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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2002
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number 0-29466
National Research Corporation
(Exact name of Registrant as specified in its charter)
Wisconsin 47-0634000
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1245 "Q" Street, Lincoln Nebraska 68508
(Address of principal executive offices) (Zip Code)
(402) 475-2525
(Registrant's telephone number, including area code)
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 X No
--- ---
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes No X
--- ---
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 October 31, 2002: 7,236,712
shares
NATIONAL RESEARCH CORPORATION
FORM 10-Q INDEX
For the Quarter Ended September 30, 2002
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets 3
Condensed Statements of Income 4
Condensed Statements of Cash Flows 5
Notes to Condensed Financial Statements 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-11
Item 3. Quantitative and Qualitative Disclosures About 12
Market Risk
Item 4. Controls and Procedures 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Certifications 15-16
Exhibit Index 17
2
PART I - Financial Information
ITEM 1 Financial Statements
NATIONAL RESEARCH CORPORATION
CONDENSED BALANCE SHEETS
September 30, December 31,
2002 2001
------------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 1,658,296 $ 1,080,053
Investments in marketable debt securities 8,931,761 6,636,543
Trade accounts receivable, less allowance
for doubtful accounts of $60,820 and
$101,674 in 2002 and 2001, respectively 2,837,594 2,141,104
Unbilled revenues 2,284,300 1,671,079
Prepaid expenses and other 274,183 286,653
Income taxes recoverable --- 266,034
Deferred income taxes 181,529 210,452
----------- -----------
Total current assets 16,167,663 12,291,918
----------- -----------
Net property and equipment 12,552,646 12,907,197
----------- -----------
Customer lists, net of accumulated amortization 599,949 631,135
Goodwill and other intangibles, net of
accumulated amortization 7,910,965 7,908,043
Other 29,724 34,099
------------ -----------
Total assets $37,260,947 $33,772,392
=========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of notes payable $ 128,082 $ 132,312
Accounts payable 400,673 1,391,043
Accrued wages, bonuses and profit sharing 639,651 494,446
Accrued expenses 423,687 364,642
Income taxes payable 670,059 ---
Billings in excess of revenues earned 2,984,963 2,649,370
----------- -----------
Total current liabilities 5,247,115 5,031,813
Notes payable, net of current portion 5,078,570 5,169,757
Deferred income taxes 412,455 217,424
----------- -----------
Total liabilities 10,738,140 10,418,994
----------- -----------
Shareholders' equity:
Preferred stock, $.01 par value; authorized
2,000,000 shares, no shares issued and
outstanding - -
Common stock, $.001 par value; authorized
20,000,000 shares, issued 7,535,434 in 2002
and 7,395,593 in 2001 outstanding 7,230,834
in 2002 and 7,093,893 in 2001 7,527 7,395
Additional paid-in capital 17,798,883 17,255,917
Retained earnings 10,213,675 7,597,340
Accumulated other comprehensive income
(loss), net of taxes 24,520 (4,185)
Treasury stock, at cost; 304,600 in 2002 and
301,700 shares in 2001 (1,521,798) (1,503,069)
----------- -----------
Total shareholders' equity 26,522,807 23,353,398
----------- -----------
Total liabilities and shareholders' equity $37,260,947 $33,772,392
=========== ===========
See accompanying notes to condensed financial statements.
3
NATIONAL RESEARCH CORPORATION
CONDENSED STATEMENTS OF INCOME
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
2002 2001 2002 2001
------------ ------------ ------------ ------------
Revenues $ 7,317,037 $ 6,104,832 $ 16,165,316 $ 13,562,930
------------ ------------ ------------ ------------
Operating expenses:
Direct expenses 3,388,030 2,688,610 6,962,252 6,323,551
Selling, general and administrative 1,200,381 1,383,983 3,562,212 3,516,858
Depreciation and amortization 400,884 509,139 1,223,240 1,377,086
------------ ------------ ------------ ------------
Total operating expenses 4,989,295 4,581,732 11,747,704 11,217,495
------------ ------------ ------------ ------------
Operating income 2,327,742 1,523,100 4,417,612 2,345,435
Other income (expense):
Interest income 63,091 74,092 187,976 317,981
Interest expense (109,313) (112,920) (340,689) (342,142)
Other, net (696) (2,269) (72,250) (11,435)
------------ ------------ ------------ ------------
Total other expense (46,918) (41,097) (224,963) (35,596)
------------ ------------ ------------ ------------
Income before income taxes 2,280,824 1,482,003 4,192,649 2,309,839
Provision for income taxes 854,282 550,086 1,576,313 831,550
------------ ------------ ------------ ------------
Net income 1,426,542 931,917 2,616,336 1,478,289
============ ============ ============ ============
Net income per share--basic and diluted $ .20 $ .13 $ .37 $ .21
============ ============ ============ ============
Weighted average shares and share
equivalents outstanding--basic 7,176,323 7,056,563 7,138,581 7,047,463
============ ============ ============ ============
Weighted average shares and share
equivalents outstanding--diluted 7,200,344 7,101,548 7,162,602 7,092,448
============ ============ ============ ============
See accompanying notes to condensed financial statements.
4
NATIONAL RESEARCH CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
2002 2001
----------- -----------
Cash flows from operating activities:
Net income $ 2,616,336 $ 1,478,289
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,223,240 1,377,086
Deferred income taxes 209,164 103,345
Gain on sale of property and equipment (1,420) (598)
Gain on sale of other investments (18) ---
Changes in assets and liabilities:
Trade accounts receivable (696,490) 117,438
Unbilled revenues (613,221) (53,004)
Prepaid expenses and other 30,572 (56,092)
Accounts payable (521,212) 132,056
Accrued expenses, wages, bonuses, and
profit sharing 204,250 (254,509)
Income taxes recoverable and (payable) 936,093 482,561
Billings in excess of revenues earned 335,593 (214,566)
----------- -----------
Net cash provided by operating activities 3,722,887 3,112,006
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment (1,301,743) (1,270,030)
Proceeds from sale of property and equipment 1,420 598
Acquisition of healthcare survey business (21,565) (3,762,229)
Purchases of securities available-for-sale (7,536,519) (9,211,601)
Proceeds from the maturities of securities
available-for-sale 5,284,811 10,808,011
----------- -----------
Net cash used in investing activities (3,573,596) (3,435,251)
----------- -----------
Cash flows from financing activities:
Payments on notes payable (95,417) (96,021)
Proceeds from exercise of stock options 543,098 124,231
Purchase of treasury stock (18,729) ---
----------- -----------
Net cash provided by financing activities 428,952 28,210
----------- -----------
Net increase (decrease) in cash and cash
equivalents 578,243 295,035)
----------- -----------
Cash and cash equivalents at beginning of period 1,080,053 3,218,805
----------- -----------
Cash and cash equivalents at end of period $ 1,658,296 $ 2,923,770
=========== ===========
Supplemental disclosure of cash paid for:
Interest $ 340,689 $ 342,131
=========== ===========
Taxes $ 429,660 $ 245,754
=========== ===========
Supplemental disclosures of noncash investing activities:
Accounts payable included $210,335 in 2001 for purchases of property and
equipment.
In connection with the Company's acquisition of a business in 2001, the
Company assumed unearned revenues of $0.3 million for uncompleted customer
contracts. See accompanying notes to condensed financial statements.
5
NATIONAL RESEARCH CORPORATION
Notes to Condensed Financial Statements
1. INTERIM FINANCIAL REPORTING
The condensed balance sheet of National Research Corporation (the "Company") at
December 31, 2001 was derived from the Company's audited 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 of America.
Information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted. These condensed
financial statements should be read in conjunction with the financial statements
and notes thereto that are included in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 2001, filed with the Securities and
Exchange Commission in March 2002.
2. COMPREHENSIVE INCOME
Other than its net income, the Company's only other source of comprehensive
income is unrealized gains or losses on marketable debt securities. Other
comprehensive income from marketable debt securities was $28,705 and $30,328 for
the nine month periods ended September 30, 2002 and 2001, respectively.
3. GOODWILL AND OTHER INTANGIBLE ASSETS
In June 2001, the Financial Accounting Standards Board issued SFAS No. 142.
Goodwill and Other Intangible Assets. This statement replaces the requirement to
amortize goodwill and certain other intangible assets (with indefinite useful
lives) with an annual impairment test. SFAS No. 142 also requires an evaluation
of the estimated useful lives of intangible assets and an impairment test for
goodwill and non-amortizable assets upon adoption.
The Company adopted the provisions of SFAS No. 142 as of January 1, 2002. As a
result of adopting this standard, the Company ceased amortizing goodwill and
certain other non-amortizable intangible assets effective January 1, 2002. Total
amortization expense was $16,610 and $175,745 during the three months ended
September 30, 2002 and 2001, respectively, and $49,828 and $385,756 during the
nine months ended September 30, 2002 and 2001, respectively. The following is
the September 30, 2002 and 2001 statement of income data, adjusted as if SFAS
No. 142 had been effective as of January 1, 2001:
6
Three months ended Nine months ended
September 30, September 30,
--------------------- ---------------------
2002 2001 2002 2001
--------- --------- --------- ---------
Reported net income 1,426,542 931,917 2,616,336 1,478,289
Amortization of goodwill, net
of taxes -- 105,029 -- 231,063
Adjusted net income 1,426,542 1,036,946 2,616,336 1,709,352
Reported net income per share $0.20 $0.13 $0.37 $0.21
Amortization of goodwill, net
of taxes -- $0.01 -- $0.03
Adjusted net income per share $0.20 $0.14 $0.37 $0.24
All of the Company's goodwill and non-amortizable intangible assets are
allocated to one reporting unit, the healthcare survey business. The Company
also completed it's transitional evaluation of the recoverability of goodwill
and non-amortizable intangible assets as of January 1, 2002, using the fair
value methodology of SFAS No. 142. The Company's analysis did not result in the
recognition of an impairment loss on goodwill or other non-amortizable
intangible assets.
4. EARNINGS PER SHARE
Net income per share has been calculated and presented for "basic" and "diluted"
data. "Basic" net income per share is computed by dividing net income by the
weighted average number of common shares outstanding, whereas "diluted" net
income per share is computed by dividing net income by the weighted average
number of common shares outstanding adjusted for the dilutive effects of options
and common equivalent shares outstanding. At September 30, 2002 and 2001, 34,080
and 51,931 options, respectively, have been excluded from the diluted net income
per share computation because their exercise prices (ranging from $7.10 to $8.00
per share) exceed the average quoted market value of the Company's stock.
7
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth, for the periods indicated, selected financial
information derived from the Company's condensed financial statements, expressed
as a percentage of total revenues. 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 financial statements.
Percentage of Total Revenues
--------------------------------------------
Three months ended Nine months ended
September 30, September 30,
-------------------- ---------------------
2002 2001 2002 2001
-------------------- ---------------------
Revenues: 100.0% 100.0% 100.0% 100.0%
==================== =====================
Operating expenses:
Direct expenses 46.3 44.0 43.1 46.6
Selling, general and
administrative 16.4 22.7 22.0 25.9
Depreciation and amortization 5.5 8.3 7.6 10.2
-------------------- ---------------------
Total operating expenses: 68.2 75.0 72.7 82.7
-------------------- ---------------------
Operating income 31.8% 25.0% 27.3% 17.3%
==================== =====================
Three Months Ended September 30, 2002 Compared to Three Months Ended September
30, 2001
Total revenues. Total revenues increased 19.9% in the three month period ended
September 30, 2002 to $7.3 million from $6.1 million in the three month period
ended September 30, 2001. The increase was primarily due to the addition of new
clients(including a major contract signed in January 2002). The third quarter in
both years includes the seasonal quarterly increase in revenue from the annual
release of the Healthcare Market Guide.
Direct expenses. Direct expenses increased 26.0% to $3.4 million in the three
month period ended September 30, 2002 from $2.7 million in the same period
during 2001. The increase in direct expenses in the 2002 period was primarily
due to increases in revenue and consisted of increases in printing and postage
costs of $631,000, fieldwork and fees of $238,000, and computer related expenses
of $20,000. This increase was partially offset by decreases in labor and payroll
expenses of $193,000. Direct expenses as a percentage of total revenues
increased to 46.3% in the three month period ended September 30, 2002 from 44.0%
during the same period of 2001.
Selling, general and administrative expenses. Selling, general and
administrative expenses decreased 13.3% to $1.2 million for the three month
period ended September 30, 2002 from $1.4
8
million for the same period in 2001. This decrease was primarily due to
decreases in legal and consulting fees of $279,000 incurred primarily in
connection with a previously disclosed legal proceeding. This decrease was
offset by increases in product development costs and marketing costs of $76,000
and increases in salaries and benefits of $36,000. Selling, general, and
administrative expenses decreased as a percentage of total revenues to 16.4% for
the three month period ended September 30, 2002 from 22.7% for the same period
in 2001.
Depreciation and amortization. Depreciation and amortization expenses decreased
21.3% to $401,000 in the three month period ended September 2002 from $509,000
in the same period of 2001. The decrease is primarily due to the adoption of
SFAS No. 142 on January 1, 2002. In connection with the adoption of SFAS No.
142, the Company ceased amortizing goodwill and certain other intangible assets.
The three month period ended September 30, 2001 included $159,135 for
amortization of certain intangible assets no longer subject to amortization.
This was partially offset by additional depreciation in 2002 of software,
computer equipment and production equipment. Depreciation and amortization
expenses as a percentage of total revenues decreased to 5.5% in the three-month
period ended September 30, 2002 from 8.3% in the same period of 2001.
Provision for income taxes. The provision for income taxes totaled $854,000
(37.5% effective tax rate) for the three month period ended September 30, 2002
as compared to $550,000 (37.2% effective tax rate) for the same period in 2001.
The effective tax rate was lower in 2001 due to differences in state income
taxes.
Nine Months Ended September 30, 2002 Compared to Nine Months Ended September 30,
2001
Total revenues. Total revenues increased 19.2% in the nine month period ended
September 30, 2002 to $16.2 million from $13.6 million in the nine month period
ended September 30, 2001. The increase was primarily due to the addition of new
clients(including a major new contract signed in January 2002)and, to a lesser
extent, an increase in scope of work from existing clients.
Direct expenses. Direct expenses increased 10.1% to $7.0 million in the nine
month period ended September 30, 2002 from $6.3 million in the same period
during 2001. The increase was primarily due to increases in revenue and
consisted of increases in printing and postage of $679,000, fieldwork and fees
of $266,000 and computer expenses of $105,000. This increase was partially
offset by decreases in labor and payroll expenses of $447,000. Direct expenses
decreased as a percentage of total revenues to 43.1% in the nine month period
ended September 30, 2002 from 46.6% during the same period of 2001.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased 1.3% to $3.6 million in the nine month periods
ended September 30, 2002 from $3.5 million in the same period during 2001.
Increases in salaries and benefits of $188,000, contract services of $100,000
and marketing of $57,000 were partially offset by decreases in legal and
consulting fees of $316,000 incurred primarily in connection with a previously
disclosed legal proceeding. Selling, general, and administrative expenses as a
percentage of total revenues decreased to 22.0% for the nine month period ended
September 30, 2002 from 25.9% for the same period in 2001.
9
Depreciation and amortization. Depreciation and amortization expenses decreased
11.2% to $1.2 million in the nine month period ended September 2002 from $1.4
million in the same period of 2001. The decrease is primarily due to the
adoption of SFAS No. 142 on January 1, 2002. In connection with the adoption of
SFAS No. 142, the Company ceased amortizing goodwill and certain other
intangible assets. The nine month period ended September 30, 2001 included
$350,095 for amortization of certain intangible assets no longer subject to
amortization. This was partially offset by the additional depreciation of
software, computer equipment and production equipment. Depreciation and
amortization expenses as a percentage of total revenues decreased to 7.6% in the
nine-month period ended September 30, 2002 from 10.2% in the same period of
2001.
Provision for income taxes. The provision for income taxes totaled $1.6 million
(37.6% effective tax rate) for the nine month period ended September 30, 2002 as
compared to $832,000 (36.0% effective tax rate) for the same period in 2001. The
effective tax rate was lower in 2001 due to differences in state income taxes.
Liquidity and Capital Resources
The Company's principal source of funds historically has been cash flow from its
operations. The Company's cash flow has been sufficient to provide funds for
working capital and capital expenditures, other than expenditures related to the
Company's building, which were paid, in part, from the proceeds of borrowings
and the sales of securities available-for-sale.
As of September 30, 2002, the Company had cash and cash equivalents of $1.7
million and working capital of $10.9 million.
During the nine months ended September 30, 2002, the Company generated $3.7
million of net cash from operating activities as compared to $3.1 million during
the same period in the prior year. The increase in cash flow was mainly due to
higher net income, as well as changes in accrued expenses and income taxes
payable. This was offset by the timing of collections of accounts receivable,
the timing of costs incurred in advance of billings on certain projects and a
decrease in accounts payable.
For the nine months ended September 30, 2002, net cash used in investing
activities was $3.6 million as compared to $3.4 million during the same period
in the prior year. The 2002 net cash used in investing activities was primarily
due to the investment of $1.3 million in furniture, computer equipment, software
and production equipment to support the expansion of the Company's business, and
an increase of the net purchases of securities available-for sale over the
proceeds from the maturities of securities of $2.3 million. The 2001 net cash
used in investing activities was primarily due to the purchase of The Picker
Institute's healthcare survey business ($3.8 million) and investment of $1.3
million in furniture, computer equipment, software and production equipment to
support the expansion of the Company's business, and was partially offset by the
net proceeds of maturities of securities available-for-sale over the purchase of
securities available for sale of $1.6 million.
10
Net cash generated in financing activities was $429,000 for the nine months
ended September 30, 2002 compared to $28,000 of net cash generated during the
same period in the prior year. The cash provided by financing activities during
2002 and 2001 was primarily due to proceeds from exercised stock options.
The Company typically bills clients for projects before they have been
completed. Billed amounts are recorded as billings in excess of revenues earned
or deferred revenue on the Company's financial statements and are recognized as
income when earned. As of September 30, 2002 and as of December 31, 2001, the
Company had $3.0 million and $2.6 million of deferred revenues, respectively.
The increase in deferred revenues at September 30, 2002 results primarily from
project billing before revenues were earned. In addition, when work is performed
in advance of billing, the Company records this work as a cost in excess of
billings or unbilled revenue. At September 30, 2002 and December 31, 2001, the
Company had $2.3 million and $1.7 million of unbilled revenues, respectively.
Substantially all deferred and unbilled revenues will be earned and billed,
respectively, within 12 months of the respective period ends.
In October 1998, the Company announced plans to repurchase up to 245,000 shares
of common stock in the open market or in privately negotiated transactions. The
Company repurchased 245,000 shares between October 1998 and March 1999. In April
1999, the Board of Directors of the Company authorized the repurchase of an
additional 150,000 shares. As of October 31, 2002, 68,100 shares have been
repurchased under the new authorization.
Accounting Pronouncements
In June 2002, the Financial Accounting Standards Board issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal Activities. Under SFAS No.
146, a liability for exit costs would not be recognizable based upon the date
that an entity commits to an exit plan. Instead, liabilities and expenses
associated with exit plan activities are required to be expensed as incurred
under the new standard. This statement also establishes that fair value is the
objective for initial measurement of the liability. This statement addresses
financial accounting and reporting for costs associated with exit or disposal
activities and is effective for exit or disposal activities that are initiated
after December 31, 2002.
In October 2002, the Emerging Issues Task Force of the Financial Accounting
Standards Board reached a tentative conclusion on the accounting for revenues in
transactions that involve multiple deliverables. The guidance governs how to
identify whether goods or services or both, that are to be delivered separately
in a bundled sales arrangement, should be accounted for separately. This
guidance is expected to be effective for fiscal years beginning after December
15, 2002, so we expect to adopt the guidance in our financial statements for the
quarter ended March 31, 2003. We have not yet determined the impact of this
tentative conclusion on our financial statements.
11
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, 2001.
ITEM 4 Controls and Procedures
(a) Based on their evaluation as of a date within 90 days of the filing of this
Quarterly Report on Form 10-Q, the Company's principal executive officer and
principal financial officer have concluded that the Company's disclosure
controls and procedures (as defined in Rules 13a-14(c) and 15 d-14 (c) under the
Securities Exchange Act of 1934 ( the "Exchange Act")) are effective to ensure
that information required to be disclosed by the Company in reports that it
files or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in Securities and Exchange Commission
rules and forms.
(b) No significant changes were made in the Company's internal controls or in
other factors that could significantly affect these controls subsequent to the
date of their evaluation.
12
PART II - Other Information
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibits
(99.1) Certification of the President and Chief Executive Officer
pursuant to 18 U.S.C. ss. 1350
(99.2) Certification of the Vice President, Treasurer and Chief
Financial Officer pursuant to 18 U.S.C. ss. 1350
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended September
30, 2002.
13
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: November 14, 2002 By: /s/ Michael D. Hays
----------------------------------------
Michael D. Hays
President and Chief Executive Officer
Date: November 14, 2002 By: /s/ Patrick E. Beans
----------------------------------------
Patrick E. Beans
Vice President, Treasurer, Secretary and
Chief Financial Officer (Principal
Financial and Accounting Officer)
14
Certification
I, Michael D. Hays, certify that:
1. I have reviewed this quarterly report on Form 10-Q of National Research
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2002 /s/ Michael D. Hays
---------------------------------------
Michael D. Hays
President and Chief Executive Officer
15
Certification
I, Patrick E. Beans, certify that:
1. I have reviewed this quarterly report on Form 10-Q of National Research
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2002 /s/ Patrick E. Beans
---------------------------------------
Patrick E. Beans
Vice President, Treasurer and
Chief Financial Officer
16
NATIONAL RESEARCH CORPORATION
EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-Q
For the Quarterly Period ended September 30, 2002
Exhibit
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(99.1) Certification of the President and Chief Executive Officer
pursuant to 18 U.S.C. ss. 1350
(99.2) Certification of the Vice President, Treasurer and Chief
Financial Officer pursuant to 18 U.S.C. ss. 1350
17