NATIONAL RESEARCH CORP - Quarter Report: 2010 June (Form 10-Q)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
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x
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the quarterly period ended June 30,
2010
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or
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o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the transition period from ________ to
________
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Commission
File Number 0-29466
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National Research
Corporation
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(Exact
name of Registrant as specified in its
charter)
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Wisconsin
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47-0634000
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(I.R.S.
Employer
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incorporation
or organization)
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Identification
No.)
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1245 “Q” Street,
Lincoln,
Nebraska 68508
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(Address
of principal executive offices) (Zip
Code)
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(402)
475-2525
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(Registrant’s
telephone number, including area
code)
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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 T 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). (Registrant is not yet required to provide
financial disclosure in an Interactive Data File format.)
Yes £ No £
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 T Smaller
reporting company £
(Do not check if a 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 T
Indicate
the number of shares outstanding of each of the issuer’s classes of common stock
as of the latest practicable date.
Common Stock, $.001 par
value, outstanding as of August 6, 2010: 6,653,001 shares
NATIONAL
RESEARCH CORPORATION
FORM 10-Q
INDEX
For the
Quarter Ended June 30, 2010
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Page No.
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PART
I.
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FINANCIAL
INFORMATION
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Item
1.
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Financial
Statements
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Condensed
Consolidated Balance Sheets
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4
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Condensed
Consolidated Statements of Income
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5
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Condensed
Consolidated Statements of Cash Flows
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6
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Condensed
Notes to Consolidated Financial Statements
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7-13
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Item
2.
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Management’s
Discussion and Analysis of Financial
Condition and Results of Operations
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13-18
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Item
3.
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Quantitative
and Qualitative Disclosures About Market
Risk
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18
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Item
4.
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Controls
and Procedures
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18
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PART
II.
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OTHER
INFORMATION
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Item
1A.
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Risk
Factors
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18
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Item
2.
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Unregistered
Sales of Equity Securities and Use
of Proceeds
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18
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Item
6.
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Exhibits
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19
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Signatures
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20
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Exhibit
Index
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21
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-2-
Special Note Regarding
Forward-Looking Statements
Certain
matters discussed in this Quarterly Report on Form 10-Q 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 (the “Company”) “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:
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·
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The
possibility of non-renewal of the Company’s performance tracking
contracts;
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·
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The
Company’s ability to compete in its markets, which are highly competitive,
and the possibility of increased price pressure and
expenses;
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·
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The
effects of the economic downturn;
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·
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The
possibility of consolidation in the healthcare
industry;
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·
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The
impact of federal healthcare reform legislation or other regulatory
changes;
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·
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The
Company’s ability to retain its limited number of key
clients;
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·
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The
Company’s ability to manage its growth, including identifying acquisition
candidates and effectively integrating acquired
companies;
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·
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The
Company’s ability to collect the data on which its business
relies;
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·
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The
Company’s ability to attract and retain key managers and other
personnel;
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·
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The
possibility that the Company’s intellectual property and other proprietary
information technology could be copied or independently developed by its
competitors;
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·
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Errors
in, or dissatisfaction with, performance tracking and other surveys
provided by the Company;
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·
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Regulatory
developments; and
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·
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The
factors set forth under the caption “Risk Factors” in Part I, Item 1A of
the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2009, as such section may be updated by Part II,
Item 1A of the Company’s subsequently filed Quarterly Reports on Form 10-Q
(including this Report).
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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
Quarterly Report on Form 10-Q and the Company undertakes no obligation to
publicly update such forward-looking statements to reflect subsequent events or
circumstances.
-3-
PART
I – Financial Information
ITEM
1. Financial
Statements
NATIONAL
RESEARCH CORPORATION AND SUBSIDIARY
CONDENSED
CONSOLIDATED BALANCE SHEETS
(In
thousands, except share amounts)
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June
30, 2010
(Unaudited)
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December
31, 2009
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||||||
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Assets
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||||||||
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Current
assets:
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||||||||
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Cash
and cash equivalents
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$ | 7,236 | $ | 2,512 | ||||
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Trade
accounts receivable, less allowance for doubtful accounts of $310 and $279
in 2010 and 2009, respectively
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7,902 | 5,214 | ||||||
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Unbilled
revenue
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1,248 | 1,173 | ||||||
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Prepaid
expenses and other
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1,451 | 1,864 | ||||||
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Recoverable
income taxes
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1,325 | 803 | ||||||
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Deferred
income taxes
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201 | 98 | ||||||
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Total
current assets
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19,363 | 11,664 | ||||||
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Property
and equipment, net
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13,031 | 13,975 | ||||||
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Intangible
assets, net
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6,307 | 6,883 | ||||||
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Goodwill
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39,927 | 39,924 | ||||||
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Other
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196 | 53 | ||||||
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Total
assets
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$ | 78,824 | $ | 72,499 | ||||
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Liabilities and
Shareholders’ Equity
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Current
liabilities:
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Current
portion of note payable
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$ | 819 | $ | 816 | ||||
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Accounts
payable
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564 | 598 | ||||||
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Accrued
wages, bonus and profit sharing
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2,281 | 1,926 | ||||||
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Accrued
expenses
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1,166 | 848 | ||||||
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Deferred
revenue
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15,909 | 11,907 | ||||||
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Total
current liabilities
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20,739 | 16,095 | ||||||
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Note
payable, net of current portion
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6,149 | 6,903 | ||||||
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Deferred
income taxes
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5,306 | 5,126 | ||||||
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Deferred
revenue
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253 | 204 | ||||||
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Other
long term liabilities
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9 | -- | ||||||
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Total
liabilities
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32,456 | 28,328 | ||||||
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Shareholders’
equity:
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Common
stock, $.001 par value; authorized 20,000,000 shares, issued 8,029,282 in
2010 and 8,018,044 in 2009, outstanding 6,653,001 in 2010 and 6,662,111 in
2009
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8 | 8 | ||||||
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Additional
paid-in capital
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28,274 | 27,871 | ||||||
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Retained
earnings
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40,165 | 37,905 | ||||||
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Accumulated
other comprehensive income
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766 | 769 | ||||||
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Treasury
stock, at cost; 1,376,281 shares in 2010 and 1,355,933 shares in
2009
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(22,845 | ) | (22,382 | ) | ||||
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Total
shareholders’ equity
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46,368 | 44,171 | ||||||
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Total
liabilities and shareholders’ equity
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$ | 78,824 | $ | 72,499 | ||||
See
accompanying condensed notes to consolidated financial statements.
-4-
NATIONAL
RESEARCH CORPORATION AND SUBSIDIARY
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(In
thousands, except for share amounts, unaudited)
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Three
months ended
June 30,
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Six
months ended
June 30, |
|||||||||||||||
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2010
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2009
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2010
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2009
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Revenue
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$ | 14,139 | $ | 13,594 | $ | 31,509 | $ | 30,334 | ||||||||
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Operating
expenses:
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Direct
expenses
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5,877 | 6,114 | 12,333 | 13,242 | ||||||||||||
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Selling,
general and administrative
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4,545 | 3,887 | 9,014 | 8,016 | ||||||||||||
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Depreciation
and amortization
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1,059 | 891 | 2,157 | 2,001 | ||||||||||||
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Total operating
expenses
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11,481 | 10,892 | 23,504 | 23,259 | ||||||||||||
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Operating income
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2,658 | 2,702 | 8,005 | 7,075 | ||||||||||||
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Other
income (expense):
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Interest
income
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2 | - | 3 | 1 | ||||||||||||
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Interest
expense
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(93 | ) | (85 | ) | (191 | ) | (223 | ) | ||||||||
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Other, net
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49 | (98 | ) | 6 | (57 | ) | ||||||||||
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Total other income
(expense)
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(42 | ) | (183 | ) | (182 | ) | (279 | ) | ||||||||
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Income before income
taxes
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2,616 | 2,519 | 7,823 | 6,796 | ||||||||||||
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Provision
for income taxes
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956 | 910 | 3,034 | 2,537 | ||||||||||||
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Net income
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$ | 1,660 | $ | 1,609 | $ | 4,789 | $ | 4,259 | ||||||||
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Net
income per share – basic
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$ | .25 | $ | .24 | $ | .72 | $ | .64 | ||||||||
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Net
income per share – diluted
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$ | .25 | $ | .24 | $ | .71 | $ | .63 | ||||||||
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Weighted
average shares and share equivalents outstanding – basic
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6,634 | 6,637 | 6,637 | 6,635 | ||||||||||||
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Weighted
average shares and share equivalents outstanding – diluted
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6,732 | 6,734 | 6,724 | 6,720 | ||||||||||||
See
accompanying condensed notes to consolidated financial statements.
-5-
NATIONAL
RESEARCH CORPORATION AND SUBSIDIARY
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In
thousands, unaudited)
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Six
months ended
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||||||||
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June
30,
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||||||||
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2010
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2009
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|||||||
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Cash
flows from operating activities:
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||||||||
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Net
income
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$ | 4,789 | $ | 4,259 | ||||
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Adjustments
to reconcile net income to net cash
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||||||||
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provided
by operating activities:
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Depreciation
and amortization
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2,157 | 2,001 | ||||||
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Deferred
income taxes
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73 | 539 | ||||||
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Loss
(gain) on disposal of property and equipment
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1 | -- | ||||||
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Non-cash
share-based compensation expense
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368 | 384 | ||||||
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Tax
benefit from exercise of stock options
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4 | -- | ||||||
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Net
changes in assets and liabilities:
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||||||||
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Trade
accounts receivable
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(2,686 | ) | (855 | ) | ||||
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Unbilled
revenue
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(74 | ) | (310 | ) | ||||
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Prepaid
expenses and other
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221 | 123 | ||||||
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Accounts
payable
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(57 | ) | 187 | |||||
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Accrued
expenses, wages, bonuses and profit sharing
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830 | 233 | ||||||
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Income
taxes recoverable and payable
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(522 | ) | (115 | ) | ||||
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Deferred
revenue
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4,050 | 1,198 | ||||||
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Net
cash provided by operating activities
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9,154 | 7,644 | ||||||
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Cash
flows from investing activities:
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||||||||
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Purchases
of property and equipment
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(588 | ) | (2,083 | ) | ||||
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Payment
of acquisition earn-out obligation
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(172 | ) | -- | |||||
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Net
cash used in investing activities
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(760 | ) | (2,083 | ) | ||||
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Cash
flows from financing activities:
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||||||||
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Proceeds
from notes payable
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-- | 3,741 | ||||||
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Payments
on notes payable
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(690 | ) | (7,887 | ) | ||||
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Payments
on other long term liabilities
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(17 | ) | -- | |||||
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Purchases
of treasury stock
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(399 | ) | -- | |||||
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Proceeds
from exercise of stock options
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31 | -- | ||||||
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Common
stock withheld from vested restricted shares for payroll
tax withholdings
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(64 | ) | (73 | ) | ||||
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Excess
tax benefit from share-based compensation
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5 | 4 | ||||||
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Payment
of dividends on common stock
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(2,529 | ) | (2,131 | ) | ||||
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Net
cash used in financing activities
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(3,663 | ) | (6,346 | ) | ||||
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Effect
of exchange rate changes on cash
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(7 | ) | 80 | |||||
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Increase
(decrease) in cash and cash equivalents
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4,724 | (705 | ) | |||||
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Cash
and cash equivalents at beginning of period
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2,512 | 1,109 | ||||||
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Cash
and cash equivalents at end of period
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$ | 7,236 | $ | 404 | ||||
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Supplemental
disclosure of cash paid for:
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||||||||
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Interest
expense
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$ | 191 | $ | 258 | ||||
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Income
taxes
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$ | 4,158 | $ | 2,053 | ||||
See accompanying condensed notes to consolidated
financial statements.
-6-
NATIONAL
RESEARCH CORPORATION AND SUBSIDIARY
CONDENSED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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1.
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BASIS
OF CONSOLIDATION AND PRESENTATION
|
National
Research Corporation (the “Company”) is a provider of ongoing survey-based
performance measurement, analysis, tracking, improvement services and governance
education to the healthcare industry in the United States and
Canada. The Company provides market research services to hospitals
and insurance companies and develops tools that enable healthcare organizations
to obtain performance measurement information necessary to comply with industry
and regulatory standards, and to improve their business practices.
The
Company has six operating segments that are aggregated into one reporting
segment because they have similar economic characteristics and meet the other
aggregation criteria from the Financial Accounting Standards Board (“FASB”)
guidance on segment disclosure. The six operating segments are as
follows: NRC Picker U.S. and NRC Picker Canada, which each offer renewable
performance tracking and improvement services, custom research,
subscription-based educational services, and a renewable syndicated service;
Ticker, which offers stand-alone market information as well as a comparative
performance database to allow the Company’s clients to assess their performance
relative to the industry, to access best practice examples, and to utilize
competitive information for marketing purposes; Payer Solutions, which offers
functional disease-specific and health status measurement tools; The Governance
Institute, which offers subscription-based governance information and
educational conferences designed to improve the effectiveness of hospital and
healthcare systems by continually strengthening their healthcare boards, medical
leadership, and management performance in the United States; and My InnerView
(“MIV”), which provides quality and performance improvement solutions to the
senior care industry.
The
condensed consolidated balance sheet of the Company at December 31, 2009, was
derived from the Company’s audited consolidated balance sheet as of that
date. All other financial statements contained herein are unaudited
and, in the opinion of management, include all adjustments (consisting only of
normal recurring adjustments) the Company considers necessary for a fair
presentation of financial position, results of operations and cash flows in
accordance with accounting principles generally accepted in the United
States. Certain 2009 financial amounts have been reclassified to
conform to 2010 presentation.
Information
and footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States
have been condensed or omitted. These consolidated financial
statements should be read in conjunction with the financial statements and notes
thereto that are included in the Company’s Form 10-K for the fiscal year ended
December 31, 2009, filed with the Securities and Exchange Commission on
March 31, 2010.
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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.
The
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiary, National Research Corporation Canada. All
significant intercompany transactions and balances have been
eliminated. Because there are no minority interests in the
consolidated subsidiary, all of the Company’s net income, comprehensive income
and shareholders’ equity are attributable to controlling interests.
-7-
The
functional currency of the Company’s foreign subsidiary, National Research
Corporation Canada, is the subsidiary’s local currency. The Company
translates the assets and liabilities of its foreign subsidiary at the
period-end rate of exchange and income statement items at the average rate
prevailing during the period. The Company records the resulting
translation adjustment in accumulated other comprehensive income (loss), a
component of shareholders’ equity. Gains and losses related to
transactions denominated in a currency other than the subsidiary’s local
currency and short-term intercompany accounts are included in other income
(expense), net in the consolidated statements of income.
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 June 30, 2010:
|
Level 1
|
Level 2
|
Level 3
|
||||||||||
|
(In
thousands)
|
||||||||||||
|
Money
Market Funds
|
$ | 237 | $ | -- | $ | -- | ||||||
During
the three-month period ended June 30, 2010, the Company did not have transfers
between the Level measurements.
The
Company's long-term debt of $7.0 million at June 30, 2010, is recorded at
historical cost. The estimated fair value of the Company's long-term debt is
$7.1 million at June 30, 2010, based primarily on estimated current rates
available for debt of the same remaining duration and adjusted for
nonperformance risk and credit risk.
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 June 30, 2010, there was no indication of impairment related to the
non-financial assets.
-8-
2. COMPREHENSIVE
INCOME
Comprehensive
income, including components of other comprehensive income, was as
follows:
|
Three
months ended
June 30,
|
Six
months ended June
30,
|
|||||||||||||||
|
(in
thousands)
|
(in
thousands)
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Net
income
|
$ | 1,660 | $ | 1,609 | $ | 4,789 | $ | 4,259 | ||||||||
|
Other
comprehensive income (loss):
|
||||||||||||||||
|
Foreign
currency translation
|
(187 | ) | 350 | (3 | ) | 259 | ||||||||||
|
Total
other comprehensive income (loss)
|
(187 | ) | 350 | (3 | ) | 259 | ||||||||||
|
Comprehensive
income
|
$ | 1,473 | $ | 1,959 | $ | 4,786 | $ | 4,518 | ||||||||
3. INCOME TAXES
The
Company’s effective tax rate increased to 38.8% for the six-month period ended
June 30, 2010, compared to 37.3% for the same period in 2009 due to projected
taxable income moving the Company’s federal tax rate from 34% to
35%. This increased rate also adjusted deferred tax balances by
$152,000 with the offset to income tax expense. These increases were
partially offset by a decrease in Canadian statutory income tax rates and
increases in tax credits from a state tax incentive program. The
Company’s projected annualized effective tax rate for 2010 is
37.7%.
The
unrecognized tax benefits were increased by $5,000 during the six-month period
ended June 30, 2010, for a balance of $546,000. The Company's policy
is to recognize potential accrued interest and penalties related to unrecognized
tax benefits in income tax expense.
4. NOTES
PAYABLE
On
December 19, 2008, the Company borrowed $9.0 million under a term note to
partially finance the acquisition of MIV. The term note is payable in
35 equal installments of $97,000 with the balance of principal and interest
payable in a balloon payment due on December 31, 2011. Borrowings
under the term note bear interest at a rate of 5.2% per year. In July
2010, the Company refinanced the existing term loan with a $6.9 million term
loan. The new term loan is payable in 35 monthly installments of
$80,104 with a balloon payment for the remaining principal balance and interest
due on July 31, 2013. Borrowings under the new term loan bear
interest at a rate of 3.79% per year.
The term
note is secured by certain of the Company’s assets, including the Company’s
land, building, accounts receivable and intangible assets. The term
note contains 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 June 30, 2010, the Company was in compliance with these
restrictions and covenants. The new term loan has the same
collateralization, covenants and restrictions as the previous term
note.
The
Company also entered into a revolving credit note in 2006. The
maximum aggregate amount available under the revolving credit note was
originally $3.5 million, but an addendum to the note dated March 26, 2008,
changed the amount to $6.5 million. The revolving credit note was
renewed in July 2010 to extend the term to June 30, 2011. The Company
may borrow, repay and re-borrow amounts under the revolving credit note from
time to time until its maturity on June 30, 2011.
-9-
The
maximum aggregate amount available under the revolving credit note of $6.5
million is subject to a borrowing base equal to 75% of the Company’s eligible
accounts receivable. Borrowings under the renewed revolving credit
note bear interest at a variable annual rate equal to 1) 2.5% plus the daily
reset one-month LIBOR rate or 2) 2.2% plus the 1-, 2-, 3-, 6- or 12-month LIBOR
rate, or 3) the bank’s Money Market Loan Rate. As of June 30, 2010,
the revolving credit note did not have a balance. According to
borrowing base requirements, the Company had the capacity to borrow $5.9 million
as of June 30, 2010.
5. 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.
The
National Research Corporation 2004 Non-Employee Director Stock Plan (the “2004
Director Plan”) is a nonqualified plan that provides for the granting of options
with respect to 550,000 shares of the Company’s common stock. The
2004 Director Plan provides for grants of nonqualified 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 12,000
shares of the Company’s common stock are granted to directors that are
re-elected or retained as a director at such meeting. On May 7, 2009,
the Board of Directors amended the plan to increase the number of shares of
common stock authorized for issuance under the plan from 250,000 to 550,000
shares, and the Company’s shareholders approved the increase at the annual
meeting on May 7, 2010. The grants of options to directors on the
date of the 2009 annual meeting of shareholders were also approved by the
Company’s shareholders at the 2010 annual meeting of shareholders.
The
following table summarizes stock option activity under the Company’s 2001 and
2006 Equity Incentive Plans, the 1997 Equity Incentive Plan (under which no
additional options will be granted) and the 2004 Director Plan for the six
months ended June 30, 2010.
|
Number
of
Options
|
Weighted
Average Exercise Price
|
Weighted
Average Remaining Contractual Terms
Years
|
Aggregate
Intrinsic Value
|
|||||||||||||
|
Outstanding
at December 31, 2009
|
577,822 | $ | 22.06 | |||||||||||||
|
Granted
|
122,647 | $ | 23.58 | |||||||||||||
|
Exercised
|
(2,000 | ) | $ | 15.46 | ||||||||||||
|
Outstanding
at June 30, 2010
|
698,469 | $ | 22.34 | 5.96 | $ | 15,603,797 | ||||||||||
|
Exercisable
at June 30, 2010
|
349,319 | $ | 20.73 | 6.13 | $ | 7,241,383 | ||||||||||
Options
to purchase shares of common stock were granted with exercise prices equal to
the fair value of the common stock on the date of grant. The fair
value of stock options granted was estimated using a Black-Scholes valuation
model with the following assumptions:
|
2010
|
2009
|
||
|
Expected
dividend yield at date of grant
|
2.86
to 3.09%
|
1.93
to 2.35%
|
|
|
Expected
stock price volatility
|
31.20
to 27.00%
|
24.20
to 30.20%
|
|
|
Risk-free
interest rate
|
2.13
to 2.56%
|
1.55
to 2.15%
|
|
|
Expected
life of options (in years)
|
4.00
to 6.00
|
4.00
to 6.00
|
-10-
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 common 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 prior to exercise. The Company considers groups of associates who have similar historical exercise behavior separately for valuation purposes.
The
following table summarizes information regarding non-vested shares of common
stock granted to associates under the 2001 Equity Incentive Plan for the
six-month period ended:
|
Shares Outstanding
|
Weighted
Average Grant Date Fair Value Per
Share
|
|||||||
|
Outstanding
at December 31, 2009
|
21,956 | $ | 21.68 | |||||
|
Granted
|
9,238 | $ | 21.65 | |||||
|
Vested
|
(8,558 | ) | $ | 23.37 | ||||
|
Forfeited
|
-- | -- | ||||||
|
Outstanding
at June 30, 2010
|
22,636 | $ | 21.03 | |||||
As of
June 30, 2010, the total unrecognized compensation cost related to non-vested
stock awards was approximately $245,000 and is expected to be recognized over a
weighted average period of 3.70 years.
6. GOODWILL
AND OTHER INTANGIBLE ASSETS
The
following represents a summary of changes in the Company’s carrying amount of
goodwill for the six months ended June 30, 2010.
|
(In
thousands)
|
||||
|
Balance
as of December 31, 2009
|
$ | 39,924 | ||
|
Foreign
currency translation
|
3 | |||
|
Balance
as of June 30, 2010
|
$ | 39,927 | ||
Intangible
assets consisted of the following:
|
June 30, 2010
|
December 31, 2009
|
|||||||
|
(In
thousands)
|
||||||||
|
Non-amortizing
other intangible assets:
|
||||||||
|
Trade
name
|
1,191 | 1,191 | ||||||
|
Amortizing
other intangible assets:
|
||||||||
|
Customer
related intangibles
|
8,174 | 8,174 | ||||||
|
Trade
name
|
1,572 | 1,572 | ||||||
|
Total
other intangible assets
|
10,937 | 10,937 | ||||||
|
Less
accumulated amortization
|
(4,630 | ) | (4,054 | ) | ||||
|
Other
intangible assets, net
|
$ | 6,307 | $ | 6,883 | ||||
-11-
7. PROPERTY
AND EQUIPMENT
|
June 30, 2010
|
December 31, 2009
|
|||||||
|
(In
thousands)
|
||||||||
|
Property
and equipment
|
$ | 25,514 | $ | 29,105 | ||||
|
Accumulated
depreciation
|
(12,483 | ) | (15,130 | ) | ||||
|
Property
and equipment, net
|
$ | 13,031 | $ | 13,975 | ||||
8. EARNINGS
PER SHARE
Net
income per share has been calculated and presented for “basic” and “diluted”
data. “Basic” net income per share was computed by dividing net
income by the weighted average number of common shares outstanding, whereas
“diluted” net income per share was computed by dividing net income by the
weighted average number of common shares outstanding adjusted for the dilutive
effects of options and restricted stock. As of June 30, 2010 and
2009, the Company excluded 412,574 and 102,739 options for each period,
respectively, from the diluted net income per share computation because their
exercise or grant price exceeded the fair market value of the common stock on
such date.
The
following table shows the amounts used in computing earnings per share and the
effect on the weighted average number of shares of dilutive potential common
stock:
|
Three
months ended
|
Six
months ended
|
|||||||||||||||
|
June 30,
(in
thousands)
|
June 30,
(in
thousands)
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Weighted
average shares and share equivalents - basic
|
6,634 | 6,637 | 6,637 | 6,635 | ||||||||||||
|
Weighted
average dilutive effect of options
|
86 | 84 | 74 | 74 | ||||||||||||
|
Weighted
average dilutive effect of restricted stock
|
12 | 13 | 13 | 11 | ||||||||||||
|
Weighted
average shares and share equivalents - dilutive
|
6,732 | 6,734 | 6,724 | 6,720 | ||||||||||||
9. ADOPTION
OF NEW ACCOUNTING PRONOUNCEMENTS
In
January 2010, the FASB amended fair value guidance to require companies to make
new disclosures about recurring and or non-recurring fair value measurements
including significant transfers into and out of Level 1 and Level 2
measurements. This guidance was effective for annual or interim
reporting periods beginning after December 15, 2009. The adoption of
this pronouncement has not had an effect on the consolidated financial
statements, as it pertains only to disclosure requirements. In
addition, as part of this guidance and effective for annual or interim reporting
periods beginning after December 15, 2010, disclosure of purchases,
sales, issuances, and settlement of assets must be on a gross basis for Level 3
measurements, where currently it is on a net basis. Also, the level
of disaggregation will be increased by “class” instead of “major
category.” Management believes this will not affect the consolidated
financial statements as it pertains to only disclosure
requirements.
In
February 2010, the FASB changed guidance on “Subsequent
Events.” Previous guidance established general standards of
accounting for and disclosure of events that occur after the balance sheet date
but before financial statements are issued or are available to be
issued. The February 2010 update eliminated the requirement for
a company that is required to file reports with the Securities and Exchange
Commission (“SEC”) to disclose the date through which subsequent events have
been evaluated, along with the requirement to disclose whether that date is the
date the financial statements were issued or the date the financial statements
were available to be issued. The adoption of this pronouncement has
not had an effect on the consolidated financial statements, as it pertains only
to disclosure requirements.
-12-
10. RECENT
ACCOUNTING PRONOUNCEMENTS
In
September 2009, the FASB issued new guidance for revenue recognition with
multiple deliverables, which is effective for revenue arrangements entered into
or materially modified in fiscal years beginning on or after June 15, 2010,
although early adoption is permitted. This guidance eliminates the
residual method under the current guidance and replaces it with the “relative
selling price” method when allocating revenue in a multiple deliverable
arrangement. The selling price for each deliverable shall be
determined using vendor specific objective evidence of selling price, if it
exists, otherwise third-party evidence of selling price. If neither
exists for a deliverable, the vendor shall use its best estimate of the selling
price for that deliverable. After adoption, this guidance will also
require expanded qualitative and quantitative disclosures. As of June
30, 2010, the Company is assessing the potential impact on its financial
position and results of operations.
11. RELATED
PARTY TRANSACTIONS
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, which is
conducted by an independent insurance broker, the Company began purchasing
dental insurance for certain of its associates from Ameritas in 2007 and vision
insurance for certain of its associates from Ameritas in 2009. The
total value of these purchases was $37,000 and $30,000 for the three-month
periods and $74,000 and $55,000 for the six-month periods ended June 30, 2010
and 2009, respectively.
12. SUBSEQUENT
EVENTS
On August
3, 2010, the Company acquired all of the issued and outstanding shares of stock
and stock rights of Outcome Concept Systems, Inc. (“OCS”), a provider of
clinical, financial and operational benchmarks and analytics to home care and
hospice providers. The all-cash purchase price, excluding transaction
costs, of $15.0 million plus a $1.3 million payment for the estimated working
capital adjustment, was funded with available cash on hand and borrowings of
$1.3 million under the Company’s existing revolving credit note and $10.0
million under a new term note. The new term note is payable in 35
monthly installments of $121,190 with a balloon payment for the remaining
principal balance and interest due on July 31, 2013. Borrowings under
the term note bear interest at a rate of 3.79% per year. The term
note is secured by certain of the Company’s assets including land, building,
accounts receivable and intangible assets. The term note contains the
same covenants and restrictions included in the Company’s other term borrowings
described in Note 4.
ITEM
2. Management’s
Discussion and Analysis of Financial Condition and Results of Operations
Overview
The
Company believes it is a leading provider of ongoing survey-based performance
measurement, analysis, tracking, improvement services and governance education
to the healthcare industry in the United States and Canada. Since
1981, the Company has provided these services using traditional market research
methodologies, such as direct mail, telephone-based surveys, focus groups and
in-person interviews. The current primary data collection methodology
used is direct mail, but the Company uses other methodologies for certain types
of studies. The Company addresses the growing need of healthcare
providers, payers, nursing homes, and assisted living facilities to measure the
care outcomes, specifically experience and health status of their patients
and/or members, and provides information on governance issues. The
Company develops tools that enable healthcare organizations to obtain
performance measurement information necessary to comply with industry and
regulatory standards, and to improve their business practices so they can
maximize new member and/or patient attraction, experience, member retention and
profitability. The Company believes that a driver of its future
growth, and the growth of its industry in general, will be the increase in
demand for performance measurement, improvement, and educational services as a
result of more public reporting programs. The Company’s primary types
of information services are renewable performance tracking and improvement
services, custom research, subscription-based educational services, and a
renewable syndicated service.
-13-
Results
of Operations
The
following table sets forth for the periods indicated, select financial
information derived from the Company’s consolidated financial statements
expressed as a percentage of total revenue. The trends illustrated in
the following table may not necessarily be indicative of future
results. The discussion that follows the table should be read in
conjunction with the condensed consolidated financial statements.
|
Three
months ended
|
Six
months ended
|
|||||||||||||||
|
June 30,
|
June 30,
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Revenue:
|
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
|
Operating
expenses:
|
||||||||||||||||
|
Direct
expenses
|
41.6 | 45.0 | 39.1 | 43.7 | ||||||||||||
|
Selling,
general and administrative
|
32.1 | 28.6 | 28.6 | 26.4 | ||||||||||||
|
Depreciation
and amortization
|
7.5 | 6.5 | 6.9 | 6.6 | ||||||||||||
|
Total
operating expenses
|
81.2 | 80.1 | 74.6 | 76.7 | ||||||||||||
|
Operating
income
|
18.8 | % | 19.9 | % | 25.4 | % | 23.3 | % | ||||||||
Three
Months Ended June 30, 2010, Compared to Three Months Ended June 30,
2009
Revenue. Revenue
for the three-month period ended June 30, 2010, increased 4.0% to $14.1 million,
compared to $13.6 million in the three-month period ended June 30,
2009. The increase was due to the addition of new clients and
expanded sales from existing clients.
Direct
expenses. Direct expenses decreased 3.9% to $5.9 million in
the three-month period ended June 30, 2010, compared to $6.1 million in the same
period during 2009. Direct expenses decreased due to the growth in
subscription-based products with lower variable costs and increased use of more
cost efficient survey methodology, as well as staffing
reductions. Direct expenses decreased as a percentage of revenue to
41.6% in the three-month period ended June 30, 2010, from 45.0% during the same
period of 2009.
Selling, general and administrative
expenses. Selling, general and administrative expenses
increased 16.9% to $4.5 million for the three-month period ended June 30, 2010,
compared to $3.9 million for the same period in 2009. The increase
was primarily due to expansion of the sales force, the addition of several
executives in various leadership roles, and transaction costs related to the OCS
acquisition. Selling, general, and administrative expenses increased
as a percentage of revenue to 32.1% for the three-month period ended June 30,
2010, from 28.6% for the same period in 2009.
Depreciation and
amortization. Depreciation and amortization expenses increased
18.9% to $1.1 million for the three-month period ended June 30, 2010, compared
to $891,000 for the same period in 2009 primarily due to a large software
project that was placed into service at the end of 2009. Depreciation
and amortization expenses as a percentage of revenue increased to 7.5% for the
three-month period ended June 30, 2010, from 6.5% in the same period of
2009.
-14-
Provision for income taxes.
The provision for income taxes totaled $956,000 (36.5% effective tax
rate) for the three-month period ended June 30, 2010, compared to $910,000
(36.1% effective tax rate) for the same period in 2009. The effective
tax rate increased during 2010 based on projected taxable income, moving the
Company’s federal tax rate from 34% to 35%. This increase was
partially offset by a decrease in Canadian statutory income tax rates and
increases in tax credits from a state tax incentive program.
Six
Months Ended June 30, 2010, Compared to Six Months Ended June 30,
2009
Revenue. Revenue
for the six-month period ended June 30, 2010, increased 3.9% to $31.5 million
compared to $30.3 million in the six-month period ended June 30,
2009. The increase was due to the addition of new clients and
expanded sales from existing clients.
Direct
expenses. Direct expenses decreased 6.9% to $12.3 million in
the six-month period ended June 30, 2010, compared to $13.2 million in the same
period during 2009. The change was primarily due to the growth in
subscription-based products with lower variable costs and increased use of more
cost efficient survey methodology, as well as staffing
reductions. Direct expenses decreased as a percentage of revenue to
39.1% in the six-month period ended June 30, 2010, from 43.7% during the same
period of 2009.
Selling, general and administrative
expenses. Selling, general and administrative expenses
increased 12.5% to $9.0 million for the six-month period ended June 30, 2010,
compared to $8.0 million for the same period in 2009. The change was
primarily due to expansion of the sales force, the addition of several
executives in various leadership roles, and transaction costs related to the OCS
acquisition. Selling, general, and administrative expenses increased
as a percentage of revenue to 28.6% for the six-month period ended June 30,
2010, from 26.4% for the same period in 2009.
Depreciation and
amortization. Depreciation and amortization expenses for the
six-month period ended June 30, 2010, increased 7.8% to $2.2 million, compared
to $2.0 million for the same period in 2009, primarily due to a large software
project that was placed into service at the end of 2009. Depreciation and
amortization expenses as a percentage of revenue increased to 6.9% in the
six-month period ended June 30, 2010, from 6.6% in the same period of
2009.
Provision for income taxes.
The provision for income taxes totaled $3.0 million (38.8% effective tax
rate) for the six-month period ended June 30, 2010, compared to $2.5 million
(37.3% effective tax rate) for the same period in 2009. The effective
tax rate is higher in 2010 based on projected taxable income moving the
Company’s federal tax rate from 34% to 35%. This increased rate also
adjusted deferred tax balances by $152,000 with the offset to income tax
expense. These increases were partially offset by a decrease in
Canadian statutory income tax rates and increases in tax credits from a state
tax incentive program.
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
new legislation makes extensive changes to the current system of healthcare
insurance and benefits that will include changes in Medicare and Medicaid
payment policies and other healthcare delivery reforms that could potentially
impact the Company’s business. At this time, it is difficult to
estimate this impact to the Company, however, it is expected that the Company’s
healthcare costs could increase in 2011 as a result of this
legislation. The Company will continue to assess what effect this
legislation will have on future revenue as it better understands the impact on
its clients.
-15-
Liquidity
and Capital Resources
The
Company believes it has adequate capital resources and operating cash flow to
meet its projected capital and debt maturity needs for the foreseeable
future. Requirements for working capital, capital expenditures, and
debt maturities will continue to be funded by operations and the Company’s
borrowing arrangements.
Working
Capital
The
Company had a working capital deficiency of $1.4 million as of June 30, 2010,
compared to a working capital deficiency of $4.4 million on December 31,
2009. The decrease in the working capital deficiency was primarily
due to a $4.7 million increase in cash and cash equivalents and a $2.7 million
increase in accounts receivable, partially offset by an increase in deferred
revenue of $4.0 million. The working capital deficiency balance was
primarily due to a deferred revenue balance of $15.9 million as of June 30,
2010, and $11.9 million as of December 31, 2009.
The
deferred revenue balance is mainly due to timing of initial billings on new and
renewal contracts. The Company typically invoices clients for half or
more of the contract value at the start of the contract. 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.
Cash
Flows
Net cash
provided by operating activities was $9.2 million and $7.6 million for the
six-month periods ended June 30, 2010, and June 30, 2009, respectively, an
increase of $1.5 million, or approximately 19.8%. The increase in
cash provided by operating activities is primarily the result of an increase of
$2.9 million in the change in deferred revenue, partially offset by an increase
in the change in accounts receivables and unbilled revenue of $1.6
million. The increases in deferred revenue collections and accounts
receivable balances are primarily the result of $2.0 million in new sales
compared to the same period in 2009, with the majority of the contract amounts
billed at the start of the contract. The decrease in unbilled revenue
is primarily the result of changes in the timing of billing and growth in
subscription-based contracts which are normally billed fully at the start of the
contract. The remaining $300,000 increase in cash provided by
operating activities is attributable to increased net income adjusted for
non-cash changes including depreciation and amortization, deferred income taxes,
and share-based compensation.
Net cash
used in investing activities was $760,000 and $2.1 million for the six-month
periods ended June 30, 2010, and June 30, 2009, respectively, a decrease of $1.3
million, or approximately 63.5%. The decrease in cash used by
investing activities is due to a decrease of $1.5 million in property and
equipment purchases, partially offset by a $172,000 earn-out payment related to
the MIV acquisition.
Net cash
used in financing activities was $3.7 million and $6.3 million for the six-month
periods ended June 30, 2010, and June 30, 2009, respectively, a decrease of $2.7
million, or approximately 42.3%. The decrease in cash used by
financing activities is principally due to a $7.2 million decrease in payments
on the Company’s term note and revolving credit note, partially offset by a $3.7
million decrease in proceeds from borrowings on the revolving credit
note. These decreases were partially offset by an
increase in dividends paid of $398,000. Additionally, the Company’s treasury
stock purchases increased by $399,000.
-16-
The
effect of changes in foreign exchange rates (decreased) increased cash and cash
equivalents by ($7,000) and $80,000 in the six-month periods ended June 30,
2010, and 2009, respectively.
Capital
Expenditures
Cash paid
for capital expenditures for the six-month period ended June 30, 2010 was
$588,000. The Company expects that the additional capital
expenditures during 2010 will be primarily for computer hardware and software,
production equipment and furniture, and will be funded by cash generated from
operations.
Debt
and Equity
On
December 19, 2008, the Company borrowed $9.0 million under a term note to
partially finance the acquisition of MIV. The term note is payable in
35 equal installments of $97,000 with the balance of principal and interest
payable in a balloon payment due on December 31, 2011. Borrowings
under the term note bear interest at a rate of 5.2% per year. In July
2010 the Company refinanced the existing term loan with a $6.9 million term
loan. The new term loan is payable in 35 monthly installments of
$80,104 with a balloon payment for the remaining principal balance and interest
due on July 31, 2013. Borrowings under the new term loan bear
interest at a rate of 3.79% per year.
The term
note is secured by certain of the Company’s assets, including the Company’s
land, building, accounts receivable and intangible assets. The term
note contains 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 June 30, 2010, the Company was in compliance with these
restrictions and covenants. The new term loan has the same
collateralization and covenants and restrictions as the previous term
note.
The
Company also entered into a revolving credit note in 2006. The
maximum aggregate amount available under the revolving credit note was
originally $3.5 million, but an addendum to the note dated March 26, 2008,
changed the amount to $6.5 million. The revolving credit note was
renewed in July 2010 to extend the term to June 30, 2011. The Company
may borrow, repay and re-borrow amounts under the revolving credit note from
time to time until its maturity on June 30, 2011.
The
maximum aggregate amount available under the revolving credit note of $6.5
million is subject to a borrowing base equal to 75% of the Company’s eligible
accounts receivable. Borrowings under the revolving credit note bear
interest at a variable annual rate equal to 1) 2.5% plus the daily reset
one-month LIBOR rate, or 2) 2.2% plus the 1-, 2-, 3-, 6- or 12-month LIBOR rate,
or 3) the bank’s Money Market Loan Rate. As of June 30, 2010, the
revolving credit note did not have a balance. According to borrowing
base requirements, the Company had the capacity to borrow $5.9 million as of
June 30, 2010.
The
agreement under which the Company acquired MIV provides for contingent earn-out
payments over three years based on growth in revenue and
earnings. The 2009 earn-out payment, paid in February 2010, was
$172,000 net of closing valuation adjustments. The Company currently
estimates that the earn-outs for 2010 and 2011 could be $2.0 to $3.0 million for
each year, and expects to fund these through cash flow from
operations.
Shareholders’
equity increased $2.2 million to $46.4 million as of June 30, 2010, from $44.2
million as of December 31, 2009. The increase was primarily due to
net income of $4.8 million, partly offset by dividends paid of $2.5
million.
On August
3, 2010, the Company acquired all of the issued and outstanding shares of stock
and stock rights of OCS, a leading provider of clinical, financial and
operational benchmarks and analytics to home care and hospice
providers. The OCS acquisition complements and expands the Company’s
product offerings across the continuum of care. The all-cash
purchase price, excluding transaction costs, of $15.0 million, plus a $1.3
million payment for the estimated working capital adjustment, was funded with
available cash on hand and borrowings of $1.3 million under the Company’s
existing revolving credit note and $10.0 million under a new term
note. The new term note is payable in 35 monthly installments of
$121,190 with a balloon payment for the remaining principal balance and interest
due on July 31, 2013. Borrowings under the term note bear interest at
a rate of 3.79% per year. The term note is secured by certain of the
Company’s assets including land, building, accounts receivable and intangible
assets. The term note contains the same covenants and restrictions
included in the Company’s other term borrowings.
-17-
Stock
Repurchase Program
In
February 2006, the Board of Directors of the Company authorized the repurchase
of 750,000 shares of common stock in the open market or in privately negotiated
transactions. As of June 30, 2010, the remaining number of shares
that could be purchased under this authorization was 268,717.
ITEM 3.
Quantitative and
Qualitative Disclosures about Market Risk
The
Company has not experienced any material changes in its market risk exposures
since December 31, 2009.
ITEM
4. Controls and
Procedures
The
Company’s management, with the participation of the Company’s principal
executive officer and principal financial officer, has evaluated the
effectiveness of the design and operation of the Company’s disclosure controls
and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934) as of the end of the period covered by this
report and has concluded that, as of the end of such period, the Company’s
disclosure controls and procedures were effective.
There
have been no changes in the Company’s internal control over financial reporting
(as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities
Exchange Act of 1934) that occurred during the Company’s most recent fiscal
quarter that have materially affected, or are reasonably likely to materially
affect, the Company’s internal control over financial reporting.
PART
II – Other Information
ITEM 1A.
Risk
Factors
Risk
factors relating to the Company are contained in Part I, Item 1A of its Annual
Report on Form 10-K for the fiscal year ended December 31, 2009. No
material change to such risk factors has occurred during the three months ended
June 30, 2010.
ITEM
2. Unregistered
Sales of Equity Securities and Use of Proceeds
In
February 2006, the Board of Directors of the Company authorized the repurchase
of an additional 750,000 shares of Common Stock 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 August 6, 2010, 481,283 shares have been
repurchased under that authorization.
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The table
below summarizes stock repurchases for the three-month period ended June 30,
2010.
|
Period
|
Total
Number of Shares Purchased
|
Average
Price
Paid
per Share
|
Total
Number of Shares Purchased as Part of Publicly Announced
Plans or Programs
|
Maximum
Number of Shares that May Yet Be Purchased Under the Plans or Programs
|
||||||||||||
|
April
1 – April 30, 2010
|
0 | $ | 0.00 | 0 | 275,317 | |||||||||||
|
May
1 – May 31, 2010
|
6,600 | $ | 24.65 | 6,600 | 268,717 | |||||||||||
|
June
1 – June 30, 2010
|
0 | $ | 0.00 | 0 | 268,717 | |||||||||||
ITEM
6. Exhibits
The
exhibits listed in the accompanying index of exhibits are filed as part of this
Quarterly Report on Form 10-Q.
-19-
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
| NATIONAL RESEARCH CORPORATION | |||
| Date: August 13, 2010 |
By:
|
/s/ Michael D. Hays | |
| Michael D. Hays | |||
| President and Chief Executive Officer (Principal Executive Officer) | |||
|
Date:
August 13, 2010
|
By:
|
/s/ Patrick E. Beans | |
|
Patrick
E. Beans
Vice
President, Treasurer, Secretary and
Chief
Financial Officer (Principal
Financial
and Accounting Officer)
|
|||
-20-
NATIONAL
RESEARCH CORPORATION
EXHIBIT
INDEX TO QUARTERLY REPORT ON FORM 10-Q
For the
Quarterly Period ended June 30, 2010
Exhibit
|
(10)
|
National
Research Corporation 2004 Director Stock Plan, as
amended.
|
|
(31.1)
|
Certification
by the Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a)
under the Securities Exchange Act of
1934.
|
|
(31.2)
|
Certification
by the Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a)
under the Securities Exchange Act of
1934.
|
|
(32)
|
Written
Statement of the Chief Executive Officer and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350.
|
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