Items]
Stock Issued During Period, Shares, Restricted Stock Award, Gross		23,469
Nonvested [Member] | Common Class B [Member] | The 2006 Equity Incentive Plan [Member]
Note 7 - Share-Based Compensation (Details) [Line Items]
Stock Issued During Period, Shares, Restricted Stock Award, Gross			19,751
Share Based Compensation Arrangement By Share Based Payment Award, Nonvested Restricted Stock, Outstanding, Number	10,101
Nonvested [Member] | Common Class B [Member]
Note 7 - Share-Based Compensation (Details) [Line Items]
Stock Issued During Period, Shares, Restricted Stock Award, Gross		3,912
Nonvested [Member]
Note 7 - Share-Based Compensation (Details) [Line Items]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized (in Dollars)	340,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	2 years 193 days
Allocated Share-based Compensation Expense (in Dollars)	140,000	74,000	143,000
Nonvested [Member] | Minimum [Member]
Note 7 - Share-Based Compensation (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	1 year
Nonvested [Member] | Maximum [Member]
Note 7 - Share-Based Compensation (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	5 years
Common Class A [Member] | The 2001 Equity Incentive Plan [Member]
Note 7 - Share-Based Compensation (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	1,800,000
Share-Based Compensation Arrangement By Share-Based Payment Award, Options, Grants, Cumulative	1,683,309
Common Class A [Member] | 2004 Director Plan [Member]
Note 7 - Share-Based Compensation (Details) [Line Items]
Share-Based Compensation Arrangement By Share-Based Payment Award, Options, Grants, Cumulative	1,395,000
Share-based Goods and Nonemployee Services Transaction, Shares Approved for Issuance	1,650,000
Common Stock Options Granted To Directors	36,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	255,000
Common Class A [Member] | The 2006 Equity Incentive Plan [Member]
Note 7 - Share-Based Compensation (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	1,800,000
Share-Based Compensation Arrangement By Share-Based Payment Award, Options, Grants, Cumulative	766,545
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	1,033,455
Common Class A [Member]
Note 7 - Share-Based Compensation (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	232,344	238,890	498,024
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period, Intrinsic Value (in Dollars)	1,126,000	5,600,000	900,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Period Vested, Aggregate Intrinsic Value (in Dollars)	1,500,000	2,300,000	1,300,000
Common Class B [Member] | The 2001 Equity Incentive Plan [Member]
Note 7 - Share-Based Compensation (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	300,000
Share-Based Compensation Arrangement By Share-Based Payment Award, Options, Grants, Cumulative	280,552
Common Class B [Member] | 2004 Director Plan [Member]
Note 7 - Share-Based Compensation (Details) [Line Items]
Share-Based Compensation Arrangement By Share-Based Payment Award, Options, Grants, Cumulative	232,500
Share-based Goods and Nonemployee Services Transaction, Shares Approved for Issuance	275,000
Common Stock Options Granted To Directors	6,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	42,500
Common Class B [Member] | The 2006 Equity Incentive Plan [Member]
Note 7 - Share-Based Compensation (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	300,000
Share-Based Compensation Arrangement By Share-Based Payment Award, Options, Grants, Cumulative	127,758
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	172,242
Common Class B [Member]
Note 7 - Share-Based Compensation (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	38,718	39,815	83,004
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period, Intrinsic Value (in Dollars)	992,000	941,000	150,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Period Vested, Aggregate Intrinsic Value (in Dollars)	$ 500,000	$ 376,000	$ 224,000
Common Class A and Class B [Member]
Note 7 - Share-Based Compensation (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value (in Dollars per share)	$ 3.24	$ 2.43	$ 2.12
The 2001 Equity Incentive Plan [Member] | Minimum [Member]
Note 7 - Share-Based Compensation (Details) [Line Items]
Share-based Compensation Arrangement By Share-based Payment Award Option Term	5 years
The 2001 Equity Incentive Plan [Member] | Maximum [Member]
Note 7 - Share-Based Compensation (Details) [Line Items]
Share-based Compensation Arrangement By Share-based Payment Award Option Term	10 years
2004 Director Plan [Member] | Normal Term [Member]
Note 7 - Share-Based Compensation (Details) [Line Items]
Share-based Goods and Nonemployee Services Transaction Option Terms	10 years
2004 Director Plan [Member] | Termination of Service [Member]
Note 7 - Share-Based Compensation (Details) [Line Items]
Share-based Goods and Nonemployee Services Transaction Option Terms	3 years
The 2006 Equity Incentive Plan [Member] | Minimum [Member]
Note 7 - Share-Based Compensation (Details) [Line Items]
Share-based Compensation Arrangement By Share-based Payment Award Option Term	5 years
The 2006 Equity Incentive Plan [Member] | Maximum [Member]
Note 7 - Share-Based Compensation (Details) [Line Items]
Share-based Compensation Arrangement By Share-based Payment Award Option Term	10 years

XML

Note 5 - Income Taxes (Details) - Deferred Tax Assets and Liabilities (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Deferred tax assets:
Allowance for doubtful accounts	$ 63	$ 86
Accrued expenses	497	356
Share based compensation	1,113	859
Capital loss carryforward	1,124	1,132
Net operating loss		170
Tax credit carryforward		319
Other	39
Gross deferred tax assets	2,836	2,922
Less Valuation Allowance	(1,124)	(1,138)
Deferred tax assets	1,712	1,784
Deferred tax liabilities:
Prepaid expenses	286	324
Property and equipment	1,426	1,790
Intangible assets	6,879	6,415
Other	200	235
Deferred tax liabilities	8,791	8,764
Net deferred tax liabilities	$ (7,079)	$ (6,980)

XML

Note 7 - Share-Based Compensation (Details) - Stock Options Valuation Assumptions	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Minimum [Member]
Note 7 - Share-Based Compensation (Details) - Stock Options Valuation Assumptions [Line Items]
Expected dividend yield at date of grant	2.26%	2.63%	2.00%
Expected stock price volatility	30.34%	29.10%	28.70%
Risk-free interest rate	0.55%	0.56%	1.70%
Expected life of options (in years)	4 years	4 years	4 years
Maximum [Member]
Note 7 - Share-Based Compensation (Details) - Stock Options Valuation Assumptions [Line Items]
Expected dividend yield at date of grant	3.46%	3.98%	2.55%
Expected stock price volatility	30.51%	31.70%	32.00%
Risk-free interest rate	1.07%	1.15%	2.14%
Expected life of options (in years)	6 years	6 years	6 years

XML

Note 5 - Income Taxes (Details) - Income Tax Expense (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Income Tax Expense [Abstract]
Current	$ 7,169	$ 5,488	$ 4,018
Deferred	195	1,140	1,170
Total	7,364	6,628	5,188
Current	716	684	606
Deferred	(7)	(6)	(1)
Total	709	678	605
Current	1,020	787	609
Deferred	(89)	(954)	194
Total	931	(167)	803
Total	$ 9,004	$ 7,139	$ 6,596

XML

Note 1 - Summary of Significant Accounting Policies (Details) (USD $)	1 Months Ended	12 Months Ended
	May 31, 2013	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Note 1 - Summary of Significant Accounting Policies (Details) [Line Items]
Number of Common Stock Classes	2
Stock Issued During Period, Shares, Stock Splits (in Shares)	3
Stockholders' Equity Note, Stock Split, Conversion Ratio	0.5
Revenue Recognition, Subscription Period		12 months
Capitalized Computer Software, Additions		$ 1,700,000	$ 636,000
Number of Operating Segments			8
Number of Reportable Segments		1
Income Tax Credits and Adjustments		290,000	289,000	229,000
Unrecognized Tax Benefits		188,000	224,000	266,000
Unrecognized Tax Benefits, Interest on Income Taxes Expense		5,000	11,000
Cash Equivalents, at Carrying Value		21,200,000	7,500,000
Recognized Favorable Impact [Member]
Note 1 - Summary of Significant Accounting Policies (Details) [Line Items]
Unrecognized Tax Benefits		$ 188,000	$ 224,000
Furniture and Fixtures [Member] | Minimum [Member]
Note 1 - Summary of Significant Accounting Policies (Details) [Line Items]
Property, Plant and Equipment, Estimated Useful Lives		three
Furniture and Fixtures [Member] | Maximum [Member]
Note 1 - Summary of Significant Accounting Policies (Details) [Line Items]
Property, Plant and Equipment, Estimated Useful Lives		ten
Computer Equipment [Member] | Minimum [Member]
Note 1 - Summary of Significant Accounting Policies (Details) [Line Items]
Property, Plant and Equipment, Estimated Useful Lives		three
Computer Equipment [Member] | Maximum [Member]
Note 1 - Summary of Significant Accounting Policies (Details) [Line Items]
Property, Plant and Equipment, Estimated Useful Lives		five
Other Capitalized Property Plant and Equipment [Member] | Minimum [Member]
Note 1 - Summary of Significant Accounting Policies (Details) [Line Items]
Property, Plant and Equipment, Estimated Useful Lives		three
Other Capitalized Property Plant and Equipment [Member] | Maximum [Member]
Note 1 - Summary of Significant Accounting Policies (Details) [Line Items]
Property, Plant and Equipment, Estimated Useful Lives		five
Building and Building Improvements [Member] | Minimum [Member]
Note 1 - Summary of Significant Accounting Policies (Details) [Line Items]
Property, Plant and Equipment, Estimated Useful Lives		seven
Building and Building Improvements [Member] | Maximum [Member]
Note 1 - Summary of Significant Accounting Policies (Details) [Line Items]
Property, Plant and Equipment, Estimated Useful Lives		forty
Common Class A [Member]
Note 1 - Summary of Significant Accounting Policies (Details) [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in Shares)		99,562	92,460	358,707
Common Class B [Member]
Note 1 - Summary of Significant Accounting Policies (Details) [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in Shares)		6,407	15,410	59,785
Revenue [Member]
Note 1 - Summary of Significant Accounting Policies (Details) [Line Items]
Concentration Risk, Percentage		19.00%	22.00%	20.00%
Minimum [Member]
Note 1 - Summary of Significant Accounting Policies (Details) [Line Items]
Marketing Arrangement Term		1 year
License Term		1 year
Maximum [Member]
Note 1 - Summary of Significant Accounting Policies (Details) [Line Items]
Marketing Arrangement Term		3 years
License Term		3 years
Original Amount [Member]
Note 1 - Summary of Significant Accounting Policies (Details) [Line Items]
Number of Operating Segments			8
Revised Amount [Member]
Note 1 - Summary of Significant Accounting Policies (Details) [Line Items]
Number of Operating Segments		2

XML

Note 7 - Share-Based Compensation (Details) - Non-vested stock (USD $)	Dec. 31, 2013	Dec. 31, 2012
Common Class A [Member]
Note 7 - Share-Based Compensation (Details) - Non-vested stock [Line Items]
Outstanding at December 31, 2012	60,609	60,609
Outstanding at December 31, 2012 (in Dollars per share)	$ 5.77	$ 5.77
Outstanding at December 31, 2013	60,609	60,609
Outstanding at December 31, 2013 (in Dollars per share)	$ 5.77	$ 5.77
Common Class B [Member]
Note 7 - Share-Based Compensation (Details) - Non-vested stock [Line Items]
Outstanding at December 31, 2012	10,101	10,101
Outstanding at December 31, 2012 (in Dollars per share)	$ 34.65	$ 34.65
Outstanding at December 31, 2013	10,101	10,101
Outstanding at December 31, 2013 (in Dollars per share)	$ 34.65	$ 34.65

XML

Note 3 - Property and Equipment (Tables)

12 Months Ended

Dec. 31, 2013

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment [Table Text Block]

	2013		2012
	(In thousands)
Furniture and equipment	$	4,015	$	3,797
Computer equipment and software		18,569		17,647
Building		9,322		9,322
Land		425		425
		32,331		31,191
Less accumulated depreciation and amortization		20,433		18,698
Net property and equipment	$	11,898	$	12,493

	2013		2012
	(In thousands)
Furniture and equipment	$	519	$	514
Computer equipment and software		47		47
		566		561
Less accumulated amortization		294		196
Net assets under capital lease	$	272	$	365

XML

Note 6 - Notes Payable (Details) (USD $)				12 Months Ended				8 Months Ended	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013 New Combined Term Note [Member]	Dec. 31, 2013 Rate Option 1 [Member] One Month LIBOR [Member] Revolving Credit Facility [Member]	Dec. 31, 2013 Rate Option 2 [Member] One, Two, Three, Six, or Twelve Month LIBOR [Member] Revolving Credit Facility [Member]	May 08, 2013 Term Loan MIV Acquisition [Member]	May 08, 2013 Term Loan OCS Acquisition [Member]	Dec. 31, 2013 New Combined Term Note [Member]	Dec. 31, 2013 New Combined Term Note [Member]	May 08, 2013 New Combined Term Note [Member]	Dec. 31, 2013 Revolving Credit Facility [Member]	Mar. 31, 2008 Revolving Credit Facility [Member]
Note 6 - Notes Payable (Details) [Line Items]
Debt Instrument, Interest Rate, Stated Percentage			3.12%			3.79%	3.79%	3.12%	3.12%
Number of Monthly Installments								60	60	60
Debt Instrument, Periodic Payment (in Dollars)								$ 212,468	$ 212,468
Line of Credit Facility, Maximum Borrowing Capacity (in Dollars)	6,500,000	6,500,000										6,500,000
Borrowing Capacity, Percentage of Accounts Receivable											75.00%
Debt Instrument, Basis Spread on Variable Rate				2.50%	2.20%
Line of Credit Facility, Interest Rate at Period End											2.67%
Line of Credit Facility, Remaining Borrowing Capacity (in Dollars)											$ 6,500,000

XML

Note 4 - Goodwill and Intangible Assets (Details) - Intangible assets (USD $) In Thousands, unless otherwise specified						12 Months Ended				12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2013 Customer Relationships [Member]	Dec. 31, 2012 Customer Relationships [Member]	Dec. 31, 2013 Noncompete Agreements [Member]	Dec. 31, 2012 Noncompete Agreements [Member]	Dec. 31, 2013 Trade Names [Member]	Dec. 31, 2012 Trade Names [Member]	Dec. 31, 2013 Minimum [Member] Customer Relationships [Member]	Dec. 31, 2012 Minimum [Member] Customer Relationships [Member]	Dec. 31, 2013 Minimum [Member] Trade Names [Member]	Dec. 31, 2012 Minimum [Member] Trade Names [Member]	Dec. 31, 2013 Maximum [Member] Customer Relationships [Member]	Dec. 31, 2012 Maximum [Member] Customer Relationships [Member]	Dec. 31, 2013 Maximum [Member] Trade Names [Member]	Dec. 31, 2012 Maximum [Member] Trade Names [Member]
Finite-Lived Intangible Assets [Line Items]
Gross	$ 57,593	$ 57,799
Net	57,593	57,799	57,730
Gross	1,191	1,191
Net	1,191	1,191
Useful Life						3 years	3 years			5 years	5 years	5 years	5 years	15 years	15 years	10 years	10 years
Gross				10,499	10,521
Accumulated Amortization	9,182	8,250		7,334	6,709	430	346	1,418	1,195
Net	3,649	4,603		3,165	3,812		84	484	707
Useful Life						3 years	3 years			5 years	5 years	5 years	5 years	15 years	15 years	10 years	10 years
Gross						430	430
Useful Life						3 years	3 years			5 years	5 years	5 years	5 years	15 years	15 years	10 years	10 years
Gross								1,902	1,902
Gross	12,831	12,853
Accumulated Amortization	9,182	8,250		7,334	6,709	430	346	1,418	1,195
Gross	14,022	14,044
Net	$ 4,840	$ 5,794

XML

Note 1 - Summary of Significant Accounting Policies (Details) - Net Income Per Share Computation (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Employee Stock Option [Member] | Common Class A [Member]
Weighted average effect of dilutive securities:
Dilutive securities	388	492	474
Employee Stock Option [Member] | Common Class B [Member]
Weighted average effect of dilutive securities:
Dilutive securities	61	82	79
Restricted Stock [Member] | Common Class A [Member]
Weighted average effect of dilutive securities:
Dilutive securities	34	37	36
Restricted Stock [Member] | Common Class B [Member]
Weighted average effect of dilutive securities:
Dilutive securities	6	6	6
Common Class A [Member]
Numerator for net income per share - basic:
Allocation of distributed earnings (in Dollars)	$ 1,071	$ 8,681	$ 2,956
Allocation of undistributed earnings (in Dollars)	6,670	(1,147)	2,826
Net income attributable to common shareholders (in Dollars)	7,741	7,534	5,782
Denominator for net income per share - basic:
Weighted average common shares outstanding - basic	20,677	20,325	20,016
Weighted average effect of dilutive securities:
Weighted average common shares outstanding - diluted	21,099	20,854	20,526
Net income per share - diluted (in Dollars per share)	$ 0.37	$ 0.37	$ 0.29
Net income per share - basic (in Dollars per share)	$ 0.37	$ 0.36	$ 0.28
Numerator for net income per share - diluted:
Net income attributable to common shareholders for basic computation (in Dollars)	7,741	7,534	5,782
Common Class B [Member]
Numerator for net income per share - basic:
Allocation of distributed earnings (in Dollars)	1,071	8,681	2,956
Allocation of undistributed earnings (in Dollars)	6,672	(1,147)	2,826
Net income attributable to common shareholders (in Dollars)	7,743	7,534	5,782
Denominator for net income per share - basic:
Weighted average common shares outstanding - basic	3,447	3,388	3,336
Weighted average effect of dilutive securities:
Weighted average common shares outstanding - diluted	3,514	3,476	3,421
Net income per share - diluted (in Dollars per share)	$ 2.20	$ 2.17	$ 1.69
Net income per share - basic (in Dollars per share)	$ 2.25	$ 2.22	$ 1.73
Numerator for net income per share - diluted:
Net income attributable to common shareholders for basic computation (in Dollars)	$ 7,743	$ 7,534	$ 5,782

XML

Note 6 - Notes Payable (Details) - Notes Payable (Parentheticals) (USD $)			8 Months Ended	12 Months Ended		12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013 New Combined Term Note [Member]	Dec. 31, 2013 New Combined Term Note [Member]	May 08, 2013 New Combined Term Note [Member]	Dec. 31, 2012 Term Loan MIV Acquisition and Term Loan OCS Acquisition [Member]
Note 6 - Notes Payable (Details) - Notes Payable (Parentheticals) [Line Items]
Revolving credit note, maximum borrowing capacity	$ 6,500,000	$ 6,500,000
Note payable, face amount			11,800,000	11,800,000
Number of monthly installments			60	60	60
Fixed interest rate			3.12%	3.12%		3.79%
Monthly payment			$ 212,468	$ 212,468		$ 201,294

XML

Note 10 - Related Party (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Ameritas Life Insurance Corp [Member]
Note 10 - Related Party (Details) [Line Items]
Related Party Transaction, Amounts of Transaction	$ 212,000	$ 198,000	$ 166,000
EPIC Property Management [Member]
Note 10 - Related Party (Details) [Line Items]
Related Party Transaction, Amounts of Transaction			103,000
Nebraska Global Investment Company LLC [Member]
Note 10 - Related Party (Details) [Line Items]
Related Party Transaction, Amounts of Transaction	$ 57,000	$ 55,000

XML

Note 5 - Income Taxes (Details) - Income Tax Reconciliation (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Income Tax Reconciliation [Abstract]
Expected federal income taxes	$ 8,571	$ 7,772	$ 6,356
Foreign tax rate differential	(226)	(203)	(145)
U.S. tax graduated rates		11	(99)
State income taxes, net of federal benefit and state tax credits	605	552	522
Federal tax credits	(217)	(282)	(132)
Uncertain tax positions	(43)	(73)	9
Deferred tax adjustment due to change in state tax law		(661)
Recapitalization expenses	182
Other	132	23	85
Total	$ 9,004	$ 7,139	$ 6,596

XML

Supplemental Disclosures Of Non-Cash Investing And Financing Activities

12 Months Ended

Dec. 31, 2013

Supplemental Cash Flow Elements [Abstract]

Cash Flow, Supplemental Disclosures [Text Block]

Supplemental disclosures of non-cash investing and financing activities:

Capital lease obligations for property and equipment originating during the years ended December 31, 2013, 2012 and 2011 was $5,000, $9,000 and $115,000, respectively.

In connection with the Company’s equity incentive plans, certain optionees tendered to the Company previously owned shares to pay for the option strike price. The total non-cash stock options exercised was $150,000, $4.6 million and $445,000 for the years ended December 31, 2013, 2012, and 2011, respectively.

XML

Note 11 - Associate Benefits (Details) (USD $)	12 Months Ended			24 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2013
Disclosure Text Block Supplement [Abstract]
Defined Contribution Plan, Employer Matching Contribution, Percent of Employees' Gross Pay				25.00%
Defined Contribution Plan Maximum Percentage of Annual Contribution Employee Subject to Match				6.00%
Defined Contribution Plan, Employers Matching Contribution, Annual Vesting Percentage				20.00%
Defined Contribution Plan, Employer Discretionary Contribution Amount (in Dollars)	$ 252,000	$ 236,000	$ 182,000

XML

Note 4 - Goodwill and Intangible Assets (Details) - Summary of changes in the carrying amount of goodwill (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Summary of changes in the carrying amount of goodwill [Abstract]
Balance	$ 57,799	$ 57,730
Foreign Currency Translation	(206)	69
Balance	$ 57,593	$ 57,799

XML

Note 7 - Share-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	2013				2012				2011
Expected dividend yield at date of grant		2.26	to	3.46%		2.63	to	3.98%		2.00	to	2.55%
Expected stock price volatility		30.34	to	30.51%		29.10	to	31.70%		28.70	to	32.00%
Risk-free interest rate		0.55	to	1.07%		0.56	to	1.15%		1.70	to	2.14%
Expected life of options (in years)		4	to	6		4	to	6		4	to	6

Schedule of Share-based Compensation, Activity [Table Text Block]

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Terms (Years)		Aggregate Intrinsic Value (In thousands)
Class A
Outstanding at December 31, 2012		1,367,754		$	8.45
Granted		232,344		$	15.98
Exercised		(155,253	)	$	3.36			$	1,126
Forfeited		--			--
Outstanding at December 31, 2013		1,444,845		$	10.21		6.48	$	12,438
Exercisable at December 31, 2013		693,975		$	8.96		5.37	$	6,846
Class B
Outstanding at December 31, 2012		227,959		$	18.45
Granted		38,718		$	29.35
Exercised		(31,875	)	$	14.69			$	992
Forfeited		--			--
Outstanding at December 31, 2013		234,802		$	20.76		6.54	$	3,276
Exercisable at December 31, 2013		109,662		$	18.85		5.43	$	1,739

Schedule of Nonvested Share Activity [Table Text Block]

	Class A Shares Outstanding		Class A Weighted Average Grant Date Fair Value Per Share		Class B Shares Outstanding		Class B Weighted Average Grant Date Fair Value Per Share
Outstanding at December 31, 2012		60,609	$	5.77		10,101	$	34.65
Granted		--		--		--		--
Vested		--		--		--		--
Forfeited		--		--		--		--
Outstanding at December 31, 2013		60,609	$	5.77		10,101	$	34.65

XML

Note 6 - Notes Payable (Tables)

12 Months Ended

Dec. 31, 2013

Debt Disclosure [Abstract]

Schedule of Debt [Table Text Block]

	2013		2012
	(In thousands)
Revolving credit note with U.S. Bank, maximum available $6.5 million subject to borrowing base, matures June 30, 2014	$	--	$	--
Note payable to U.S. Bank for $11.8 million, interest at a 3.12% fixed rate, 60 monthly principal and interest payments of $212,468 through April 2018		10,324		--
Notes payable to U.S. Bank, interest at a 3.79% fixed rate, monthly principal and interest payments of $201,294, with final balloon payment due July 31, 2013		--		12,436
Total notes payable		10,324		12,436
Less current portion		2,256		12,436
Note payable, net of current portion	$	8,068	$	--

Schedule of Maturities of Long-term Debt [Table Text Block]

	Total Payments		2014		2015		2016		2017		2018
	(In thousands)
Notes payable	$	10,324	$	2,256	$	2,328	$	2,402	$	2,480	$	858

XML

Note 7 - Share-Based Compensation (Details) - Stock Option Activity (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Common Class A [Member]
Note 7 - Share-Based Compensation (Details) - Stock Option Activity [Line Items]
Number of options	1,444,845	1,367,754
Weighted average exercise price (in Dollars per share)	$ 10.21	$ 8.45
Weighted average remaining contractual terms (years)	6 years 175 days
Aggregate intrinsic value (in thousands) (in Dollars)	$ 12,438
Number of options	693,975
Weighted average exercise price (in Dollars per share)	$ 8.96
Weighted average remaining contractual terms (years)	5 years 135 days
Aggregate intrinsic value (in thousands) (in Dollars)	6,846,000
Number of options	232,344	238,890	498,024
Weighted average exercise price (in Dollars per share)	$ 15.98
Number of options	(155,253)
Weighted average exercise price (in Dollars per share)	$ 3.36
Aggregate intrinsic value (in thousands) (in Dollars)	1,126,000	5,600,000	900,000
Common Class B [Member]
Note 7 - Share-Based Compensation (Details) - Stock Option Activity [Line Items]
Number of options	234,802	227,959
Weighted average exercise price (in Dollars per share)	$ 20.76	$ 18.45
Weighted average remaining contractual terms (years)	6 years 197 days
Aggregate intrinsic value (in thousands) (in Dollars)	3,276
Number of options	109,662
Weighted average exercise price (in Dollars per share)	$ 18.85
Weighted average remaining contractual terms (years)	5 years 156 days
Aggregate intrinsic value (in thousands) (in Dollars)	1,739,000
Number of options	38,718	39,815	83,004
Weighted average exercise price (in Dollars per share)	$ 29.35
Number of options	(31,875)
Weighted average exercise price (in Dollars per share)	$ 14.69
Aggregate intrinsic value (in thousands) (in Dollars)	$ 992,000	$ 941,000	$ 150,000

XML

Note 5 - Income Taxes (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Income Tax Disclosure [Abstract]
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	35.00%	35.00%	35.00%
Deferred Tax Assets, Net, Current	$ 53,000	$ 547,000
Deferred Tax Liabilities, Net, Noncurrent	7,132,000	7,527,000
Valuation Allowance, Deferred Tax Asset, Change in Amount	14,000	214,000	0
Capital Loss Carryforwards	3,100,000
Deferred Tax Assets, Valuation Allowance	1,124,000	1,138,000
Undistributed Earnings of Foreign Subsidiaries	10,700,000
Potential Income Tax Related To Repatriation Of Foreign Earnings		705,000
Unrecognized Tax Benefits	188,000	224,000	266,000
Unrecognized Tax Benefits, Interest on Income Taxes Accrued	5,000
Unrecognized Tax Benefits, Income Tax Penalties Accrued	$ 0

XML

Note 9 - Leases (Tables)

12 Months Ended

Dec. 31, 2013

Leases [Abstract]

Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]

Year Ending December 31,	Capital Leases		Operating Leases
	(In thousands)
2014	$	137	$	782
2015		104		753
2016		9		507
2017		--		324
2018		--		202
Thereafter		--		14
Total minimum lease payments		250
Less: Amount representing interest		28
Present value of minimum lease payments		222
Less: Current maturities		114
Capital lease obligations, net of current portion	$	108

XML

Note 12 - Segment Information (Tables)

12 Months Ended

Dec. 31, 2013

Segment Reporting [Abstract]

Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas [Table Text Block]

	2013		2012		2011
	(In thousands)
Revenue:
United States	$	85,863	$	79,895	$	70,074
Canada		6,727		6,526		5,693
Total	$	92,590	$	86,421	$	75,767
Long-lived assets:
United States	$	71,139	$	72,817
Canada		3,383		3,414
Total	$	74,522	$	76,231
Total assets:
United States	$	97,982	$	87,670
Canada		13,014		12,376
Total	$	110,996	$	100,046

XML

Consolidated Statements of Cash Flows (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Cash flows from operating activities:
Net income	$ 15,484,000	$ 15,068,000	$ 11,564,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	3,732,000	4,699,000	5,065,000
Deferred income taxes	16,000	(421,000)	1,297,000
(Gain) Loss on sale of property and equipment	23,000	4,000	(1,000)
Tax benefit from exercise of stock options	84,000	601,000	66,000
Non-cash stock compensation expense	955,000	388,000	763,000
Change in assets and liabilities:
Trade accounts receivable	970,000	(879,000)	(2,064,000)
Unbilled revenue	(386,000)	(11,000)	194,000
Prepaid expenses	(166,000)	(357,000)	253,000
Other current assets	76,000	(106,000)	(121,000)
Accounts payable	331,000	(516,000)	52,000
Accrued expenses, wages, bonus and profit sharing	212,000	1,602,000	1,176,000
Income taxes payable and recoverable	(100,000)	(303,000)	1,420,000
Deferred revenue	(1,916,000)	(637,000)	(1,183,000)
Net cash provided by operating activities	19,315,000	19,132,000	18,481,000
Cash flows from investing activities:
Purchases of property and equipment	(2,188,000)	(2,348,000)	(2,812,000)
Earn-out related to acquisitions			(4,115,000)
Net cash used in investing activities	(2,188,000)	(2,348,000)	(6,927,000)
Cash flows from financing activities:
Proceeds from notes payable			4,545,000
Payments on notes payable	(2,112,000)	(2,050,000)	(6,218,000)
Payments on capital lease obligations	(110,000)	(108,000)	(130,000)
Proceeds from exercise of stock options	840,000	1,283,000	568,000
Excess tax benefit from share-based compensation	755,000	2,078,000	407,000
Repurchase of shares for payroll tax withholdings related to share-based compensation	(55,000)	(527,000)	(146,000)
Payment of dividends on common stock	(2,142,000)	(17,363,000)	(5,912,000)
Net cash used in financing activities	(2,824,000)	(16,687,000)	(6,886,000)
Effect of exchange rate changes on cash	(497,000)	107,000	(105,000)
Net increase in cash and cash equivalents	13,806,000	204,000	4,563,000
Cash and cash equivalents at beginning of period	8,286,000	8,082,000	3,519,000
Cash and cash equivalents at end of period	22,092,000	8,286,000	8,082,000
Supplemental disclosure of cash paid for:
Interest expense, net of capitalized amounts	368,000	554,000	542,000
Income taxes	$ 8,181,000	$ 5,108,000	$ 3,383,000

XML

Supplemental Disclosures Of Non-Cash Investing And Financing Activities (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Supplemental Cash Flow Elements [Abstract]
Capital Lease Obligations Incurred	$ 5,000	$ 9,000	$ 115,000
Stock Issued	$ 150,000	$ 4,600,000	$ 445,000

XML

Note 3 - Property and Equipment (Details) - Property and Equipment (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Property, Plant and Equipment [Line Items]
Furniture and equipment	$ 4,015	$ 3,797
Computer equipment and software	18,569	17,647
Building	9,322	9,322
Land	425	425
	32,331	31,191
Less accumulated depreciation and amortization	20,433	18,698
Net property and equipment	11,898	12,493
Property and equipment under capital lease	566	561
Less accumulated amortization	294	196
Net assets under capital lease	272	365
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property and equipment under capital lease	519	514
Computer Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment under capital lease	$ 47	$ 47

XML

Note 6 - Notes Payable (Details) - Remaining Note Payable Maturities (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Remaining Note Payable Maturities [Abstract]
Notes payable	$ 10,324	$ 12,436
Notes payable	2,256
Notes payable	2,328
Notes payable	2,402
Notes payable	2,480
Notes payable	$ 858

XML

Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 22,092	$ 8,286
Trade accounts receivable, less allowance for doubtful accounts of $183 and $244, respectively	11,043	12,119
Unbilled revenue	1,282	932
Prepaid expenses	1,310	1,269
Income taxes receivable	265	158
Deferred income taxes	53	547
Other current assets	429	504
Total current assets	36,474	23,815
Net property and equipment	11,898	12,493
Intangible assets, net	4,840	5,794
Goodwill	57,593	57,799
Other	191	145
Total assets	110,996	100,046
Current liabilities:
Current portion of notes payable	2,256	12,436
Accounts payable	654	291
Accrued wages, bonus and profit sharing	4,319	4,392
Accrued expenses	2,462	2,265
Current portion of capital lease obligations	114	102
Deferred revenue	13,885	15,812
Total current liabilities	23,690	35,298
Notes payable, net of current portion	8,068
Deferred income taxes	7,132	7,527
Deferred revenue	243	254
Capital lease obligations, net of current portion	108	225
Total liabilities	39,241	43,304
Shareholders’ equity:
Preferred stock, $0.01 par value, authorized 2,000,000 shares, none issued
Additional paid-in capital	42,192	39,493
Retained earnings	58,042	44,700
Accumulated other comprehensive income, foreign currency translation adjustment	302	1,124
Treasury stock, at cost; 4,516,245 Class A shares, 752,707 Class B shares in 2013 and 4,504,800 Class A shares, 750,800 Class B shares in 2012	(28,810)	(28,604)
Total shareholders’ equity	71,755	56,742
Total liabilities and shareholders’ equity	110,996	100,046
Common Class A [Member]
Shareholders’ equity:
Common Stock	25	25
Common Class B [Member]
Shareholders’ equity:
Common Stock	$ 4	$ 4

XML

Note 5 - Income Taxes (Details) - Income Before Income Taxes (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Income Before Income Taxes [Abstract]
U.S. Operations	$ 21,882	$ 19,836	$ 16,017
Foreign Operations	2,606	2,371	2,143
	$ 24,488	$ 22,207	$ 18,160

XML

Consolidated Statements of Shareholders' Equity (USD $) In Thousands	Common Stock [Member] Common Class A [Member]	Common Stock [Member] Common Class B [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Treasury Stock [Member]	Total
Balances at Dec. 31, 2010	$ 24	$ 4	$ 28,950	$ 41,343	$ 1,108	$ (22,845)	$ 48,584
Purchase of treasury stock						(591)	(591)
Issuance of common shares for the exercise of stock options			940				940
Tax benefit from the exercise of options and vested restricted stock			407				407
Non-cash stock compensation expense			763				763
Dividends declared per common share				(5,912)			(5,912)
Other comprehensive income (loss), foreign currency translation adjustment					(201)		(201)
Net income				11,564			11,564
Balances at Dec. 31, 2011	24	4	31,060	46,995	907	(23,436)	55,554
Purchase of treasury stock						(5,168)	(5,168)
Issuance of common shares for the exercise of stock options	1		5,967				5,968
Tax benefit from the exercise of options and vested restricted stock			2,078				2,078
Non-cash stock compensation expense			388				388
Dividends declared per common share				(17,363)			(17,363)
Other comprehensive income (loss), foreign currency translation adjustment					217		217
Net income				15,068			15,068
Balances at Dec. 31, 2012	25	4	39,493	44,700	1,124	(28,604)	56,742
Purchase of treasury stock						(206)	(206)
Issuance of common shares for the exercise of stock options			990				990
Tax benefit from the exercise of options and vested restricted stock			755				755
Non-cash stock compensation expense			955				955
Fractional share cashed out			(1)				(1)
Dividends declared per common share				(2,142)			(2,142)
Other comprehensive income (loss), foreign currency translation adjustment					(822)		(822)
Net income				15,484			15,484
Balances at Dec. 31, 2013	$ 25	$ 4	$ 42,192	$ 58,042	$ 302	$ (28,810)	$ 71,755

XML

Note 9 - Leases (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Leases [Abstract]
Operating Leases, Rent Expense	$ 720,000	$ 715,000	$ 986,000

XML

Note 1 - Summary of Significant Accounting Policies (Details) - Fair Value of Financial Assets and Liabilities (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Note 1 - Summary of Significant Accounting Policies (Details) - Fair Value of Financial Assets and Liabilities [Line Items]
Fair value of financial asset	$ 21,242	$ 7,487
Money Market Funds [Member] | Fair Value, Inputs, Level 1 [Member]
Note 1 - Summary of Significant Accounting Policies (Details) - Fair Value of Financial Assets and Liabilities [Line Items]
Fair value of financial asset	7,266	5,245
Money Market Funds [Member]
Note 1 - Summary of Significant Accounting Policies (Details) - Fair Value of Financial Assets and Liabilities [Line Items]
Fair value of financial asset	7,266	5,245
Commercial Paper [Member] | Fair Value, Inputs, Level 1 [Member]
Note 1 - Summary of Significant Accounting Policies (Details) - Fair Value of Financial Assets and Liabilities [Line Items]
Fair value of financial asset	13,976	2,242
Commercial Paper [Member]
Note 1 - Summary of Significant Accounting Policies (Details) - Fair Value of Financial Assets and Liabilities [Line Items]
Fair value of financial asset	13,976	2,242
Fair Value, Inputs, Level 1 [Member]
Note 1 - Summary of Significant Accounting Policies (Details) - Fair Value of Financial Assets and Liabilities [Line Items]
Fair value of financial asset	$ 21,242	$ 7,487

XML

Schedule II - Valuation and Qualifying Accounts (Details) - Valuation and Qualifying Accounts (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Allowance for doubtful accounts:
Balance at Beginning of Year	$ 244	$ 289	$ 337
Bad Debt Expense	145	173	80
Write-offs Net of Recoveries	206	218	128
Balance at End of Year	$ 183	$ 244	$ 289

XML

Schedule II - Valuation and Qualifying Accounts

12 Months Ended

Dec. 31, 2013

Valuation and Qualifying Accounts [Abstract]

Schedule of Valuation and Qualifying Accounts Disclosure [Text Block]

	Balance at Beginning of Year		Bad Debt Expense		Write-offs Net of Recoveries		Balance at End of Year
Allowance for doubtful accounts:
Year Ended December 31, 2011		337		80		128		289
Year Ended December 31, 2012		289		173		218		244
Year Ended December 31, 2013		244		145		206		183

XML

Note 1 - Summary of Significant Accounting Policies (Details) - Long-term Debt (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Long-term Debt [Abstract]
Total carrying amount of long-term debt	$ 10,324	$ 12,436
Estimated fair value of long-term debt	$ 10,156	$ 12,490

XML

Note 1 - Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block]

	2013		2012		2011
	(In thousands)
Amounts charged against income, before income tax benefit	$	955	$	388	$	763
Amount of related income tax benefit		377		153		302
Total impact to net income	$	578	$	235	$	461

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

	Level 1		Level 2		Level 3		Total
			(In thousands)
As of December 31, 2013
Money Market Funds	$	7,266	$	--	$	--	$	7,266
Commercial Paper	$	13,976	$	--	$	--	$	13,976
Total	$	21,242	$	--	$	--	$	21,242
As of December 31, 2012
Money Market Funds	$	5,245	$	--	$	--	$	5,245
Commercial Paper	$	2,242	$	--	$	--	$	2,242
Total	$	7,487	$	--	$	--	$	7,487

Schedule of Long-term Debt Instruments [Table Text Block]

	December 31, 2013		December 31, 2012
	(In thousands)
Total carrying amount of long-term debt	$	10,324	$	12,436
Estimated fair value of long-term debt	$	10,156	$	12,490

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	2013				2012						2011
	Class A		Class B		Class A			Class B			Class A		Class B
	(In thousands, except per share data)
Numerator for net income per share - basic:
Allocation of distributed earnings	$	1,071	$	1,071	$	8,681		$	8,681		$	2,956	$	2,956
Allocation of undistributed earnings		6,670		6,672		(1,147	)		(1,147	)		2,826		2,826
Net income attributable to common shareholders	$	7,741	$	7,743	$	7,534		$	7,534		$	5,782	$	5,782
Denominator for net income per share - basic:
Weighted average common shares outstanding - basic		20,677		3,447		20,325			3,388			20,016		3,336
Net income per share - basic	$	0.37	$	2.25	$	0.37		$	2.22		$	0.29	$	1.73
Numerator for net income per share - diluted:
Net income attributable to common shareholders for basic computation	$	7,741	$	7,743	$	7,534		$	7,534		$	5,782	$	5,782
Denominator for net income per share - diluted:
Weighted average common shares outstanding - basic		20,677		3,447		20,325			3,388			20,016		3,336
Weighted average effect of dilutive securities:
Stock Options		388		61		492			82			474		79
Restricted Stock		34		6		37			6			36		6
Weighted average common shares outstanding - diluted		21,099		3,514		20,854			3,476			20,526		3,421
Net income per share - diluted	$	0.37	$	2.20	$	0.36		$	2.17		$	0.28	$	1.69

XML

Consolidated Statements of Shareholders' Equity (Parentheticals) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Common Stock [Member] | Common Class A [Member]
Shares of treasury stock purchased	11,445	324,093	51,864
Shares of common stock issued for the exercise of stock options	155,253	786,303	176,013
Issuance of restriced shares, net of forfeitures		10,074	42,969
Dividends declared per common share (in Dollars per share)	$ 0.05	$ 0.42	$ 0.15
Common Stock [Member] | Common Class B [Member]
Shares of treasury stock purchased	1,908	54,015	8,644
Shares of common stock issued for the exercise of stock options	31,876	131,051	29,336
Issuance of restriced shares, net of forfeitures		1,679	7,162
Dividends declared per common share (in Dollars per share)	$ 0.31	$ 2.54	$ 0.88
Common Class A [Member]
Shares of common stock issued for the exercise of stock options	155,253
Common Class B [Member]
Shares of common stock issued for the exercise of stock options	31,875

XML

Consolidated Balance Sheets (Parentheticals) (USD $) In Thousands, except Share data, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Allowance for doubtful accounts (in Dollars) (in Dollars)	$ 183	$ 244
Preferred stock, par value (in Dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	2,000,000	2,000,000
Preferred stock, shares issued	0	0
Common Class A [Member]
Common Stock, Par Value (in Dollars per share)	$ 0.001	$ 0.001
Common Stock, Shares Authorized	60,000,000	60,000,000
Common Stock, Shares Issued	25,285,029	25,129,776
Common Stock, Shares Outstanding	20,768,784	20,624,976
Treasury stock, Shares	4,516,245	4,504,800
Common Class B [Member]
Common Stock, Par Value (in Dollars per share)	$ 0.001	$ 0.001
Common Stock, Shares Authorized	80,000,000	80,000,000
Common Stock, Shares Issued	4,220,117	4,188,296
Common Stock, Shares Outstanding	3,467,410	3,437,496
Treasury stock, Shares	752,707	750,800

XML

Note 8 - Restructuring and Severance Costs

12 Months Ended

Dec. 31, 2013

Restructuring and Related Activities [Abstract]

Restructuring and Related Activities Disclosure [Text Block]

(8)     Restructuring and Severance Costs

The Company records restructuring liabilities that represent charges incurred in connection with consolidations, including operations from acquisitions. These charges consist primarily of severance costs. Severance charges are based on various factors including the employee’s length of service, contract provisions, and salary levels. Expense for one-time termination benefits are accrued over each individual’s service period. The Company records the expense using its best estimate based upon detailed analysis. Although significant changes are not expected, actual costs may differ from these estimates.

In 2011, the Company vacated its office in Wausau, Wisconsin, and reached agreements to terminate the operating lease for its Wausau office and other services. As a result, the Company made lump-sum payments totaling $280,000, which were included in selling, general and administrative expenses in 2011.

XML

Document And Entity Information (USD $)	12 Months Ended
	Dec. 31, 2013	Jun. 28, 2013	Feb. 21, 2014 Common Class A [Member]	Feb. 21, 2014 Common Class B [Member]
Document Information [Line Items]
Entity Registrant Name	NATIONAL RESEARCH CORP
Document Type	10-K
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding			20,795,772	3,478,128
Entity Public Float		$ 201,088,365
Amendment Flag	false
Entity Central Index Key	0000070487
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Accelerated Filer
Entity Well-known Seasoned Issuer	No
Document Period End Date	Dec. 31, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY

XML

Note 9 - Leases

12 Months Ended

Dec. 31, 2013

Leases [Abstract]

Leases of Lessor Disclosure [Text Block]

(9)     Leases

The Company leases printing equipment in the United States, and office space in Canada, California, Nebraska and Washington. The Company recorded rent expense in connection with its operating leases of $720,000, $715,000, and $986,000 in 2013, 2012, and 2011, respectively. The Company also has capital leases for production, mailing and computer equipment.

Payments under non-cancelable operating leases and capital leases at December 31, 2013 are:

Year Ending December 31,	Capital Leases		Operating Leases
	(In thousands)
2014	$	137	$	782
2015		104		753
2016		9		507
2017		--		324
2018		--		202
Thereafter		--		14
Total minimum lease payments		250
Less: Amount representing interest		28
Present value of minimum lease payments		222
Less: Current maturities		114
Capital lease obligations, net of current portion	$	108

XML

Consolidated Statements of Income (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Revenue	$ 92,590	$ 86,421	$ 75,767
Operating expenses:
Direct	38,844	35,461	28,667
Selling, general and administrative	25,208	23,542	23,300
Depreciation and amortization	3,732	4,699	5,065
Total operating expenses	67,784	63,702	57,032
Operating income	24,806	22,719	18,735
Other income (expense):
Interest income	63	32	13
Interest expense	(397)	(541)	(629)
Other, net	16	(3)	41
Total other expense	(318)	(512)	(575)
Income before income taxes	24,488	22,207	18,160
Provision for income taxes	9,004	7,139	6,596
Net income	$ 15,484	$ 15,068	$ 11,564
Common Class A [Member]
Basic earnings per share:
Diluted earnings per share (in Dollars per share)	$ 0.37	$ 0.37	$ 0.29
Basic earnings per share (in Dollars per share)	$ 0.37	$ 0.36	$ 0.28
Weighted average shares and share equivalents outstanding
Weighted average shares and share equivalents outstanding, basic (in Shares)	20,677	20,325	20,016
Weighted average shares and share equivalents outstanding, diluted (in Shares)	21,099	20,854	20,526
Common Class B [Member]
Basic earnings per share:
Diluted earnings per share (in Dollars per share)	$ 2.20	$ 2.17	$ 1.69
Basic earnings per share (in Dollars per share)	$ 2.25	$ 2.22	$ 1.73
Weighted average shares and share equivalents outstanding
Weighted average shares and share equivalents outstanding, basic (in Shares)	3,447	3,388	3,336
Weighted average shares and share equivalents outstanding, diluted (in Shares)	3,514	3,476	3,421

XML

Note 3 - Property and Equipment

12 Months Ended

Dec. 31, 2013

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

(3)     Property and Equipment

At December 31, 2013, and 2012, property and equipment consisted of the following:

	2013		2012
	(In thousands)
Furniture and equipment	$	4,015	$	3,797
Computer equipment and software		18,569		17,647
Building		9,322		9,322
Land		425		425
		32,331		31,191
Less accumulated depreciation and amortization		20,433		18,698
Net property and equipment	$	11,898	$	12,493

Depreciation and amortization expense related to property and equipment, including assets under capital lease, for the years ended December 31, 2013, 2012, and 2011 was $2.8 million, $3.4 million, and $3.5 million, respectively.

Property and equipment included the following amounts under capital lease:

	2013		2012
	(In thousands)
Furniture and equipment	$	519	$	514
Computer equipment and software		47		47
		566		561
Less accumulated amortization		294		196
Net assets under capital lease	$	272	$	365

XML

Note 2 - Variable Interest Entity

12 Months Ended

Dec. 31, 2013

Variable Interest Entity [Abstract]

Variable Interest Entity [Text Block]

(2)     Variable Interest Entity

Connect was formed in June 2013 to develop and commercialize the Connect programs. Connect programs provide healthcare organizations the technology to engage patients through real-time identification and management of individual patient needs, preferences, risks, and experiences.  The platform ensures that organizations have access to a longitudinal view of the patient to more effectively manage patient engagement across the continuum of care. NRC has a 49% ownership interest in Connect. NG Customer-Connect, LLC holds 25% interest, and the remaining 26% is held by Illuminate Health, LLC. NRC has agreed to lease certain employees to Connect. In return for a fee, Connect will service the Company’s discharge call program clients. NRC will make capital contributions of up to $2.5 million on an as-needed basis as determined by the Board of Directors of Connect. Profits and losses are allocated under the hypothetical liquidation at book value approach.

NRC has a future obligation to purchase the other equity units in Connect when certain targeted events have been achieved. If, at any time, there is at least $12.5 million of annual recurring contract value, including the NRC contracts being serviced, and the members have approved a financial statement showing a pro forma minimum 35% EBITDA margin for revenue on a going-forward basis, then within 90 days thereafter NRC is required to purchase from the other members, and the other members shall be required to sell to NRC, all of their equity units not owned by NRC. As of December 31, 2013, the price at which NG Customer-Connect, LLC and Illuminate Health LLC had the obligation to sell their equity units to NRC was $0.

NRC is deemed the primary beneficiary of the variable interest entity and has a 49% ownership interest in Connect. An entity is considered the primary beneficiary of a variable interest entity if it has both the power to direct the activities of the variable interest entity that most significantly impact the variable interest entity’s economic performance and an obligation to absorb losses or the right to receive benefits that could potentially be significant to the variable interest entity. Connect is thinly capitalized and relies on NRC advances and reimbursements to fund its operations. Together, NRC and NRC associates hold a majority of the voting rights on Connect board of directors and have the ability to direct the majority of Connect operations.

Included in the Company’s consolidated financial statements for the year ended December 31, 2013, was Connect’s net operating loss of $837,000. The net operating loss of Connect during 2013 was attributable to NRC. Connect had total assets of $649,000 and total liabilities of $186,000 as of December 31, 2013.

XML

Accounting Policies, by Policy (Policies)

12 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Nature of Operations [Text Block]

Description of Business and Basis of Presentation

National Research Corporation (“NRC” or the “Company”) is a leading provider of analytics and insights that facilitate revenue growth, patient, employee and customer retention and patient engagement for healthcare providers, payers and other healthcare organizations in the United States and Canada. The Company’s ten largest clients accounted for 19%, 22%, and 20% of the Company’s total revenue in 2013, 2012, and 2011, respectively.

Recapitalization [Policy Text Block]

Recapitalization

In May 2013, the Company consummated a recapitalization (the “May 2013 Recapitalization”) pursuant to which the Company established two classes of common stock (class A common stock and class B common stock), issued a dividend of three shares of class A common stock for each share of the Company’s then existing common stock and reclassified each then existing share of common stock as .5 of one share of class B common stock. All previously reported share and per share amounts in the accompanying financial statements and related notes have been restated to reflect the May 2013 Recapitalization.

Consolidation, Policy [Policy Text Block]

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiary, National Research Corporation Canada, and a variable interest entity, Customer-Connect LLC (“Connect”), which NRC has been deemed the primary beneficiary. All significant intercompany transactions and balances have been eliminated.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Foreign Currency Transactions and Translations Policy [Policy Text Block]

Translation of Foreign Currencies

The Company’s Canadian subsidiary uses as its functional currency the local currency of the country in which it operates. It translates its assets and liabilities into U.S. dollars at the exchange rate in effect at the balance sheet date. It translates its revenue and expenses at the average exchange rate during the period. The Company includes translation gains and losses in accumulated other comprehensive income (loss), a component of shareholders’ equity. Gains and losses related to transactions denominated in a currency other than the functional currency of the countries in which the Company operates and short-term intercompany accounts are included in other income (expense) in the consolidated statements of income. Since the undistributed earnings of the Company’s foreign subsidiaries are considered to be indefinitely reinvested, the components of accumulated other comprehensive income (loss) have not been tax effected.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

The Company derives a majority of its operating revenue from its annually renewable services, which include performance measurement and improvement services, healthcare analytics and governance education services. The Company provides these services to its clients under annual client service contracts, although such contracts are generally cancelable on short or no notice without penalty. The Company also derives some revenue from its custom and other research projects. 

Services are provided under subscription-based service agreements. The Company recognizes subscription-based service revenue over the period of time the service is provided. Generally, the subscription periods are for twelve months and revenue is recognized equally over the subscription period.

Certain contracts are fixed-fee arrangements with a portion of the project fee billed in advance and the remainder billed periodically over the duration of the project. Revenue and direct expenses for services provided under these contracts are recognized under the proportional performance method. Under the proportional performance method, the Company recognizes revenue based on output measures or key milestones such as survey set-up, survey mailings, survey returns and reporting. The Company measures its progress based on the level of completion of these output measures and recognizes revenue accordingly. Management judgments and estimates must be made and used in connection with revenue recognized using the proportional performance method. If management made different judgments and estimates, then the amount and timing of revenue for any period could differ materially from the reported revenue.

The Company also derives revenue from hosting arrangements where our propriety software is offered as a service to our customers through our data processing facilities. The Company’s revenue also includes software-related revenue for software license revenue, installation services, post-contract support (maintenance) and training. Software-related revenue is recognized in accordance with the provisions of Accounting Standards Codification (“ASC”) 985-605, Software-Revenue Recognition.

Hosting arrangements to provide customers with access to the Company’s propriety software are marketed under long-term arrangements generally over periods of one to three years. Under these arrangements, the customer is not provided the contractual right to take possession of the licensed software at any time during the hosting period without significant penalty, and the customer is not provided the right to run the software on their own hardware or contract with another party unrelated to us to host the software. Upfront fees for setup services are typically billed for our hosting arrangements, however, these arrangements do not qualify for separation from the ongoing hosting services due to the absence of standalone value for the set-up services. Therefore, we account for these arrangements as service contracts and recognize revenue ratably over the hosting service period when all other conditions to revenue are met. Other conditions that must be met before the commencement of revenue recognition include achieving evidence of an arrangement, determining that the collection of the revenue is probable, and determining that fees are fixed and determinable.

The Company’s software arrangements typically involve the sale of a time-based license bundled with installation services, post-contract support (“PCS”) and training. License terms range from one year to three years, and require an annual fee for bundled elements of the arrangement. PCS is also contractually provided for a period that is co-terminus with the term of the time-based license. The Company’s installation services are not considered to be essential to the functionality of the software license. The Company does not achieve vendor-specific objective evidence (“VSOE”) of the fair value of the undelivered elements of its software arrangements (primarily PCS) and, therefore, these arrangements are accounted for as a single unit of accounting with revenue recognized ratably over the minimum bundled PCS period.

The Company’s revenue arrangements (not involving software elements) with a client may include combinations of performance measurement and improvement services, healthcare analytics or governance education services which may be executed at the same time, or within close proximity of one another (referred to as a multiple-element arrangement). Each element of a multiple-element arrangement is accounted for as a separate unit of accounting provided each delivered element is sold separately by the Company or another vendor; and for an arrangement that includes a general right of return relative to the undelivered elements, delivery or performance of the undelivered services are considered probable and substantially in the control of the Company. The Company’s arrangements generally do not include a general right of return related to the delivered services. If these criteria are not met, the arrangement is accounted for as a single unit of accounting with revenue generally recognized equally over the subscription period or recognized under the proportional performance method.

Revenue is allocated to each separate unit of accounting based on relative selling price using a selling price hierarchy: VSOE, if available, third-party evidence (“TPE”) if VSOE is not available, or estimated selling price if VSOE nor TPE is available. VSOE is established based on the services normal selling price and discounts for the specific services when sold separately. TPE is established by evaluating similar competitor services in standalone arrangements. If neither exists for a deliverable, the best estimate of the selling price (“ESP”) is used for that deliverable based on list price, representing a component of management’s market strategy, and an analysis of historical prices for bundled and standalone arrangements. Revenue allocated to an element is limited to revenue that is not subject to refund or otherwise represents contingent revenue. VSOE, TPE and ESP are periodically adjusted to reflect current market conditions. These adjustments are not expected to differ significantly from historical results.

Trade and Other Accounts Receivable, Policy [Policy Text Block]

Trade Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance based on specific account analysis and on the Company’s historical write-off experience. The Company reviews the allowance for doubtful accounts monthly. Past due balances over 90 days and over a specified amount are reviewed individually for collectability and provisions are made for accounts not specifically reviewed. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Property, Plant and Equipment, Policy [Policy Text Block]

Property and Equipment

Property and equipment is stated at cost. Major expenditures to purchase property or to substantially increase useful lives of property are capitalized. Maintenance, repairs and minor renewals are expensed as incurred. When assets are retired or otherwise disposed of, their costs and related accumulated depreciation are removed from the accounts and resulting gains or losses are included in income.

For costs of software developed for internal use, the Company expenses computer software costs as incurred in the preliminary project stage, which involves the conceptual formulation, evaluation and selection of technology alternatives. Costs incurred related to the design, coding, installation and testing of software during the application project stage are capitalized. Costs for training and application maintenance are expensed as incurred. The Company has capitalized approximately $1.7 million and $636,000 of internal and external costs incurred for the development of internal-use software for the years ended December 31, 2013 and 2012, respectively, with such costs classified as property and equipment.

The Company provides for depreciation and amortization of property and equipment using annual rates which are sufficient to amortize the cost of depreciable assets over their estimated useful lives. The Company uses the straight-line method of depreciation and amortization over estimated useful lives of three to ten years for furniture and equipment, three to five years for computer equipment, three to five years for capitalized software, and seven to forty years for the Company’s office building and related improvements.

Leases are categorized as operating or capital at the inception of the lease. Assets under capital lease obligations are reported at the lower of fair value or the present value of the aggregate future minimum lease payments at the beginning of the lease term. The Company depreciates capital lease assets without transfer-of-ownership or bargain-purchase-options using the straight-line method over the lease terms, excluding any lease renewals, unless the lease renewals are reasonably assured. Capital lease assets with transfer-of-ownership or bargain-purchase-options are depreciated using the straight-line method over the assets’ estimated useful lives.

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

Impairment of Long-Lived Assets and Amortizing Intangible Assets

Long-lived assets, such as property and equipment and purchased intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. No impairments were recorded during the years ended December 31, 2013, 2012, or 2011.

Among others, management believes the following circumstances are important indicators of potential impairment of such assets and as a result may trigger an impairment review:

● Significant underperformance in comparison to historical or projected operating results;

● Significant changes in the manner or use of acquired assets or the Company’s overall strategy;

● Significant negative trends in the Company’s industry or the overall economy;

● A significant decline in the market price for the Company’s common stock for a sustained period; and

● The Company’s market capitalization falling below the book value of the Company’s net assets.

Goodwill and Intangible Assets, Policy [Policy Text Block]

Goodwill and Intangible Assets

Intangible assets include customer relationships, trade names, non-compete agreements and goodwill. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company reviews intangible assets with indefinite lives for impairment annually as of October 1 and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

When performing the impairment assessment, the Company will first assess qualitative factors to determine whether it is necessary to recalculate the fair value of the intangible assets with indefinite lives. If the Company believes, as a result of the qualitative assessment, that it is more likely than not that the fair value of the indefinite-lived intangibles is less than their carrying amount, the Company calculates the fair value using a market approach. If the carrying value of intangible assets with indefinite lives exceeds their fair value, then the intangible assets are written-down to their fair values. The Company did not recognize any impairments related to indefinite-lived intangibles during 2013, 2012 or 2011.

Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. All of the Company’s goodwill is allocated to its reporting units, which are the same as its operating segments. Goodwill is reviewed for impairment at least annually, as of October 1, and whenever events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable.

The Company reviews for goodwill impairment by first assessing qualitative factors to determine whether any impairment may exist. If the Company believes, as a result of the qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a quantitative two-step test is required; otherwise, no further testing is required. Under the first step of the quantitative test, the fair value of the reporting unit is compared with its carrying value (including goodwill). If the fair value of the reporting unit exceeds its carrying value, step two is not performed. If the fair value of the reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit and the Company performs step two of the impairment test (measurement). Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the fair value of that goodwill. The fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation and the residual fair value after this allocation is the fair value of the reporting unit goodwill.

In instances when a step two is required, the fair value of the reporting unit is determined using an income approach and comparable market multiples. Under the income approach, there are a number of inputs used to calculate the fair value using a discounted cash flow model, including operating results, business plans, projected cash flows and a discount rate. Discount rates, growth rates and cash flow projections are the most sensitive and susceptible to change as they require significant management judgment. Discount rates are determined by using a weighted average cost of capital, which considers market and industry data. Management develops growth rates and cash flow projections for each reporting unit considering industry and Company-specific historical and projected information. Terminal value rate determination follows common methodology of capturing the present value of perpetual cash flow estimates beyond the last projected period assuming a constant weighted average cost of capital and low long-term growth rates. Under the market approach, the Company considers its market capitalization, comparisons to other public companies’ data, and recent transactions of similar businesses within the Company’s industry.

The Company performed a qualitative analysis as of October 1, 2013 which did not indicate that it was more likely than not that the carrying values of the reporting units exceeded fair value. No impairments were recorded during the years ended December 31, 2013, 2012 or 2011.

Segment Reporting, Policy [Policy Text Block]

Segment Information

During the first quarter of 2013, due to the Company change in operating structure (or strategy), the Company condensed its eight operating segments into two operating segments that are aggregated into one reporting segment because they have similar economic characteristics and meet the other aggregation criteria guidance on segment disclosure.  The two operating segments, organized by geographic area, are National Research Corporation (United States) and National Research Corporation Canada, which each offer a portfolio of solutions to address specific market needs around growth, retention, engagement and thought leadership for healthcare organizations.

Income Tax, Policy [Policy Text Block]

Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Under that method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis using enacted tax rates. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances, if any, are established when necessary to reduce deferred tax assets to the amount that is more likely than not to be realized. The Company uses the deferral method of accounting for its investment tax credits related to state tax incentives. During the years ended December 31, 2013, 2012 and 2011, the Company recorded income tax benefits relating to these tax credits of $290,000, $289,000, and $229,000, respectively.

The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

The Company had an unrecognized tax benefit at December 31, 2013 and 2012, of $188,000 and $224,000, respectively, excluding interest of $5,000 and $11,000, respectively, and no penalties. Of this amount, $188,000 and $224,000 at December 31, 2013 and 2012, respectively, represents the net unrecognized tax benefits that, if recognized, would favorably impact the effective income tax rate. The Company accrues interest and penalties related to uncertain tax position in the statements of income as income tax expense. The Company is not subject to tax examinations for years prior to 2010 in the U.S. and 2009 in Canada.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Share-Based Compensation

The Company measures and recognizes compensation expense for all share-based payments. The compensation expense is recognized based on the grant-date fair value of those awards. All of the Company’s existing stock option awards and non-vested stock awards have been determined to be equity-classified awards.

Amounts recognized in the financial statements with respect to these plans:

	2013		2012		2011
	(In thousands)
Amounts charged against income, before income tax benefit	$	955	$	388	$	763
Amount of related income tax benefit		377		153		302
Total impact to net income	$	578	$	235	$	461

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash equivalents were $21.2 million and $7.5 million as of December 31, 2013, and 2012, respectively, consisting primarily of money market accounts and funds invested in commercial paper. At certain times, cash equivalent balances may exceed federally insured limits.

Fair Value Measurement, Policy [Policy Text Block]

Fair Value Measurements

The Company’s valuation techniques are based on maximizing observable inputs and minimizing the use of unobservable inputs when measuring fair value. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect the Company’s market assumptions. The inputs are then classified into the following hierarchy: (1) Level 1 Inputs—quoted prices in active markets for identical assets and liabilities; (2) Level 2 Inputs—observable market-based inputs other than Level 1 inputs, such as quoted prices for similar assets or liabilities in active markets, quoted prices for similar or identical assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data; (3) Level 3 Inputs—unobservable inputs.

The following details the Company’s financial assets and liabilities within the fair value hierarchy at December 31, 2013 and 2012:

	Level 1		Level 2		Level 3		Total
			(In thousands)
As of December 31, 2013
Money Market Funds	$	7,266	$	--	$	--	$	7,266
Commercial Paper	$	13,976	$	--	$	--	$	13,976
Total	$	21,242	$	--	$	--	$	21,242
As of December 31, 2012
Money Market Funds	$	5,245	$	--	$	--	$	5,245
Commercial Paper	$	2,242	$	--	$	--	$	2,242
Total	$	7,487	$	--	$	--	$	7,487

The Company's long-term debt described in Note 6 is recorded at historical cost. The fair value of long-term debt is classified in Level 2 of the fair value hierarchy and was estimated based primarily on estimated current rates available for debt of the same remaining duration and adjusted for nonperformance and credit. The following are the carrying amount and estimated fair values of long-term debt:

	December 31, 2013		December 31, 2012
	(In thousands)
Total carrying amount of long-term debt	$	10,324	$	12,436
Estimated fair value of long-term debt	$	10,156	$	12,490

The Company believes that the carrying amounts of accounts receivable, accounts payable, and accrued expenses approximate their fair value. All non-financial assets that are not recognized or disclosed at fair value in the financial statements on a recurring basis, which includes goodwill and non-financial long-lived assets, are measured at fair value in certain circumstances (for example, when there is evidence of impairment). As of December 31, 2013 and 2012, there was no impairment related to property and equipment, goodwill and other intangible assets.

Commitments and Contingencies, Policy [Policy Text Block]

Contingencies
From time to time, the Company is involved in certain claims and litigation arising in the normal course of business. Management assesses the probability of loss for such contingencies and recognizes a liability when a loss is probable and estimable. At December 31, 2013, the Company was not engaged in any legal proceedings that are expected, individually or in the aggregate, to have a material effect on the Company.

Earnings Per Share, Policy [Policy Text Block]

Earnings Per Share

Net income per share of class A common stock and class B common stock is computed using the two-class method. Basic net income per share is computed by allocating undistributed earnings to common shares and using the weighted-average number of common shares outstanding during the period.

Diluted net income per share is computed using the weighted-average number of common shares and, if dilutive, the potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options and vesting of restricted stock. The dilutive effect of outstanding stock options is reflected in diluted earnings per share by application of the treasury stock method.

The liquidation rights and the rights upon the consummation of an extraordinary transaction are the same for the holders of class A common stock and class B common stock. Other than share distributions and liquidation rights, the amount of any dividend or other distribution payable on each share of class A common stock will be equal to one-sixth (1/6^th) of the amount of any such dividend or other distribution payable on each share of class B common stock. As a result, the undistributed earnings for each year are allocated based on the contractual participation rights of the class A and class B common stock as if the earnings for the year had been distributed.

At December 31, 2013, 2012, and 2011, the Company had 99,562, 92,460 and 358,707 options of class A shares and 6,407, 15,410, and 59,785 options of class B shares, respectively, which have been excluded from the diluted net income per share computation because the exercise price exceeds the fair market value.

	2013				2012						2011
	Class A		Class B		Class A			Class B			Class A		Class B
	(In thousands, except per share data)
Numerator for net income per share - basic:
Allocation of distributed earnings	$	1,071	$	1,071	$	8,681		$	8,681		$	2,956	$	2,956
Allocation of undistributed earnings		6,670		6,672		(1,147	)		(1,147	)		2,826		2,826
Net income attributable to common shareholders	$	7,741	$	7,743	$	7,534		$	7,534		$	5,782	$	5,782
Denominator for net income per share - basic:
Weighted average common shares outstanding - basic		20,677		3,447		20,325			3,388			20,016		3,336
Net income per share - basic	$	0.37	$	2.25	$	0.37		$	2.22		$	0.29	$	1.73
Numerator for net income per share - diluted:
Net income attributable to common shareholders for basic computation	$	7,741	$	7,743	$	7,534		$	7,534		$	5,782	$	5,782
Denominator for net income per share - diluted:
Weighted average common shares outstanding - basic		20,677		3,447		20,325			3,388			20,016		3,336
Weighted average effect of dilutive securities:
Stock Options		388		61		492			82			474		79
Restricted Stock		34		6		37			6			36		6
Weighted average common shares outstanding - diluted		21,099		3,514		20,854			3,476			20,526		3,421
Net income per share - diluted	$	0.37	$	2.20	$	0.36		$	2.17		$	0.28	$	1.69

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

There have been no new accounting pronouncements not yet effective or adopted that have significance or potential significance to the consolidated financial statements in 2013.

XML

Note 10 - Related Party

12 Months Ended

Dec. 31, 2013

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

(10)     Related Party

A Board member of the Company also serves as an officer of Ameritas Life Insurance Corp. In connection with the Company’s regular assessment of its insurance-based associate benefits and the costs associated therewith, in 2007 the Company began purchasing dental insurance for certain of its associates from Ameritas Life Insurance Corp. and, in 2009, the Company also began purchasing vision insurance for certain of its associates from Ameritas Life Insurance Corp. The total value of these purchases was $212,000, $198,000 and $166,000 in 2013, 2012 and 2011 respectively.

The Company leased office space for OCS from EPIC Property Management LLC from August 2010 through June 2011.  A former owner of OCS and an associate of the Company during the lease term was a co-owner of EPIC Property Management LLC. The total of the rental and utility payments under the lease for the year ended December 31, 2011, was $103,000.

Michael Hays, our Chief Executive Officer, is a director and owner of 14% of the equity interests of Nebraska Global Investment Company LLC. In 2012, the Company purchased certain technology consulting and software development services from Nebraska Global Investment Company LLC. The total value of these purchases was $57,000 and $55,000 in 2013 and 2012 respectively. The Company did not have any transactions with Nebraska Global Investment Company LLC during 2011 or 2010.

XML

Note 6 - Notes Payable

12 Months Ended

Dec. 31, 2013

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

(6)     Notes Payable

Notes payable consisted of the following:

	2013		2012
	(In thousands)
Revolving credit note with U.S. Bank, maximum available $6.5 million subject to borrowing base, matures June 30, 2014	$	--	$	--
Note payable to U.S. Bank for $11.8 million, interest at a 3.12% fixed rate, 60 monthly principal and interest payments of $212,468 through April 2018		10,324		--
Notes payable to U.S. Bank, interest at a 3.79% fixed rate, monthly principal and interest payments of $201,294, with final balloon payment due July 31, 2013		--		12,436
Total notes payable		10,324		12,436
Less current portion		2,256		12,436
Note payable, net of current portion	$	8,068	$	--

The Company had two term notes, which were used to partially finance acquisitions in 2008 and 2010. Borrowings under the term notes bore interest at an annual rate of 3.79%. The Company refinanced these two term notes on May 9, 2013, and combined them into one new term note. The new term note is payable in 60 monthly installments of $212,468. Borrowings under the new term note bear interest at an annual rate of 3.12%.

The Company also has a revolving credit note that was renewed in May 2013 to extend the term to June 30, 2014. The Company may borrow, repay and re-borrow amounts under the revolving credit note from time to time until its maturity on June 30, 2014. The maximum aggregate amount available under the revolving credit note of $6.5 million is subject to a borrowing base equal to 75.0% of the Company’s eligible accounts receivable. Borrowings under the renewed revolving credit note bear interest at a variable annual rate, with three rate options at the discretion of management as follows: (1) 2.5% plus the daily reset one-month LIBOR rate or (2) 2.2% plus the one-, two-, three-, six- or twelve-month London Interbank Offered Rate (“LIBOR”) rate, or (3) the bank’s one-, two-, three-, six- or twelve-month Money Market Loan Rate. The rate at December 31, 2013 was 2.67%. As of December 31, 2013, the revolving credit note did not have a balance. According to borrowing base requirements, the Company had the capacity to borrow $6.5 million as of December 31, 2013. 

The term note and revolving credit note are secured by certain of the Company’s assets, including the Company’s land, building, accounts receivable and intangible assets. The term note and the revolving credit note contain various restrictions and covenants applicable to the Company, including requirements that the Company maintain certain financial ratios at prescribed levels and restrictions on the ability of the Company to consolidate or merge, create liens, incur additional indebtedness or dispose of assets. As of December 31, 2013, the Company was in compliance with the financial covenants.

The remaining note payable maturities for each year subsequent to December 31, 2013, are as follows:

	Total Payments		2014		2015		2016		2017		2018
	(In thousands)
Notes payable	$	10,324	$	2,256	$	2,328	$	2,402	$	2,480	$	858

XML

Note 9 - Leases (Details) - Payments Under Non-Cancelable Operating Leases and Capital Leases (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Payments Under Non-Cancelable Operating Leases and Capital Leases [Abstract]
2014	$ 137
2014	782
2015	104
2015	753
2016	9
2016	507
2017	324
2018	202
Thereafter	14
Total minimum lease payments	250
Less: Amount representing interest	28
Present value of minimum lease payments	222
Less: Current maturities	114	102
Capital lease obligations, net of current portion	$ 108	$ 225

XML

Note 4 - Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

(4)     Goodwill and Intangible Assets

Goodwill and intangible assets consisted of the following at December 31, 2013:

	Useful Life					Gross	Accumulated Amortization			Net
		(In years)					(In thousands)
Goodwill					$	57,593			$	57,593
Non-amortizing intangible assets:
Indefinite trade name						1,191				1,191
Amortizing intangible assets:
Customer related		5	-	15		10,499		7,334		3,165
Non-compete agreements			3			430		430		-
Trade names		5	-	10		1,902		1,418		484
Total amortizing intangible assets						12,831		9,182		3,649
Total intangible assets other than goodwill					$	14,022	$	9,182	$	4,840

Goodwill and intangible assets consisted of the following at December 31, 2012:

	Useful Life				Gross		Accumulated Amortization		Net
	(In years)						(In thousands)
Goodwill					$	57,799			$	57,799
Non-amortizing intangible assets:
Indefinite trade name						1,191				1,191
Amortizing intangible assets:
Customer related		5	-	15		10,521		6,709		3,812
Non-compete agreements			3			430		346		84
Trade names		5	-	10		1,902		1,195		707
Total amortizing intangible assets						12,853		8,250		4,603
Total intangible assets other than goodwill					$	14,044	$	8,250	$	5,794

The following represents a summary of changes in the Company’s carrying amount of goodwill for the years ended December 31, 2013, and 2012 (in thousands):

Balance as of December 31, 2011	$	57,730
Foreign currency translation		69
Balance as of December 31, 2012	$	57,799
Foreign currency translation		(206	)
Balance as of December 31, 2013	$	57,593

Aggregate amortization expense for customer related intangibles, trade names and non-competes for the years ended December 31, 2013, 2012 and 2011 was $954,000, $1.3 million, and $1.6 million, respectively. Estimated amortization expense for the next five years is: 2014—$842,000; 2015—$789,000; 2016—$597,000; 2017—$531,000: 2018—$522,000: thereafter $369,000.

XML

Note 5 - Income Taxes

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

(5)      Income Taxes

For the years ended December 31, 2013, 2012, and 2011, income before income taxes consists of the following:

	2013		2012		2011
	(In thousands)
U.S. Operations	$	21,882	$	19,836	$	16,017
Foreign Operations		2,606		2,371		2,143
	$	24,488	$	22,207	$	18,160

Income tax expense consisted of the following components:

	2013			2012			2011
	(In thousands)
Federal:
Current	$	7,169		$	5,488		$	4,018
Deferred		195			1,140			1,170
Total	$	7,364		$	6,628		$	5,188
Foreign:
Current	$	716		$	684		$	606
Deferred		(7	)		(6	)		(1	)
Total	$	709		$	678		$	605
State:
Current	$	1,020		$	787		$	609
Deferred		(89	)		(954	)		194
Total	$	931		$	(167	)	$	803
Total	$	9,004		$	7,139		$	6,596

The difference between the Company’s income tax expense as reported in the accompanying consolidated financial statements and the income tax expense that would be calculated applying the U.S. federal income tax rate of 35% for 2013, 2012, and 2011 on pretax income was as follows:

	2013			2012			2011
	(In thousands)
Expected federal income taxes	$	8,571		$	7,772		$	6,356
Foreign tax rate differential		(226	)		(203	)		(145	)
U.S. tax graduated rates		--			11			(99	)
State income taxes, net of federal benefit and state tax credits		605			552			522
Federal tax credits		(217	)		(282	)		(132	)
Uncertain tax positions		(43	)		(73	)		9
Deferred tax adjustment due to change in state tax law		--			(661	)		--
Recapitalization expenses		182			--			--
Other		132			23			85
Total	$	9,004		$	7,139		$	6,596

Deferred tax assets and liabilities at December 31, 2013 and 2012, were comprised of the following:

	2013			2012
	(In thousands)
Deferred tax assets:
Allowance for doubtful accounts	$	63		$	86
Accrued expenses		497			356
Share based compensation		1,113			859
Capital loss carryforward		1,124			1,132
Net operating loss		--			170
Tax credit carryforward		--			319
Other		39			--
Gross deferred tax assets		2,836			2,922
Less Valuation Allowance		(1,124	)		(1,138	)
Deferred tax assets		1,712			1,784
Deferred tax liabilities:
Prepaid expenses		286			324
Property and equipment		1,426			1,790
Intangible assets		6,879			6,415
Other		200			235
Deferred tax liabilities		8,791			8,764
Net deferred tax liabilities	$	(7,079	)	$	(6,980	)

At December 31, 2013 and 2012, net deferred tax assets of $53,000 and $547,000 respectively, were included in current deferred income taxes. At December 31, 2013 and 2012, net deferred tax liabilities of $7.1 million and $7.5 million, respectively, were included in long term deferred income taxes.

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers projected future taxable income, carry-back opportunities, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, the Company believes it is more likely than not that it will realize the benefits of these deductible differences, net of the valuation allowance recorded. The net impact on income tax expense related to changes in the valuation allowance for 2013, 2012, and 2011, were $14,000, $214,000 and $0, respectively.

The Company has domestic capital loss carryforwards of $3.1 million at December 31, 2013. The total $3.1 million of the capital loss carryforwards relate to the pre-acquisition periods of acquired companies and are due to expire in 2014. The Company has provided a $1.1 million valuation allowance against the tax benefit associated with the capital loss carryforwards.

The undistributed foreign earnings of the Company’s foreign subsidiary of approximately $10.7 million are considered to be indefinitely reinvested. Accordingly, no provision for U.S. federal and state income taxes or foreign withholding taxes has been provided for such undistributed earnings. The Company estimated at December 31, 2013, that an additional tax liability of $705,000 would become due if repatriation of undistributed earnings would occur.

The unrecognized tax benefit at December 31, 2013, was $188,000, excluding interest of $5,000 and no penalties. The full unrecognized tax benefits, if recognized, would favorably impact the effective income tax rate. The Company believes it is reasonably possible that the total amount of unrecognized tax benefits could continue to decrease during the next 12 months due to the expiration of the U.S. federal statute of limitations associated with certain other tax positions. The Company accrues interest and penalties related to uncertain tax position in the statements of income as income tax expense.

The change in the unrecognized tax benefits for 2013 and 2012 is as follows:

	(In thousands)
Balance of unrecognized tax benefits at December 31, 2011	$	266
Reductions due to lapse of applicable statute of limitations		(117	)
Additions based on tax positions of prior years		84
Additions based on tax positions related to the current year		(9	)
Balance of unrecognized tax benefits at December 31, 2012	$	224
Reductions due to lapse of applicable statute of limitations		(91	)
Additions based on tax positions of prior years		27
Additions based on tax positions related to the current year		28
Balance of unrecognized tax benefits at December 31, 2013	$	188

The Company files a U.S. federal income tax return, various state jurisdictions and a Canada federal and provincial income tax return. The 2010 to 2013 U.S. federal and state returns remain open to examination. The 2009 to 2013 Canada federal and provincial income tax returns remain open to examination.

XML

Note 7 - Share-Based Compensation

12 Months Ended

Dec. 31, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

(7)     Share-Based Compensation

The Company measures and recognizes compensation expense for all share-based payments based on the grant-date fair value of those awards. All of the Company’s existing stock option awards and non-vested stock awards have been determined to be equity-classified awards.

In August 2001, the Board of Directors adopted, and on May 1, 2002, the Company’s shareholders approved, the National Research Corporation 2001 Equity Incentive Plan (“2001 Equity Incentive Plan”). The 2001 Equity Incentive Plan provides for the granting of stock options, stock appreciation rights, restricted stock, performance shares and other share-based awards and benefits up to an aggregate of 1,800,000 shares of class A common stock and 300,000 shares of class B common stock. Stock options granted may be either nonqualified or incentive stock options. Stock options vest over one to five years following the date of grant and option terms are generally five to ten years following the date of grant. Due to the expiration of the 2001 Equity Incentive plan, at December 31, 2013, there were no shares of stock available for future grants. The Company has accounted for grants of 1,683,309 class A and 280,552 class B options and restricted stock under the 2001 Equity Incentive Plan using the date of grant as the measurement date for financial accounting purposes.

The Company’s 2004 Non-Employee Director Stock Plan (the “2004 Director Plan”) is a nonqualified plan that provides for the granting of options with respect to 1,650,000 shares of class A common stock and 275,000 shares of class B common stock. The 2004 Director Plan provides for grants of nonqualified stock options to each director of the Company who is not employed by the Company. On the date of each annual meeting of shareholders of the Company, options to purchase 36,000 shares of class A common stock and 6,000 shares of class B common stock are granted to directors that are re-elected or retained as a director at such meeting. Stock options vest one year following the date of grant and option terms are generally ten years following the date of grant, or three years in the case of termination of the outside director’s service. At December 31, 2013, there were 255,000 shares of class A common stock and 42,500 shares of class B common stock available for issuance pursuant to future grants under the 2004 Director Plan. The Company has accounted for grants of 1,395,000 class A and 232,500 class B options under the 2004 Director Plan using the date of grant as the measurement date for financial accounting purposes.

In February 2006, the Board of Directors adopted, and on May 4, 2006, the Company’s shareholders approved the National Research Corporation 2006 Equity Incentive Plan (the “2006 Equity Incentive Plan”). The 2006 Equity Incentive Plan provides for the granting of stock options, stock appreciation rights, restricted stock, performance shares and other share-based awards and benefits up to an aggregate of 1,800,000 shares of class A common stock and 300,000 shares of class B common stock. Stock options granted may be either incentive stock options or nonqualified stock options. Vesting terms vary with each grant and option terms are generally five to ten years following the date of grant. At December 31, 2013, there were 1,033,455 shares of class A common stock and 172,242 shares of class B common stock available for issuance pursuant to future grants under the 2006 Equity Incentive Plan. The Company has accounted for grants of 766,545 class A and 127,758 class B options and restricted stock under the 2006 Equity Incentive Plan using the date of grant as the measurement date for financial accounting purposes.

The Company granted options to purchase 232,344 shares of the Company’s class A common stock and 38,718 shares of the class B common stock during the twelve-month period ended December 31, 2013. During the same period in 2012, the Company granted options to purchase 238,890 shares of class A common stock and 39,815 shares of class B common stock, and during 2011 granted options to purchase 498,024 shares of class A common stock and 83,004 shares of class B common stock. Options to purchase shares of common stock are typically granted with exercise prices equal to the fair value of the common stock on the date of grant. The Company does, in certain limited situations, grant options with exercise prices that exceed the fair value of the common shares on the date of grant. The fair value of stock options granted (pre-May 2013 Recapitalization) was estimated using a Black-Scholes valuation model with the following assumptions:

	2013				2012				2011
Expected dividend yield at date of grant		2.26	to	3.46%		2.63	to	3.98%		2.00	to	2.55%
Expected stock price volatility		30.34	to	30.51%		29.10	to	31.70%		28.70	to	32.00%
Risk-free interest rate		0.55	to	1.07%		0.56	to	1.15%		1.70	to	2.14%
Expected life of options (in years)		4	to	6		4	to	6		4	to	6

The risk-free interest rate assumptions were based on the U.S. Treasury yield curve in effect at the time of the grant. The expected volatility was based on historical monthly price changes of the Company’s stock based on the expected life of the options at the date of grant. The expected life of options is the average number of years the Company estimates that options will be outstanding. The Company considers groups of associates that have similar historical exercise behavior separately for valuation purposes.

The following table summarizes stock option activity under the 2001 and 2006 Equity Incentive Plans and the 2004 Director Plan for the year ended December 31, 2013:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Terms (Years)		Aggregate Intrinsic Value (In thousands)
Class A
Outstanding at December 31, 2012		1,367,754		$	8.45
Granted		232,344		$	15.98
Exercised		(155,253	)	$	3.36			$	1,126
Forfeited		--			--
Outstanding at December 31, 2013		1,444,845		$	10.21		6.48	$	12,438
Exercisable at December 31, 2013		693,975		$	8.96		5.37	$	6,846
Class B
Outstanding at December 31, 2012		227,959		$	18.45
Granted		38,718		$	29.35
Exercised		(31,875	)	$	14.69			$	992
Forfeited		--			--
Outstanding at December 31, 2013		234,802		$	20.76		6.54	$	3,276
Exercisable at December 31, 2013		109,662		$	18.85		5.43	$	1,739

The weighted average grant date fair value of stock options granted during the years ended December 31, 2013, 2012, and 2011, was $3.24, $2.43 and $2.12, respectively, for both class A and class B common stock. The total intrinsic value of stock options exercised during the years ended December 31, 2013, was $1.1 million for the shares of class A common stock and $992,000 for the shares of class B common stock. The total intrinsic value of stock options exercised was $5.6 million for the shares of class A common stock and $941,000 for the shares of class B common stock for the year ended December 31, 2012, and $900,000 for the shares of class A common stock and $150,000 for the shares of class B common stock for the year ended December 31, 2011. The total intrinsic value of stock options vested during the years ended December 31, 2013, was $1.5 million for the shares of class A common stock and $0.5 million for the shares of class B common stock. The total intrinsic value of stock options vested was $2.3 million for the shares of class A common stock and $376,000 for the shares of class B common stock for the year ended December 31, 2012, and $1.3 million for the shares of class A common stock and $224,000 for the shares of class B common stock for the year ended December 31, 2011. As of December 31, 2013, the total unrecognized compensation cost related to non-vested stock option awards was approximately $729,000 and $122,000 for class A and class B common stock shares, respectively, which was expected to be recognized over a weighted average period of 2.38 years for each class of stock.

Cash received from stock options exercised for the years ended December 31, 2013, 2012, and 2011 was $840,000, $1.3 million, and $568,000, respectively. The actual tax benefit realized for the tax deduction from stock options exercised was $753,000, $2.0 million and $350,000, for the years ended December 31, 2013, 2012, and 2011, respectively.

During 2012, the Company granted 23,469 and 3,912 non-vested shares of class A and class B common stock, respectively, under the 2006 Equity Incentive Plan. During 2011, the Company granted 118,503 and 19,751 non-vested shares of class A and class B common stock, respectively, under the 2006 Equity Incentive Plan. No non-vested shares of common stock were granted during 2013. As of December 31, 2013, the Company had 60,609 and 10,101 non-vested shares of class A and class B common stock, respectively, outstanding under the 2006 Equity Incentive Plan. These shares vest over one to five years following the date of grant and holders thereof are entitled to receive dividends from the date of grant, whether or not vested. The fair value of the awards is calculated as the fair market value of the shares on the date of grant. The Company recognized $140,000, $74,000 and $143,000 of non-cash compensation for the years ended December 31, 2013, 2012, and 2011, respectively, related to this non-vested stock.

The following table summarizes information regarding non-vested stock granted to associates under the 2001 and 2006 Equity Incentive Plans for the year ended December 31, 2013:

	Class A Shares Outstanding		Class A Weighted Average Grant Date Fair Value Per Share		Class B Shares Outstanding		Class B Weighted Average Grant Date Fair Value Per Share
Outstanding at December 31, 2012		60,609	$	5.77		10,101	$	34.65
Granted		--		--		--		--
Vested		--		--		--		--
Forfeited		--		--		--		--
Outstanding at December 31, 2013		60,609	$	5.77		10,101	$	34.65

As of December 31, 2013, the total unrecognized compensation cost related to non-vested stock awards was approximately $340,000 and is expected to be recognized over a weighted average period of 2.53 years.

XML

Note 12 - Segment Information (Details) - Revenue and Assets by Geographic Area (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Revenue:
Revenue	$ 92,590	$ 86,421	$ 75,767
Long-lived assets:
Long-lived assets	74,522	76,231
Total assets:
Total assets	110,996	100,046
United States [Member]
Revenue:
Revenue	85,863	79,895	70,074
Long-lived assets:
Long-lived assets	71,139	72,817
Total assets:
Total assets	97,982	87,670
Canada [Member]
Revenue:
Revenue	6,727	6,526	5,693
Long-lived assets:
Long-lived assets	3,383	3,414
Total assets:
Total assets	$ 13,014	$ 12,376

XML

Note 12 - Segment Information (Details)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Note 12 - Segment Information (Details) [Line Items]
Number of Operating Segments		8
Number of Reportable Segments	1
Reduced To [Member]
Note 12 - Segment Information (Details) [Line Items]
Number of Operating Segments	2

XML

Note 1 - Summary of Significant Accounting Policies (Details) - Amounts Recognized in Financial Statements (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Amounts Recognized in Financial Statements [Abstract]
Amounts charged against income, before income tax benefit	$ 955	$ 388	$ 763
Amount of related income tax benefit	377	153	302
Total impact to net income	$ 578	$ 235	$ 461

XML

Note 6 - Notes Payable (Details) - Notes Payable (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Note 6 - Notes Payable (Details) - Notes Payable [Line Items]
Notes payable	$ 10,324	$ 12,436
Less current portion	2,256	12,436
Note payable, net of current portion	8,068
New Combined Term Note [Member]
Note 6 - Notes Payable (Details) - Notes Payable [Line Items]
Notes payable	10,324
Term Loan MIV Acquisition and Term Loan OCS Acquisition [Member]
Note 6 - Notes Payable (Details) - Notes Payable [Line Items]
Notes payable		$ 12,436

XML

Note 12 - Segment Information

12 Months Ended

Dec. 31, 2013

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

(12)     Segment Information

During the first quarter of 2013, the Company condensed its eight operating segments into two operating segments that are aggregated into one reporting segment because they have similar economic characteristics and meet the other aggregation criteria for guidance on segment disclosure.  The two operating segments, organized by geographic area, are National Research Corporation (United States) and National Research Corporation Canada, which each offer a portfolio of solutions to address specific market needs around growth, retention, engagement and thought leadership for healthcare organizations. The table below presents entity-wide information regarding the Company’s revenue and assets by geographic area:

	2013		2012		2011
	(In thousands)
Revenue:
United States	$	85,863	$	79,895	$	70,074
Canada		6,727		6,526		5,693
Total	$	92,590	$	86,421	$	75,767
Long-lived assets:
United States	$	71,139	$	72,817
Canada		3,383		3,414
Total	$	74,522	$	76,231
Total assets:
United States	$	97,982	$	87,670
Canada		13,014		12,376
Total	$	110,996	$	100,046

XML

Note 4 - Goodwill and Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	Useful Life					Gross	Accumulated Amortization			Net
		(In years)					(In thousands)
Goodwill					$	57,593			$	57,593
Non-amortizing intangible assets:
Indefinite trade name						1,191				1,191
Amortizing intangible assets:
Customer related		5	-	15		10,499		7,334		3,165
Non-compete agreements			3			430		430		-
Trade names		5	-	10		1,902		1,418		484
Total amortizing intangible assets						12,831		9,182		3,649
Total intangible assets other than goodwill					$	14,022	$	9,182	$	4,840

	Useful Life				Gross		Accumulated Amortization		Net
	(In years)						(In thousands)
Goodwill					$	57,799			$	57,799
Non-amortizing intangible assets:
Indefinite trade name						1,191				1,191
Amortizing intangible assets:
Customer related		5	-	15		10,521		6,709		3,812
Non-compete agreements			3			430		346		84
Trade names		5	-	10		1,902		1,195		707
Total amortizing intangible assets						12,853		8,250		4,603
Total intangible assets other than goodwill					$	14,044	$	8,250	$	5,794

Schedule of Goodwill [Table Text Block]

Balance as of December 31, 2011	$	57,730
Foreign currency translation		69
Balance as of December 31, 2012	$	57,799
Foreign currency translation		(206	)
Balance as of December 31, 2013	$	57,593

XML

Note 5 - Income Taxes (Details) - Change in Unrecognized Tax Benefits (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Change in Unrecognized Tax Benefits [Abstract]
Balance of unrecognized tax benefits	$ 224,000	$ 266,000
Reductions due to lapse of applicable statue of limitations	(91,000)	(117,000)
Additions based on tax positions of prior years	27,000	84,000
Additions based on tax positions related to the current year	28,000	(9,000)
Balance of unrecognized tax benefits	$ 188,000	$ 224,000

XML

Note 4 - Goodwill and Intangible Assets (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization of Intangible Assets	$ 954,000	$ 1,300,000	$ 1,600,000
Finite-Lived Intangible Assets, Amortization Expense, Next Twelve Months	842,000
Finite-Lived Intangible Assets, Amortization Expense, Year Two	789,000
Finite-Lived Intangible Assets, Amortization Expense, Year Three	597,000
Finite-Lived Intangible Assets, Amortization Expense, Year Four	531,000
Finite-Lived Intangible Assets, Amortization Expense, Year Five	522,000
Finite-Lived Intangible Assets, Amortization Expense, after Year Five	$ 369,000

XML

Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2010
Net Income	$ 15,484	$ 15,068	$ 11,564
Other comprehensive income (loss):
Cumulative translation adjustment	(822)	217	(201)
Other comprehensive income (loss)	(822)	217	(201)
Comprehensive Income	$ 14,662	$ 15,285	$ 11,363

XML

Note 1 - Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

(1)     Summary of Significant Accounting Policies

Description of Business and Basis of Presentation

National Research Corporation (“NRC” or the “Company”) is a leading provider of analytics and insights that facilitate revenue growth, patient, employee and customer retention and patient engagement for healthcare providers, payers and other healthcare organizations in the United States and Canada. The Company’s ten largest clients accounted for 19%, 22%, and 20% of the Company’s total revenue in 2013, 2012, and 2011, respectively.

Recapitalization

In May 2013, the Company consummated a recapitalization (the “May 2013 Recapitalization”) pursuant to which the Company established two classes of common stock (class A common stock and class B common stock), issued a dividend of three shares of class A common stock for each share of the Company’s then existing common stock and reclassified each then existing share of common stock as .5 of one share of class B common stock. All previously reported share and per share amounts in the accompanying financial statements and related notes have been restated to reflect the May 2013 Recapitalization.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiary, National Research Corporation Canada, and a variable interest entity, Customer-Connect LLC (“Connect”), which NRC has been deemed the primary beneficiary. All significant intercompany transactions and balances have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Translation of Foreign Currencies

The Company’s Canadian subsidiary uses as its functional currency the local currency of the country in which it operates. It translates its assets and liabilities into U.S. dollars at the exchange rate in effect at the balance sheet date. It translates its revenue and expenses at the average exchange rate during the period. The Company includes translation gains and losses in accumulated other comprehensive income (loss), a component of shareholders’ equity. Gains and losses related to transactions denominated in a currency other than the functional currency of the countries in which the Company operates and short-term intercompany accounts are included in other income (expense) in the consolidated statements of income. Since the undistributed earnings of the Company’s foreign subsidiaries are considered to be indefinitely reinvested, the components of accumulated other comprehensive income (loss) have not been tax effected.

Revenue Recognition

The Company derives a majority of its operating revenue from its annually renewable services, which include performance measurement and improvement services, healthcare analytics and governance education services. The Company provides these services to its clients under annual client service contracts, although such contracts are generally cancelable on short or no notice without penalty. The Company also derives some revenue from its custom and other research projects. 

Services are provided under subscription-based service agreements. The Company recognizes subscription-based service revenue over the period of time the service is provided. Generally, the subscription periods are for twelve months and revenue is recognized equally over the subscription period.

Certain contracts are fixed-fee arrangements with a portion of the project fee billed in advance and the remainder billed periodically over the duration of the project. Revenue and direct expenses for services provided under these contracts are recognized under the proportional performance method. Under the proportional performance method, the Company recognizes revenue based on output measures or key milestones such as survey set-up, survey mailings, survey returns and reporting. The Company measures its progress based on the level of completion of these output measures and recognizes revenue accordingly. Management judgments and estimates must be made and used in connection with revenue recognized using the proportional performance method. If management made different judgments and estimates, then the amount and timing of revenue for any period could differ materially from the reported revenue.

The Company also derives revenue from hosting arrangements where our propriety software is offered as a service to our customers through our data processing facilities. The Company’s revenue also includes software-related revenue for software license revenue, installation services, post-contract support (maintenance) and training. Software-related revenue is recognized in accordance with the provisions of Accounting Standards Codification (“ASC”) 985-605, Software-Revenue Recognition.

Hosting arrangements to provide customers with access to the Company’s propriety software are marketed under long-term arrangements generally over periods of one to three years. Under these arrangements, the customer is not provided the contractual right to take possession of the licensed software at any time during the hosting period without significant penalty, and the customer is not provided the right to run the software on their own hardware or contract with another party unrelated to us to host the software. Upfront fees for setup services are typically billed for our hosting arrangements, however, these arrangements do not qualify for separation from the ongoing hosting services due to the absence of standalone value for the set-up services. Therefore, we account for these arrangements as service contracts and recognize revenue ratably over the hosting service period when all other conditions to revenue are met. Other conditions that must be met before the commencement of revenue recognition include achieving evidence of an arrangement, determining that the collection of the revenue is probable, and determining that fees are fixed and determinable.

The Company’s software arrangements typically involve the sale of a time-based license bundled with installation services, post-contract support (“PCS”) and training. License terms range from one year to three years, and require an annual fee for bundled elements of the arrangement. PCS is also contractually provided for a period that is co-terminus with the term of the time-based license. The Company’s installation services are not considered to be essential to the functionality of the software license. The Company does not achieve vendor-specific objective evidence (“VSOE”) of the fair value of the undelivered elements of its software arrangements (primarily PCS) and, therefore, these arrangements are accounted for as a single unit of accounting with revenue recognized ratably over the minimum bundled PCS period.

The Company’s revenue arrangements (not involving software elements) with a client may include combinations of performance measurement and improvement services, healthcare analytics or governance education services which may be executed at the same time, or within close proximity of one another (referred to as a multiple-element arrangement). Each element of a multiple-element arrangement is accounted for as a separate unit of accounting provided each delivered element is sold separately by the Company or another vendor; and for an arrangement that includes a general right of return relative to the undelivered elements, delivery or performance of the undelivered services are considered probable and substantially in the control of the Company. The Company’s arrangements generally do not include a general right of return related to the delivered services. If these criteria are not met, the arrangement is accounted for as a single unit of accounting with revenue generally recognized equally over the subscription period or recognized under the proportional performance method.

Revenue is allocated to each separate unit of accounting based on relative selling price using a selling price hierarchy: VSOE, if available, third-party evidence (“TPE”) if VSOE is not available, or estimated selling price if VSOE nor TPE is available. VSOE is established based on the services normal selling price and discounts for the specific services when sold separately. TPE is established by evaluating similar competitor services in standalone arrangements. If neither exists for a deliverable, the best estimate of the selling price (“ESP”) is used for that deliverable based on list price, representing a component of management’s market strategy, and an analysis of historical prices for bundled and standalone arrangements. Revenue allocated to an element is limited to revenue that is not subject to refund or otherwise represents contingent revenue. VSOE, TPE and ESP are periodically adjusted to reflect current market conditions. These adjustments are not expected to differ significantly from historical results.

Trade Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance based on specific account analysis and on the Company’s historical write-off experience. The Company reviews the allowance for doubtful accounts monthly. Past due balances over 90 days and over a specified amount are reviewed individually for collectability and provisions are made for accounts not specifically reviewed. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Property and Equipment

Property and equipment is stated at cost. Major expenditures to purchase property or to substantially increase useful lives of property are capitalized. Maintenance, repairs and minor renewals are expensed as incurred. When assets are retired or otherwise disposed of, their costs and related accumulated depreciation are removed from the accounts and resulting gains or losses are included in income.

For costs of software developed for internal use, the Company expenses computer software costs as incurred in the preliminary project stage, which involves the conceptual formulation, evaluation and selection of technology alternatives. Costs incurred related to the design, coding, installation and testing of software during the application project stage are capitalized. Costs for training and application maintenance are expensed as incurred. The Company has capitalized approximately $1.7 million and $636,000 of internal and external costs incurred for the development of internal-use software for the years ended December 31, 2013 and 2012, respectively, with such costs classified as property and equipment.

The Company provides for depreciation and amortization of property and equipment using annual rates which are sufficient to amortize the cost of depreciable assets over their estimated useful lives. The Company uses the straight-line method of depreciation and amortization over estimated useful lives of three to ten years for furniture and equipment, three to five years for computer equipment, three to five years for capitalized software, and seven to forty years for the Company’s office building and related improvements.

Leases are categorized as operating or capital at the inception of the lease. Assets under capital lease obligations are reported at the lower of fair value or the present value of the aggregate future minimum lease payments at the beginning of the lease term. The Company depreciates capital lease assets without transfer-of-ownership or bargain-purchase-options using the straight-line method over the lease terms, excluding any lease renewals, unless the lease renewals are reasonably assured. Capital lease assets with transfer-of-ownership or bargain-purchase-options are depreciated using the straight-line method over the assets’ estimated useful lives.

Impairment of Long-Lived Assets and Amortizing Intangible Assets

Long-lived assets, such as property and equipment and purchased intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. No impairments were recorded during the years ended December 31, 2013, 2012, or 2011.

Among others, management believes the following circumstances are important indicators of potential impairment of such assets and as a result may trigger an impairment review:

● Significant underperformance in comparison to historical or projected operating results;

● Significant changes in the manner or use of acquired assets or the Company’s overall strategy;

● Significant negative trends in the Company’s industry or the overall economy;

● A significant decline in the market price for the Company’s common stock for a sustained period; and

● The Company’s market capitalization falling below the book value of the Company’s net assets.

Goodwill and Intangible Assets

Intangible assets include customer relationships, trade names, non-compete agreements and goodwill. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company reviews intangible assets with indefinite lives for impairment annually as of October 1 and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

When performing the impairment assessment, the Company will first assess qualitative factors to determine whether it is necessary to recalculate the fair value of the intangible assets with indefinite lives. If the Company believes, as a result of the qualitative assessment, that it is more likely than not that the fair value of the indefinite-lived intangibles is less than their carrying amount, the Company calculates the fair value using a market approach. If the carrying value of intangible assets with indefinite lives exceeds their fair value, then the intangible assets are written-down to their fair values. The Company did not recognize any impairments related to indefinite-lived intangibles during 2013, 2012 or 2011.

Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. All of the Company’s goodwill is allocated to its reporting units, which are the same as its operating segments. Goodwill is reviewed for impairment at least annually, as of October 1, and whenever events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable.

The Company reviews for goodwill impairment by first assessing qualitative factors to determine whether any impairment may exist. If the Company believes, as a result of the qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a quantitative two-step test is required; otherwise, no further testing is required. Under the first step of the quantitative test, the fair value of the reporting unit is compared with its carrying value (including goodwill). If the fair value of the reporting unit exceeds its carrying value, step two is not performed. If the fair value of the reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit and the Company performs step two of the impairment test (measurement). Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the fair value of that goodwill. The fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation and the residual fair value after this allocation is the fair value of the reporting unit goodwill.

In instances when a step two is required, the fair value of the reporting unit is determined using an income approach and comparable market multiples. Under the income approach, there are a number of inputs used to calculate the fair value using a discounted cash flow model, including operating results, business plans, projected cash flows and a discount rate. Discount rates, growth rates and cash flow projections are the most sensitive and susceptible to change as they require significant management judgment. Discount rates are determined by using a weighted average cost of capital, which considers market and industry data. Management develops growth rates and cash flow projections for each reporting unit considering industry and Company-specific historical and projected information. Terminal value rate determination follows common methodology of capturing the present value of perpetual cash flow estimates beyond the last projected period assuming a constant weighted average cost of capital and low long-term growth rates. Under the market approach, the Company considers its market capitalization, comparisons to other public companies’ data, and recent transactions of similar businesses within the Company’s industry.

The Company performed a qualitative analysis as of October 1, 2013 which did not indicate that it was more likely than not that the carrying values of the reporting units exceeded fair value. No impairments were recorded during the years ended December 31, 2013, 2012 or 2011.

Segment Information

During the first quarter of 2013, due to the Company change in operating structure (or strategy), the Company condensed its eight operating segments into two operating segments that are aggregated into one reporting segment because they have similar economic characteristics and meet the other aggregation criteria guidance on segment disclosure.  The two operating segments, organized by geographic area, are National Research Corporation (United States) and National Research Corporation Canada, which each offer a portfolio of solutions to address specific market needs around growth, retention, engagement and thought leadership for healthcare organizations.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Under that method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis using enacted tax rates. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances, if any, are established when necessary to reduce deferred tax assets to the amount that is more likely than not to be realized. The Company uses the deferral method of accounting for its investment tax credits related to state tax incentives. During the years ended December 31, 2013, 2012 and 2011, the Company recorded income tax benefits relating to these tax credits of $290,000, $289,000, and $229,000, respectively.

The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

The Company had an unrecognized tax benefit at December 31, 2013 and 2012, of $188,000 and $224,000, respectively, excluding interest of $5,000 and $11,000, respectively, and no penalties. Of this amount, $188,000 and $224,000 at December 31, 2013 and 2012, respectively, represents the net unrecognized tax benefits that, if recognized, would favorably impact the effective income tax rate. The Company accrues interest and penalties related to uncertain tax position in the statements of income as income tax expense. The Company is not subject to tax examinations for years prior to 2010 in the U.S. and 2009 in Canada.

Share-Based Compensation

The Company measures and recognizes compensation expense for all share-based payments. The compensation expense is recognized based on the grant-date fair value of those awards. All of the Company’s existing stock option awards and non-vested stock awards have been determined to be equity-classified awards.

Amounts recognized in the financial statements with respect to these plans:

	2013		2012		2011
	(In thousands)
Amounts charged against income, before income tax benefit	$	955	$	388	$	763
Amount of related income tax benefit		377		153		302
Total impact to net income	$	578	$	235	$	461

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash equivalents were $21.2 million and $7.5 million as of December 31, 2013, and 2012, respectively, consisting primarily of money market accounts and funds invested in commercial paper. At certain times, cash equivalent balances may exceed federally insured limits.

Fair Value Measurements

The Company’s valuation techniques are based on maximizing observable inputs and minimizing the use of unobservable inputs when measuring fair value. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect the Company’s market assumptions. The inputs are then classified into the following hierarchy: (1) Level 1 Inputs—quoted prices in active markets for identical assets and liabilities; (2) Level 2 Inputs—observable market-based inputs other than Level 1 inputs, such as quoted prices for similar assets or liabilities in active markets, quoted prices for similar or identical assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data; (3) Level 3 Inputs—unobservable inputs.

The following details the Company’s financial assets and liabilities within the fair value hierarchy at December 31, 2013 and 2012:

	Level 1		Level 2		Level 3		Total
			(In thousands)
As of December 31, 2013
Money Market Funds	$	7,266	$	--	$	--	$	7,266
Commercial Paper	$	13,976	$	--	$	--	$	13,976
Total	$	21,242	$	--	$	--	$	21,242
As of December 31, 2012
Money Market Funds	$	5,245	$	--	$	--	$	5,245
Commercial Paper	$	2,242	$	--	$	--	$	2,242
Total	$	7,487	$	--	$	--	$	7,487

The Company's long-term debt described in Note 6 is recorded at historical cost. The fair value of long-term debt is classified in Level 2 of the fair value hierarchy and was estimated based primarily on estimated current rates available for debt of the same remaining duration and adjusted for nonperformance and credit. The following are the carrying amount and estimated fair values of long-term debt:

	December 31, 2013		December 31, 2012
	(In thousands)
Total carrying amount of long-term debt	$	10,324	$	12,436
Estimated fair value of long-term debt	$	10,156	$	12,490

The Company believes that the carrying amounts of accounts receivable, accounts payable, and accrued expenses approximate their fair value. All non-financial assets that are not recognized or disclosed at fair value in the financial statements on a recurring basis, which includes goodwill and non-financial long-lived assets, are measured at fair value in certain circumstances (for example, when there is evidence of impairment). As of December 31, 2013 and 2012, there was no impairment related to property and equipment, goodwill and other intangible assets.

Contingencies
From time to time, the Company is involved in certain claims and litigation arising in the normal course of business. Management assesses the probability of loss for such contingencies and recognizes a liability when a loss is probable and estimable. At December 31, 2013, the Company was not engaged in any legal proceedings that are expected, individually or in the aggregate, to have a material effect on the Company.

Earnings Per Share

Net income per share of class A common stock and class B common stock is computed using the two-class method. Basic net income per share is computed by allocating undistributed earnings to common shares and using the weighted-average number of common shares outstanding during the period.

Diluted net income per share is computed using the weighted-average number of common shares and, if dilutive, the potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options and vesting of restricted stock. The dilutive effect of outstanding stock options is reflected in diluted earnings per share by application of the treasury stock method.

The liquidation rights and the rights upon the consummation of an extraordinary transaction are the same for the holders of class A common stock and class B common stock. Other than share distributions and liquidation rights, the amount of any dividend or other distribution payable on each share of class A common stock will be equal to one-sixth (1/6^th) of the amount of any such dividend or other distribution payable on each share of class B common stock. As a result, the undistributed earnings for each year are allocated based on the contractual participation rights of the class A and class B common stock as if the earnings for the year had been distributed.

At December 31, 2013, 2012, and 2011, the Company had 99,562, 92,460 and 358,707 options of class A shares and 6,407, 15,410, and 59,785 options of class B shares, respectively, which have been excluded from the diluted net income per share computation because the exercise price exceeds the fair market value.

	2013				2012						2011
	Class A		Class B		Class A			Class B			Class A		Class B
	(In thousands, except per share data)
Numerator for net income per share - basic:
Allocation of distributed earnings	$	1,071	$	1,071	$	8,681		$	8,681		$	2,956	$	2,956
Allocation of undistributed earnings		6,670		6,672		(1,147	)		(1,147	)		2,826		2,826
Net income attributable to common shareholders	$	7,741	$	7,743	$	7,534		$	7,534		$	5,782	$	5,782
Denominator for net income per share - basic:
Weighted average common shares outstanding - basic		20,677		3,447		20,325			3,388			20,016		3,336
Net income per share - basic	$	0.37	$	2.25	$	0.37		$	2.22		$	0.29	$	1.73
Numerator for net income per share - diluted:
Net income attributable to common shareholders for basic computation	$	7,741	$	7,743	$	7,534		$	7,534		$	5,782	$	5,782
Denominator for net income per share - diluted:
Weighted average common shares outstanding - basic		20,677		3,447		20,325			3,388			20,016		3,336
Weighted average effect of dilutive securities:
Stock Options		388		61		492			82			474		79
Restricted Stock		34		6		37			6			36		6
Weighted average common shares outstanding - diluted		21,099		3,514		20,854			3,476			20,526		3,421
Net income per share - diluted	$	0.37	$	2.20	$	0.36		$	2.17		$	0.28	$	1.69

Recent Accounting Pronouncements

There have been no new accounting pronouncements not yet effective or adopted that have significance or potential significance to the consolidated financial statements in 2013. 

XML

Note 8 - Restructuring and Severance Costs (Details) (2010 Restructuring Plan Contract Terminations [Member], USD $)	12 Months Ended
	Dec. 31, 2011
2010 Restructuring Plan Contract Terminations [Member]
Note 8 - Restructuring and Severance Costs (Details) [Line Items]
Payments for Restructuring	$ 280,000

XML

Note 5 - Income Taxes (Tables)

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Schedule of Income before Income Tax, Domestic and Foreign [Table Text Block]

	2013		2012		2011
	(In thousands)
U.S. Operations	$	21,882	$	19,836	$	16,017
Foreign Operations		2,606		2,371		2,143
	$	24,488	$	22,207	$	18,160

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

	2013			2012			2011
	(In thousands)
Federal:
Current	$	7,169		$	5,488		$	4,018
Deferred		195			1,140			1,170
Total	$	7,364		$	6,628		$	5,188
Foreign:
Current	$	716		$	684		$	606
Deferred		(7	)		(6	)		(1	)
Total	$	709		$	678		$	605
State:
Current	$	1,020		$	787		$	609
Deferred		(89	)		(954	)		194
Total	$	931		$	(167	)	$	803
Total	$	9,004		$	7,139		$	6,596

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

	2013			2012			2011
	(In thousands)
Expected federal income taxes	$	8,571		$	7,772		$	6,356
Foreign tax rate differential		(226	)		(203	)		(145	)
U.S. tax graduated rates		--			11			(99	)
State income taxes, net of federal benefit and state tax credits		605			552			522
Federal tax credits		(217	)		(282	)		(132	)
Uncertain tax positions		(43	)		(73	)		9
Deferred tax adjustment due to change in state tax law		--			(661	)		--
Recapitalization expenses		182			--			--
Other		132			23			85
Total	$	9,004		$	7,139		$	6,596

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

	2013			2012
	(In thousands)
Deferred tax assets:
Allowance for doubtful accounts	$	63		$	86
Accrued expenses		497			356
Share based compensation		1,113			859
Capital loss carryforward		1,124			1,132
Net operating loss		--			170
Tax credit carryforward		--			319
Other		39			--
Gross deferred tax assets		2,836			2,922
Less Valuation Allowance		(1,124	)		(1,138	)
Deferred tax assets		1,712			1,784
Deferred tax liabilities:
Prepaid expenses		286			324
Property and equipment		1,426			1,790
Intangible assets		6,879			6,415
Other		200			235
Deferred tax liabilities		8,791			8,764
Net deferred tax liabilities	$	(7,079	)	$	(6,980	)

Schedule of Unrecognized Tax Benefits Roll Forward [Table Text Block]

	(In thousands)
Balance of unrecognized tax benefits at December 31, 2011	$	266
Reductions due to lapse of applicable statute of limitations		(117	)
Additions based on tax positions of prior years		84
Additions based on tax positions related to the current year		(9	)
Balance of unrecognized tax benefits at December 31, 2012	$	224
Reductions due to lapse of applicable statute of limitations		(91	)
Additions based on tax positions of prior years		27
Additions based on tax positions related to the current year		28
Balance of unrecognized tax benefits at December 31, 2013	$	188

XML

Note 2 - Variable Interest Entity (Details) (USD $)	12 Months Ended
	Dec. 31, 2013
Note 2 - Variable Interest Entity (Details) [Line Items]
Annual Recurring Contract Value	$ 12,500,000
Proforma Minimum EBITDA Margin	35.00%
Variable Interest Entity Noncontrolling Interest Put Option	0
Variable Interest Entity Profit or Loss	837,000
Variable Interest Entity, Consolidated, Carrying Amount, Assets	649,000
Variable Interest Entity, Consolidated, Carrying Amount, Liabilities	186,000
Additional Capital Contributions [Member] | NRC [Member]
Note 2 - Variable Interest Entity (Details) [Line Items]
Variable Interest Entity, Financial or Other Support, Amount	$ 2,500,000
NRC [Member]
Note 2 - Variable Interest Entity (Details) [Line Items]
Variable Interest Entity, Qualitative or Quantitative Information, Ownership Percentage	49.00%
NG Customer-Connect, LLC [Member]
Note 2 - Variable Interest Entity (Details) [Line Items]
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners	25.00%
Illuminate Health, LLC [Member]
Note 2 - Variable Interest Entity (Details) [Line Items]
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners	26.00%

XML

Note 11 - Associate Benefits

12 Months Ended

Dec. 31, 2013

Disclosure Text Block Supplement [Abstract]

Compensation and Employee Benefit Plans [Text Block]

(11)     Associate Benefits

The Company sponsors a qualified 401(k) plan covering substantially all associates with no eligibility service requirement. Under the 401(k) plan, the Company matches 25.0% of the first 6.0% of compensation contributed by each associate. Employer contributions, which are discretionary, vest to participants at a rate of 20% per year. The Company contributed $252,000, $236,000 and $182,000 in 2013, 2012 and 2011, respectively, as a matching percentage of associate 401(k) contributions.