What changed in this filing

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Item 1. Financial Statements

2022-11-03 compared with 2022-08-04 · 473 added, 126 removed, 840 unchanged (42% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Revenues and grant income:

Net patient revenues

$ 260,247  

$ 254,817  

$ 776,661  

$ 708,648  

Other revenues

10,596  

11,491  

33,584  

33,916  

Government stimulus income

10,429  

10,940  

48,304  

Net operating revenues and grant income

270,843  

276,737  

821,185  

790,868  

Cost and expenses:

Salaries, wages, and benefits

173,198  

170,235  

518,828  

483,263  

Other operating

72,883  

73,109  

218,279  

204,211  

Facility rent

10,294  

10,204  

30,770  

30,437  

Depreciation and amortization

10,253  

10,229  

30,011  

30,521  

Total costs and expenses

266,765  

263,975  

798,339  

749,089  

Income from operations

12,762  

22,846  

41,779  

Other income:

Non–operating income

15,245  

Gain on acquisition of equity method investment

Unrealized gains/(losses) on marketable equity securities

Income before income taxes

Income tax provision

95,202  

Unrealized losses on marketable equity securities

Income/(loss) before income taxes

19,818  

128,999  

Income tax (provision)/benefit

Net income/(loss)

14,403  

123,092  

Net (income)/loss attributable to noncontrolling interest

Net income attributable to National HealthCare Corporation

Earnings per share attributable to National HealthCare Corporation stockholders:

Net income/(loss) attributable to National HealthCare Corporation

$ 16,092  

$ 122,802  

Earnings/(loss) per share attributable to National HealthCare Corporation stockholders:

$ 1.04  

$ 8.00  

$ 1.04  

$ 7.97  

Weighted average common shares outstanding:

15,445,569  

15,364,043  

15,438,375  

15,347,042  

15,445,569  

15,364,043  

15,477,103  

15,414,683  

Dividends declared per common share

$ 0.57  

$ 0.52  

$ 1.69  

$ 1.56  

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

4 unchanged sentences

Three Months Ended

Six Months Ended

Net income attributable to National Healthcare Corporation

Other comprehensive income/(loss):

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

Nine Months Ended

Net income/(loss)

$ 14,403  

$ 123,092  

Other comprehensive loss:

Unrealized losses on investments in marketable debt securities

Reclassification adjustment for realized gains on sales of marketable debt securities

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

Other comprehensive income/(loss), net of tax

Income tax benefit related to items of other comprehensive income

Other comprehensive loss, net of tax

Net (income)/loss attributable to noncontrolling interest

Comprehensive income/(loss) attributable to National HealthCare Corporation

$ 4,064  

$ 120,511  

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

2 unchanged sentences

(in thousands)

June 30, 2022

September 30,

Current Assets:

Cash and cash equivalents

$ 44,515  

$ 107,607  

Restricted cash and cash equivalents, current portion

25,838  

10,407  

Marketable equity securities

107,655  

113,108  

Marketable debt securities

24,559  

35,310  

Restricted marketable equity securities

20,341  

26,958  

Restricted marketable debt securities, current portion

20,727  

Accounts receivable

99,003  

96,124  

Prepaid expenses and other assets

10,306  

Total current assets

344,529  

426,638  

Property and Equipment:

Property and equipment, at cost

1,076,116  

1,064,337  

Accumulated depreciation and amortization

Net property and equipment

511,373  

520,996  

Other Assets:

1 unchanged sentence

Restricted marketable debt securities, less current portion

118,858  

116,063  

Deposits and other assets

13,039  

Operating lease right-of-use assets

126,499  

156,116  

168,295  

Intangible assets

Notes receivable

Investments in unconsolidated companies

Total other assets

439,657  

455,762  

$ 1,295,559  

$ 1,403,396  

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

2 unchanged sentences

(in thousands, except share and per share amounts)

June 30, 2022

September 30,

Liabilities and Stockholders ’

65 unchanged sentences

in thousands)   

Six Months Ended

Nine Months Ended

Cash Flows From Operating Activities:

$ 14,403  

$ 123,092  

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

Depreciation and amortization

30,011  

30,521  

Equity in earnings of unconsolidated investments

Distributions from unconsolidated investments

Unrealized (gains)/losses on marketable equity securities

Unrealized losses on marketable equity securities

11,479  

23,227  

(Gains)/losses on sale of marketable securities

Gain on acquisition of equity method investment

Recovery of notes receivable  

( 3,728 )  

Deferred income taxes

11 unchanged sentences

Other noncurrent liabilities

Net cash provided by/(used in) operating activities

Net cash provided by/(used in) operating activities

( 3,192 )  

46,871  

Cash Flows From Investing Activities:

1 unchanged sentence

Acquisition of equity method investment, net of cash acquired

Proceeds from sale of real estate

Investments in unconsolidated companies and notes receivable

( 2,000 )  

Proceeds from the sale of property and equipment

Collections of notes receivable

1 unchanged sentence

Proceeds from sale of marketable securities

38,114  

89,129  

Net cash used in investing activities

9 unchanged sentences

Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents, Beginning of Period

119,743  

158,502  

Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents, End of Period

$ 72,200  

$ 126,767  

Balance Sheet Classifications:

Cash and cash equivalents

$ 44,515  

$ 112,462  

Restricted cash and cash equivalents

27,685  

14,305  

Total Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents

$ 72,200  

$ 126,767  

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

2 unchanged sentences

(in thousands, except share and per share amounts)

For the six months ended June 30, 2022 :

For the nine months ended September 30, 2022 :

Comprehensive

1 unchanged sentence

Income (Loss)

Balance at December 31, 2021

Balance at January 1, 2022

15,452,033  

6 unchanged sentences

15,349  

Equity contributed by noncontrolling interest

Contributions attributable to noncontrolling interest

Other comprehensive loss

23 unchanged sentences

902,610  

For the six months ended June 30, 2021:

Net loss

Other comprehensive loss

Stock–based compensation

Shares sold –

options exercised

Repurchase of common shares

Dividends declared to common stockholders ($ 0.57 per share)

Balance at September 30, 2022

15,393,103  

228,522  

659,059  

881,328  

For the nine months ended September 30, 2021:

Comprehensive

Stockholders’

Income (Loss)

Balance at December 31, 2020

Balance at January 1, 2021

15,369,745  

36 unchanged sentences

$ 913,252  

Other comprehensive loss

Stock–based compensation

Dividends declared to common stockholders ($ 0.52 per share)

Balance at September 30, 2021

15,423,240  

$ 230,974  

$ 661,783  

$ 2,766  

$ 6,213  

$ 901,890  

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

1 unchanged sentence

Notes to Interim Condensed Consolidated Financial Statements

June 30, 2022

September 30, 2022

(unaudited)  

3 unchanged sentences

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

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.

As of September 30, 2022, we operate or manage, through certain affiliates, 68 skilled nursing facilities with a total of 8,726 licensed beds, 23 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.

37 unchanged sentences

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 $ 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.

Bad debt expense was $ 1,685,000  and $ 6,026,000 for the three and nine months ended September 30, 2022.

For the three and nine months ended September 30, 2021, bad debt expense was $ 1,452,000 and $ 3,473,000 , respectively. As of September 30, 2022, and December 31, 2021, the Company has recorded allowance for doubtful accounts of $ 7,841,000 and $ 6,411,000 , respectively, as our best estimate of expected losses inherent in the accounts receivable balance.

Other Revenues

22 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 $ 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.

Costs that could be classified as "general and administrative" by the Company would include its corporate office costs, excluding stock-based compensation, which were $ 6,050,000 and $ 16,636,000 for the three and nine months ended September 30, 2022.

General and administrative costs were $ 5,361,000 and $ 15,615,000 for the three and nine months ended September 30, 2021, respectively.

Long-Term Leases

53 unchanged sentences

We pay the refundable portion of our entry fees to residents when they relocate from our community and the apartment is re-occupied.

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 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.

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

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

As of September 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 $ 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 Company recorded $ 0 and $ 10,429,000 of government stimulus income from the Provider Relief Funds for the three months ended September 30, 2022 and 2021, respectively.

The Company recorded $ 10,940,000 and $ 48,304,000 of government stimulus income from the Provider Relief Funds for the nine months ended September 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.

5 unchanged sentences

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 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.

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

During the succeeding nine months, repayment occurs 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.

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.

As of September 30, 2022 and December 31, 2021, $ 138,000 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.

5 unchanged sentences

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 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. 

At September 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 $ 5,001,000 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.

We have recorded $ 4,773,000 and $ 5,053,000 in net patient revenues for these supplemental Medicaid payments for the three months ended September 30, 2022 and 2021, respectively.

We have recorded $ 15,312,000 and $ 16,102,000 in net patient revenues for these supplemental Medicaid payments for the nine months ended September 30, 2022 and 2021, respectively.

Note 4 –

5 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Net patient revenues:

Inpatient services

$ 228,138  

$ 222,884  

$ 680,776  

$ 644,986  

Homecare and hospice

32,109  

31,933  

95,885  

63,662  

Total net patient revenue

$ 260,247  

$ 254,817  

$ 776,661  

$ 708,648  

For inpatient and hospice services, revenue is recognized on a daily basis as each day represents a separate contract and performance obligation.

9 unchanged sentences

Three Months Ended

Six Months Ended

Nine 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 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. 

As of September 30, 2022 and December 31, 2021, the Company has recorded $ 138,000 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.

1 unchanged sentence

Balance at December 31, 2021

$ 15,022  

Payments received

Payments recouped

Balance at June 30, 2022

Balance at September 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 $ 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.

We have made provisions of approximately $ 15,496,000 and $ 17,595,000 as of September 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

Nine Months Ended

Rental income

$ 5,830  

$ 5,792  

$ 17,642  

$ 16,954  

Management and accounting services fees

11,993  

12,703  

Insurance services

Total other revenues

$ 10,596  

$ 11,491  

$ 33,584  

$ 33,916  

Rental Income

4 unchanged sentences

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

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.

We recognized management fees and interest on management fees from these facilities of $ 1,029,000 and $ 970,000 for the three months ended September 30, 2022 and 2021, respectively.

We recognized management fees and interest on management fees of $ 3,012,000 and $ 2,806,000 from these facilities for the nine months ended September 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 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.

compensation insurance services, the premium revenues reflected in the interim condensed consolidated statements of operations for the three months ended September 30, 2022 and 2021 were $ 496,000 and $ 780,000 , respectively.

The premium revenues reflected in the interim condensed consolidated statements of operations for the nine months ended September 30, 2022 and 2021 were $ 1,939,000 and $ 2,298,000 , 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.

For professional liability insurance services, the premium revenues reflected in the interim condensed consolidated statements of operations for the three months ended September 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 nine months ended September 30, 2022 and 2021 were $ 1,558,000 and $ 1,534,000 , 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

Six Months Ended

Nine Months Ended

Dividends and net realized gains and losses on sales of securities

$ 1,324  

$ 2,365  

$ 4,381  

$ 6,242  

Interest income

1 unchanged sentence

Total non-operating income

$ 2,731  

$ 3,399  

$ 8,451  

$ 15,245  

Caris HealthCare, L.P.

17 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 June 30, 2022

Three Months Ended September 30, 2022

Revenues and grant income:

Net patient revenues

$ 228,138  

$ 32,109  

$ 260,247  

Other revenues

Government stimulus income

10,794  

10,596  

Net operating revenues and grant income

227,940  

32,109  

10,794  

270,843  

Costs and expenses:

Salaries, wages, and benefits

144,047  

19,581  

173,198  

Other operating

66,522  

72,883  

10,294  

Depreciation and amortization

10,253  

Total costs and expenses

227,992  

26,714  

12,059  

266,765  

Income/(loss) from operations

( 1,265 )  

Non-operating income

1 unchanged sentence

Income/(loss) before income taxes

Three Months Ended June 30, 2021

$ 5,395  

Three Months Ended September 30, 2021

Net patient revenues

$ 222,884  

$ 31,933  

$ 254,817  

Other revenues

11,363  

11,491  

Government stimulus income

10,429  

Net operating revenues and grant income

233,441  

31,933  

11,363  

276,737  

Costs and expenses:

Salaries, wages, and benefits

141,318  

18,771  

10,146  

170,235  

Other operating

64,755  

73,109  

10,204  

Depreciation and amortization

10,229  

Total costs and expenses

223,569  

25,101  

15,305  

263,975  

Income/(loss) from operations

12,762  

Non-operating income

Gain on acquisition of equity method investment

Unrealized losses on marketable equity securities

Income before income taxes

Six Months Ended June 30, 2022

Income/(loss) before income taxes

$ 9,872  

$ 6,832  

Nine Months Ended September 30, 2022

Net patient revenues

$ 680,776  

$ 95,885  

$ 776,661  

Other revenues

33,569  

33,584  

Government stimulus income

10,940  

Net operating revenues and grant income

691,731  

95,885  

33,569  

821,185  

Costs and expenses:

Salaries, wages, and benefits

435,322  

58,007  

25,499  

518,828  

Other operating

192,791  

19,848  

218,279  

24,498  

30,770  

Depreciation and amortization

27,120  

30,011  

Total costs and expenses

680,182  

80,086  

38,071  

798,339  

Income/(loss) from operations

11,549  

15,799  

22,846  

Non-operating income

Unrealized losses on marketable equity securities

Income before income taxes

Six Months Ended June 30, 2021

Income/(loss) before income taxes

$ 11,549  

$ 15,799  

$ 19,818  

Nine Months Ended September 30, 2021

Revenues and grant income:

Net patient revenues

$ 644,986  

$ 63,662  

$ 708,648  

Other revenues

33,592  

33,916  

Government stimulus income

48,304  

Net operating revenues and grant income

693,614  

63,662  

33,592  

790,868  

Costs and expenses:

Salaries, wages, and benefits

407,534  

39,922  

35,807  

483,263  

Other operating

185,860  

10,291  

204,211  

24,129  

30,437  

Depreciation and amortization

27,790  

30,521  

Total costs and expenses

645,970  

51,990  

51,129  

749,089  

Income/(loss) from operations

47,644  

11,672  

41,779  

Non-operating income

15,245  

Gain on acquisition of equity method investment

Unrealized gains on marketable equity securities

95,202  

Unrealized losses on marketable equity securities

Income before income taxes

$ 47,644  

$ 11,672  

$ 69,683  

$ 128,999  

Note 8 –

1 unchanged sentence

Operating Leases

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 $ 9,563,000 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.

At September 30, 2022, we lease from NHI the real property of 28 skilled nursing facilities, five assisted living centers and three independent living centers under one lease agreement.

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

The lease includes base rent plus a percentage rent.

The percentage rent is based on a quarterly calculation of revenue increases and is payable on a quarterly basis.

Total facility rent expense to NHI was $ 9,478,000 and $ 9,026,000 for the three months ended September 30, 2022 and 2021, respectively.

Total facility rent expense to NHI was $ 28,293,000 and $ 28,336,000 for the nine months ended September 30, 2022 and 2021, respectively.

On September 1, 2022, we transferred the operations of seven skilled nursing facilities located in Massachusetts and New Hampshire to a third -party operator.

We leased the real property of these seven facilities from NHI.

In conjunction with the transfer of the operations to a third party, we terminated our lease agreement for the seven skilled nursing facilities and amended our master lease agreement with NHI. 

The amendment was accounted for as a lease modification under ASC 842, Leases . The base rent within the amended master lease agreement increased approximately $ 8,775,000 over the next four and one - third years. 

Therefore, for the remainder of 2022 ( September- December), our base rent increased $ 875,000 . The annual base rent in 2023  increased from $ 30,750,000 to $ 34,075,000 , in 2024 from $ 30,750,000 to $ 32,625,000 , in 2025 from $ 30,750,000 to $ 32,225,000 , and in 2026 from $ 30,750,000 to $ 31,975,000 .  

Finance Leases

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

At September 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 June 30, 2022 ( in thousands ):

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

$ 5,200  

$ 35,950  

34,353  

33,278  

32,613  

Total minimum lease payments

144,342  

amounts representing interest

Present value of future minimum lease payments

126,499  

current portion

Noncurrent lease liabilities

$ 2,134  

$ 97,888  

Note 9 –

3 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 June 30

Six Months Ended June 30

Three Months Ended

Nine Months Ended

Weighted average common shares outstanding

Net income attributable to National HealthCare Corporation

Earnings per common share, basic

15,445,569  

15,364,043  

15,438,375  

15,347,042  

Net income/(loss) attributable to National HealthCare Corporation

$ 16,092  

$ 122,802  

Earnings/(loss) per common share, basic

$ 1.04  

$ 8.00  

Weighted average common shares outstanding

15,445,569  

15,364,043  

15,438,375  

15,347,042  

Effects of dilutive instruments

38,728  

67,641  

Weighted average common shares outstanding

Net income attributable to National HealthCare Corporation

Earnings per common share, diluted

15,445,569  

15,364,043  

15,477,103  

15,414,683  

Net income/(loss) attributable to National HealthCare Corporation

$ 16,092  

$ 122,802  

Earnings/(loss) per common share, diluted

$ 1.04  

$ 7.97  

In the above table, options to purchase 389,781  and 620,076  shares of our common stock have been excluded for the nine months ended September 30, 2022 

and 2021, respectively, due to their anti-dilutive impact.

Note 10 –

6 unchanged sentences

Marketable securities consist of the following (in thousands) :

June 30, 2022

September 30, 2022

December 31, 2021

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14,998  

15,082  

14,998  

Restricted investments available for sale:

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

June 30, 2022

September 30, 2022

December 31, 2021

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

June 30, 2022

September 30, 2022

December 31, 2021

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$ 172,100  

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.

Gross unrealized gains related to marketable equity securities are $ 77,991,000 and $ 85,394,000 as of September 30, 2022 and December 31, 2021, respectively.

Gross unrealized losses related to marketable equity securities are $ 5,022,000 and $ 946,000 as of September 30, 2022 and December 31, 2021, respectively.

For the three months ended September 30, 2022 and 2021, the Company recognized net unrealized losses of $ 11,056,000 and $ 23,797,000 , respectively, for the changes in fair market value of the marketable equity securities in the interim condensed consolidated statements of operations.

For the nine months ended September 30, 2022 and 2021, the Company recognized a net unrealized losses of $ 11,479,000 and a net unrealized loss of $ 23,227,000 , 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 $ 0 and $ 3,189,000 as of September 30, 2022 and December 31, 2021, respectively.

Gross unrealized losses related to available for sale marketable debt securities are $ 12,099,000 and $ 1,176,000 as of September 30, 2022 and December 31, 2021, respectively.

September 30, 2022, a total of 52 debt securities with a total market value of $ 45,367,000 have been in an unrealized loss position for greater than 12 months.

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 six months ended 

June 30, 2022 and 2021.

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

September 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 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.

Proceeds from the sale of marketable securities during the nine months ended September 30, 2022 and 2021 were $ 38,114,000 and $ 89,129,000 , respectively.

Investment losses of $ 756,000 and investment gains of $ 941,000 were realized on these sales during the nine months ended September 30, 2022 and 2021, respectively.

Note 11 –

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

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

1   – 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.

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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 June 30, 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 September 30, 2022 and December 31, 2021 for assets and liabilities measured at fair value on a recurring basis (in thousands) :

Fair Value Measurements Using

June 30, 2022

September 30, 2022

For Identical

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Goodwill and Other Intangible Assets

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" ).

At September 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.

2 unchanged sentences

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

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

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

January 1, 2022

June 30, 2022

$ 3,741  

$ 164,554  

$ 168,295  

September 30, 2022

$ 3,741  

$ 164,554  

$ 168,295  

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 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.

During the nine months ended September 30, 2022, the Company repurchased 99,547 shares of its common stock for a total cost of $ 6,907,000 .

During the nine months ended September 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 –

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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 $ 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 totaled $ 638,000 and $ 726,000 for the three months ended September 30, 2022 and 2021, respectively.

Stock-based compensation totaled $ 1,980,000 and $ 1,905,000 for the nine months ended September 30, 2022 and 2021, respectively.

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

in the interim condensed consolidated statements of operations.

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.

At September 30, 2022, the Company had $ 3,846,000 of unrecognized compensation cost related to unvested stock–based compensation awards.

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

Stock Options

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

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

September 30,

Risk–free interest rate

2 unchanged sentences

Expected dividend yield

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

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

Exercise Price

Options outstanding at January 1, 2021

866,956  

$ 72.11  

Options granted

55,706  

Options exercised

1 unchanged sentence

Options outstanding at December 31, 2021

374,926  

Options granted

301,386  

Options exercised

Options cancelled

Options outstanding at June 30, 2022

Options exercisable at June 30, 2022

June 30, 2022

Options outstanding at September 30, 2022

461,307  

$ 44,582  

Options exercisable at September 30, 2022

159,921  

$ 44,582  

September 30, 2022

Exercise Prices

3 unchanged sentences

Life in Years

372,912  

61.90 - 69.19  

88,395  

71.64 - 77.92  

461,307  

Note 15 –

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. 

The Company's income tax benefit as a percentage of our income before income taxes was 26.8 % and 53.6 % for the three months ended September 30, 2022 and 2021, respectively.

The Company's income tax provision as a percentage of our income before income taxes was 27.3 % and 4.6 % for the nine months ended September 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 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.

The tax benefit related to the statute of limitation expirations was $ 437,000 for the three and nine months ended September 30, 2022.

The tax benefit related to the statute of limitation expirations was $ 1,444,000 for the three and nine months ended September 30, 2021.

For the nine months ended September 30, 2021, the income tax provision and effective tax rate were favorably impacted by the nontaxable gain recognized upon re-measurement 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 $ 102,663,000 and $ 98,048,000 at June 30, 2022 and December 31, 2021, respectively.

The liability we have recognized for reported claims and estimates for incurred but unreported claims totals $ 103,710,000 and $ 98,048,000 at September 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.

37 unchanged sentences

Supreme Court's review of a petition for certiorari filed in an unrelated matter, but involving one of the legal arguments raised in the motion to dismiss. 

Supreme Court has recently denied the petition for certiorari, but the district court has not yet lifted the stay in this matter.

We expect that the motion to dismiss will be renewed once the stay is lifted. 

4 unchanged sentences

However, compliance with such laws and regulations can be subject to future government review and interpretation as well as significant regulatory action including fines, penalties, and exclusions from the Medicare, Medicaid and other federal healthcare programs.

There have been several enacted and proposed federal and state relief measures as a result of COVID- 19 which have provided substantial support to us during this pandemic;

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.

There have been several enacted federal and state relief measures as a result of COVID- 19 which have provided substantial support to us during this pandemic.

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 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 .

In conjunction with the OTAs, we have signed an acknowledgement agreement with NHI that will terminate our lease agreement with the seven skilled nursing facilities and amend our master lease agreement. 

The lease termination agreement and amendment to the master lease are subject to the operations being transferred.   

On September 1, 2022, we transferred the operations of seven skilled nursing facilities located in Massachusetts and New Hampshire to a third -party operator.

NHC leased the real property of these seven facilities from NHI.

In conjunction with the transfer of the operations to a third party, we terminated our lease agreement with NHI for the seven skilled nursing facilities and amended our master lease agreement with NHI, see Note 8 –

Long-Term Leases.

The seven skilled nursing facilities had net patient revenues of $ 13,214,000 and $ 17,907,000 for the three months ended September 30, 2022 and 2021, respectively. 

The seven skilled nursing facilities had net patient revenues of $ 48,697,000 and $ 50,149,000 for the nine months ended September 30, 2022 and 2021, respectively.

Excluding stimulus funds, the seven skilled nursing facilities had losses before income taxes of $ 259,000 and $ 1,360,000 for the three months ended September 30, 2022 and 2021, respectively. 

Excluding stimulus funds, the seven skilled nursing facilities had losses before income taxes of $ 2,831,000 and $ 7,257,000 for the nine months ended September 30, 2022 and 2021, respectively. 

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