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National Research Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 14, 2009 10:19AM

National Research Corp. (NRCI) filed Quarterly Report for the period ended 2009-06-30. National Research Corporation is a leading provider of ongoing survey-based performance measurement analysis and tracking services to the healthcare industry. The company addresses the growing need of healthcare providers and payers to measure the care outcomes specifically satisfaction and health status of their patients and/or members. The company\'s primary types of information services are renewable performance tracking services custom research and a renewable syndicated service. National Research Corp. has a market cap of $168.3 million; its shares were traded at around $25.27 with a P/E ratio of 21.1 and P/S ratio of 3.3. The dividend yield of National Research Corp. stocks is 2.4%. National Research Corp. had an annual average earning growth of 13.8% over the past 5 years.

Highlight of Business Operations:

Direct expenses. Direct expenses increased 18.5% to $6.3 million in the three-month period ended June 30, 2009, compared to $5.3 million in the same period during 2008. The change was primarily due to servicing the increase in revenue from the MIV business, which resulted in a $1.0 million increase in related expenses. Direct expenses increased as a percentage of revenue to 46.4% in the three-month period ended June 30, 2009, from 44.7% during the same period of 2008 due to MIV’s current cost structure.

Selling, general and administrative expenses. Selling, general and administrative expenses increased 10.4% to $3.7 million for the three-month period ended June 30, 2009, compared to $3.3 million for the same period in 2008. The increase was primarily due to an increase in expenses of $800,000 related to the MIV business that was partly offset by decreases in expenses due to changes in the business model and the allocation of responsibilities related to sales and servicing clients. Selling, general, and administrative expenses decreased as a percentage of revenue to 27.2% for the three-month period ended June 30, 2009, from 28.1% for the same period in 2008.

Direct expenses. Direct expenses increased 20.8% to $13.6 million in the six-month period ended June 30, 2009, compared to $11.2 million in the same period during 2008. The change was primarily due to servicing the increase in revenue from the MIV business, which resulted in a $2.0 million increase in related expenses. The remaining change was generally due to the implementation of the monthly subscription Market Guide. Until September 2008, the Company would defer costs of preparing the survey data for Market Guide and expense these at the time the annual contract revenue was recognized. Starting in October 2008, these costs were expensed monthly. Direct expenses increased as a percentage of revenue to 44.8% in the six-month period ended June 30, 2009, from 44.4% during the same period of 2008.

The Company had a working capital deficiency of $8.0 million as of June 30, 2009, compared to a working capital deficiency of $10.7 million on December 31, 2008. The decrease in the working capital deficiency was primarily due to a $3.8 million reduction in the current notes payable over the same period in 2008. This was offset by a reduction in cash and cash equivalents of $705,000, due to reductions in the current notes payable.

The Company 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 2009 to extend the term to June 30, 2010. The Company may borrow, repay and re-borrow amounts under the revolving credit note from time to time until its maturity on June 30, 2010. The maximum aggregate amount available under the revolving credit note is $6.5 million, 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 rate equal to (1) prime (as defined in the credit facility) less 0.50% or (2) one-, two-, three-, six- or twelve-month LIBOR. As of June 30, 2009, the balance of the revolving credit note was $66,000. According to borrowing base requirements, the Company had the capacity to borrow another $5.1 million as of June 30, 2009.

Shareholders’ equity increased $2.7 million to $41.3 million as of June 30, 2009, from $38.6 million as of December 31, 2008. The increase was primarily due to net income, partly offset by dividends paid of $2.1 million.

Read the The complete Report



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