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National Research Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 12, 2011 08:32PM
National Research Corp. (NRCI) filed Quarterly Report for the period ended 2011-06-30. National Research Corp. has a market cap of $219.9 million; its shares were traded at around $32.49 with a P/E ratio of 23.4 and P/S ratio of 3.5. The dividend yield of National Research Corp. stocks is 2.7%. National Research Corp. had an annual average earning growth of 15.2% over the past 10 years. GuruFocus rated National Research Corp. the business predictability rank of 5-star.
Highlight of Business Operations:
Direct expenses. Direct expenses increased 23.5% to $7.3 million for the three-month period ended June 30, 2011, compared to $5.9 million in the same period during 2010. This was due to increases in variable expenses of $424,000, including postage and contracted survey related costs to service the higher volume of business, and an increase in fixed expenses of $377,000 from additional staffing and related expenses in information technology development and client service functions. The addition of OCS also increased variable expenses by $217,000 and fixed expenses by $366,000. Direct expenses decreased as a percentage of revenue to 39.6% in the three-month period ended June 30, 2011, from 41.6% during the same period of 2010. This was mainly due to growth in subscription based agreements and expanded use of more cost-efficient survey methodologies. This percentage is projected to be at an average of 37.0% for the full year.
Direct expenses. Direct expenses increased 13.7% to $14.0 million in the six-month period ended June 30, 2011, compared to $12.3 million in the same period during 2010 due to an increase in variable expenses of $346,000, including postage and contracted survey related costs to service the higher volume of business, and an increase in fixed expenses of $174,000 from additional staffing and related expenses in information technology development and client service functions. The addition of OCS also increased variable expenses by $394,000 and fixed expenses by $771,000. Direct expenses decreased as a percentage of revenue to 36.8% in the six-month period ended June 30, 2011, from 39.1% during the same period of 2010. This is mainly due to growth in subscription based agreements and expanded use of more cost efficient survey methodologies.
The Company had a working capital deficiency of $6.3 million as of June 30, 2011, compared to a working capital deficiency of $8.8 million as of December 31, 2010. The decrease in the working capital deficiency was primarily due to a $2.4 million increase in trade accounts receivable, $945,000 increase in cash and cash equivalents, a $870,000 increase in unbilled revenue, and a $1.5 million decrease in accrued expenses and accounts payable combined, partially offset by $1.4 million of additional borrowings on the revolving credit note, $790,000 increase in accrued wages, $259,000 increase in deferred revenue, $477,000 decrease in recoverable income taxes, and $279,000 decrease in deferred income taxes. The working capital deficiency balance was primarily due to a deferred revenue balance of $18.0 million as of June 30, 2011, and $17.7 million as of December 31, 2010.
Net cash used by financing activities was $2.1 million in the six months ended June 30, 2011. Cash was generated from borrowings under the term note and revolving credit note totaling $4.5 million. Proceeds from the exercise of and the excess tax benefit of share-based compensation provided cash of $325,000 and $196,000, respectively. Cash was used to pay dividends of $3.0 million, repay borrowings under the term and revolving credit notes totaling $4.1 million, and repurchases of the Company s common stock for $74,000.
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 2010 and 2009 earn-out payments paid in February 2011 and 2010, were $1.6 million and $172,000 respectively, net of closing valuation adjustments, and were recorded as additions to goodwill. In April 2011, the Company reached an agreement which limits the final earn-out payment associated with the MIV acquisition at $2.6 million. Of this amount, $2.4 million was paid during April 2011, and if certain conditions are satisfied, a final payment, if any, up to $117,000 will be paid no later than February 2012. The payments have been recorded as additions to goodwill.
Shareholders equity increased $4.0 million to $52.5 million at June 30, 2011, from $48.6 million at December 31, 2010. The increase was due to net income of $5.8 million, non-cash stock compensation expense of $498,000, the exercise of stock options of $395,000, tax benefits of share-based compensation of $196,000, and an increase in the cumulative translation adjustment of $186,000, offset by dividends paid of $3.0 million and share repurchases of $144,000, including $74,000 of restricted shares for payroll tax withholdings and $70,000 previously owned common shares tendered by optionees to pay for the option strike price to exercise options.
Stocks Discussed: NRCI,