What changed in this filing

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Item 1. Financial Statements

2023-05-04 compared with 2022-11-03 · 117 added, 481 removed, 832 unchanged (42% of the section changed)

4 unchanged sentences

Three 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

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/(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  

Unrealized gains on marketable equity securities

Income before income taxes

Income tax provision

Net loss/(income) attributable to noncontrolling interest

Net income attributable to National HealthCare Corporation

Earnings per share attributable to National HealthCare Corporation stockholders:

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

Nine Months Ended

Net income/(loss)

$ 14,403  

$ 123,092  

Other comprehensive loss:

Unrealized losses on investments in marketable debt securities

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)/loss attributable to noncontrolling interest

Comprehensive income/(loss) attributable to National HealthCare Corporation

$ 4,064  

$ 120,511  

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

Other comprehensive income/(loss), net of tax

Net loss/(income) attributable to noncontrolling interest

Comprehensive income 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)

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)

September 30,

Liabilities and Stockholders ’

19 unchanged sentences

17,615  

Provider relief funds

Contract liabilities

15,022  

Dividends payable

11 unchanged sentences

Deferred income taxes

11,519  

10,909  

Other noncurrent liabilities

13 unchanged sentences

656,664  

Accumulated other comprehensive income/(loss)

Accumulated other comprehensive loss

Total National HealthCare Corporation stockholders’

12 unchanged sentences

in thousands)   

Nine Months Ended

Three 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 losses on marketable equity securities

11,479  

23,227  

Unrealized gains on marketable equity securities

(Gains)/losses on sale of marketable securities

Gain on acquisition of equity method investment

Recovery of notes receivable  

( 3,728 )  

Deferred income taxes

3 unchanged sentences

Prepaid expenses and other assets

Operating lease obligations

Trade accounts payable

6 unchanged sentences

Other noncurrent liabilities

Net cash provided by/(used in) operating activities

( 3,192 )  

46,871  

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

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

3 unchanged sentences

Noncontrolling interest contributions

Issuance of common shares

Repurchase of common shares

3 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 nine months ended September 30, 2022 :

For the three months ended March 31, 2023 :

Comprehensive

7 unchanged sentences

$ 877,514  

Net income/(loss)

11,723  

1 unchanged sentence

11,285  

Contributions attributable to noncontrolling interest

Other comprehensive loss

Other comprehensive income

Stock–based compensation

1 unchanged sentence

options exercised

21,463  

Repurchase of common shares

6 unchanged sentences

879,902  

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  

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:

For the three months ended March 31, 2022:

Comprehensive

Stockholders’

Income (Loss)

Balance at January 1, 2022

7 unchanged sentences

15,349  

Equity contributed by noncontrolling interest

Other comprehensive loss

11 unchanged sentences

911,056  

$ 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  

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.

7 unchanged sentences

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

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.

As of March 31, 2023, we operate or manage, through certain affiliates, 68 skilled nursing facilities with a total of 8,732 licensed beds, 23 assisted living facilities with 1,181 units, five independent living facilities, three behavioral health hospitals, 34  homecare agencies, and 30  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.

23 unchanged sentences

GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates and could cause our reported net income to vary significantly from period to period, including but not limited to, the potential future effects of the novel coronavirus (“COVID- 19”

Actual results could differ from those estimates and could cause our reported net income to vary significantly from period to period.

Net Patient Revenues and Accounts Receivable

Net patient revenues are derived from services rendered to patients for skilled and intermediate nursing, rehabilitation therapy, assisted living and independent living, home health care services, and hospice services.

Net patient revenue is reported at the amount that reflects the consideration to which the Company expects to be entitled in exchange for providing patient services.

9 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 $ 1,685,000  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.

Bad debt expense was $ 1,811,000  and $ 2,536,000 for the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023, and December 31, 2022, the Company has recorded allowance for doubtful accounts of $ 7,005,000 and $ 6,246,000 , 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 $ 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.

Costs that could be classified as "general and administrative" by the Company would include its corporate office costs, excluding stock-based compensation, which were $ 5,653,000 and $ 5,787,000 for the three months ended March 31, 2023 and 2022, respectively.

Long-Term Leases

56 unchanged sentences

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

As of March 31, 2023, and December 31, 2022, we have recorded a future service obligation liability in the amount of $ 2,218,000 .

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

2 unchanged sentences

Deferred revenue includes the deferred gain on the sale of assets to National Health Corporation (“National”) and the non-refundable portion ( 10% ) of CCRC entrance fees being amortized over the remaining life expectancies of the residents.

Other noncurrent liabilities also include funds received related to the Employee Retention Credit ("ERC"), a refundable tax credit for businesses that sustained a partial suspension of operations limiting commerce due to COVID- 19 or had significant declines in gross receipts during 2020 and 2021.

Noncontrolling Interest

11 unchanged sentences

in the interim condensed consolidated balance sheets.

Reclassifications

Certain accounts in the prior-year financial statements have been reclassified for comparative purposes to conform to the presentation in the current-year financial statements. 

Note 3 –

2 unchanged sentences

government enacted several laws beginning in March 2020 designed to help the nation respond to the COVID- 19 pandemic.

The laws impacted healthcare providers in a variety of ways, but the largest legislation from a monetary relief perspective is the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"). Through the CARES Act, as well as the Paycheck Protection Program and Health Care Enhancement Act ("PPPCHE"), the federal government allocated $178 billion to the Public Health and Social Services Emergency Fund , which is referred to as the Provider Relief Fund.

The laws impacted healthcare providers in a variety of ways, but the largest legislation from a monetary relief perspective was the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"). Through the CARES Act, as well as the Paycheck Protection Program and Health Care Enhancement Act ("PPPCHE"), the federal government allocated $178 billion to the Public Health and Social Services Emergency Fund , which is referred to as the Provider Relief Fund.

The Provider Relief Fund is administered through grants and other mechanisms to skilled nursing providers, home health providers, hospitals, and other Medicare and Medicaid enrolled providers to cover unreimbursed health care related expenses or lost revenue attributable to the public health emergency resulting from COVID- 19.

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 $ 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.

The Company recorded $ 0 and $ 10,620,000 of government stimulus income from the Provider Relief Funds for the three months ended March 31, 2023 and 2022, respectively.

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

The Company’s assessment of whether the terms and conditions for amounts received have been met for income recognition and the Company’s related income calculation considered all frequently asked questions and other interpretive guidance issued to date by the U.S.

Department of Health and Human Services (“HHS”).

Additionally, as part of the CARES Act, the legislation included an expansion of the Medicare Accelerated and Advance Payment Program.

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.

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 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 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.

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%.

The CARES Act also temporarily permitted employers to defer the deposit and payment of the employer’s portion of the social security taxes ( 6.2% of employee wages) that otherwise would have been due between March 27, 2020 and December 31, 2020.

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 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 $ 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.

We have recorded $ 4,883,000 and $ 5,538,000 in net patient revenues for these supplemental Medicaid payments for the three months ended March 31, 2023 and 2022, respectively.

Note 4 –

5 unchanged sentences

Three Months Ended

Nine Months Ended

Net patient revenues:

2 unchanged sentences

$ 224,842  

$ 680,776  

$ 644,986  

Homecare and hospice

1 unchanged sentence

31,495  

95,885  

63,662  

Total net patient revenue

$ 260,247  

$ 254,817  

Total net patient revenues

$ 258,007  

11 unchanged sentences

Three Months Ended

Nine Months Ended

Private Pay and Other

Medicare covers skilled nursing services for beneficiaries who require nursing care and/or rehabilitation services following a hospitalization of at least three consecutive days (there is temporary relief from the three -day hospital stay during the COVID- 19 emergency).

Medicare covers skilled nursing services for beneficiaries who require nursing care and/or rehabilitation services following a hospitalization of at least three consecutive days. 

Although, there has been temporary relief from the three -day hospital stay through the COVID- 19 public health emergency, which is set to end on May 11, 2023.

For each eligible day a Medicare beneficiary is in a skilled nursing facility, Medicare pays the facility a daily payment, subject to adjustment for certain factors such as a wage index in the geographic area.

17 unchanged sentences

Certain managed care payors for homecare services pay on a per-visit basis.

This revenue is recorded on an accrual basis based upon the date of services at amounts equal to its established or estimated per-visit rates.     

Contract Liabilities

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 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.

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

Balance at December 31, 2021

$ 15,022  

Payments received

Payments recouped

Balance at September 30, 2022

This revenue is recorded on an accrual basis based upon the date of services at amounts equal to its established or estimated per-visit rates.

Third Party Payors

6 unchanged sentences

Estimated settlements are adjusted in future periods as adjustments become known, or as years are settled or are no longer subject to such audits, reviews, and investigations.

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 $ 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.

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 $ 16,679,000 and $ 16,631,000 as of March 31, 2023 

and December 31, 2022, 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

Nine Months Ended

Rental income

1 unchanged sentence

$ 5,982  

$ 17,642  

$ 16,954  

Management and accounting services fees

11,993  

12,703  

Insurance services

2 unchanged sentences

$ 12,026  

$ 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 $ 1,029,000 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.

For the three months ended March 31, 2023 and 2022, we recognized management fees and interest on management fees of $ 1,190,000 and $ 981,000 , respectively, for these centers.

Insurance Services

For workers’

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.

compensation insurance services, the premium revenues reflected in the interim condensed consolidated statements of operations for the three months ended March 31, 2023 and 2022 were $ 736,000 and $ 728,000 , 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 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.

For professional liability insurance services, the premium revenues reflected in the interim condensed consolidated statements of operations for the three months ended March 31, 2023 and 2022 were $ 312,000 and $ 519,000 , 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

Nine Months Ended

Dividends and net realized gains and losses on sales of securities

1 unchanged sentence

$ 1,753  

$ 4,381  

$ 6,242  

Interest income

3 unchanged sentences

$ 3,199  

$ 8,451  

$ 15,245  

Caris HealthCare, L.P.

On June 11, 2021, the Company acquired the remaining 24.9 % equity interest in Caris HealthCare, L.P.

(“Caris”).

Prior to the June 11, 2021 acquisition date, Caris was our most significant equity method investment with a 75.1 % non-controlling ownership interest.

From the respective acquisition date, Caris’

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 –

6 unchanged sentences

category that includes revenues from rental income, management and accounting services fees, insurance services, and costs of the corporate office.

For additional information on these reportable segments see Note 2 –

Summary of Significant Accounting Policies.

The Company’s CODM evaluates performance and allocates capital resources to each segment based on an operating model that is designed to improve the quality of patient care and profitability of the Company while enhancing long-term shareholder value.

1 unchanged sentence

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

Three Months Ended September 30, 2022

Three Months Ended March 31, 2023

Revenues and grant income:

30 unchanged sentences

Non-operating income

Unrealized losses on marketable equity securities

Income/(loss) before income taxes

$ 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

Unrealized losses on marketable equity securities

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  

Unrealized gains on marketable equity securities

Income before income taxes

$ 7,854  

Non-operating income

Unrealized losses on marketable equity securities

Income/(loss) before income taxes

$ 5,352  

1 unchanged sentence

$ 15,721  

Nine Months Ended September 30, 2021

Revenues and grant income:

Three Months Ended March 31, 2022

Net patient revenues

18 unchanged sentences

170,694  

483,263  

Other operating

2 unchanged sentences

10,065  

24,129  

30,437  

Depreciation and amortization

27,790  

30,521  

Total costs and expenses

6 unchanged sentences

14,217  

41,779  

Non-operating income

15,245  

Gain on acquisition of equity method investment

95,202  

Unrealized losses on marketable equity securities

Unrealized gains on marketable equity securities

Income before income taxes

6 unchanged sentences

Operating Leases

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.

At March 31, 2023, 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 annual base rent is $ 34,075,000 in 2023, $ 32,625,000 in 2024, $ 32,225,000 in 2025, and $ 31,975,000 in 2026 with the lease term expiring in 2026.

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 .  

Total facility rent expense to NHI was $ 9,295,000 and $ 9,252,000 for the three months ended March 31, 2023 and 2022, respectively.

Finance Leases

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

At March 31, 2023, 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.

Each of the leases is a ten -year lease with two five–year renewal options.

Each of the leases is a ten -year lease with two five–year renewal options with the original lease expiring in 2024.

Under the terms of the leases, base rent totals $ 5,200,000 annually with rent thereafter escalating by 4 % of the increase in facility revenue over the 2014 base year.

Minimum Lease Payments

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

The following table summarizes the maturity of our finance and operating lease liabilities as of March 31, 2023 ( in thousands ):

$ 4,767  

11 unchanged sentences

$ 83,988  

$ 97,888  

Note 9 –

4 unchanged sentences

Three Months Ended

Nine Months Ended

Weighted average common shares outstanding

1 unchanged sentence

15,416,836  

15,438,375  

15,347,042  

Net income/(loss) attributable to National HealthCare Corporation

Net income attributable to National HealthCare Corporation

$ 11,723  

$ 15,318  

Earnings/(loss) per common share, basic

Earnings per common share, basic

$ 0.76  

3 unchanged sentences

15,416,836  

15,438,375  

15,347,042  

Effects of dilutive instruments

4 unchanged sentences

15,463,855  

15,477,103  

15,414,683  

Net income/(loss) attributable to National HealthCare Corporation

Net income attributable to National HealthCare Corporation

$ 11,723  

$ 15,318  

Earnings/(loss) per common share, diluted

Earnings per common share, diluted

$ 0.76  

$ 0.99  

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 

In the above table, options to purchase 0  and 5,783  shares of our common stock have been excluded for the three months ended March 31, 2023 

and 2022, respectively, due to their anti-dilutive impact.

3 unchanged sentences

Our investments in marketable debt securities are classified as available for sale securities and carried at fair value with the unrealized gains and losses recognized through accumulated other comprehensive income at each measurement date.

Any credit related decline in fair market values of our available for sale debt securities are recorded in our results of operations through an allowance for credit losses.

Any credit related decline in fair market values below amortized cost of our available for sale debt securities are recorded in our results of operations through an allowance for credit losses.

Realized gains and losses from securities sales are recognized in results of operations upon disposition of the securities using the specific identification method on a trade date basis.

1 unchanged sentence

Marketable securities consist of the following (in thousands) :

September 30, 2022

March 31, 2023

December 31, 2022

12 unchanged sentences

Treasury securities

15,082  

14,998  

Restricted investments available for sale:

25 unchanged sentences

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

September 30, 2022

March 31, 2023

December 31, 2022

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) :

September 30, 2022

March 31, 2023

December 31, 2022

18 unchanged sentences

$ 142,647  

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.

Gross unrealized gains related to marketable equity securities are $ 72,266,000 and $ 71,869,000 as of March 31, 2023 and December 31, 2022, respectively.

Gross unrealized losses related to marketable equity securities are $ 2,238,000 and $ 3,227,000 as of March 31, 2023 and December 31, 2022, respectively.

For the three months ended March 31, 2023 and 2022, the Company recognized net unrealized gains of $ 1,386,000 and $ 3,126,000 , 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 $ 80,000 and $ 9,000 as of March 31, 2023 and December 31, 2022, respectively.

Gross unrealized losses related to available for sale marketable debt securities are $ 9,179,000 and $ 11,071,000 as of March 31, 2023 and December 31, 2022, 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 nine months ended 

September 30, 2022 and 2021.

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

March 31, 2023 and 2022.

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 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.

Proceeds from the sale of available for sale marketable securities during the three months ended March 31, 2023 and 2022 were $ 15,492,000 and $ 16,946,000 , respectively.

Investment losses of $ 492,000 and investment gains of $ 45,000 were realized on these sales during the three months ended March 31, 2023 and 2022, respectively.

Note 11 –

9 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 September 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 March 31, 2023 and December 31, 2022 for assets and liabilities measured at fair value on a recurring basis (in thousands) :

Fair Value Measurements Using

September 30, 2022

March 31, 2023

For Identical

12 unchanged sentences

18,287  

Mortgage–backed securities

Asset–backed securities

22,348  

37 unchanged sentences

Goodwill and Other Intangible Assets

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" ).

At March 31, 2023, the Company reviewed the carrying value of goodwill for impairment indicators.

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.

However, our accounting estimates could materially change from period to period due to changing market factors.

We will continue to monitor future events, changes in circumstances, and the potential impact thereof.

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

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

At March 31, 2023, the following table represents the activity related to our goodwill by segment ( in thousands ):

January 1, 2023

2 unchanged sentences

$ 168,295  

September 30, 2022

March 31, 2023

$ 3,741  

3 unchanged sentences

Note 13 - Stock Repurchase Program

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.

During the three months ended March 31, 2023, the Company repurchased 44,349 shares of its common stock for a total cost of $ 2,482,000 .

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 .

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 $ 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 totaled $ 639,000 and $ 712,000 for the three months ended March 31, 2023 and 2022, respectively.

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

in the interim condensed consolidated statements of operations.

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.

At March 31, 2023, the Company had $ 5,347,000 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 nine months ended September 30, 2022 and for the year ended December 31, 2021.

September 30,

The following table summarizes the significant assumptions used to value the options granted for the three months ended March 31, 2023 and for the year ended December 31, 2022.

Risk–free interest rate

4.71 %  

1.83 %  

Expected volatility

30.27 %  

31.40 %  

Expected life, in years

Expected dividend yield

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

4.43 %  

3.57 %  

The following table summarizes our outstanding stock options for the three months ended March 31, 2023 and for the year ended December 31, 2022.

Exercise Price

10 unchanged sentences

246,436  

Options exercised

Options cancelled

Options outstanding at September 30, 2022

Options outstanding at March 31, 2023

691,580  

$ 62.18  

Options exercisable at September 30, 2022

$ 979,843  

Options exercisable at March 31, 2023

157,901  

September 30, 2022

$ 69.78  

March 31, 2023

Exercise Prices

9 unchanged sentences

Note 15 –

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. 

The Company's income tax provision as a percentage of our income before income taxes was 28.2 % and 25.3 % for the three months ended March 31, 2023 and 2022, 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.

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.

For the three months ended March 31, 2023 and 2022, the accrual of state income tax was the most significant reconciling item.

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 $ 103,710,000 and $ 98,048,000 at September 30, 2022 and December 31, 2021, respectively.

The liability we have recognized for reported claims and estimates for incurred but unreported claims totals $ 105,626,000 and $ 102,469,000 at March 31, 2023 and December 31, 2022, 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.

21 unchanged sentences

Jennifer Cook and Sally Gaither v.

Integrated Behavioral Health, Inc., NHC HealthCare/Moulton, LLC, et al.

Integrated Behavioral Health, Inc., NHC HealthCare/Moulton, LLC, et al., Case No.

2:20 -CV- 00877 -AMM (N.D.

1 unchanged sentence

The United States declined intervention on March 1, 2021.

Thereafter, the Plaintiff filed an amended Complaint against Dr.

Thereafter, the Plaintiffs filed an amended Complaint against Dr.

Sanja Malhotra, Integrated Behavioral Health, Inc.

and other entities that Dr.

Malhotra is alleged to own or in which he has a financial interest. 

Malhotra was alleged to own or in which he allegedly had a financial interest.

The Complaint also named multiple skilled nursing facilities as Defendants, including NHC Healthcare/Moulton, LLC, an affiliate of National HealthCare Corporation.

The Complaint alleges that nurse practitioners affiliated with Dr.

Malhotra provided free services to the facilities in exchange for referrals to entities owned by or in which Dr.

Malhotra had a financial interest in violation of the False Claims Act and Anti-Kickback Statute.

NHC Healthcare/Moulton, LLC denies the allegations and is vigorously defending the claim.

A motion to dismiss was filed on November 4, 2021. 

The Complaint alleged that nurse practitioners affiliated with Dr.

Malhotra provided free services to the facilities in exchange for referrals to entities owned by or in which Dr.

Malhotra had a financial interest in violation of the False Claims Act and Anti-Kickback Statute.

NHC Healthcare/Moulton, LLC denied the allegations and filed a motion to dismiss on November 4, 2021.

On January 28, 2022, the district court stayed this matter and administratively terminated the motion to dismiss pending the U.S.

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. 

There is no expected timeline for the lifting of the stay.  

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.

Thereafter, the U.S.

Supreme Court denied the petition for certiorari in the unrelated matter.

As a result, NHC Healthcare/Moulton, LLC renewed its motion to dismiss.

The District Court granted NHC Healthcare/Moulton’s Motion to Dismiss, along with other pending Motions to Dismiss, and entered an Order of Dismissal on March 23, 2023 and an Amended Order of Dismissal on April 4, 2023, which dismissed the case in its entirety with prejudice with respect to the claims asserted by the Plaintiffs.

The Plaintiffs filed a Notice of Appeal on April 20, 2023 to appeal the dismissal to the 11th Circuit Court of Appeals.

Governmental Regulations

2 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 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 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