8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

_______________________

Date of Report (Date of earliest event reported): August 5, 2014

National Research Corporation

(Exact name of registrant as specified in its charter)

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

1245 Q Street, Lincoln, Nebraska 68508

(Address of principal executive offices, including zip code)

(402) 475-2525

(Registrant’s telephone number)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[  ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[  ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[  ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[  ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

On August 5, 2014, National Research Corporation (the “Company”) issued a press release announcing its earnings for the quarter ended June 30, 2014. A copy of such press release is furnished as Exhibit 99.1 and is incorporated by reference herein.

On August 6, 2014, the Company held a conference call and online Web simulcast in connection with the Company’s announcement of its earnings for the quarter ended June 30, 2014. A copy of the script for such conference call and simulcast is furnished as Exhibit 99.2 and is incorporated by reference herein. An archive of such conference call and simulcast and the related question and answer session will be available online at www.earnings.com.

Item 9.01. Financial Statements and Exhibits.

(a)     Not applicable.

(b)     Not applicable.

(c)     Not applicable.

(d)     Exhibits. The following exhibits are being furnished herewith:

(99.1) Press Release of National Research Corporation, dated August 5, 2014.

(99.2) Script for conference call and online Web simulcast, held August 6, 2014.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: August 6, 2014

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

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NATIONAL RESEARCH CORPORATION

Exhibit Index to Current Report on Form 8-K

Dated August 5, 2014

Exhibit
Number

(99.1)     Press Release of National Research Corporation, dated August 5, 2014.

(99.2)     Script for conference call and online Web simulcast, held August 6, 2014.

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EX-99

Exhibit 99.1

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

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

NATIONAL RESEARCH CORPORATION ANNOUNCES

SECOND QUARTER 2014 RESULTS

 __________________________________________

LINCOLN, Nebraska (August 5, 2014) — National Research Corporation (NASDAQ:NRCIA and NRCIB) today announced results for the second quarter of 2014.

● Net New Sales $4.1 million

● Total Contract Value $99.5 million

● Revenue up 7% to $24.0 million

● Net Income of $4.1 million, up 18%

Remarking on company performance, Michael D. Hays, chief executive officer of National Research Corporation said “Net new sales are up 25% from last quarter and looking ahead at new sales for the last half of the year, suggests recent changes made appear sustainable.”

Revenue for the quarter ended June 30, 2014, was $24.0 million, compared to $22.4 million for the same quarter in 2013. Net income for the quarter ended June 30, 2014, was $4.1 million, compared to $3.4 million for the quarter ended June 30, 2013. Diluted earnings per share increased to $0.10 for Class A shares and $0.57 for Class B shares for the quarter ended June 30, 2014, from diluted earnings per share of $0.08 for Class A shares and $0.49 for Class B shares for the quarter ended June 30, 2013. Combined diluted earnings per share (a non-GAAP measure) increased to $0.16 for the quarter ended June 30, 2014, from $0.14 for the second quarter of 2013.     

Regarding second quarter performance, Kevin Karas, chief financial officer of National Research Corporation, said, “The positive trend of double-digit revenue growth continued in our Acute Care Experience (17%), Market Insights (13%) and Connect (23%) offerings. From an earnings standpoint, we continue to enjoy leverage on incremental revenue which resulted in net income growth by 18% for the quarter.”

A listen-only simulcast of National Research Corporation’s 2014 second quarter conference call will be available online at http://www.media-server.com/m/p/ui8foa57 on August 6, 2014, beginning at 11:00 a.m. Eastern time. The online replay will follow approximately one hour later and continue for 30 days.

NRC Announces Second Quarter 2014 Results

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August 5, 2014

For more than 33 years, National Research Corporation has been at the forefront of patient-centered care, helping healthcare providers measure and improve quality and services through analytics that offer a rich understanding of customers’ experiences, preferences, risks and behaviors across the healthcare continuum.

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

This press release includes “forward-looking” statements related to the Company that can generally be identified as describing the Company’s future plans, objectives or goals. Such forward-looking statements are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those currently anticipated. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. For further information about the factors that could affect the Company’s future results, please see the Company’s filings with the Securities and Exchange Commission.

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NRC Announces Second Quarter 2014 Results

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August 5, 2014

NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

Unaudited Condensed Consolidated Statements of Income

(In thousands, except per share data)

	Three months ended June 30,						Six months ended June 30,
	2014			2013			2014			2013
Revenue	$	24,001		$	22,354		$	50,031		$	47,260
Operating expenses:
Direct expenses		10,773			9,498			21,102			19,744
Selling, general and administrative		5,984			6,391			12,349			12,884
Depreciation and amortization		926			931			1,861			1,882
Total operating expenses		17,683			16,820			35,312			34,510
Operating income		6,318			5,534			14,719			12,750
Other income (expense):
Interest income		19			12			36			31
Interest expense		(78	)		(101	)		(160	)		(217	)
Other, net		7			18			14			32
Total other expense		(52	)		(71	)		(110	)		(154	)
Income before income taxes		6,266			5,463			14,609			12,596
Provision for income taxes		2,215			2,029			5,104			4,692
Net income	$	4,051		$	3,434		$	9,505		$	7,904
Earnings Per Share of Common Stock:
Basic Earnings Per Share:
Class A	$	0.10		$	0.08		$	0.23		$	0.19
Class B	$	0.58		$	0.50		$	1.37		$	1.15
Diluted Earnings Per Share:
Class A	$	0.10		$	0.08		$	0.22		$	0.19
Class B	$	0.57		$	0.49		$	1.34		$	1.12
Weighted average shares and share equivalents outstanding
Class A - basic		20,771			20,672			20,757			20,671
Class B - basic		3,474			3,445			3,472			3,445
Class A - diluted		21,073			21,085			21,098			21,074
Class B - diluted		3,539			3,516			3,540			3,513

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NRC Announces Second Quarter 2014 Results

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August 5, 2014

NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

Unaudited Condensed Consolidated Balance Sheets

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

	Jun. 30,			Dec. 31,
	2014			2013
ASSETS
Current Assets:
Cash and cash equivalents	$	31,539		$	22,092
Accounts receivable, net		11,450			11,043
Income taxes receivable		612			357
Other current assets		3,874			3,074
Total current assets		47,475			36,566
Property and equipment, net		12,179			11,898
Goodwill		57,599			57,593
Other, net		4,615			5,031
Total Assets	$	121,868		$	111,088
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and accrued expenses	$	3,639		$	3,230
Deferred revenue		16,062			13,885
Accrued compensation		3,187			4,319
Income taxes payable		108			92
Notes payable		2,291			2,256
Total current liabilities		25,287			23,782
Non-current liabilities		14,503			15,551
Total Liabilities		39,790			39,333
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 25,372,186 in 2014 and 25,285,029 in 2013, outstanding 20,808,304 in 2014 and 20,768,784 in 2013		25			25
Class B Common stock, $0.001 par value; authorized 80,000,000 shares, issued 4,234,643 in 2014 and 4,220,117 in 2013, outstanding 3,480,217 in 2014 and 3,467,410 in 2013		4			4
Additional paid-in capital		43,859			42,192
Retained earnings		67,547			58,042
Accumulated other comprehensive income		359			302
Treasury stock		(29,716	)		(28,810	)
Total shareholder’s equity		82,078			71,755
Total liabilities and shareholders’ equity	$	121,868		$	111,088

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NRC Announces Second Quarter 2014 Results

Page 5

August 5, 2014

NATIONAL RESEARCH CORPORATION AND SUBSIDIARY

Unaudited Non-GAAP Combined Earnings Per Share Schedule

(In thousands, except per share data)

	Three months ended June 30,				Six months ended June 30,
	2014		2013		2014		2013
Combined Earnings Per Share
Basic Earnings Per Share	$	0.17	$	0.14	$	0.39	$	0.33
Diluted Earnings Per Share	$	0.16	$	0.14	$	0.39	$	0.32
Combined weighted average shares and share equivalents outstanding
Combined - Basic		24,245		24,118		24,228		24,116
Combined - Diluted		24,613		24,600		24,638		24,587

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EX-99

Exhibit 99.2

Mike:

Thank you, ___________, and welcome everyone to National Research Corporation’s 2014 second quarter conference call. My name is Mike Hays, the Company’s CEO. Joining me on the call today is Kevin Karas, our Chief Financial Officer.

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

Kevin :

Thank you, Mike.

This conference call includes forward-looking statements related to the Company that involve risks and uncertainties that could cause actual results or outcomes to differ materially from those currently anticipated. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. For further information about the facts that could affect the Company's future results, please see the Company's filings with the Securities and Exchange Commission. With that, I’ll turn it back to you, Mike.

Mike:

Thank you, Kevin. And again, welcome everyone.

Overall I was pleased with our performance in the second quarter. Net new sales, a key driver of future revenue growth, increased 25% over the first quarter 2014, and net income increased a very healthy 18% quarter-over-quarter.

Before I continue, I’ll return the call to Kevin for his review of our second quarter financial performance.

Kevin

Thank you, Mike.

Net new sales of $4.1 million were added in the second quarter of 2014, including $562,000 for Customer Connect. Total contract value at the end of the second quarter was $99.5 million, which includes $1.3 million of total contract value for Customer Connect.

2

Revenue for the second quarter 2014 was $24.0 million, an increase of 7% over the second quarter of 2013. Revenue growth for the quarter is comprised entirely from organic growth, which was driven by a combination of continued gains in market share and vertical growth from cross selling, and increasing contract value in our existing client base. Second quarter 2014 results include $154,000 of revenue from Customer Connect.

Consolidated operating income for the second quarter of 2014 was $6.3 million or 26% of revenue, compared to $5.5 million or 25% of revenue for the same period last year. The 2014 second quarter consolidated operating income includes $389,000 in operating losses from Customer Connect. Operating income for the second quarter 2014 without the Customer Connect losses was $6.7 million, which represents a 28% operating income margin and an increase in operating income of 20% over the second quarter of 2013.

Total operating expenses for the second quarter increased from $16.8 million in 2013, to $17.7 million in 2014.

Direct expenses increased to $10.8 million for the second quarter 2014, compared to $9.5 million for the same period in 2013. Direct expenses as a percent of revenue were 45% for the second quarter 2014 and are expected to average 42% of revenue for the full year in 2014.

3

Selling, general and administrative expenses decreased to $6.0 million, or 25% of revenue, for the second quarter 2014, compared to $6.4 million or 29% of revenue for the same period in 2013. Second quarter 2013 expenses included $250,000 of costs related to the recapitalization. SG&A expense for the second quarter of 2014 without Customer Connect was $5.6 million or 23% of revenue.

Including the incremental expenses that are projected to be incurred for Customer Connect resources, consolidated SG&A expense is expected to average 25% of revenue for the full year of 2014.

Depreciation and amortization expense for the second quarter 2014 was $927,000, compared to $932,000 in the second quarter of 2013. The decrease was attributed to declining intangible asset amortization expenses. Depreciation and amortization expense was 4% of revenue for the second quarter 2014 and is expected to also be 4% of revenue for the full year in 2014.

The provision for income taxes totaled $2.2 million for the second quarter 2014, compared to $2.0 million for the same period in 2013. The effective tax rate was 35.3% for the second quarter of 2014, compared to an effective tax rate of 37.1% in the second quarter of 2013. The effective tax rate has decreased in 2014 as a result of reduced expense from state income taxes. The effective tax rate is expected to average 35% for the full year in 2014.

4

Net income for the second quarter 2014 increased by 18% to $4.1 million, compared to $3.4 million in 2013. Our net income margin for the second quarter increased to 17%, compared to 15% in 2013. For the second quarter of 2014, our combined non-GAAP diluted earnings per share were $0.16, compared to $0.14 for the second quarter of 2013.

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

Mike:

Thank you, Kevin.

As referenced, new sales are improving and are doing so for a variety of reasons, the most important of which is that healthcare organizations are placing increased value on the voice of the customer. This is driving an increasing demand for our product portfolio. Let me provide a few key examples.

One is our patient experience product where we are witnessing increased demand being driven by additional CAHPS requirements, value-based purchasing programs, and a growing number of other financial incentives and/or penalties tied to patient experience.

5

We are also seeing increased international interest in our Picker Patient Experience measurement tools. As you are aware, our Picker tools are the basis of the required HCAHPS measures in the United States. We have recently signed an intellectual property agreement with the Australian government which has selected Picker as its national standard. Australia now joins the UK and several European countries that standardize on Picker as their national patient experience measurement tool.

Interest in the voice of the customer is also growing regarding brand equity.

As healthcare systems acquire acute care hospitals and other providers across the continuum, how best to manage the brand becomes a board room debate. In fact, in a recently released paper on mega challenges for healthcare providers, brand strategy and management were high on the list. Our Market Insights product has been tracking brand equity for 27 years and across all of healthcare, we are the recognized measurement standard for all things brand.

Tracking and understanding the impact of social media was also cited as a key challenge for healthcare. Our Market Insights product was early in monitoring social media impact and we are looking at additional tools to address this growing challenge for healthcare providers.

6

In summary, brand and social media are two examples of why demand for our Market Insights product, which is all about listening to the customer, is increasing.

We don’t talk about the Market Insights product as often as we should. It may surprise many that 365 days a year, for each of the largest 250 markets in the U.S., we capture consumers’ health-related attitudes, preferences and behaviors. In fact, Market Insights has become the largest consumer tracking study in the country, independent of industry. Clearly this is a powerful and likely insurmountable barrier to entry. And, as we all are aware, the growing appetite for the voice of the customer is also a core driver for Customer Connect.

NRC “is” the voice of the customer for a growing number of healthcare organizations and we have a product road map to drive those voices into the far greater numbered hallways and board rooms going forward.

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

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Closing Statement – Mike:

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

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