What changed in this filing

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Item 1. Financial Statements

2023-08-03 compared with 2023-05-04 · 365 added, 101 removed, 848 unchanged (35% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

Revenues and grant income:

Net patient revenues

$ 269,605  

$ 260,077  

$ 527,612  

$ 516,414  

Other revenues

12,977  

10,962  

24,533  

22,988  

Government stimulus income

10,940  

Net operating revenues and grant income

282,582  

271,359  

552,145  

550,342  

Cost and expenses:

Salaries, wages, and benefits

175,294  

174,936  

343,118  

345,630  

Other operating

73,234  

71,311  

144,723  

145,396  

Facility rent

10,411  

19,993  

20,476  

Depreciation and amortization

10,083  

10,001  

20,131  

19,758  

Total costs and expenses

268,605  

266,808  

528,156  

531,574  

Income from operations

13,977  

23,989  

18,768  

Other income:

Non–operating income

Unrealized gains on marketable equity securities

Unrealized gains/(losses) on marketable equity securities

Income before income taxes

22,323  

38,044  

24,065  

Income tax provision

Net loss/(income) attributable to noncontrolling interest

( 1,362 )  

15,917  

27,202  

17,510  

Net loss attributable to noncontrolling interest

Net income attributable to National HealthCare Corporation

$ 16,281  

$ 3,203  

$ 28,004  

$ 18,521  

Earnings per share attributable to National HealthCare Corporation stockholders:

$ 1.06  

$ 0.21  

$ 1.83  

$ 1.20  

$ 1.06  

$ 0.21  

$ 1.83  

$ 1.20  

Weighted average common shares outstanding:

15,297,435  

15,452,402  

15,317,319  

15,434,718  

15,322,344  

15,487,123  

15,339,240  

15,475,553  

Dividends declared per common share

$ 0.59  

$ 0.57  

$ 1.16  

$ 1.12  

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

Other comprehensive income/(loss):

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

Reclassification adjustment for realized gains on sales of marketable debt securities

Reclassification adjustment for realized (gains)/losses on sales of marketable debt securities

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

Net loss attributable to noncontrolling interest

Comprehensive income/(loss) attributable to National HealthCare Corporation

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

4 unchanged sentences

Cash and cash equivalents

$ 78,492  

$ 58,667  

Restricted cash and cash equivalents, current portion

23,330  

15,121  

Marketable equity securities

103,812  

100,786  

Marketable debt securities

11,140  

23,136  

Restricted marketable equity securities

25,127  

22,358  

Restricted marketable debt securities, current portion

16,244  

Accounts receivable

101,260  

99,986  

Prepaid expenses and other assets

10,560  

10,546  

Total current assets

368,734  

353,932  

Property and Equipment:

Property and equipment, at cost

1,096,659  

1,081,219  

Accumulated depreciation and amortization

Net property and equipment

501,890  

506,532  

Other Assets:

1 unchanged sentence

Restricted marketable debt securities, less current portion

110,125  

103,267  

Deposits and other assets

13,130  

12,728  

Operating lease right-of-use assets

107,043  

120,521  

168,295  

Intangible assets

1 unchanged sentence

Total other assets

410,060  

414,986  

$ 1,280,684  

$ 1,275,450  

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

67 unchanged sentences

(unaudited –

in thousands)   

Three Months Ended

in thousands)

Six Months Ended

Cash Flows From Operating Activities:

2 unchanged sentences

Equity in earnings of unconsolidated investments

Unrealized gains on marketable equity securities

(Gains)/losses on sale of marketable securities

Distributions from unconsolidated investments

Unrealized (gains)/losses on marketable equity securities

Realized losses on sale of marketable securities

Deferred income taxes

15 unchanged sentences

Purchases of property and equipment

Collections of notes receivable

Acquisition of skilled nursing facility

Proceeds from the sale of property and equipment

(Investments in)/collections of notes receivable

Purchases of marketable securities

5 unchanged sentences

Noncontrolling interest contributions

Issuance of common shares

Repurchase of common shares

1 unchanged sentence

Net cash used in financing activities

Net Decrease in Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents

Net Increase/(Decrease) in Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents

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

8 unchanged sentences

(in thousands, except share and per share amounts)

For the three months ended March 31, 2023 :

For the six months ended June 30, 2023 :

Comprehensive

Stockholders’

Income (Loss)

Balance at January 1, 2023

4 unchanged sentences

$ 877,514  

Net income/(loss)

11,723  

11,285  

Other comprehensive income

10 unchanged sentences

879,902  

For the three months ended March 31, 2022:

Net income/(loss)

16,281  

15,917  

Other comprehensive loss

Stock–based compensation

Shares sold –

options exercised

Dividends declared to common stockholders ($ 0.59 per share)

Balance at June 30, 2023

15,320,543  

225,926  

666,896  

886,358  

For the six months ended June 30, 2022:

Comprehensive

10 unchanged sentences

15,349  

Equity contributed by noncontrolling interest

Other comprehensive loss

11 unchanged sentences

$ 911,056  

Net income/(loss)

Other comprehensive loss

Stock–based compensation

Shares sold –

options exercised

16,554  

Dividends declared to common stockholders ($ 0.57 per share)

Balance at June 30, 2022

15,487,885  

$ 234,482  

$ 670,262  

$ 4,695  

$ 902,610  

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

September 30, 2022

June 30, 2023

(unaudited)  

3 unchanged sentences

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

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.

As of June 30, 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, 35 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.

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 $ 1,811,000  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.

Bad debt expense was $ 1,852,000  and $ 3,663,000 for the three and six months ended June 30, 2023.

For the three and six months ended June 30, 2022, bad debt expense was $ 1,805,000 and $ 4,341,000 , respectively. As of June 30, 2023 

and December 31, 2022, the Company has recorded allowance for doubtful accounts of $ 8,584,000 and $ 6,246,000 , respectively, as our best estimate of expected losses inherent in the accounts receivable balance.

Other Revenues

Other revenues include revenues from the provision of insurance services, management and accounting services to other long–term care providers, and rental income.

Other revenues include revenues from the provision of insurance services to other healthcare providers, management and accounting services to other healthcare providers, and rental income.

Our insurance revenues consist of premiums that are generally paid in advance and then amortized into income over the policy period.

6 unchanged sentences

Government Grants

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

Segment Reporting

11 unchanged sentences

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

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

Costs that could be classified as "general and administrative" by the Company would include its corporate office costs, excluding stock-based compensation, which were $ 4,995,000 and $ 10,648,000 for the three and six months ended June 30, 2023.

General and administrative costs were $ 4,799,000 and $ 10,586,000 for the three and six months ended June 30, 2022, respectively.

Long-Term Leases

5 unchanged sentences

The Company records right-of-use assets and liabilities for non-cancelable real estate operating leases with original or remaining lease terms in excess of one year.

Leases with a lease term of 12 months or less at inception are not recorded and are expensed on a straight-line basis over the lease term.

Leases with a lease term of 12 months or less at inception are expensed on a straight-line basis over the lease term.

We recognize lease components and non-lease components together and not as separate parts of a lease for real estate leases.

24 unchanged sentences

The Company’s indefinite-lived intangible assets consist of trade names and certificates of need and licenses.

The Company reviews indefinite-lived intangible assets for impairment on an annual basis or more frequently if events or changes in circumstances indicate that the carrying amount of the intangible asset may not be recoverable.

The Company reviews indefinite-lived intangible assets for impairment on an annual basis or more frequently if events or changes in circumstances indicate that the fair value of the intangible asset is below its carrying amount.

Accrued Risk Reserves   

We are self–insured for risks related to health insurance and have wholly–owned limited purpose insurance companies that insure risks related to workers’

compensation and general and professional liability insurance claims.

We are self–insured for risks related to workers' compensation and general and professional liability insurance.

We have two wholly–owned limited purpose insurance companies that insure these risks.

The accrued risk reserves include a liability for reported claims and estimates for incurred but unreported claims.

7 unchanged sentences

We are principally self-insured for incidents occurring in all centers owned or leased by us.

The coverages include both primary policies and excess policies.

The coverage includes both primary policies and excess policies.

In all years, settlements, if any, in excess of available insurance policy limits and our own reserves would be expensed by us.

8 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 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. 

As of June 30, 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.

Other Noncurrent Liabilities

1 unchanged sentence

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

15 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 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 $ 10,620,000 of government stimulus income from the Provider Relief Funds for the three months ended March 31, 2023 and 2022, respectively.

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 $ 320,000 of government stimulus income from the Provider Relief Funds for the three months ended June 30, 2023 and 2022, respectively.

The Company recorded $ 0 and $ 10,940,000 of government stimulus income from the Provider Relief Funds for the six months ended June 30, 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.

2 unchanged sentences

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

We have recorded $ 6,247,000 and $ 5,001,000 in net patient revenues for these supplemental Medicaid payments for the three months ended June 30, 2023 and 2022, respectively. We have recorded $ 11,130,000 and $ 10,539,000 in net patient revenues for these supplemental Medicaid payments for the six months ended June 30, 2023 and 2022, respectively.

Note 4 –

5 unchanged sentences

Three Months Ended

Six Months Ended

Net patient revenues:

2 unchanged sentences

$ 227,796  

$ 462,929  

$ 452,638  

Homecare and hospice

1 unchanged sentence

32,281  

Total net patient revenues

64,683  

63,776  

Total net patient revenue

$ 269,605  

$ 260,077  

$ 527,612  

$ 516,414  

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

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. 

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.

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

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.

Third Party Payors

Laws and regulations governing the Medicare and Medicaid programs are complex and subject to interpretation.

Laws and regulations governing Medicare and Medicaid programs are complex and subject to interpretation.

Noncompliance with such laws and regulations can be subject to regulatory actions including fines, penalties, and exclusion from the Medicare and Medicaid programs.

4 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 $ 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.

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 $ 15,659,000 and $ 16,631,000 as of June 30, 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

Six Months Ended

Rental income

1 unchanged sentence

$ 5,830  

$ 12,009  

$ 11,812  

Management and accounting services fees

3 unchanged sentences

$ 10,962  

$ 24,533  

$ 22,988  

Rental Income

4 unchanged sentences

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

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.

We recognized management fees and interest on management fees from these facilities of $ 1,276,000 and $ 1,002,000 for the three months ended June 30, 2023 and 2022, respectively.

We recognized management fees and interest on management fees of $ 2,466,000 and $ 1,983,000 from these facilities for the six months ended June 30, 2023 and 2022, respectively.

Insurance Services

For workers’

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

compensation insurance services, the premium revenues reflected in the interim condensed consolidated statements of operations for the three months ended June 30, 2023 and 2022 were $ 570,000 and $ 716,000 , respectively.

The premium revenues reflected in the interim condensed consolidated statements of operations for the six months ended June 30, 2023 and 2022 were $ 1,307,000 and $ 1,443,000 , 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 March 31, 2023 and 2022 were $ 312,000 and $ 519,000 , respectively.

For professional liability insurance services, the premium revenues reflected in the interim condensed consolidated statements of operations for the three months ended June 30, 2023 and 2022 were $ 312,000 and $ 519,000 , respectively.

The premium revenues reflected in the interim condensed consolidated statements of operations for the six months ended June 30, 2023 and 2022 were $ 623,000 and $ 1,039,000 , 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

Dividends and net realized gains and losses on sales of securities

1 unchanged sentence

$ 1,304  

$ 2,914  

$ 3,057  

Interest income

3 unchanged sentences

$ 2,521  

$ 8,019  

$ 5,720  

Note 7 –

9 unchanged sentences

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

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

Revenues and grant income:

16 unchanged sentences

10,134  

Other operating

175,294  

Other operating

64,535  

9 unchanged sentences

10,474  

13,977  

Non-operating income

5 unchanged sentences

$ 22,323  

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

Net patient revenues

6 unchanged sentences

Government stimulus income

Net operating revenues and grant income

228,216  

32,281  

10,862  

271,359  

Costs and expenses:

Salaries, wages, and benefits

149,092  

19,024  

174,936  

Other operating

61,886  

71,311  

10,411  

Depreciation and amortization

10,001  

Total costs and expenses

228,603  

26,171  

12,034  

266,808  

Income/(loss) from operations

Non-operating income

Unrealized losses on marketable equity securities

Income/(loss) before income taxes

$ 6,110  

$ 3,523  

Six Months Ended June 30, 2023

Net patient revenues

$ 462,929  

$ 64,683  

$ 527,612  

Other revenues

23,936  

24,533  

Net operating revenues and grant income

8 unchanged sentences

18,776  

343,118  

Other operating

2 unchanged sentences

144,723  

16,333  

19,993  

Depreciation and amortization

18,271  

20,131  

Total costs and expenses

6 unchanged sentences

10,988  

23,989  

Non-operating income

5 unchanged sentences

$ 38,044  

Six Months Ended June, 2022

Revenues and grant income:

Net patient revenues

$ 452,638  

$ 63,776  

$ 516,414  

Other revenues

22,775  

22,988  

Government stimulus income

10,940  

Net operating revenues and grant income

463,791  

63,776  

22,775  

550,342  

Costs and expenses:

Salaries, wages, and benefits

291,276  

38,426  

15,928  

345,630  

Other operating

126,269  

13,539  

145,396  

16,739  

20,476  

Depreciation and amortization

17,922  

19,758  

Total costs and expenses

452,520  

53,372  

25,682  

531,574  

Income/(loss) from operations

11,271  

10,404  

18,768  

Non-operating income

Unrealized losses on marketable equity securities

Income before income taxes

$ 11,271  

$ 10,404  

$ 2,390  

$ 24,065  

Note 8 –

1 unchanged sentence

Operating Leases

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.

At June 30, 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.

2 unchanged sentences

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 $ 9,295,000 and $ 9,252,000 for the three months ended March 31, 2023 and 2022, respectively.

Total facility rent expense to NHI was $ 9,124,000 and $ 9,563,000 for the three months ended June 30, 2023 and 2022, respectively.

Total facility rent expense to NHI was $ 18,419,000 and $ 18,815,000 for the six months ended June 30, 2023 and 2022, respectively.

Finance Leases

At March 31, 2023, we leased and operated three senior healthcare facilities in the state of Missouri under three separate lease agreements.

At June 30, 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.

2 unchanged sentences

Minimum Lease Payments

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

The following table summarizes the maturity of our finance and operating lease liabilities as of June 30, 2023 ( in thousands ):

$ 3,467  

17 unchanged sentences

Three Months Ended

Six Months Ended

Weighted average common shares outstanding

1 unchanged sentence

15,452,402  

Net income attributable to National HealthCare Corporation

15,317,319  

15,434,718  

Earnings per common share, basic

Net income attributable to National HealthCare Corporation

$ 16,281  

$ 3,203  

$ 28,004  

$ 18,521  

Earnings per common share, basic

$ 1.06  

$ 0.21  

$ 1.83  

$ 1.20  

Weighted average common shares outstanding

1 unchanged sentence

15,452,402  

15,317,319  

15,434,718  

Effects of dilutive instruments

1 unchanged sentence

34,721  

21,921  

40,835  

Weighted average common shares outstanding

1 unchanged sentence

15,487,123  

Net income attributable to National HealthCare Corporation

15,339,240  

15,475,553  

Earnings per common share, diluted

Net income attributable to National HealthCare Corporation

$ 16,281  

$ 3,203  

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 

$ 28,004  

$ 18,521  

Earnings per common share, diluted

$ 1.06  

$ 0.21  

$ 1.83  

$ 1.20  

In the above table, options to purchase 641,310  and 391,050  shares of our common stock have been excluded for the six months ended June 30, 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 below amortized cost 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 the 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.

Refer to Note 11 for a description of the Company's methodology for determining the fair value of marketable securities.

Marketable securities consist of the following (in thousands) :

March 31, 2023

June 30, 2023

December 31, 2022

8 unchanged sentences

13,885  

14,317  

13,885  

Asset-backed securities

27 unchanged sentences

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

March 31, 2023

June 30, 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) :

March 31, 2023

June 30, 2023

December 31, 2022

18 unchanged sentences

$ 142,647  

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.

Gross unrealized gains related to marketable equity securities are $ 76,349,000 and $ 71,869,000 as of June 30, 2023 and December 31, 2022, respectively.

Gross unrealized losses related to marketable equity securities are $ 1,671,000 and $ 3,227,000 as of June 30, 2023 and December 31, 2022, respectively.

For the three months ended June 30, 2023 and 2022, the Company recognized net unrealized gains of $ 4,650,000 and net unrealized losses of $ 3,549,000 , 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, 2023 and 2022, the Company recognized net unrealized gains of $ 6,036,000 and net unrealized losses of $ 423,000 , 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 $ 24,000 and $ 9,000 as of June 30, 2023 and December 31, 2022, respectively.

Gross unrealized losses related to available for sale marketable debt securities are $ 10,486,000 and $ 11,071,000 as of June 30, 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 three months ended 

March 31, 2023 and 2022.

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

June 30, 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 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.

Proceeds from the sale of available for sale marketable securities during the six months ended June 30, 2023 and 2022 were $ 28,051,000 and $ 30,814,000 , respectively.

Investment losses of $ 561,000 and $ 364,000 were realized on these sales during the six months ended June 30, 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 March 31, 2023 and December 31, 2022 for assets and liabilities measured at fair value on a recurring basis (in thousands) :

The following table summarizes fair value measurements by level at June 30, 2023 and December 31, 2022 for assets and liabilities measured at fair value on a recurring basis (in thousands) :

Fair Value Measurements Using

March 31, 2023

June 30, 2023

For Identical

12 unchanged sentences

19,039  

Asset–backed securities

Mortgage–backed securities

19,909  

37 unchanged sentences

Goodwill and Other Intangible Assets

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

At June 30, 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.

2 unchanged sentences

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

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

At June 30, 2023, the following table represents the activity related to our goodwill by segment ( in thousands ):

January 1, 2023

2 unchanged sentences

$ 168,295  

March 31, 2023

June 30, 2023

$ 3,741  

3 unchanged sentences

Note 13 - Stock Repurchase Program

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. 

During the six months ended June 30, 2023, the Company repurchased 44,349 shares of its common stock for a total cost of $ 2,482,000 .

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 .

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

Stock–based compensation totaled $ 772,000 and $ 629,000 for the three months ended June 30, 2023 and 2022, respectively.

Stock-based compensation totaled $ 1,411,000 and $ 1,341,000 for the six months ended June 30, 2023 and 2022, respectively.

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

in the interim condensed consolidated statements of operations.

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.

At June 30, 2023, the Company had $ 4,736,000 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 three months ended March 31, 2023 and for the year ended December 31, 2022.

The following table summarizes the significant assumptions used to value the options granted for the six months ended June 30, 2023 and for the year ended December 31, 2022.

Risk–free interest rate

8 unchanged sentences

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.

The following table summarizes our outstanding stock options for the six months ended June 30, 2023 and for the year ended December 31, 2022.

Exercise Price

10 unchanged sentences

299,806  

Options outstanding at March 31, 2023

691,580  

$ 62.18  

Options cancelled

Options outstanding at Jun 30, 2023

693,810  

Options exercisable at March 31, 2023

$ 2,136,935  

Options exercisable at June 30, 2023

179,654  

March 31, 2023

June 30, 2023

Exercise Prices

9 unchanged sentences

Note 15 –

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.

The Company's income tax provision as a percentage of our income before income taxes was 28.7 % and 38.7 % for the three months ended June 30, 2023 and 2022, respectively.

The Company's income tax provision as a percentage of our income before income taxes was 28.5 % and 27.2 % for the six months ended June 30, 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.

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

federal statutory income tax rate of 21 % primarily due to state income taxes, excess tax benefits from stock-based compensation, adjustments to unrecognized tax benefits, 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, 2023, the accrual of state income tax and adjustments to unrecognized tax benefits were the only significant reconciling items.

For the three months and six months ended June 30, 2022, the accrual of state income taxes and adjustments to unrecognized tax benefits were the only significant reconciling items.

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.  

2 unchanged sentences

Note 16 –

Credit Facility

In May 2023, we entered into an unsecured $ 50,000,000 credit facility that has a 364 -day maturity date.

Loans bear interest at the one -month secured overnight financing rate (“SOFR”) plus 1.25 %. If we maintain certain aggregate deposit levels within the financial institution, the credit facility shall bear interest at one -month SOFR plus 1.10 %.

The credit facility is available for general corporate purposes, including working capital and acquisitions.

The credit facility agreement contains customary representations and financial covenants, including covenants that restrict, among other things, asset dispositions, additional indebtedness, investments, sale-leasebacks, and certain contingent liabilities.

The credit facility contains customary events of default and remedies.

As of June 30, 2023, we have no outstanding balance on the credit facility.

Note 17 –

Contingencies and Commitments

Accrued Risk Reserves

We are self–insured for risks related to health insurance and have wholly–owned limited purpose insurance companies that insure risks related to workers’

We have wholly–owned limited purpose insurance companies that insure risks related to workers’

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 $ 105,626,000 and $ 102,469,000 at March 31, 2023 and December 31, 2022, respectively.

The liability we have recognized for reported claims and estimates for incurred but unreported claims totals $ 106,220,000 and $ 102,469,000 at June 30, 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.

42 unchanged sentences

Governmental Regulations

Laws and regulations governing the Medicare, Medicaid and other federal healthcare programs are complex and subject to interpretation.

Laws and regulations governing Medicare, Medicaid and other federal healthcare programs are complex and subject to interpretation.

Management believes that it is following all applicable laws and regulations in all material respects.

1 unchanged sentence

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