What changed in this filing

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Item 1. Financial Statements

2024-05-09 compared with 2023-11-02 · 400 added, 824 removed, 442 unchanged (73% of the section changed)

4 unchanged sentences

Three Months Ended

Nine Months Ended

Revenues and grant income:

Net patient revenues

$ 277,005  

$ 260,247  

$ 804,617  

$ 776,661  

$ 285,823 $ 258,007

Other revenues

11,480  

10,596  

36,013  

33,584  

Government stimulus income

10,940  

Net operating revenues and grant income

288,485  

270,843  

840,630  

821,185  

11,353 11,556

Net operating revenues

297,176 269,563

Cost and expenses:

Salaries, wages, and benefits

182,664  

173,198  

525,782  

518,828  

183,138 167,824

Other operating

72,490  

72,883  

217,213  

218,279  

77,429 71,489

Facility rent

10,094  

10,294  

30,087  

30,770  

10,348 10,092

Depreciation and amortization

10,135  

10,253  

30,266  

30,011  

10,586 10,048

Total costs and expenses

275,460  

266,765  

803,616  

798,339  

281,547 259,551

Income from operations

13,025  

37,014  

22,846  

15,629 10,012

Other income:

Non–operating income

12,116  

Unrealized gains/(losses) on marketable equity securities

Income/(loss) before income taxes

14,029  

52,073  

19,818  

Income tax (provision)/benefit

Net income/(loss)

10,121  

37,323  

14,403  

Net loss attributable to noncontrolling interest

Net income/(loss) attributable to National HealthCare Corporation

$ 10,388  

$ 38,392  

$ 16,092  

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

$ 0.68  

$ 2.51  

$ 1.04  

$ 0.68  

$ 2.50  

$ 1.04  

Non–operating income

Unrealized gains on marketable equity securities

Income before income taxes

35,713 15,721

Income tax provision

( 9,462 ) ( 4,436 )

26,251 11,285

Net (income)/loss attributable to noncontrolling interest

Net income attributable to National HealthCare Corporation

$ 26,213 $ 11,723

Earnings per share attributable to National HealthCare Corporation stockholders:

$ 1.71 $ 0.76

$ 1.69 $ 0.76

Weighted average common shares outstanding:

15,299,913  

15,445,569  

15,311,453  

15,438,375  

15,324,511  

15,445,569  

15,334,269  

15,477,103  

15,350,240 15,337,423

15,505,096 15,356,335

Dividends declared per common share

$ 0.59  

$ 0.57  

$ 1.75  

$ 1.69  

$ 0.59 $ 0.57

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

NATIONAL HEALTHCARE CORPORATION

Interim Condensed Consolidated Statements of Comprehensive Income/(Loss)

(unaudited –

in thousands)

Interim Condensed Consolidated Statements of Comprehensive Income

(unaudited – in thousands)

Three Months Ended

Nine Months Ended

Net income/(loss)

$ 10,121  

$ 37,323  

$ 14,403  

Other comprehensive loss:

Unrealized losses on investments in marketable debt securities

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

Income tax benefit related to items of other comprehensive income

Other comprehensive loss, net of tax

Net loss attributable to noncontrolling interest

Comprehensive income/(loss) attributable to National HealthCare Corporation

$ 9,327  

$ 37,810  

$ 4,064  

$ 26,251 $ 11,285

Other comprehensive income/(loss):

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

( 472 ) 1,958

Reclassification adjustment for realized gains on sales of marketable debt securities

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

Other comprehensive income/(loss), net of tax

( 437 ) 1,679

Net (income)/loss attributable to noncontrolling interest

Comprehensive income attributable to National HealthCare Corporation

$ 25,776 $ 13,402

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

$ 100,308  

$ 58,667  

$ 93,982 $ 107,076

Restricted cash and cash equivalents, current portion

18,865  

15,121  

26,010 17,725

Marketable equity securities

102,137  

100,786  

123,040 111,117

Marketable debt securities

23,136  

Restricted marketable equity securities

23,683  

22,358  

29,616 26,779

Restricted marketable debt securities, current portion

12,005  

16,244  

Accounts receivable

102,603  

99,986  

125,664 108,545

Prepaid expenses and other assets

10,546  

Notes receivable

Total current assets

382,578  

353,932  

417,586 406,235

Property and Equipment:

Property and equipment, at cost

1,102,467  

1,081,219  

1,065,543 1,101,681

Accumulated depreciation and amortization

( 576,845 ) ( 608,352 )

Net property and equipment

498,266  

506,532  

488,698 493,329

Other Assets:

1 unchanged sentence

Restricted marketable debt securities, less current portion

106,857  

103,267  

119,042 109,478

Deposits and other assets

13,472  

12,728  

13,738 14,786

Operating lease right-of-use assets

100,788  

120,521  

168,295  

87,356 94,201

168,295 168,295

Intangible assets

Investments in unconsolidated companies

16,747 16,267

Total other assets

401,063  

414,986  

$ 1,281,907  

$ 1,275,450  

413,356 411,232

$ 1,319,640 $ 1,310,796

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 ’

Liabilities and Stockholders ’ Equity

Current Liabilities:

Trade accounts payable

$ 16,471  

$ 16,958  

$ 20,697 $ 19,194

Finance lease obligations, current portion

Operating lease liabilities, current portion

29,222  

29,075  

29,733 29,352

Accrued payroll

69,719  

72,510  

64,156 84,110

Amounts due to third party payors

15,588  

16,631  

19,988 18,369

Accrued risk reserves, current portion

30,870  

31,365  

30,800 30,549

Other current liabilities

31,650  

17,615  

24,302 22,991

Contract liabilities

Dividends payable

Total current liabilities

204,694  

197,887  

Finance lease obligations, less current portion

206,429 214,476

Operating lease liabilities, less current portion

70,200  

91,016  

56,004 63,175

Accrued risk reserves, less current portion

77,255  

71,104  

77,437 72,710

Refundable entrance fees

Deferred income taxes

10,909  

19,639 17,200

Other noncurrent liabilities

26,622  

19,953  

27,909 26,379

Total liabilities

394,567  

397,936  

393,126 400,316

Common stock, $.01 par value;

2 unchanged sentences

Capital in excess of par value

226,888  

226,991  

226,909 227,604

Retained earnings

668,244  

656,664  

704,726 687,599

Accumulated other comprehensive loss

Total National HealthCare Corporation stockholders’

885,171  

874,276  

( 7,041 ) ( 6,604 )

Total National HealthCare Corporation stockholders’ equity

924,748 908,752

Noncontrolling interest

887,340  

877,514  

926,514 910,480

Total liabilities and equity

$ 1,281,907  

$ 1,275,450  

$ 1,319,640 $ 1,310,796

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

1 unchanged sentence

Interim Condensed Consolidated Statements of Cash Flows

(unaudited –

in thousands)

Nine Months Ended

(unaudited – in thousands)

Three Months Ended

Cash Flows From Operating Activities:

$ 37,323  

$ 14,403  

$ 26,251 $ 11,285

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

Depreciation and amortization

30,266  

30,011  

10,586 10,048

Equity in earnings of unconsolidated investments

Distributions from unconsolidated investments

Unrealized (gains)/losses on marketable equity securities

11,479  

Realized losses on sale of marketable securities

Recovery of notes receivable

( 67 ) ( 1,535 )

Unrealized gains on marketable equity securities

( 14,399 ) ( 1,386 )

(Gains)/losses on sale of marketable securities

Gain on sale of unconsolidated company

Deferred income taxes

Stock–based compensation

Changes in operating assets and liabilities:

Accounts receivable

( 17,119 ) ( 3,148 )

Prepaid expenses and other assets

1 unchanged sentence

Trade accounts payable

1,503 ( 4,018 )

Accrued payroll

( 19,954 ) ( 15,800 )

Amounts due to third party payors

Accrued risk reserves

Provider relief funds

Contract liabilities

Other current liabilities

14,035  

Other noncurrent liabilities

Net cash provided by/(used in) operating activities

85,483  

Net cash provided by operating activities

Cash Flows From Investing Activities:

Purchases of property and equipment

Acquisition of skilled nursing facility

Proceeds from the sale of property and equipment

Investments in notes receivable

( 400 )  

( 5,955 ) ( 6,640 )

Proceeds from sale of unconsolidated company

Investments in unconsolidated companies

Collections of notes receivable

Purchases of marketable securities

( 8,703 ) ( 10,281 )

Proceeds from sale of marketable securities

36,578  

38,114  

11,615 15,492

Net cash used in investing activities

( 2,415 ) ( 1,427 )

Cash Flows From Financing Activities:

Principal payments under finance lease obligations

( 860 ) ( 1,218 )

Dividends paid to common stockholders

Noncontrolling interest contributions

Issuance of common shares

( 9,051 ) ( 8,748 )

Issuance of common stock

Repurchase of common shares

( 9,900 ) ( 2,482 )

Entrance fee refunds

( 668 ) ( 171 )

Net cash used in financing activities

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

45,390  

( 12,067 ) ( 12,619 )

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

( 4,836 ) ( 189 )

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

74,865  

119,743  

125,968 74,865

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

$ 120,255  

$ 72,200  

$ 121,132 $ 74,676

Balance Sheet Classifications:

Cash and cash equivalents

$ 100,308  

$ 44,515  

$ 93,982 $ 46,144

Restricted cash and cash equivalents

19,947  

27,685  

27,150 28,532

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

$ 120,255  

$ 72,200  

$ 121,132 $ 74,676

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

NATIONAL HEALTHCARE CORPORATION

Interim Condensed Consolidated Statements of Stockholders ’

Interim Condensed Consolidated Statements of Stockholders ’ Equity

(in thousands, except share and per share amounts)

For the nine months ended September 30, 2023 :

For the three months ended March 31, 2024 :

Comprehensive

Stockholders’

Balance at January 1, 2024

15,357,746  

$ 226,991  

$ 656,664  

$ 3,238  

$ 877,514  

Net income/(loss)

11,723  

11,285  

Other comprehensive income

Stock–based compensation

Shares sold –

options exercised

15,350,661 $ 153 $ 227,604 $ 687,599 $ ( 6,604 ) $ 1,728 $ 910,480

– – – 26,213 – 38 26,251

Other comprehensive loss

– – – – ( 437 ) – ( 437 )

Stock–based compensation

– – 793 – – – 793

Shares sold – options exercised

150,194 1 8,412 – – – 8,413

Repurchase of common shares

( 101,131 ) – ( 9,900 ) – – – ( 9,900 )

Dividends declared to common stockholders ($ 0.59 per share)

– – – ( 9,086 ) – – ( 9,086 )

Balance at March 31, 2024

15,320,443  

$ 225,148  

$ 659,654  

$ 2,800  

879,902  

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  

Net income/(loss)

10,388  

10,121  

Other comprehensive loss

Stock–based compensation

Shares sold –

options exercised

Dividends declared to common stockholders ($ 0.59 per share)

Balance at September 30, 2023

15,324,560  

226,888  

668,244  

887,340  

For the nine months ended September 30, 2022:

15,399,724 $ 154 $ 226,909 $ 704,726 $ ( 7,041 ) $ 1,766 926,514

For the three months ended March 31, 2023:

Comprehensive

Stockholders’

Income (Loss)

Balance at January 1, 2023

15,452,033  

$ 232,167  

$ 669,078  

$ 1,605  

$ 5,456  

$ 908,460  

15,318  

15,349  

Other comprehensive loss

Stock–based compensation

Shares sold –

options exercised

21,463  

Repurchase of common shares

Dividends declared to common stockholders ($ 0.55 per share)

Balance at March 31, 2022

15,471,331  

$ 232,733  

$ 675,887  

$ 5,737  

$ 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  

15,357,746 $ 153 $ 226,991 $ 656,664 $ ( 9,532 ) $ 3,238 $ 877,514

Net income/(loss)

Other comprehensive loss

Stock–based compensation

Shares sold –

options exercised

– – – 11,723 – ( 438 ) 11,285

Other comprehensive income

– – – – 1,679 – 1,679

Stock–based compensation

– – 639 – – – 639

Shares sold – options exercised

7,046 – – – – – –

Repurchase of common shares

( 44,349 ) – ( 2,482 ) – – – ( 2,482 )

Dividends declared to common stockholders ($ 0.57 per share)

Balance at September 30, 2022

15,393,103  

228,522  

659,059  

881,328  

– – – ( 8,733 ) – – ( 8,733 )

Balance at March 31, 2023

15,320,443 $ 153 $ 225,148 $ 659,654 $ ( 7,853 ) $ 2,800 879,902

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, 2023

(unaudited)  

Note 1 –

Description of Business

National HealthCare Corporation (“NHC”

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

As of September 30, 2023, we operate or manage, through certain affiliates, 68 skilled nursing facilities with a total of 8,732 licensed beds, 26 assisted living facilities with 1,501 units, five independent living facilities, three behavioral health hospitals, 35 homecare agencies, and 30 hospice agencies.

March 31, 2024

Note 1 – Description of Business

National HealthCare Corporation (“NHC” or the “Company”) is a leading provider of senior health care services.

As of March 31, 2024, we operate or manage, through certain affiliates, 65 skilled nursing facilities with a total of 8,421 licensed beds, 24 assisted living facilities with 1,365 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.

1 unchanged sentence

We operate in 8 states and are located primarily in the southeastern United States.

Note 2 –

Summary of Significant Accounting Policies

Note 2 – Summary of Significant Accounting Policies

The listing below is not intended to be a comprehensive list of all our significant accounting policies.

In many cases, the accounting treatment of a particular transaction is specifically dictated by U.S.

generally accepted accounting principles (“GAAP”), with limited need for management’s judgment in their application.

There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result.

generally accepted accounting principles (“GAAP”), with limited need for management’s judgment in their application.

There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result.

See our audited December 31, 2023 consolidated financial statements and notes thereto which contain accounting policies and other disclosures required by U.S.

7 unchanged sentences

The Company presents the amount of consolidated net income that is attributable to NHC and the noncontrolling interest in its consolidated statements of operations.

We assume that users of these interim financial statements have read or have access to the audited December 31, 2022 

consolidated financial statements and that the adequacy of additional disclosure needed for a fair presentation, except in regard to material contingencies, may be determined in that context.

We assume that users of these interim financial statements have read or have access to the audited December 31, 2023 consolidated financial statements and that the adequacy of additional disclosure needed for a fair presentation, except in regard to material contingencies, may be determined in that context.

Accordingly, footnotes and other disclosures which would substantially duplicate the disclosure contained in our most recent annual report to stockholders have been omitted.

12 unchanged sentences

The performance obligations are satisfied over time as the patient simultaneously receives and consumes the benefits of the healthcare services provided.

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

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

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

Contract liabilities are recorded for payments the Company receives in which performance obligations have not been completed.

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

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

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

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

Bad debt expense was $ 1,668,000  and $ 5,331,000 for the three and nine months ended September 30, 2023, respectively.

For the three and nine months ended September 30, 2022, bad debt expense was $ 1,685,000 and $ 6,026,000 , respectively. As of September 30, 2023 

and December 31, 2022, the Company has recorded allowance for doubtful accounts of $ 8,598,000 and $ 6,246,000 , respectively, as our best estimate of expected losses inherent in the accounts receivable balance.

Bad debt expense was $ 2,471,000 and $ 1,811,000 for the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, and December 31, 2023, the Company has recorded allowance for doubtful accounts of $ 9,174,000 and $ 8,054,000 , 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 to other healthcare providers, management and accounting services to other healthcare providers, and rental income.

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

5 unchanged sentences

We recognize variable rent annually or monthly, as applicable, when, based on the actual revenue of the lessee is earned.

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

2 unchanged sentences

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

The Company also reports an “all other”

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

See Note 7 for further disclosure of the Company’s operating segments.

The Company also reports an “all other” category that includes revenues from rental income, management and accounting services fees, insurance services, and costs of the corporate office.

See Note 6 for further disclosure of the Company’s operating segments.

Other Operating Expenses

4 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 and incentive compensation, which were $ 5,661,000 and $ 16,309,000 for the three and nine months ended September 30, 2023, respectively.

General and administrative costs were $ 6,050,000 and $ 16,636,000 for the three and nine months ended September 30, 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 $ 6,164,000 and $ 5,653,000 for the three months ended March 31, 2024 and 2023, respectively.

Long-Term Leases

The Company’s lease portfolio primarily consists of finance and operating real estate leases for certain skilled nursing facilities, assisted and independent living facilities, homecare and hospice offices, and pharmacy warehouses.

The Company’s lease portfolio primarily consists of operating real estate leases for certain skilled nursing facilities, assisted and independent living facilities, homecare and hospice offices, and pharmacy warehouses.

The original terms of the leases typically range from two to fifteen years.

3 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 expensed on a straight-line basis over the lease term.

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.

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

1 unchanged sentence

The present value of the lease payments are discounted using the incremental borrowing rate associated with each lease.

The variable components of the lease payment that fluctuate with the operations of a health facility are not included in determining the right-of-use assets and lease liabilities.

The variable components of the lease payment that fluctuate with the operations of a health facility are not included in determining the right-of-use assets and lease liabilities.

Rather, these variable components are expensed as incurred.

4 unchanged sentences

Leasehold improvements are amortized over periods that do not exceed the non-cancelable respective lease terms using the straight-line method.

Finance leases are recorded at cost.

Finance leases are amortized in accordance with the provision codified within ASC 842, Leases .

Amortization of finance lease assets is included in depreciation and amortization expense.

Business Combinations

8 unchanged sentences

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

We perform our annual goodwill impairment assessment on the first day of the fourth quarter. 

Tests are performed more frequently if events occur, or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount.

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 fair value of the intangible asset is below its carrying amount.

Accrued Risk Reserves   

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 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.

Accrued Risk Reserves

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 coverage includes both primary policies and excess policies.

The coverages include 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.

Continuing Care Contracts

We have one continuing care retirement center (“CCRC”) within our operations.

Residents at this retirement center may enter into continuing care contracts with us.

The contracts provide that 10 % of the resident entry fee becomes non-refundable upon occupancy, and the remaining refundable portion of the entry fee is calculated using the lessor of the price at which the apartment is re-assigned or 90 % of the original entry fee, plus 40 % of any appreciation if the apartment value exceeds the original resident’s entry fee.

The contracts provide that 10 % of the resident entry fee becomes non-refundable upon occupancy, and the remaining refundable portion of the entry fee is calculated using the lesser of the price at which the apartment is re-assigned or 90 % of the original entry fee, plus 40 % of any appreciation if the apartment value exceeds the original resident’s entry fee.

Non-refundable fees are included as a component of the transaction price and are amortized into revenue over the actuarily determined remaining life of the resident, which is the expected period of occupancy by the resident.

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

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

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

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

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

As of September 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. 

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, 2024, and December 31, 2023, we have recorded a future service obligation liability in the amount of $ 1,606,000 .

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

Other Noncurrent Liabilities

Other noncurrent liabilities include reserves primarily related to various uncertain income tax positions, deferred revenue, and obligations to provide future services to our CCRC residents.

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.

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

1 unchanged sentence

The Company presents the noncontrolling interest and the amount of consolidated net income attributable to NHC in its interim condensed consolidated statements of operations.

The Company’s earnings per share is calculated based on net income attributable to NHC’s stockholders.

The carrying amount of the noncontrolling interest is adjusted based on an allocation of the subsidiary earnings, contributions, and distributions.

1 unchanged sentence

We have equity interests in unconsolidated limited liability companies that operate various post-acute and senior healthcare businesses.

We analyze our investments in these limited liability companies to determine if the company is considered a variable interest entity (“VIE”) and would require consolidation.

To the extent that we own interests in a VIE and we (i) have the power to direct the activities of the VIE and (ii) have the obligation or rights to absorb the VIE's losses or receive its benefits, then we would be determined to be the primary beneficiary and would consolidate the VIE.

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The Company's maximum exposure to losses in its investments in unconsolidated VIEs cannot be quantified and may or may not be limited to its investment in the unconsolidated VIE.

The investments in unconsolidated VIEs are classified as “investments in unconsolidated companies”

in the interim condensed consolidated balance sheets. 

Note 3 –

Coronavirus Pandemic

In early March 2020, COVID- 19, a disease caused by the novel strain of the coronavirus, was characterized as a pandemic by the World Health Organization.

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 of government stimulus income from the Provider Relief Funds for the three months ended September 30, 2023 and 2022.

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

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”).

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 $ 4,232,000 and $ 4,773,000 in net patient revenues for these supplemental Medicaid payments for the three months ended September 30, 2023 and 2022, respectively. We have recorded $ 15,362,000 and $ 15,312,000 in net patient revenues for these supplemental Medicaid payments for the nine months ended September 30, 2023 and 2022, respectively.

Note 4 –

Net Patient Revenues

The investments in unconsolidated VIEs are classified as “investments in unconsolidated companies” in the interim condensed consolidated balance sheets.

Recently Issued Accounting Guidance

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2023 - 07, “ Segment Reporting (Topic 280 ):

Improvement to Reportable Segment Disclosures .” The ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit and loss, and contain other disclosure requirements.

This ASU is effective for fiscal years beginning after December 15, 2023, which will be the Company's fiscal year 2024, and interim periods within fiscal years beginning after December 15, 2024.

We are currently evaluating the impact this standard will have on our disclosures.

Note 3 – Net Patient Revenues

The Company disaggregates revenue from contracts with customers by service type and by payor.

Revenue by Service Type

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

Three Months Ended

Nine Months Ended

Net patient revenues:

Inpatient services

$ 243,865  

$ 228,138  

$ 706,795  

$ 680,776  

$ 252,254 $ 226,169

Homecare and hospice

33,140  

32,109  

97,822  

95,885  

Total net patient revenue

$ 277,005  

$ 260,247  

$ 804,617  

$ 776,661  

33,569 31,838

Total net patient revenues

$ 285,823 $ 258,007

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

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Typically, patients and third -party payors are billed monthly after services are performed or the patient is discharged, and payments are due based on contract terms.

As our performance obligations relate to contracts with a duration of one year or less, the Company is not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period.

The Company has minimal unsatisfied performance obligations at the end of the reporting period as our patients are typically under no obligation to remain admitted in our facilities or under our care. 

As the period between the time of service and time of payment is typically one year or less, the Company did 

not adjust for the effects of a significant financing component.

As our performance obligations relate to contracts with a duration of one year or less, the Company is not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period.

As the period between the time of service and time of payment is typically one year or less, the Company did not adjust for the effects of a significant financing component.

Revenue by Payor

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Three Months Ended

Nine Months Ended

Private Pay and Other

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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.

The payment covers all services provided by the skilled nursing facility for the beneficiary that day, including room and board, nursing, therapy and drugs, as well as an estimate of capital–related costs to deliver those services.

For homecare services, Medicare pays based on the acuity level of the patient and based on periods of care.

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The services covered by the payment include all disciplines of care, in addition to medical supplies, within the scope of the home health benefit.

For hospice services, Medicare pays a daily rate to cover the hospice’s costs for providing services included in the patient care plan.

Medicare makes daily payments based on 1 of 4 levels of hospice care.

All hospice care and services offered to patients and their families must follow an individualized written plan of care that meets the patient’s needs.

Our hospice service revenue is subject to certain limitations on payments from Medicare.

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Medicaid is operated by individual states with the financial participation of the federal government.

The states in which we operate currently use prospective cost–based reimbursement systems.

Under cost–based reimbursement systems, the skilled nursing facility is reimbursed for the reasonable direct and indirect allowable costs it incurred in a base year in providing routine resident care services as defined by the program.

The states in which we operate currently use prospective cost–based reimbursement systems.

Private pay, managed care, and other payment sources include commercial insurance, individual patient funds, managed care plans and the Veterans Administration.

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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.     

State Relief Supplemental Funding

The Company received supplemental Medicaid payments from various states, including healthcare relief funding under the American Rescue Plan Act ("ARPA") and other state specific relief programs.

The funding generally incorporates specific use requirements primarily for direct patient care including labor related expenses or various patient care related expenses.

We have recorded $ 3,462,000 and $ 4,883,000 in net patient revenues for these supplemental Medicaid payments for the three months ended March 31, 2024 and 2023, respectively.

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 March 31, 2024 and December 31, 2023, the Company has recorded $ 7,667,000 and $ 0 , respectively, in contract liabilities related to receipts during the first quarter of 2024 from the Change Healthcare/Optum Payment Disruption ("CHOPD") Accelerated and Advance Payment program.

These payments were issued to providers who experienced delays in the submission or processing of Medicare claims payments as a result of the Change Healthcare/Optum cyber incident, which began February 21, 2024.

Recoupment of the accelerated payments began in the first quarter of 2024.

A summary of the activity related to contract liabilities follows ( in thousands ):

Balance at December 31, 2023

Payments received

Payments recouped

Balance at March 31, 2024

Third Party Payors

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

Laws and regulations governing the 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.

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Settlements with third -party payors for retroactive adjustments due to audits, reviews or investigations are considered variable consideration and are included in the determination of the estimated transaction price for providing patient care.

These settlements are estimated based on the terms of the payment agreement with the payor, correspondence from the payor and the Company’s historical settlement activity, including an assessment to ensure that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the retroactive adjustment is subsequently resolved.

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 $ 15,588,000 and $ 16,631,000 as of September 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 –

Other Revenues

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 $ 19,988,000 and $ 18,369,000 as of March 31, 2024 and December 31, 2023, respectively, for various Medicare, Medicaid, and Managed Care claims reviews and current and prior year cost reports.

Note 4 – Other Revenues

Other revenues are outlined in the table below.

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Revenues from management and accounting services include fees provided to manage and provide accounting services to other healthcare operators.

Revenues from insurance services include premiums for workers’

compensation and professional liability insurance policies that our wholly owned insurance subsidiaries have written for certain healthcare operators to which we provide management or accounting services.

Revenues from insurance services include premiums for workers’ compensation and professional liability insurance policies that our wholly owned insurance subsidiaries have written for certain healthcare operators to which we provide management or accounting services.

"Other" revenues include miscellaneous health care related earnings (in thousands) .

Three Months Ended

Nine Months Ended

Rental income

$ 5,958  

$ 5,830  

$ 17,966  

$ 17,642  

$ 5,959 $ 6,043

Management and accounting services fees

14,045  

11,993  

Insurance services

Total other revenues

$ 11,480  

$ 10,596  

$ 36,013  

$ 33,584  

$ 11,353 $ 11,556

Rental Income

The Company leases real estate assets consisting of skilled nursing facilities and assisted living facilities to third party operators.

Additionally, we sublease four Florida skilled nursing facilities included in our lease from National Health Investors (“NHI”) as noted in Note 8 –

Long Term Leases.

The Company leases real estate assets consisting of skilled nursing facilities and assisted living facilities to third party operators.

Additionally, we sublease four Florida skilled nursing facilities included in our lease from National Health Investors (“NHI”) as noted in Note 7 – Long Term Leases.

Management Fees from National Health Corporation

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 $ 1,243,000 and $ 1,029,000 for the three months ended September 30, 2023 and 2022, respectively.

We recognized management fees and interest on management fees of $ 3,968,000 and $ 3,012,000 from these facilities for the nine months ended September 30, 2023 and 2022, respectively.

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

For the three months ended March 31, 2024 and 2023, we recognized management fees and interest on management fees of $ 1,320,000 and $ 1,190,000 , 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, 2023 and 2022 were $ 678,000 and $ 496,000 , respectively.

The premium revenues reflected in the interim condensed consolidated statements of operations for the nine months ended September 30, 2023 and 2022 were $ 1,985,000 and $ 1,939,000 , 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, 2023 and 2022 were $ 312,000 and $ 519,000 , respectively.

The premium revenues reflected in the interim condensed consolidated statements of operations for the nine months ended September 30, 2023 and 2022 were $ 935,000 and $ 1,558,000 , 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".

Note 6 –

Operating Income

Non–operating income includes equity in earnings of unconsolidated investments, dividends and other realized gains and losses on sales of marketable securities, and interest income (in thousands) .

For workers’ compensation insurance services, the premium revenues reflected in the interim condensed consolidated statements of operations for the three months ended March 31, 2024 and 2023 were $ 582,000 and $ 736,000 , 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, 2024 and 2023 were $ 290,000 and $ 312,000 , 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".

Note 5 – Non – Operating Income

Non–operating income is comprised of the following (in thousands):

Three Months Ended

Nine Months Ended

Dividends and net realized gains and losses on sales of securities

$ 1,690  

$ 1,324  

$ 4,604  

$ 4,381  

$ 2,056 $ 1,233

Interest income

Equity in earnings of unconsolidated investments

Gain on sale of unconsolidated company

Total non-operating income

$ 4,097  

$ 2,731  

$ 12,116  

$ 8,451  

Note 7 –

Business Segments

$ 5,685 $ 4,323

Gain on sale of unconsolidated company

In January 2024, the Company sold its 50 % joint venture ownership interest in a homecare agency located in Nashville, Tennessee.

The total consideration paid to the company was $ 2,100,000 , which resulted in a gain of $ 1,024,000 .

Note 6 – Business Segments

The Company has two reportable operating segments:

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and ( 2 ) homecare and hospice services.

These reportable operating segments are consistent with information used by the Company’s Chief Executive Officer, as chief operating decision maker (“CODM”), to assess performance and allocate resources.

The Company also reports an “all other”

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

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.

The Company also reports an “all other” category that includes revenues from rental income, management and accounting services fees, insurance services, and costs of the corporate office.

The CODM does not review assets by segment in his resource allocation and therefore, assets by segment are not disclosed below.

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, 2023

Net patient revenues

$ 243,865  

$ 33,140  

$ 277,005  

Other revenues

11,183  

11,480  

Net operating revenues

244,162  

33,140  

11,183  

288,485  

Costs and expenses:

Salaries, wages, and benefits

151,912  

20,066  

10,686  

182,664  

Other operating

64,228  

72,490  

10,094  

Depreciation and amortization

10,135  

Total costs and expenses

233,606  

26,657  

15,197  

275,460  

Income/(loss) from operations

10,556  

13,025  

Non-operating income

Unrealized losses on marketable equity securities

Income/(loss) before income taxes

$ 10,556  

$ 6,483  

$ 14,029  

Three Months Ended September 30, 2022

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, 2024

Net patient revenues

$ 228,138  

$ 32,109  

$ 260,247  

$ 252,254 $ 33,569 $ - $ 285,823

Other revenues

10,794  

10,596  

15 - 11,338 11,353

Net operating revenues

227,940  

32,109  

10,794  

270,843  

252,269 33,569 11,338 297,176

Costs and expenses:

Salaries, wages, and benefits

144,047  

19,581  

173,198  

150,890 21,009 11,239 183,138

Other operating

66,522  

72,883  

10,294  

68,683 5,972 2,774 77,429

8,112 566 1,670 10,348

Depreciation and amortization

10,253  

9,630 187 769 10,586

Total costs and expenses

227,992  

26,714  

12,059  

266,765  

237,361 27,734 16,452 281,547

Income/(loss) from operations

14,908 5,835 ( 5,114 ) 15,629

Non-operating income

Unrealized losses on marketable equity securities

Income/(loss) before income taxes

$ 5,395  

Nine Months Ended September 30, 2023

- - 5,685 5,685

Unrealized gains on marketable equity securities

- - 14,399 14,399

Income before income taxes

$ 14,908 $ 5,835 $ 14,970 $ 35,713

Three Months Ended March 31, 2023

Net patient revenues

$ 706,795  

$ 97,822  

$ 804,617  

$ 226,169 $ 31,838 $ - $ 258,007

Other revenues

35,119  

36,013  

271 - 11,285 11,556

Net operating revenues

707,689  

97,822  

35,119  

840,630  

226,440 31,838 11,285 269,563

Costs and expenses:

Salaries, wages, and benefits

435,517  

60,804  

29,461  

525,782  

138,939 20,244 8,641 167,824

Other operating

192,473  

17,356  

217,213  

24,520  

30,087  

62,264 5,499 3,726 71,489

8,168 558 1,366 10,092

Depreciation and amortization

27,474  

30,266  

9,117 185 746 10,048

Total costs and expenses

680,252  

80,354  

43,010  

803,616  

218,586 26,486 14,479 259,551

Income/(loss) from operations

27,437  

17,468  

37,014  

7,854 5,352 ( 3,194 ) 10,012

Non-operating income

12,116  

- - 4,323 4,323

Unrealized gains on marketable equity securities

- - 1,386 1,386

Income before income taxes

$ 27,437  

$ 17,468  

$ 7,168  

$ 52,073  

Nine Months Ended September, 2022

Revenues and grant income:

Net patient revenues

$ 680,776  

$ 95,885  

$ 776,661  

Other revenues

33,569  

33,584  

Government stimulus income

10,940  

Net operating revenues and grant income

691,731  

95,885  

33,569  

821,185  

Costs and expenses:

Salaries, wages, and benefits

435,322  

58,007  

25,499  

518,828  

Other operating

192,791  

19,848  

218,279  

24,498  

30,770  

Depreciation and amortization

27,120  

30,011  

Total costs and expenses

680,182  

80,086  

38,071  

798,339  

Income/(loss) from operations

11,549  

15,799  

22,846  

Non-operating income

Unrealized losses on marketable equity securities

Income/(loss) before income taxes

$ 11,549  

$ 15,799  

$ 19,818  

Note 8 –

Long-Term Leases

$ 7,854 $ 5,352 $ 2,515 $ 15,721

Note 7 – Long-Term Leases

Operating Leases

At September 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.

At March 31, 2024, 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 annual base rent is $ 32,625,000 in 2024, $ 32,225,000 in 2025, and $ 31,975,000 in 2026 with the lease term expiring in December 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 $ 9,300,000 and $ 9,478,000 for the three months ended September 30, 2023 and 2022, respectively.

Total facility rent expense to NHI was $ 27,719,000 and $ 28,293,000 for the nine months ended September 30, 2023 and 2022, respectively.

Finance Leases

At September 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.

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.

Total facility rent expense to NHI was $ 9,472,000 and $ 9,295,000 for the three months ended March 31, 2024 and 2023, respectively.

Minimum Lease Payments

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

$ 2,166  

$ 34,765  

33,699  

32,991  

The following table summarizes the maturity of our operating lease liabilities as of March 31, 2024 ( in thousands ):

Total minimum lease payments

110,153  

amounts representing interest

Present value of future minimum lease payments

99,422  

current portion

Noncurrent lease liabilities

$ 70,200  

Note 9 –

Earnings per Share

Note 8 – Earnings per Share

Basic net income per share is computed based on the weighted average number of common shares outstanding for each period presented.

2 unchanged sentences

Three Months Ended

Nine Months Ended

Weighted average common shares outstanding

15,299,913  

15,445,569  

15,311,453  

15,438,375  

15,350,240 15,337,423

Net income attributable to National HealthCare Corporation

$ 10,388  

$ 38,392  

$ 16,092  

$ 26,213 $ 11,723

Earnings per common share, basic

$ 0.68  

$ 2.51  

$ 1.04  

$ 1.71 $ 0.76

Weighted average common shares outstanding

15,299,913  

15,445,569  

15,311,453  

15,438,375  

15,350,240 15,337,423

Effects of dilutive instruments

24,598  

22,816  

38,728  

154,856 18,912

Weighted average common shares outstanding

15,324,511  

15,445,569  

15,334,269  

15,477,103  

15,505,096 15,356,335

Net income attributable to National HealthCare Corporation

$ 10,388  

$ 38,392  

$ 16,092  

$ 26,213 $ 11,723

Earnings per common share, diluted

$ 0.68  

$ 2.50  

$ 1.04  

In the above table, options to purchase 637,409  and 389,781  shares of our common stock have been excluded for the nine months ended September 30, 2023 

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

Note 10 –

Investments in Marketable Securities

$ 1.69 $ 0.76

For the three months ended March 31, 2024, 245,726 stock options have been excluded from the calculation of diluted weighted average shares of common stock outstanding because the inclusion of these securities would have an anti-dilutive effect.

For the three months ended March 31, 2023, 691,580 stock options have been excluded from the calculation of diluted weighted average shares of common stock outstanding because the inclusion of these securities would have an anti-dilutive effect.

Note 9 – Investments in Marketable Securities

Our investments in marketable equity securities are carried at fair value with the changes in unrealized gains and losses recognized in our results of operations at each measurement date.

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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. 

Refer to Note 10 for a description of the Company's methodology for determining the fair value of marketable securities.

Marketable securities consist of the following (in thousands) :

September 30, 2023

March 31, 2024

December 31, 2023

1 unchanged sentence

Marketable equity securities

$ 30,176  

$ 102,137  

$ 30,176  

$ 100,786  

$ 30,176 $ 123,040 $ 30,176 $ 111,117

Corporate debt securities

14,317  

13,885  

Asset-backed securities

494 484 2,497 2,441

Treasury securities

- - 2,990 2,986

Restricted investments available for sale:

Marketable equity securities

24,059  

23,683  

24,326  

22,358  

24,495 29,616 24,134 26,779

Corporate debt securities

57,745  

53,928  

54,412  

51,009  

61,488 59,398 59,586 57,731

Asset-based securities

20,661  

18,572  

24,605  

22,437  

19,026 17,438 19,388 17,659

Treasury securities

47,824  

42,401  

45,989  

41,294  

47,323 43,004 46,771 42,863

State and municipal securities

$ 192,794  

$ 252,731  

$ 208,211  

265,791  

4,079 3,992 4,106 4,047

$ 187,081 $ 276,972 $ 189,648 265,623

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

September 30, 2023

March 31, 2024

December 31, 2023

NHI Common Stock

1,630,642  

$ 24,734  

$ 83,750  

1,630,642  

$ 24,734  

$ 85,152  

1,630,642 $ 24,734 $ 102,453 1,630,642 $ 24,734 $ 91,071

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, 2023

March 31, 2024

December 31, 2023

Within 1 year

$ 21,937  

$ 21,534  

$ 33,662  

$ 33,037  

76,971  

71,362  

81,500  

76,394  

$ 21,299 $ 20,785 $ 19,664 $ 19,328

77,738 73,370 81,517 77,118

6 to 10 years

38,178  

32,606  

38,547  

33,216  

32,012 28,925 33,515 30,802

Over 10 years

$ 138,559  

$ 126,911  

$ 153,709  

$ 142,647  

Gross unrealized gains related to marketable equity securities are $ 73,823,000 and $ 71,869,000 as of September 30, 2023 and December 31, 2022, respectively.

Gross unrealized losses related to marketable equity securities are $ 2,238,000 and $ 3,227,000 as of September 30, 2023 and December 31, 2022, respectively.

For the three months ended September 30, 2023 and 2022, the Company recognized net unrealized losses of $ 3,093,000 and $ 11,056,000 , 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, 2023 and 2022, the Company recognized net unrealized gains of $ 2,943,000 and net unrealized losses of $ 11,479,000 , 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 $ 3,000 and $ 9,000 as of September 30, 2023 and December 31, 2022, respectively.

Gross unrealized losses related to available for sale marketable debt securities are $ 11,651,000 , comprised of securities with a fair value of $ 123,530,000 , as of September 30, 2023. 

Gross unrealized losses related to available for sale marketable debt securities are $ 11,071,000 , comprised of securities with a fair value of $ 139,629,000 , as of December 31, 2022.

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, 2023 and 2022.

For the marketable debt 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 nine months ended September 30, 2023 and 2022 were $ 36,578,000 and $ 38,114,000 , respectively.

Investment losses of $ 603,000 and $ 756,000 were realized on these sales during the nine months ended September 30, 2023 and 2022, respectively. 

Note 11 –

Fair Value Measurements

1,361 1,236 642 479

$ 132,410 $ 124,316 $ 135,338 $ 127,727

Gross unrealized gains related to marketable equity securities are $ 98,459,000 and $ 84,514,000 as of March 31, 2024 and December 31, 2023, respectively.

Gross unrealized losses related to marketable equity securities are $ 474,000 and $ 928,000 as of March 31, 2024 and December 31, 2023, respectively.

For the three months ended March 31, 2024 and 2023, the Company recognized net unrealized gains of $ 14,399,000 and $ 1,386,000 , 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 $ 179,000 and $ 326,000 as of March 31, 2024 and December 31, 2023, respectively.

Gross unrealized losses related to available for sale marketable debt securities are $ 8,273,000 and $ 7,937,000 as of March 31, 2024 and December 31, 2023, 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, 2024 and 2023.

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, 2024 and 2023 were $ 11,615,000 and $ 15,492,000 , respectively.

Investment gains of $ 344,000 and investment losses of $ 492,000 were realized on these sales during the three months ended March 31, 2024 and 2023, respectively.

Note 10 – Fair Value Measurements

The accounting standard for fair value measurements provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements.

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

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

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

3  – The valuation is based on unobservable inputs that are supported by minimal or no market activity and that are significant to the fair value of the instrument.

Level 3 valuations are typically performed using pricing models, discounted cash flow methodologies, or similar techniques that incorporate management’s own estimates of assumptions that market participants would use in pricing the instrument, or valuations that require significant management judgment or estimation.

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

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

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

Level 3 – The valuation is based on unobservable inputs that are supported by minimal or no market activity and that are significant to the fair value of the instrument.

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, 2024 and December 31, 2023 for assets and liabilities measured at fair value on a recurring basis (in thousands) :

Fair Value Measurements Using

September 30, 2023

March 31, 2024

For Identical

Cash and cash equivalents

$ 100,308  

$ 93,982 $ 93,982 $ – $ –

Restricted cash and cash equivalents

19,947  

27,150 27,150 – –

Marketable equity securities

125,820  

152,656 152,656 – –

Corporate debt securities

58,180  

34,905  

23,275  

Mortgage–backed securities

18,572  

59,882 42,611 17,271 –

Asset–backed securities

17,438 – 16,961 477

Treasury securities

46,198  

43,004 43,004 – –

State and municipal securities

3,992 – 3,992 –

Total financial assets

$ 372,986  

$ 328,466  

$ 44,520  

$ 398,104 $ 359,403 $ 38,224 $ 477

Fair Value Measurements Using

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Cash and cash equivalents

$ 58,667  

$ 107,076 $ 107,076 $ – $ –

Restricted cash and cash equivalents

16,198  

18,892 18,892 – –

Marketable equity securities

123,144  

137,896 137,896 – –

Corporate debt securities

64,894  

48,525  

16,369  

Asset–backed securities

22,931  

60,171 42,860 17,311 –

Asset–backed securities

17,659 – 17,210 449

Treasury securities

50,051  

45,850 45,850 – –

State and municipal securities

4,047 – 4,047 –

Total financial assets

$ 340,656  

$ 297,922  

$ 42,734  

Note 12 –

Goodwill and Other Intangible Assets

At September 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.

$ 391,591 $ 352,574 $ 38,568 $ 449

Note 11 – Goodwill and Other Intangible Assets

At March 31, 2024, 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.

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

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

At March 31, 2024, the following table represents the activity related to our goodwill by segment ( in thousands ):

January 1, 2024

$ 3,741  

$ 164,554  

$ 168,295  

September 30, 2023

$ 3,741  

$ 164,554  

$ 168,295  

$ 3,741 $ 164,554 $ – $ 168,295

March 31, 2024

$ 3,741 $ 164,554 $ – $ 168,295

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

Note 12 - Stock Repurchase Program

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

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 three months ended March 31, 2024, the Company repurchased 101,131 shares of its common stock for a total cost of $ 9,900,000 .

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 .

The shares were funded from cash on hand and were cancelled and returned to the status of authorized but unissued.

Note 14 –

Stock –

Based Compensation

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 $ 708,000 and $ 639,000 for the three months ended September 30, 2023 and 2022, respectively.

Stock-based compensation totaled $ 2,119,000 and $ 1,980,000 for the nine months ended September 30, 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, 2023, the Company had $ 4,068,000 of unrecognized compensation cost related to unvested stock–based compensation awards.

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

Note 13 – Stock – Based Compensation

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 $ 793,000 and $ 639,000 for the three months ended March 31, 2024 and 2023, respectively.

Stock–based compensation is included in “Salaries, wages and benefits” in the interim condensed consolidated statements of operations.

At March 31, 2024, the Company had $ 7,652,000 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, 2023 and for the year ended December 31, 2022.

September 30,

Risk–free interest rate

4.52 %  

1.83 %  

The following table summarizes the significant assumptions used to value the options granted for the three months ended March 31, 2024 and for the year ended December 31, 2023.

Risk–free interest rate

4.33 % 4.52 %

Expected volatility

29.30 %  

31.40 %  

24.1 % 29.3 %

Expected life, in years

Expected dividend yield

4.41 %  

3.57 %  

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

2.64 % 4.41 %

The following table summarizes our outstanding stock options for the three months ended March 31, 2024 and for the year ended December 31, 2023.

Exercise Price

Options outstanding at January 1, 2023

374,926  

$ 72.95  

445,144 $ 66.62 $ –

Options granted

302,266  

299,278 54.44 –

Options exercised

( 103,481 ) 64.72 –

Options cancelled

( 52,407 ) 60.58 –

Options outstanding at December 31, 2023

445,144  

588,534 61.30 –

Options granted

299,712  

245,726 94.07 –

Options exercised

Options cancelled

Options outstanding at September 30, 2023

689,909  

$ 2,768,603  

Options exercisable at September 30, 2023

175,847  

September 30, 2023

( 137,874 ) 60.95 –

Options outstanding at March 31, 2024

696,386 $ 72.93 $ 15,025,015

Options exercisable at March 31, 2024

174,105 $ 68.48 $ 4,531,876

March 31, 2024

Exercise Prices

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Life in Years

601,514  

53.94 - 69.19  

88,395  

71.64 - 77.92  

689,909  

Note 15 –

The Company's income tax provision as a percentage of our income before income taxes was 27.9 % for the three months ended September 30, 2023.

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

The Company's income tax provision as a percentage of our income before income taxes was 28.3 % and 27.3 % for the nine months ended September 30, 2023 and 2022, respectively. 

Note 14 – Income Taxes

The Company's income tax provision as a percentage of our income before income taxes was 26.5 % and 28.2 % for the three months ended March 31, 2024 and 2023, 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 $ 0 for the three and nine months ended September 30, 2023.

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

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.  

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, 2024 and 2023, the accrual of state income tax was the most significant reconciling item.

The Company is no longer subject to U.S.

federal and state examinations by tax authorities for years before 2020 (with certain state exceptions).

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 %.

Note 15 – 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.

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The credit facility contains customary events of default and remedies.

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

Note 17 –

Contingencies and Commitments

As of March 31, 2024, the Company had no outstanding balance on the credit facility.

We do not expect to renew this credit facility upon its maturity date.

Note 16 – Contingencies and Commitments

Accrued Risk Reserves

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 $ 108,125,000 and $ 102,469,000 at September 30, 2023 and December 31, 2022, respectively.

We have wholly-owned limited purpose insurance companies that insure risks related to workers’ compensation 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 $ 108,237,000 and $ 103,259,000 at March 31, 2024 and December 31, 2023, 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.

It is possible that these claims plus unasserted claims could exceed our insurance coverages and our reserves, which could have a material adverse effect on our consolidated financial position, results of operations and cash flows.

As a result of the terms of our insurance policies and our use of wholly owned limited purpose insurance companies, we have retained significant insurance risk with respect to workers’

compensation and general and professional liability.

As a result of the terms of our insurance policies and our use of wholly owned limited purpose insurance companies, we have retained significant insurance risk with respect to workers’ compensation and general and professional liability.

We consider the professional services of independent actuaries to assist us in estimating our exposures for claims obligations (for both asserted and unasserted claims) related to deductibles and exposures in excess of coverage limits, and we maintain reserves for these obligations.

Such estimates are based on many variables including historical and statistical information and other factors.

Workers ’

For workers’

compensation, we utilize a wholly–owned Tennessee domiciled property/casualty insurance company to write coverage for NHC affiliates and for third–party customers.

Policies are written for a duration of twelve months and cover only risks related to workers’

compensation losses.

Workers ’ Compensation

For workers’ compensation, we utilize a wholly–owned Tennessee domiciled property/casualty insurance company to write coverage for NHC affiliates and for third–party customers.

Policies are written for a duration of twelve months and cover only risks related to workers’ compensation losses.

All customers are companies which operate in the senior care industry.

Business is written on a direct basis. 

General and Professional Liability Insurance and Lawsuits

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There is certain additional litigation incidental to our business, none of which, based upon information available to date, would be material to our financial position, results of operations, or cash flows.

In addition, the long–term care industry is continuously subject to scrutiny by governmental regulators, which could result in litigation or claims related to regulatory compliance matters.

Qui Tam Litigation

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

This is a qui tam case originally filed under seal on June 22, 2020.

Ala.) This is a qui tam case originally filed under seal on June 22, 2020.

The United States declined intervention on March 1, 2021.

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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, which remains pending.

The Plaintiffs filed a Notice of Appeal on April 20, 2023 to appeal the dismissal to the United States Court of Appeals for the Eleventh Circuit.

On December 21, 2023, the Eleventh Circuit entered an Order affirming the District Court’s dismissal of the claims.

The time period for the Plaintiffs to file a Petition for a Writ of Certiorari with the United States Supreme Court has expired making the Order affirming dismissal issued by the Eleventh Circuit final.

Governmental Regulations

3 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements