Accounting Policies, by Policy (Policies) | 12 Months Ended |
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Accounting Policies [Abstract] | | | |
Recapitalization [Policy Text Block] | Recapitalization | | |
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In May 2013, the Company consummated a recapitalization (the “May 2013 Recapitalization”) pursuant to which the Company established two classes of common stock (class A common stock and class B common stock), issued a dividend of three shares of class A common stock for each share of the Company’s then existing common stock and reclassified each then existing share of common stock as one-half of one share of class B common stock. All previously reported share and per share amounts in the accompanying financial statements and related notes have been restated to reflect the May 2013 Recapitalization. |
Consolidation, Policy [Policy Text Block] | Principles of Consolidation | | |
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The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiary, National Research Corporation Canada, and a variable interest entity, Customer-Connect LLC (“Connect”), which NRC has been deemed the primary beneficiary. All significant intercompany transactions and balances have been eliminated. |
Use of Estimates, Policy [Policy Text Block] | Use of Estimates | | |
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The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. |
Reclassification, Policy [Policy Text Block] | | | Reclassifications |
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Certain reclassifications have been made to the 2013 and 2012 financial statement information to conform to the 2014 financial statement presentation. There was no impact on the previously reported net income and earnings per share. |
Foreign Currency Transactions and Translations Policy [Policy Text Block] | Translation of Foreign Currencies | | |
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The Company’s Canadian subsidiary uses as its functional currency the local currency of the country in which it operates. It translates its assets and liabilities into U.S. dollars at the exchange rate in effect at the balance sheet date. It translates its revenue and expenses at the average exchange rate during the period. The Company includes translation gains and losses in accumulated other comprehensive income (loss), a component of shareholders’ equity. Gains and losses related to transactions denominated in a currency other than the functional currency of the country in which the Company operates and short-term intercompany accounts are included in other income (expense) in the consolidated statements of income. Since the undistributed earnings of the Company’s foreign subsidiary are considered to be indefinitely reinvested, the components of accumulated other comprehensive income (loss) have not been tax effected. |
Revenue Recognition, Policy [Policy Text Block] | Revenue Recognition | | |
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The Company derives a majority of its operating revenue from its annually renewable services, which include performance measurement and improvement services, healthcare analytics and governance education services. The Company provides these services to its clients under annual client service contracts, although such contracts are generally cancelable on short or no notice without penalty. The Company also derives some revenue from its custom and other research projects. |
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Services are provided under subscription-based service agreements. The Company recognizes subscription-based service revenue over the period of time the service is provided. Generally, the subscription periods are for twelve months and revenue is recognized equally over the subscription period. |
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Certain contracts are fixed-fee arrangements with a portion of the project fee billed in advance and the remainder billed periodically over the duration of the project. Revenue for services provided under these contracts are recognized under the proportional performance method. Under the proportional performance method, the Company recognizes revenue based on output measures or key milestones such as survey set-up, survey mailings, survey returns and reporting. The Company measures its progress based on the level of completion of these output measures and recognizes revenue accordingly. Management judgments and estimates must be made and used in connection with revenue recognized using the proportional performance method. If management made different judgments and estimates, then the amount and timing of revenue for any period could differ materially from the reported revenue. |
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The Company’s revenue arrangements with a client may include combinations of performance measurement and improvement services, healthcare analytics or governance education services which may be executed at the same time, or within close proximity of one another (referred to as a multiple-element arrangement). Each element of a multiple-element arrangement is accounted for as a separate unit of accounting provided each delivered element is sold separately by the Company or another vendor; and for an arrangement that includes a general right of return relative to the undelivered elements, delivery or performance of the undelivered services are considered probable and substantially in the control of the Company. The Company’s arrangements generally do not include a general right of return related to the delivered services. If these criteria are not met, the arrangement is accounted for as a single unit of accounting with revenue generally recognized equally over the subscription period or recognized under the proportional performance method. |
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Revenue is allocated to each separate unit of accounting based on relative selling price using a selling price hierarchy: vendor-specific objective evidence (“VSOE”), if available, third-party evidence (“TPE”) if VSOE is not available, or estimated selling price if VSOE nor TPE is available. VSOE is established based on the services normal selling price and discounts for the specific services when sold separately. TPE is established by evaluating similar competitor services in standalone arrangements. If neither exists for a deliverable, the best estimate of the selling price (“ESP”) is used for that deliverable based on list price, representing a component of management’s market strategy, and an analysis of historical prices for bundled and standalone arrangements. Revenue allocated to an element is limited to revenue that is not subject to refund or otherwise represents contingent revenue. VSOE, TPE and ESP are periodically adjusted to reflect current market conditions. These adjustments are not expected to differ significantly from historical results. |
Business Combinations Policy [Policy Text Block] | Business Combinations | | |
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The Company uses the acquisition method of accounting for acquired businesses. Under the acquisition method, the financial statements reflect the operations of an acquired business starting from the completion of the acquisition. The assets acquired and liabilities assumed are recorded at their respective estimated fair values at the date of the acquisition. Any excess of the purchase price over the estimated fair values of the indentifiable net assets acquired is recorded as goodwill. Significant judgment is required in estimating the fair value of assets acquired, especially intangible assets. As a result, in the case of significant acquisitions we typically engage third-party valuation specialists in estimating fair values of tangible and intangible assets. The fair value estimates are based on available historical information and on expectations and assumptions about the future, considering the perspective of marketplace participants. |
Trade and Other Accounts Receivable, Policy [Policy Text Block] | Trade Accounts Receivable | | |
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Trade accounts receivable are recorded at the invoiced amount. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance based on specific account analysis and on the Company’s historical write-off experience. The Company reviews the allowance for doubtful accounts monthly. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. |
Property, Plant and Equipment, Policy [Policy Text Block] | Property and Equipment | | |
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Property and equipment is stated at cost. Major expenditures to purchase property or to substantially increase useful lives of property are capitalized. Maintenance, repairs and minor renewals are expensed as incurred. When assets are retired or otherwise disposed of, their costs and related accumulated depreciation are removed from the accounts and resulting gains or losses are included in income. |
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For costs of software developed for internal use, the Company expenses computer software costs as incurred in the preliminary project stage, which involves the conceptual formulation, evaluation and selection of technology alternatives. Costs incurred related to the design, coding, installation and testing of software during the application project stage are capitalized. Costs for training and application maintenance are expensed as incurred. The Company has capitalized approximately $1.8 million and $1.7 million of internal and external costs incurred for the development of internal-use software for the years ended December 31, 2014 and 2013, respectively, with such costs classified as property and equipment. |
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The Company provides for depreciation and amortization of property and equipment using annual rates which are sufficient to amortize the cost of depreciable assets over their estimated useful lives. The Company uses the straight-line method of depreciation and amortization over estimated useful lives of three to ten years for furniture and equipment, three to five years for computer equipment, three to five years for capitalized software, and seven to forty years for the Company’s office building and related improvements. |
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Leases are categorized as operating or capital at the inception of the lease. Assets under capital lease obligations are reported at the lower of fair value or the present value of the aggregate future minimum lease payments at the beginning of the lease term. The Company depreciates capital lease assets without transfer-of-ownership or bargain-purchase-options using the straight-line method over the lease terms, excluding any lease renewals, unless the lease renewals are reasonably assured. Capital lease assets with transfer-of-ownership or bargain-purchase-options are depreciated using the straight-line method over the assets’ estimated useful lives. |
Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block] | | Impairment of Long-Lived Assets and Amortizing Intangible Assets | |
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Long-lived assets, such as property and equipment and purchased intangible assets subject to depreciation or amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. No impairments were recorded during the years ended December 31, 2014, 2013, or 2012. |
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Among others, management believes the following circumstances are important indicators of potential impairment of such assets and as a result may trigger an impairment review: |
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● Significant underperformance in comparison to historical or projected operating results; |
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● Significant changes in the manner or use of acquired assets or the Company’s overall strategy; |
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● Significant negative trends in the Company’s industry or the overall economy; |
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● A significant decline in the market price for the Company’s common stock for a sustained period; and |
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● The Company’s market capitalization falling below the book value of the Company’s net assets. |
Goodwill and Intangible Assets, Policy [Policy Text Block] | Goodwill and Intangible Assets | | |
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Intangible assets include customer relationships, trade names, technology, non-compete agreements and goodwill. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company reviews intangible assets with indefinite lives for impairment annually as of October 1 and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. |
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When performing the impairment assessment, the Company will first assess qualitative factors to determine whether it is necessary to recalculate the fair value of the intangible assets with indefinite lives. If the Company believes, as a result of the qualitative assessment, that it is more likely than not that the fair value of the indefinite-lived intangibles is less than their carrying amount, the Company calculates the fair value using a market approach. If the carrying value of intangible assets with indefinite lives exceeds their fair value, then the intangible assets are written-down to their fair values. The Company did not recognize any impairments related to indefinite-lived intangibles during 2014, 2013 or 2012. |
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Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. All of the Company’s goodwill is allocated to its reporting units, which are the same as its operating segments. Goodwill is reviewed for impairment at least annually, as of October 1, and whenever events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable. |
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The Company reviews for goodwill impairment by first assessing qualitative factors to determine whether any impairment may exist. If the Company believes, as a result of the qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a quantitative two-step test is required; otherwise, no further testing is required. Under the first step of the quantitative test, the fair value of the reporting unit is compared with its carrying value (including goodwill). If the fair value of the reporting unit exceeds its carrying value, step two is not performed. If the fair value of the reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit and the Company performs step two of the impairment test (measurement). Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the fair value of that goodwill. The fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation and the residual fair value after this allocation is the fair value of the reporting unit goodwill. |
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In instances when a step two is required, the fair value of the reporting unit is determined using an income approach and comparable market multiples. Under the income approach, there are a number of inputs used to calculate the fair value using a discounted cash flow model, including operating results, business plans, projected cash flows and a discount rate. Discount rates, growth rates and cash flow projections are the most sensitive and susceptible to change as they require significant management judgment. Discount rates are determined by using a weighted average cost of capital, which considers market and industry data. Management develops growth rates and cash flow projections for each reporting unit considering industry and Company-specific historical and projected information. Terminal value rate determination follows common methodology of capturing the present value of perpetual cash flow estimates beyond the last projected period assuming a constant weighted average cost of capital and low long-term growth rates. Under the market approach, the Company considers its market capitalization, comparisons to other public companies’ data, and recent transactions of similar businesses within the Company’s industry. |
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The Company performed a qualitative analysis as of October 1, 2014 which did not indicate that it was more likely than not that the carrying values of the reporting units exceeded fair value. No impairments were recorded during the years ended December 31, 2014, 2013 or 2012. |
Segment Reporting, Policy [Policy Text Block] | Segment Information | | |
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During 2014, the Company changed its operating segments from two to three to reflect a change in corporate reporting structure to the Company’s Chief Executive Officer and chief operating decision maker. The Company’s three operating segments 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 three operating segments are National Research Corporation (United States), National Research Corporation Canada and Connect, each of which offer a portfolio of solutions to address specific market needs around growth, retention, engagement and thought leadership for healthcare organizations. |
Income Tax, Policy [Policy Text Block] | Income Taxes | | |
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The Company uses the asset and liability method of accounting for income taxes. Under that method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis using enacted tax rates. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances, if any, are established when necessary to reduce deferred tax assets to the amount that is more likely than not to be realized. The Company uses the deferral method of accounting for its investment tax credits related to state tax incentives. During the years ended December 31, 2014, 2013 and 2012, the Company recorded income tax benefits relating to these tax credits of $224,000, $290,000, and $289,000, respectively. |
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The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. |
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The Company had an unrecognized tax benefit at December 31, 2014 and 2013, of $360,000 and $188,000, respectively, excluding interest of $8,000 and $5,000, respectively, and penalties in 2014 of $7,000. Of these amounts, $210,000 and $188,000 at December 31, 2014 and 2013, respectively, represents the net unrecognized tax benefits that, if recognized, would favorably impact the effective income tax rate. The remaining $150,000 at December 31, 2014 would have no impact on the effective tax rate, if recognized. The Company accrues interest and penalties related to uncertain tax position in the statements of income as income tax expense. The Company is not subject to tax examinations for years prior to 2011 in the U.S. and 2010 in Canada. |
Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block] | Share-Based Compensation | | |
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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. |
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Amounts recognized in the financial statements with respect to these plans: |
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| | 2014 | | | 2013 | | | 2012 | | | | | | | | | | | | | |
| | (In thousands) | | | | | | | | | | | | | |
Amounts charged against income, before income tax benefit | | $ | 742 | | | $ | 955 | | | $ | 388 | | | | | | | | | | | | | |
Amount of related income tax benefit | | | 269 | | | | 377 | | | | 153 | | | | | | | | | | | | | |
Total impact to net income | | $ | 473 | | | $ | 578 | | | $ | 235 | | | | | | | | | | | | | |
Cash and Cash Equivalents, Policy [Policy Text Block] | Cash and Cash Equivalents | | |
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The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash equivalents were $39.1 million and $21.2 million as of December 31, 2014, and 2013, respectively, consisting primarily of money market accounts and funds invested in commercial paper. At certain times, cash equivalent balances may exceed federally insured limits. |
Fair Value Measurement, Policy [Policy Text Block] | Fair Value Measurements | | |
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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. |
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The following details the Company’s financial assets and liabilities within the fair value hierarchy at December 31, 2014 and 2013: |
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| | Level 1 | | | Level 2 | | | Level 3 | | | Total | | | | | | | | | |
| | (In thousands) | | | | | | | | | |
As of December 31, 2014 | | | | | | | | | | | | | | | | | | | | | | | | |
Money Market Funds | | $ | 9,442 | | | $ | -- | | | $ | -- | | | $ | 9,442 | | | | | | | | | |
Commercial Paper | | $ | 29,686 | | | $ | -- | | | $ | -- | | | $ | 29,686 | | | | | | | | | |
Total | | $ | 39,128 | | | $ | -- | | | $ | -- | | | $ | 39,128 | | | | | | | | | |
As of December 31, 2013 | | | | | | | | | | | | | | | | | | | | | | | | |
Money Market Funds | | $ | 7,266 | | | $ | -- | | | $ | -- | | | $ | 7,266 | | | | | | | | | |
Commercial Paper | | $ | 13,976 | | | $ | -- | | | $ | -- | | | $ | 13,976 | | | | | | | | | |
Total | | $ | 21,242 | | | $ | -- | | | $ | -- | | | $ | 21,242 | | | | | | | | | |
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There were no transfers between levels during the years ended December 31, 2014 and 2013. |
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The Company's long-term debt described in Note 6 is recorded at historical cost. The fair value of long-term debt is classified in Level 2 of the fair value hierarchy and was estimated based primarily on estimated current rates available for debt of the same remaining duration and adjusted for nonperformance and credit. |
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The following are the carrying amount and estimated fair values of long-term debt: |
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| | 31-Dec-14 | | | 31-Dec-13 | | | | | | | | | | | | | | | | | |
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Total carrying amount of long-term debt | | $ | 8,068 | | | $ | 10,324 | | | | | | | | | | | | | | | | | |
Estimated fair value of long-term debt | | $ | 7,997 | | | $ | 10,156 | | | | | | | | | | | | | | | | | |
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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 December 31, 2014 and 2013, there was no impairment related to property and equipment, goodwill and other intangible assets. |
Commitments and Contingencies, Policy [Policy Text Block] | Contingencies | | |
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From time to time, the Company is involved in certain claims and litigation arising in the normal course of business. Management assesses the probability of loss for such contingencies and recognizes a liability when a loss is probable and estimable. At December 31, 2014, the Company was not engaged in any legal proceedings that are expected, individually or in the aggregate, to have a material effect on the Company. |
Earnings Per Share, Policy [Policy Text Block] | Earnings Per Share | | |
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Net income per share of class A common stock and class B common stock is computed using the two-class method. Basic net income per share is computed by allocating undistributed earnings to common shares and using the weighted-average number of common shares outstanding during the period. |
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Diluted net income per share is computed using the weighted-average number of common shares and, if dilutive, the potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options and vesting of restricted stock. The dilutive effect of outstanding stock options is reflected in diluted earnings per share by application of the treasury stock method. |
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The liquidation rights and the rights upon the consummation of an extraordinary transaction are the same for the holders of class A common stock and class B common stock. Other than share distributions and liquidation rights, the amount of any dividend or other distribution payable on each share of class A common stock will be equal to one-sixth (1/6th) of the amount of any such dividend or other distribution payable on each share of class B common stock. As a result, the undistributed earnings for each year are allocated based on the contractual participation rights of the class A and class B common stock as if the earnings for the year had been distributed. |
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At December 31, 2014, 2013, and 2012, the Company had 347,852, 99,562 and 92,460 options of class A shares and 21,248, 6,407, and 15,410 options of class B shares, respectively, which have been excluded from the diluted net income per share computation because the exercise price exceeds the fair market value. |
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| | 2014 | | | 2013 | | | 2012 | |
| | Class A | | | Class B | | | Class A | | | Class B | | | Class A | | | Class B | |
| | (In thousands, except per share data) | |
Numerator for net income per share - basic: | | | | | | | | | | | | | | | | | | | | | | | | |
Allocation of distributed earnings | | $ | 1,254 | | | $ | 1,258 | | | $ | 1,071 | | | $ | 1,071 | | | $ | 8,681 | | | $ | 8,681 | |
Allocation of undistributed earnings | | | 7,808 | | | | 7,836 | | | | 6,670 | | | | 6,672 | | | | (1,147 | ) | | | (1,147 | ) |
Net income attributable to common shareholders | | $ | 9,062 | | | $ | 9,094 | | | $ | 7,741 | | | $ | 7,743 | | | $ | 7,534 | | | $ | 7,534 | |
Denominator for net income per share - basic: | | | | | | | | | | | | | | | | | | | | | | | | |
Weighted average common shares outstanding - basic | | | 20,764 | | | | 3,473 | | | | 20,677 | | | | 3,447 | | | | 20,325 | | | | 3,388 | |
Net income per share - basic | | $ | 0.44 | | | $ | 2.62 | | | $ | 0.37 | | | $ | 2.25 | | | $ | 0.37 | | | $ | 2.22 | |
Numerator for net income per share - diluted: | | | | | | | | | | | | | | | | | | | | | | | | |
Net income attributable to common shareholders for | | $ | 9,062 | | | $ | 9,094 | | | $ | 7,741 | | | $ | 7,743 | | | $ | 7,534 | | | $ | 7,534 | |
basic computation |
Denominator for net income per share - diluted: | | | | | | | | | | | | | | | | | | | | | | | | |
Weighted average common shares outstanding - basic | | | 20,764 | | | | 3,473 | | | | 20,677 | | | | 3,447 | | | | 20,325 | | | | 3,388 | |
Weighted average effect of dilutive securities: | | | | | | | | | | | | | | | | | | | | | | | | |
Stock Options | | | 282 | | | | 58 | | | | 388 | | | | 61 | | | | 492 | | | | 82 | |
Restricted Stock | | | 30 | | | | 5 | | | | 34 | | | | 6 | | | | 37 | | | | 6 | |
Weighted average common shares outstanding - diluted | | | 21,076 | | | | 3,536 | | | | 21,099 | | | | 3,514 | | | | 20,854 | | | | 3,476 | |
Net income per share - diluted | | $ | 0.43 | | | $ | 2.57 | | | $ | 0.37 | | | $ | 2.2 | | | $ | 0.36 | | | $ | 2.17 | |
New Accounting Pronouncements, Policy [Policy Text Block] | In May 2014, the FASB issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). ASU 2014-09 requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The updated accounting guidance is effective for annual and interim reporting periods in fiscal years beginning after December 15, 2016. Early adoption is not permitted. An entity may choose to adopt this ASU either retrospectively or through a cumulative effect adjustment as of the start of the first period for which it applies the standard. The Company is currently in the process of evaluating the impact that this new guidance will have on our consolidated financial statements and our method of adoption. | | |