NATIONAL HEALTHCARE CORP 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Based on their evaluation as of December 31, 2023, the Chief Executive Officer and Chief Financial Officer of the Company have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a–15(e) and 15d–15(e) under the Securities Exchange Act of 1934, as amended) were effective to ensure that the information required to be disclosed by us in this Annual Report on Form 10–K was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and instructions for Form 10–K. MANAGEMENT ’ S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING We are responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a–15(f) under the Securities Exchange Act of 1934, as amended). We assessed the effectiveness of our internal control over financial reporting as of December 31, 2023. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control–Integrated Framework (2013 Framework). We have concluded that, as of December 31, 2023, our internal control over financial reporting is effective based on these criteria. Our independent registered public accounting firm, Ernst & Young LLP, has issued an attestation report on the effectiveness of the Company’s internal control over financial reporting included herein. 73 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors of National HealthCare Corporation Opinion on Internal Control Over Financial Reporting We have audited National HealthCare Corporation’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, National HealthCare Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and financial statement schedule listed in the Index at Item 15(a) and our report dated February 16, 2024 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Nashville, Tennessee February 16, 2024 74 Table of Contents C hanges in Internal Control There were no changes in our internal control over financial reporting during the quarter ended December 31, 2023 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting. ITEM 9B. OTHER INFORMATION None. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not Applicable. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information in our definitive 2024 proxy statement set forth under the captions Directors of the Company and Executive Officers of the Company is hereby incorporated by reference. ITEM 11. EXECUTIVE COMPENSATION The information in our definitive 2024 proxy statement set forth under the caption Compensation Discussion & Analysis is hereby incorporated by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS This information is incorporated by reference from our definitive 2024 proxy statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE The information in our definitive 2024 proxy statement set forth under the caption Certain Relationships and Related Transactions is hereby incorporated by reference. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information in our definitive 2024 proxy statement set forth under the caption Report of the Audit Committee is hereby incorporated by reference (which will be filed within 120 days of the end of the fiscal year to which this report relates). 75 Table of Contents PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE The following documents are filed as a part of this report: (a) (1) Financial Statements: The following financial statements are included in Item 8 of this Annual Report on Form 10-K and are filed as part of this report: Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) Consolidated Statements of Operations – Years ended December 31, 2023, 2022, and 2021 Consolidated Statements of Comprehensive Income – Years ended December 31, 2023, 2022, and 2021 Consolidated Balance Sheets – At December 31, 2023 and 2022 Consolidated Statements of Cash Flows – Years ended December 31, 2023, 2022, and 2021 Consolidated Statements of Equity – Years ended December 31, 2023, 2022, and 2021 Notes to Consolidated Financial Statements ( 2 ) Financial Statement Schedule: NATIONAL HEALTHCARE CORPORATION SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2023, 2022, AND 2021 (in thousands) Column A Column B Column C Column D Column E Additions Description Balance– Beginning of Period Charged to Costs and Expenses Charged to other Accounts Deductions Balance– End of Period For the year ended December 31, 2021 Allowance for doubtful accounts $ 5,672 $ 3,886 $ − $ 3,147 (1) $ 6,411 Accrued risk reserves $ 99,537 $ 82,219 $ − $ 83,708 $ 98,048 For the year ended December 31, 2022 Allowance for doubtful accounts $ 6,411 $ 4,711 $ − $ 4,876 (1) $ 6,246 Accrued risk reserves $ 98,048 $ 81,743 $ − $ 77,322 $ 102,469 For the year ended December 31, 2023 Allowance for doubtful accounts $ 6,246 $ 7,424 $ − $ 5,616 (1) $ 8,054 Accrued risk reserves $ 102,469 $ 81,364 $ − $ 80,574 $ 103,259 ( 1 ) Amounts written off, net of recoveries All other financial statement schedules are not required under the related instructions or are inapplicable and therefore have been omitted. 76 Table of Contents (3) Exhibits: EXHIBIT INDEX Exhibit No. Description Page No. or Location 3.1 Certificate of Incorporation of National HealthCare Corporation Incorporated by reference to Exhibit 3.1 to the Registrant’s registration statement on Form S–4 (File No. 333–37185) dated October 3, 1997) 3.2 Certificate of Amendment to the Certificate of Incorporation of National HealthCare Corporation Incorporated by reference to Exhibit 3.5 attached to Form 10-Q filed on August 3, 2017 3.3 Certificate of Designations of Series A Convertible Preferred Stock of National HealthCare Corporation Incorporated by reference to Exhibit 2.1 to the current report on Form 8–K filed on December 20, 2006 3.4 Certificate of Designation Series B Junior Participating Preferred Stock Incorporated by reference to Exhibit 3.1 to the Registrant’s registration statement on Form 8–A, dated August 3, 2007 3.5 Restated Bylaws as amended February 14, 2013 Incorporated by reference to Exhibit 3.5 to the quarterly report on Form 10–Q filed on May 8, 2013. 4.1 Form of Common Stock Incorporated by reference to Exhibit 4.1 attached to Form 10-Q filed on August 3, 2017 4.2 Description of each class of securities registered under Section 12 of the Exchange Act Incorporated by reference to Exhibit 4.2 attached to Form 10-K filed on February 21, 2020 10.1 Master Agreement of Lease dated as of October 17, 1991 by and among National Health Investors, Inc. and National HealthCorp, L.P. Incorporated by reference to Exhibit 10.1 to the Registrant's registration statement on Form S–4 filed October 3, 1997 10.2 Form of Service Agreement by and between National Health Corporation and National HealthCare Corporation Incorporated by reference to Exhibit 10.5.1 to the Registrant's registration statement on Form S–4 filed October 3, 1997 10.3 Amendment No. 1 to Master Agreement to Lease between National Health Investors, Inc. and National HealthCorp L.P. Incorporated by reference to Exhibit 10.19 from 2005 Form 10–K filed March 16, 2006 10.4 Amendment No. 2 to Master Agreement to Lease between National Health Investors, Inc. and National HealthCare L.P. Incorporated by reference to Exhibit 10.20 from 2005 Form 10–K filed March 16, 2006 10.5 Amendment No. 3 to Master Agreement to Lease between National Health Investors, Inc. and National HealthCare L.P. Incorporated by reference to Exhibit 10.21 from 2005 Form 10–K filed March 16, 2006 10.6 Amendment No. 4 to Master Agreement to Lease between National Health Investors, Inc. and National HealthCare L.P. Incorporated by reference to Exhibit 10.22 from 2005 Form 10–K filed March 16, 2006 10.7 Amendment No. 5 to Master Agreement to Lease between National Health Investors, Inc. and National HealthCare Corporation Incorporated by reference to Exhibit 10.23 from 2005 Form 10–K filed March 16, 2006 *10.8 National HealthCare Corporation's 2010 Omnibus Equity Incentive Plan Incorporated by reference to Exhibit A to 2010 Proxy Statement filed April 1, 2010. *10.9 First Amendment dated February 14, 2011 to the National HealthCare Corporation 2010 Omnibus Equity Incentive Plan Incorporated by reference to Exhibit 10.16 from 2015 Form 10-K filed February 19, 2016. 77 Table of Contents *10.10 Amendment dated March 10, 2015 to National HealthCare Corporation's 2010 Omnibus Equity Incentive Plan Incorporated by reference to Appendix A to 2015 Proxy Statement filed April 1, 2015. *10.11 2017 NHC Executive Officer Performance Based Compensation Plan Incorporated by reference to Appendix B to 2017 Proxy Statement filed April 4, 2017. * 10.12 National HealthCare Corporation’ s 2020 Omnibus Equity Incentive Plan Incorporated by reference to Appendix A to 2020 Proxy Statement filed April 6, 2020 10.13 Amendment to Purchase and Sale Agreement with Modifications to Master Agreement to Lease between National Health Investors, Inc. and National HealthCare Corporation Incorporated by reference to Exhibit 10.1 of National HealthCare Corporation's Form 10–Q filed on November 5, 2013 10.14 Agreement to Lease between NHI– REIT of Northeast, LLC, Landlord and NHC/OP, L.P. and National HealthCare Corporation, Co – Tenants Incorporated by reference to Exhibit 10.4 of National HealthCare Corporation's Form 10–Q filed on November 5, 2013 10.15 Amended and Restated Amendment No. 6 to Master Agreement to Lease between National Health Investors, Inc. and National HealthCare Corporation Incorporated by reference to Exhibit 10.2 of National HealthCare Corporation's Form 10–Q filed on November 5, 2013 10.16 Amendment No. 7 to Master Agreement to Lease between National Health Investors, Inc. and National HealthCare Corporation Incorporated by reference to Exhibit 10.3 of National HealthCare Corporation's Form 10–Q filed on November 5, 2013 10.17 Contribution Agreement dated December 29, 2011 between National HealthCare Corporation and Caris HealthCare, L.P. pursuant to which NHC acquired a 7.5% interest in Caris from McRae in exchange for $7,500,000 Incorporated by reference to Exhibit 10.26 to National HealthCare Corporation's annual report on Form 10–K filed on February 21, 2014 10.18 Assignment of membership interest in Solaris Hospice, LLC dated December 29, 2011 and effective on January 1, 2012, whereby NHC assigned its membership interest to Caris in exchange for an additional 2.7% limited partnership interest in Caris. Incorporated by reference to Exhibit 10.27 to National HealthCare Corporation's annual report on Form 10–K filed on February 21, 2014 10.19 Purchase and Sale Agreement and Extension of Master Lease dated December 26, 2012 between National Health Investors, Inc. and National HealthCare Corporation Incorporated by reference to Exhibit 10.29 to National HealthCare Corporation's annual report on Form 10–K filed on February 21, 2014 10.20 Amendment No. 8 to Master Agreement to Lease between National Health Investors, Inc. and National HealthCare Corporation Incorporated by reference to Exhibit 10.20 to National HealthCare Corporations annual report on Form 10-K Filed on February 19, 2021 10.21 Purchase and Sale Agreement dated June 11, 2021 between NHC/OP, L.P., a wholly owned subsidiary of NHC, and Norman C. McRae and McRae Investment Company, LLC Incorporated by reference to Exhibit 10.21 to National HealthCare Corporation annual report on Form 10-K Filed on February 18, 2022 10.22 Amendment No. 9 to Master Agreement to Lease between National Health Investors, Inc. and National HealthCare Corporation Incorporated by reference to Exhibit 10.1 of National HealthCare Corporation's Form 10-Q filed on November 3, 2022 10.23 Amendment No. 10 to Master Agreement to Lease between National Health Investors, Inc. and National HealthCare Corporation Incorporated by reference to Exhibit 10.2 of National HealthCare Corporation's Form 10-Q filed on November 3, 2022 10.24 National HealthCare Corporation General Policy on Insider Trading Filed Herewith 10.25 National HealthCare Corporation Compensation Recoupment Policy Filed Herewith 14 Code of Ethics of National HealthCare Corporation Available at NHC’s website www.nhccare.com or in print upon request to: National HealthCare Corp. Attn: Investor Relations P. O. Box 1398 Murfreesboro, TN 37133–1398 Telephone (615) 890–2020 21 Subsidiaries of Registrant Filed Herewith 23 Consent of Independent Registered Public Accounting Firm – Ernst & Young LLP Filed Herewith 78 Table of Contents 31.1 Rule 13a–14(a)/15d–14(a) Certification of Chief Executive Officer Filed Herewith 31.2 Rule 13a–14(a)/15d–14(a) Certification of Chief Financial Officer Filed Herewith 32 Certification pursuant to 18 U.S.C. Section 1350 by Chief Executive Officer and Chief Financial Officer Filed Herewith 101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive File (embedded within the Inline XBRL document and included in Exhibit 101) *Indicates management contract or compensatory plan or arrangement. ITEM 16. FORM 10-K SUMMARY Not applicable. 79 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NATIONAL HEALTHCARE CORPORATION Date: February 16, 2024 BY: /s/ Stephen F. Flatt Stephen F. Flatt Chief Executive Officer and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: February 16, 2024 /s/ Stephen F. Flatt Stephen F. Flatt Chief Executive Officer and Director (Principal Executive Officer) Date: February 16, 2024 /s/ Brian F. Kidd Brian F. Kidd Senior Vice President and Chief Financial Officer (Principal Financial Officer) Date: February 16, 2024 /s/ Robert G. Adams Robert G. Adams Chairman of the Board Date: February 16, 2024 /s/ J. Paul Abernathy J. Paul Abernathy Director Date: February 16, 2024 /s/ W. Andrew Adams W. Andrew Adams Director Date: February 16, 2024 /s/ Ernest G. Burgess Ernest G. Burgess Director Date: February 16, 2024 /s/ Emil E. Hassan Emil E. Hassan Director Date: February 16, 2024 /s/ Sandra Y. Trail Sandra Y. Trail Director Date: February 16, 2024 /s/ Richard F. LaRoche, Jr. Richard F. LaRoche, Jr. Director 80