What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-08-04 compared with 2022-05-05 · 220 added, 104 removed, 746 unchanged (30% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

(unaudited)          

Three Months Ended

Six Months Ended

Revenues and grant income:

Net patient revenues

11 unchanged sentences

Non–operating income

Unrealized gains on marketable equity securities

Gain on acquisition of equity method investment

Unrealized gains/(losses) on marketable equity securities

Income before income taxes

Income tax provision

Net income attributable to noncontrolling interest

Net (income)/loss attributable to noncontrolling interest

Net income attributable to National HealthCare Corporation

8 unchanged sentences

Three Months Ended

Other comprehensive loss:

Unrealized losses on investments in marketable debt securities

Six Months Ended

Net income attributable to National Healthcare Corporation

Other comprehensive income/(loss):

Unrealized gains/(losses) on investments in marketable debt securities

Reclassification adjustment for realized gains on sales of marketable debt securities

Income tax benefit related to items of other comprehensive income

Other comprehensive loss, net of tax

Net income attributable to noncontrolling interest

Comprehensive income attributable to National HealthCare Corporation

Income tax (expense)/benefit related to items of other comprehensive income

Other comprehensive income/(loss), net of tax

Comprehensive income/(loss) attributable to National HealthCare Corporation

The accompanying notes to interim condensed consolidated financial statements are an integral part of these consolidated statements.

2 unchanged sentences

(in thousands)

March 31, 2022

June 30, 2022

Current Assets:

24 unchanged sentences

(in thousands, except share and per share amounts)

March 31, 2022

June 30, 2022

Liabilities and Stockholders ’

65 unchanged sentences

in thousands)   

Three Months Ended

Six Months Ended

Cash Flows From Operating Activities:

Adjustments to reconcile net income to net cash (used in)/provided by operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

1 unchanged sentence

Distributions from unconsolidated investments

Unrealized gains on marketable equity securities

Gains on sale of marketable securities

Unrealized (gains)/losses on marketable equity securities

(Gains)/losses on sale of marketable securities

Gain on acquisition of equity method investment

Deferred income taxes

11 unchanged sentences

Other noncurrent liabilities

Net cash (used in)/provided by operating activities

Net cash provided by/(used in) operating activities

Cash Flows From Investing Activities:

Purchases of property and equipment

Acquisition of equity method investment, net of cash acquired

Proceeds from sale of real estate

Collections of notes receivable

21 unchanged sentences

(in thousands, except share and per share amounts)

For the six months ended June 30, 2022 :

Comprehensive

1 unchanged sentence

Income (Loss)

Balance at January 1, 2021

Balance at December 31, 2021

15,452,033  

6 unchanged sentences

15,349  

Equity contributed by noncontrolling interest

Other comprehensive loss

11 unchanged sentences

911,056  

Net income/(loss)

Other comprehensive loss

Stock–based compensation

Shares sold –

options exercised

16,554  

Dividends declared to common stockholders ($ 0.57 per share)

Balance at June 30, 2022

15,487,885  

234,482  

670,262  

902,610  

For the six months ended June 30, 2021:

Comprehensive

1 unchanged sentence

Income (Loss)

Balance at January 1, 2022

Balance at December 31, 2020

15,369,745  

6 unchanged sentences

21,308  

Equity contributed by noncontrolling interest

Other comprehensive loss

11 unchanged sentences

$ 3,124  

The accompanying notes to interim condensed consolidated financial statements are an integral part of these consolidated statements.

$ 810,188  

104,883  

105,330  

Contributions attributable to noncontrolling interest

Other comprehensive income

Stock–based compensation

Shares sold –

options exercised

33,100  

Dividends declared to common stockholders ($ 0.52 per share)

Balance at June 30, 2021

15,423,240  

$ 230,248  

$ 673,151  

$ 3,288  

$ 6,411  

$ 913,252  

T he accompanying notes to interim condensed consolidated financial statements are an integral part of these consolidated statements.

NATIONAL HEALTHCARE CORPORATION

Notes to Interim Condensed Consolidated Financial Statements

March 31, 2022

June 30, 2022

(unaudited)  

3 unchanged sentences

or the “Company”) is a leading provider of senior health care services.

As of March 31, 2022, we operate or manage, through certain affiliates, 75 skilled nursing facilities with a total of 9,456 licensed beds, 24 assisted living facilities, five independent living facilities, one behavioral health hospital, 35 homecare agencies, and 29 hospice agencies.

As of June 30, 2022, we operate or manage, through certain affiliates, 75 skilled nursing facilities with a total of 9,447 licensed beds, 24 assisted living facilities, five independent living facilities, three behavioral health hospitals, 35 homecare agencies, and 29 hospice agencies.

We operate specialized care units within certain of our healthcare centers such as Alzheimer's disease care units and sub-acute nursing units.

33 unchanged sentences

Additionally, there may be ancillary services which are not included in the daily rates for routine services, but instead are treated as separate performance obligations satisfied at a point in time when those services are rendered.  Contract liabilities are recorded for payments the Company receives in which performance obligations have not been completed.

The Company determines the transaction price based on established billing rates reduced by contractual adjustments provided to third party payors.

Contractual adjustments are based on contractual agreements and historical experience.

The Company determines the transaction price based on established billing rates reduced by explicit price concessions provided to third party payors.

Explicit price concessions are based on contractual agreements and historical experience.

The Company considers the patient's ability and intent to pay the amount of consideration upon admission.

Credit losses are recorded as bad debt expense, which is included as a component of other operating expenses in the interim condensed consolidated statements of operations.

Bad debt expense was $ 2,536,000 and $ 919,000 for the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, and December 31, 2021, the Company has recorded allowance for doubtful accounts of $ 6,726,000 and $ 6,411,000 , respectively, as our best estimate of expected losses inherent in the accounts receivable balance.

Bad debt expense was $ 1,805,000  and $ 4,341,000 for the three and six months ended June 30, 2022.

For the three and six months ended June 30, 2021, bad debt expense was $ 1,102,000 and $ 2,021,000 , respectively.

As of June 30, 2022, and December 31, 2021, the Company has recorded allowance for doubtful accounts of $ 7,405,000 and $ 6,411,000 , respectively, as our best estimate of expected losses inherent in the accounts receivable balance.

Other Revenues

8 unchanged sentences

Government Grants

In the absence of specific guidance to account for government grants under U.S.

GAAP, we have concluded to account for government grants in accordance with International Accounting Standard (“IAS”) 20, Accounting for Government Grants and Disclosure of Government Assistance , and as such, we recognize grant income on a systematic basis in line with the recognition of specific expenses and lost revenues for which the grants are intended to compensate. 

We account for government grants in accordance with International Accounting Standard (“IAS”) 20, Accounting for Government Grants and Disclosure of Government Assistance , and as such, we recognize grant income on a systematic basis in line with the recognition of specific expenses and lost revenues for which the grants are intended to compensate. 

Segment Reporting

1 unchanged sentence

The Company has two reportable operating segments:

( 1 ) inpatient services, which includes the operation of skilled nursing facilities, assisted and independent living facilities, and one behavioral health hospital, and ( 2 ) homecare and hospice services.

( 1 ) inpatient services, which includes the operation of skilled nursing facilities, assisted and independent living facilities, and behavioral health hospitals, and ( 2 ) homecare and hospice services.

The Company also reports an “all other”

7 unchanged sentences

With the Company being a healthcare provider, the majority of our expenses are "cost of revenue" items.

Costs that could be classified as "general and administrative" by the Company would include its corporate office costs, excluding stock-based compensation, which were $ 5,787,000 and $ 5,369,000 for the three months ended March 31, 2022 and 2021, respectively.

Costs that could be classified as "general and administrative" by the Company would include its corporate office costs, excluding stock-based compensation, which were $ 4,799,000 and $ 10,586,000 for the three and six months ended June 30, 2022.

General and administrative costs were $ 4,885,000 and $ 10,254,000 for the three and six months ended June 30, 2021, respectively.

Long-Term Leases

23 unchanged sentences

Assets acquired and liabilities assumed, if any, are measured at fair value on the acquisition date using the appropriate valuation method.

Goodwill generated from acquisitions is recognized for the excess of the purchase price over tangible and identifiable intangible assets.

Goodwill generated from acquisitions is recognized for the excess of the purchase price over the fair value of tangible and identifiable intangible assets acquired and liabilities assumed.

In determining the fair value of identifiable assets, we use various valuation techniques.

1 unchanged sentence

Goodwill and Other Intangible Assets

Goodwill represents the excess of purchase price over the fair value of identifiable net assets acquired in business combinations.

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations.

Goodwill is not amortized but is subject to an annual impairment test.

24 unchanged sentences

Refundable entrance fees are not included as part of the transaction price and are classified as noncurrent liabilities section of our consolidated balance sheets.

As of March 31, 2022, and December 31, 2021, we have recorded refundable entrance fees in the amount of $ 6,097,000 and $ 7,011,000 , respectively.

As of June 30, 2022, and December 31, 2021, we have recorded refundable entrance fees in the amount of $ 6,304,000 and $ 7,011,000 , respectively.

We also annually estimate the present value of the cost of future services and the use of facilities to be provided to the current CCRC residents and compare that amount with the balance of non-refundable deferred revenue from entrance fees received.

If the present value of the cost of future services exceeds the related anticipated revenues, a liability is recorded with a corresponding charge to income.

As of March 31, 2022, and December 31, 2021, we have recorded a future service obligation liability in the amount of $ 2,338,000 .

As of June 30, 2022, and December 31, 2021, we have recorded a future service obligation liability in the amount of $ 2,338,000 .

This obligation is reflected within other noncurrent liabilities in the interim condensed consolidated balance sheets. 

24 unchanged sentences

The Provider Relief Fund grants come with terms and condition certifications in which all providers are required to submit documents to ensure the funds are used for healthcare-related expenses or lost revenue attributable to COVID- 19.

The Company recorded $ 10,620,000 and $ 22,749,000 of government stimulus income from the Provider Relief Funds for the three months ended March 31, 2022 and 2021, respectively.

The Company recorded $ 320,000 and $ 15,126,000 of government stimulus income from the Provider Relief Funds for the three months ended June 30, 2022 and 2021, respectively.

The Company recorded $ 10,940,000 and $ 37,875,000 of government stimulus income from the Provider Relief Funds for the six months ended June 30, 2022 and 2021, respectively.

The grant income was determined on a systemic basis in line with the recognition of specific expenses and lost revenues for which the grants are intended to compensate.

3 unchanged sentences

The expanded Medicare Accelerated and Advance Payment Program is a streamlined version of existing policy that allows the Medicare Administrative Contractors (“MAC’s”) to issue up to three months of advance Medicare payments to help increase cash flow and liquidity to Medicare Part A and Part B providers in certain circumstances that include national emergencies.

We received approximately $ 51,253,000  as part of this program.

In the second quarter of 2020, we received approximately $ 51,253,000  as part of this program.

These funds are applied against claims for services provided to Medicare patients after approximately one year from the date we received the funds.

During the first eleven months after repayment began, repayment occurs through an automatic recoupment of twenty-five percent of Medicare payments.

During the first eleven months after repayment began, repayment will occur through an automatic recoupment of twenty-five percent of Medicare payments.

During the succeeding nine months, repayment will occur through an automatic recoupment of fifty percent of Medicare payments.

Any remaining balance that was not paid through the recoupment process within twenty-nine months of receipt of the funds will be required to be paid on-demand, subject to an interest rate of four percent.

Recoupment of the accelerated payments began in the second quarter of 2021.

As of March 31, 2022 and December 31, 2021, $ 5,003,000 and $ 15,022,000 , respectively, of the accelerated payments remain and are reflected within contract liabilities in the interim condensed consolidated balance sheet.

As of June 30, 2022 and December 31, 2021, $ 586,000 and $ 15,022,000 , respectively, of the accelerated payments remain and are reflected within contract liabilities in the interim condensed consolidated balance sheet.

The CARES Act and subsequent related legislation temporarily suspended Medicare sequestration beginning May 1, 2020 through March 31, 2022.

The Medicare sequestration policy reduces fee-for-service Medicare payments by 2 percent.

Beginning April 1, 2022, the sequestration reductions will then be 1% from April 1, 2022 through June 30, 2022.

The full 2% reduction is scheduled to go back into effect July 1, 2022.

The Medicare sequestration policy reduced fee-for-service Medicare payments by 2 percent.

Beginning April 1, 2022, the sequestration reductions were 1% from April 1, 2022 through June 30, 2022.

The full 2% reduction went back into effect July 1, 2022.

The CARES Act extends the sequestration policy through 2030 in exchange for this temporary suspension, which the sequestration reduction for 2030 has been increased up to 3%.

1 unchanged sentence

The provision requires that the deferred taxes be paid over a two -year period with half the amount required to be paid by December 31, 2021, and the other half by December 31, 2022.

At March 31, 2022 and December 31, 2021, we have deferred $ 10,545,000 of the Company’s share of the social security taxes included in the current liabilities section of the consolidated balance sheet. 

At June 30, 2022 and December 31, 2021, we have deferred $ 10,545,000 of the Company’s share of the social security taxes included in the current liabilities section of the consolidated balance sheet. 

We have also received supplemental Medicaid payments from many of the states in which we operate to help mitigate the incremental costs resulting from the COVID- 19 public health emergency.

We have recorded $ 5,538,000 and $ 3,955,000 in net patient revenues for these supplemental Medicaid payments for the three months ended March 31, 2022 and 2021, respectively.

We have recorded $ 5,001,000 and $ 7,094,000 in net patient revenues for these supplemental Medicaid payments for the three months ended June 30, 2022 and 2021, respectively.

We have recorded $ 10,539,000 and $ 11,049,000 in net patient revenues for these supplemental Medicaid payments for the six months ended June 30, 2022 and 2021, respectively.

Note 4 –

3 unchanged sentences

The Company’s net patient services can generally be classified into the following two categories:

( 1 ) inpatient services, which includes the operation of skilled nursing facilities, assisted and independent living facilities, and a behavioral health hospital, and ( 2 ) homecare and hospice services (in thousands) .

Three Months Ended

Six Months Ended

Net patient revenues:

13 unchanged sentences

Three Months Ended

Six Months Ended

Private Pay and Other

22 unchanged sentences

Included in the Company’s interim condensed consolidated balance sheets are contract liabilities, which represent payments the Company receives in advance of services provided.

As of March 31, 2022 and December 31, 2021, the Company has recorded $ 5,003,000 and $ 15,022,000 , respectively, in contract liabilities related to receipts from the Medicare Accelerated and Advance Payment Program. 

As of June 30, 2022 and December 31, 2021, the Company has recorded $ 586,000 and $ 15,022,000 , respectively, in contract liabilities related to receipts from the Medicare Accelerated and Advance Payment Program. 

Recoupment of the accelerated payments began in the second quarter of 2021.

A summary of the contract liabilities are follows ( in thousands ):

A summary of the contract liabilities are as follows ( in thousands ):

Balance at December 31, 2021

1 unchanged sentence

Payments recouped

Balance at March 31, 2022

Balance at June 30, 2022

Third Party Payors

7 unchanged sentences

We believe that any differences between the net revenues recorded, and final determination will not materially affect the consolidated financial statements.

We have made provisions of approximately $ 17,319,000 and $ 17,595,000 as of March 31, 2022 and December 31, 2021, respectively, for various Medicare, Medicaid, and Managed Care claims reviews and current and prior year cost reports.

We have made provisions of approximately $ 18,019,000 and $ 17,595,000 as of June 30, 2022 and December 31, 2021, respectively, for various Medicare, Medicaid, and Managed Care claims reviews and current and prior year cost reports.

Note 5 –

7 unchanged sentences

Three Months Ended

Six Months Ended

Rental income

8 unchanged sentences

We manage five skilled nursing facilities owned by National Health Corporation (“National”).

For the three months ended March 31, 2022 and 2021, we recognized management fees and interest on management fees of $ 981,000 and $ 896,000 , respectively, for these centers.

We recognized management fees and interest on management fees from these facilities of $ 1,002,000 and $ 940,000 for the three months ended June 30, 2022 and 2021, respectively.

We recognized management fees and interest on management fees of $ 1,983,000 and $ 1,837,000 from these facilities for the six months ended June 30, 2022 and 2021, respectively.

Insurance Services

For workers’

compensation insurance services, the premium revenues reflected in the interim condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021 were $ 728,000 and $ 753,000 , respectively.

Associated losses and expenses are reflected in the interim condensed consolidated statements of operations as "Salaries, wages and benefits."

For professional liability insurance services, the premium revenues reflected in the interim condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021 were $ 519,000 and $ 511,000 , respectively.

compensation insurance services, the premium revenues reflected in the interim condensed consolidated statements of operations for the three months ended June 30, 2022 and 2021 were $ 716,000 and $ 766,000 , respectively.

The premium revenues reflected in the interim condensed consolidated statements of operations for the six months ended June 30, 2022 and 2021 were $ 1,443,000 and $ 1,518,000 , respectively.

Associated losses and expenses including those for self-insurance are included in the interim condensed consolidated statements of operations as "Salaries, wages and benefits."

For professional liability insurance services, the premium revenues reflected in the interim condensed consolidated statements of operations for the three months ended June 30, 2022 and 2021 were $ 519,000 and $ 511,000 , respectively.

The premium revenues reflected in the interim condensed consolidated statements of operations for the six months ended June 30, 2022 and 2021 were $ 1,039,000 and $ 1,023,000 , respectively.

Associated losses and expenses including those for self–insurance are included in the interim condensed consolidated statements of operations as "Other operating costs and expenses".

3 unchanged sentences

Three Months Ended

Equity in earnings of unconsolidated investments

Dividends and net realized gains on sales of securities

Six Months Ended

Dividends and net realized gains and losses on sales of securities

Interest income

Equity in earnings of unconsolidated investments

Total non-operating income

4 unchanged sentences

From the respective acquisition date, Caris’

financial information is now included in the Company’s consolidated financial statements and will no longer be accounted for as an equity method investment.

financial information is now included in the Company’s consolidated financial statements and is no longer accounted for as an equity method investment.

Note 7 –

1 unchanged sentence

The Company has two reportable operating segments:

( 1 ) inpatient services, which includes the operation of skilled nursing facilities, assisted and independent living facilities, and our behavioral health hospital;

( 1 ) inpatient services, which includes the operation of skilled nursing facilities, assisted and independent living facilities, and behavioral health hospitals;

and ( 2 ) homecare and hospice services.

7 unchanged sentences

The following table sets forth the Company’s unaudited interim condensed consolidated statements of operations by business segment (in thousands ):

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

Revenues and grant income:

Net patient revenues

9 unchanged sentences

Non-operating income

Unrealized gains on marketable equity securities

Unrealized losses on marketable equity securities

Income/(loss) before income taxes

Three Months Ended June 30, 2021

Net patient revenues

Other revenues

Government stimulus income

Net operating revenues and grant income

Costs and expenses:

Salaries, wages, and benefits

Other operating

Depreciation and amortization

Total costs and expenses

Income/(loss) from operations

Non-operating income

Gain on acquisition of equity method investment

Unrealized losses on marketable equity securities

Income before income taxes

Three Months Ended March 31, 2021

Six Months Ended June 30, 2022

Net patient revenues

9 unchanged sentences

Non-operating income

Unrealized losses on marketable equity securities

Income before income taxes

Six Months Ended June 30, 2021

Revenues and grant income:

Net patient revenues

Other revenues

Government stimulus income

Net operating revenues and grant income

Costs and expenses:

Salaries, wages, and benefits

Other operating

Depreciation and amortization

Total costs and expenses

Income/(loss) from operations

Non-operating income

Gain on acquisition of equity method investment

Unrealized gains on marketable equity securities

3 unchanged sentences

Operating Leases

At March 31, 2022, we leased from NHI the real property of 35 skilled nursing facilities, seven assisted living centers and three independent living centers under two separate lease agreements.

At June 30, 2022, we lease from NHI the real property of 35 skilled nursing facilities, seven assisted living centers and three independent living centers under two separate lease agreements.

As part of the first lease agreement, we sublease four Florida skilled nursing facilities to a third -party operator.

Base rent expense under both NHI lease agreements totals $ 34,200,000 annually with rent thereafter escalating by 4 % of the increase in facility revenue over a base year.

Total facility rent expense to NHI was $ 9,252,000 and $ 9,411,000 for the three months ended March 31, 2022 and 2021, respectively.

Total facility rent expense to NHI was $ 9,563,000 and $ 9,492,000 for the three months ended June 30, 2022 and 2021, respectively.

Total facility rent expense to NHI was $ 18,815,000 and $ 18,903,000 for the six months ended June 30, 2022 and 2021, respectively.

Finance Leases

At March 31, 2022, we leased and operated three senior healthcare facilities in the state of Missouri under three separate lease agreements.

At June 30, 2022, we leased and operated three senior healthcare facilities in the state of Missouri under three separate lease agreements.

Two of the healthcare facilities are skilled nursing facilities that also include assisted living facilities and the third healthcare facility is a memory care facility.

2 unchanged sentences

Minimum Lease Payments

The following table summarizes the maturity of our finance and operating lease liabilities as of March 31, 2022 ( in thousands ):

The following table summarizes the maturity of our finance and operating lease liabilities as of June 30, 2022 ( in thousands ):

Total minimum lease payments

8 unchanged sentences

The following table summarizes the earnings and the weighted average number of common shares used in the calculation of basic and diluted earnings per share (in thousands, except for share and per share amounts):

Three Months Ended

Three Months Ended June 30

Six Months Ended June 30

Weighted average common shares outstanding

14 unchanged sentences

Marketable securities consist of the following (in thousands) :

March 31, 2022

June 30, 2022

December 31, 2021

43 unchanged sentences

Included in the marketable equity securities are the following (in thousands, except share amounts):

March 31, 2022

June 30, 2022

December 31, 2021

7 unchanged sentences

The amortized cost and estimated fair value of debt securities classified as available for sale, by contractual maturity, are as follows (in thousands) :

March 31, 2022

June 30, 2022

December 31, 2021

18 unchanged sentences

$ 172,100  

Gross unrealized gains related to marketable equity securities are $ 88,514,000 and $ 85,394,000 as of March 31, 2022 and December 31, 2021, respectively.

Gross unrealized losses related to marketable equity securities are $ 939,000 and $ 946,000 as of March 31, 2022 and December 31, 2021, respectively.

For the three months ended March 31, 2022 and 2021, the Company recognized net unrealized gains of $ 3,126,000 and $ 7,059,000 , respectively, for the changes in fair market value of the marketable equity securities in the interim condensed consolidated statements of operations.

Gross unrealized gains related to available for sale marketable debt securities are $ 484,000 and $ 3,189,000 as of March 31, 2022 and December 31, 2021, respectively.

Gross unrealized losses related to available for sale marketable debt securities are $ 4,905,000 and $ 1,176,000 as of March 31, 2022 and December 31, 2021, respectively.

Gross unrealized gains related to marketable equity securities are $ 88,463,000 and $ 85,394,000 as of June 30, 2022 and December 31, 2021, respectively.

Gross unrealized losses related to marketable equity securities are $ 4,438,000 and $ 946,000 as of June 30, 2022 and December 31, 2021, respectively.

For the three months ended June 30, 2022 and 2021, the Company recognized net unrealized losses of $ 3,549,000 and $ 6,489,000 , respectively, for the changes in fair market value of the marketable equity securities in the interim condensed consolidated statements of operations.

For the six months ended June 30, 2022 and 2021, the Company recognized a net unrealized loss of $ 423,000 and a net unrealized gain of $ 570,000 , respectively, for the changes in fair market value of the marketable equity securities in the interim condensed consolidated statements of operations.

Gross unrealized gains related to available for sale marketable debt securities are $ 25,000 and $ 3,189,000 as of June 30, 2022 and December 31, 2021, respectively.

Gross unrealized losses related to available for sale marketable debt securities are $ 8,140,000 and $ 1,176,000 as of June 30, 2022 and December 31, 2021, respectively.

The Company’s unrealized losses in our available for sale marketable debt securities were determined to be non-credit related.

The Company has not recognized any credit related impairments for the three months ended 

March 31, 2022 and 2021.

The Company has not recognized any credit related impairments for the six months ended 

June 30, 2022 and 2021.

For the marketable securities in gross unrealized loss positions, (a) it is more likely than not that the Company will not be required to sell the investment securities before recovery of the unrealized losses, and (b) the Company expects that the contractual principal and interest will be received on the investment securities.

Proceeds from the sale of marketable securities during the three months ended March 31, 2022 and 2021 were $ 16,946,000 and $ 6,086,000 , respectively.

Investment gains of $ 45,000 were realized on these sales during the three months ended March 31, 2022.

No investment gains were realized on these sales during the three months ended March 31, 2021.

Proceeds from the sale of marketable securities during the six months ended June 30, 2022 and 2021 were $ 30,814,000 and $ 44,939,000 , respectively.

Investment losses of $ 364,000 and investment gains of $ 212,000 were realized on these sales during the six months ended June 30, 2022 and 2021, respectively.

Note 11 –

4 unchanged sentences

The following summarizes the three levels of inputs that may be used to measure fair value:

1  – The valuation is based on quoted prices in active markets for identical instruments.

– The valuation is based on quoted prices in active markets for identical instruments.

2  – The valuation is based on observable inputs such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model–based valuation techniques for which all significant assumptions are observable in the market.

2 unchanged sentences

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The following table summarizes fair value measurements by level at March 31, 2022 and December 31, 2021 for assets and liabilities measured at fair value on a recurring basis (in thousands) :

The following table summarizes fair value measurements by level at June 30, 2022 and December 31, 2021 for assets and liabilities measured at fair value on a recurring basis (in thousands) :

Fair Value Measurements Using

March 31, 2022

June 30, 2022

For Identical

Cash and cash equivalents

$ 75,798  

Restricted cash and cash equivalents

15,770  

Marketable equity securities

139,363  

Corporate debt securities

72,762  

37,393  

35,369  

Mortgage–backed securities

27,881  

Treasury securities

50,461  

State and municipal securities

Total financial assets

$ 386,902  

$ 318,785  

$ 68,117  

Fair Value Measurements Using

2 unchanged sentences

Cash and cash equivalents

$ 107,607  

Restricted cash and cash equivalents

12,136  

Marketable equity securities

140,066  

Corporate debt securities

81,779  

50,005  

31,774  

Asset–backed securities

34,770  

Treasury securities

47,628  

State and municipal securities

Total financial assets

$ 431,909  

$ 357,442  

$ 74,467  

Note 12 –

Goodwill and Other Intangible Assets

At March 31, 2022, the Company reviewed the carrying value of goodwill for impairment indicators, including due to the events and circumstances surrounding the Coronavirus Pandemic ("COVID- 19" ).

As a result of the review, there were no impairment indicators regarding the Company’s goodwill during the three months ended March 31, 2022 that required a quantitative test to be performed.

At June 30, 2022, the Company reviewed the carrying value of goodwill for impairment indicators, including due to the events and circumstances surrounding the Coronavirus Pandemic ("COVID- 19" ).

As a result of the review, there were no impairment indicators regarding the Company’s goodwill that required a quantitative test to be performed.

However, our accounting estimates could materially change from period to period due to changing market factors, including those driven by COVID- 19.

1 unchanged sentence

If actual results are not consistent with our assumptions and estimates, we may be exposed to future goodwill impairment losses.

At March 31, 2022, the following table represents the activity related to our goodwill by segment ( in thousands ):

At June 30, 2022, the following table represents the activity related to our goodwill by segment ( in thousands ):

January 1, 2022

March 31, 2022

June 30, 2022

We also have recorded indefinite-lived intangible assets that consist of trade names ($ 4,340,000 ) and certificates of need and licenses ($ 2,698,000 ).

Note 13 - Stock Repurchase Program

During the three months ended March 31, 2022, the Company repurchased 2,165 shares of its common stock for a total cost of $ 146,000 .

During the three months ended March 31, 2021, the Company repurchased 3,936 shares of its common stock for a total cost of $ 278,000 . The shares were funded from cash on hand and were cancelled and returned to the status of authorized but unissued.

During the six months ended June 30, 2022, the Company repurchased 2,165 shares of its common stock for a total cost of $ 146,000 .

During the six months ended June 30, 2021, the Company repurchased 3,936 shares of its common stock for a total cost of $ 278,000 . The shares were funded from cash on hand and were cancelled and returned to the status of authorized but unissued.

Note 14 –

2 unchanged sentences

NHC recognizes stock–based compensation expense for all stock options granted over the requisite service period using the fair value at the date of grant using the Black–Scholes pricing model.

Stock–based compensation totaled $ 712,000 and $ 496,000 for the three months ended March 31, 2022 and 2021, respectively.

Stock–based compensation totaled $ 629,000 and $ 683,000 for the three months ended June 30, 2022 and 2021, respectively.

Stock-based compensation totaled $ 1,341,000 and $ 1,179,000 for the six months ended June 30, 2022 and 2021, respectively.

Stock–based compensation is included in “Salaries, wages and benefits”

in the interim condensed consolidated statements of operations.

At March 31, 2022, the Company had $ 4,432,000 of unrecognized compensation cost related to unvested stock–based compensation awards.

At June 30, 2022, the Company had $ 4,492,000 of unrecognized compensation cost related to unvested stock–based compensation awards.

This unrecognized compensation cost will be amortized over an approximate three -year period.

Stock Options

The following table summarizes the significant assumptions used to value the options granted for the three months ended March 31, 2022 and for the year ended December 31, 2021.

March 31, 2022

The following table summarizes the significant assumptions used to value the options granted for the six months ended June 30, 2022 and for the year ended December 31, 2021.

June 30, 2022

Risk–free interest rate

2 unchanged sentences

Expected dividend yield

The following table summarizes our outstanding stock options for the three months ended March 31, 2022 and for the year ended December 31, 2021.

The following table summarizes our outstanding stock options for the six months ended June 30, 2022 and for the year ended December 31, 2021.

Exercise Price

5 unchanged sentences

Options granted

Options exercised

Options cancelled

Options outstanding at March 31, 2022

Options exercisable at March 31, 2022

March 31, 2022

Options outstanding at June 30, 2022

Options exercisable at June 30, 2022

June 30, 2022

Exercise Prices

4 unchanged sentences

Note 15 –

The Company's income tax provision as a percentage of our income before income taxes was 25.3 % for the three months ended March 31, 2022 and 2021.

The Company's income tax provision as a percentage of our income before income taxes was 38.7 % and 2.6 % for the three months ended June 30, 2022 and 2021, respectively.

The Company's income tax provision as a percentage of our income before income taxes was 27.2 % and 7.3 % for the six months ended June 30, 2022 and 2021, respectively. 

Typically, these percentages vary from the U.S.

federal statutory income tax rate of 21 % primarily due to state income taxes, excess tax benefits from stock-based compensation, benefits resulting from the lapsing of statute of limitations of items in our tax contingency reserve, and non-deductible expenses.

For the three months ended March 31, 2022 and 2021, the accrual of state income tax was the only significant reconciling item.

For the three months and six months ended June 30, 2022, the accrual of state income tax was the only significant reconciling item.

For the three months and six months ended June 30, 2021, the income tax provision and effective tax rate were favorably impacted by the nontaxable gain recognized upon remeasurement of our existing equity investment in Caris Healthcare, L.P.

Our quarterly income tax provision, and our estimate of our annual effective income tax rate, is subject to variation due to several factors, including volatility based on the amount of pre-tax income or loss.  

6 unchanged sentences

compensation and general and professional liability insurance claims both for our owned and leased entities and certain of the entities to which we provide management or accounting services.

The liability we have recognized for reported claims and estimates for incurred but unreported claims totals $ 101,413,000 and $ 98,048,000 at March 31, 2022 and December 31, 2021, respectively.

The liability we have recognized for reported claims and estimates for incurred but unreported claims totals $ 102,663,000 and $ 98,048,000 at June 30, 2022 and December 31, 2021, respectively.

The liability is included in accrued risk reserves in the interim condensed consolidated balance sheets and is subject to adjustment for actual claims incurred.

45 unchanged sentences

however, the full benefit of any such programs would not be realized until these payments are fully implemented, government agencies issue applicable regulations, or guidance and such relief is provided.

Note 17  

 Subsequent Event

Note 17  – 

Massachusetts and New Hampshire Skilled Nursing Facilities

On May 3, 2022, we signed operations transfer agreements ("OTAs") for the seven skilled nursing facilities located in Massachusetts and New Hampshire. 

After a period of up to 90 days after the signing of the OTAs, the operations of the seven facilities are expected to be transferred to a third -party skilled nursing operator. 

We expect to transfer the operations during the third quarter of 2022.

The seven skilled nursing facilities had net patient revenues of $ 17,801,000 and $ 15,377,000 for the three months ended March 31, 2022 and 2021, respectively. 

The seven skilled nursing facilities had losses before income taxes of $ 635,000 and $ 2,769,000 for the three months ended March 31, 2022 and 2021, respectively. 

After a period of due diligence, the operations of the seven facilities are expected to be transferred to a third -party skilled nursing operator. We expect to transfer the operations during the third or fourth quarter of 2022.

The seven skilled nursing facilities had net patient revenues of $ 17,683,000 and $ 16,866,000 for the three months ended June 30, 2022 and 2021, respectively. 

The seven skilled nursing facilities had net patient revenues of $ 35,483,000 and $ 32,243,000 for the six months ended June 30, 2022 and 2021, respectively.

The seven skilled nursing facilities had losses before income taxes of $ 219,000 and $ 1,223,000 for the three months ended June 30, 2022 and 2021, respectively. 

The seven skilled nursing facilities had losses before income taxes of $ 854,000 and $ 3,992,000 for the six months ended June 30, 2022 and 2021, respectively.

For the year ended December 31, 2021, the seven skilled nursing facilities had net patient revenues of $ 67,161,000 and losses before income taxes of $ 3,741,000 .

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements