What changed in this filing

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Item 1. Financial Statements

2024-08-08 compared with 2024-05-09 · 239 added, 97 removed, 745 unchanged (31% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

Net patient revenues

2 unchanged sentences

11,295 12,977 22,648 24,533

Net operating revenues

Government stimulus income 9,445 - 9,445 -

Net operating revenues and grant income

300,658 282,582 597,834 552,145

14 unchanged sentences

Non–operating income

4,956 3,696 10,641 8,019

Unrealized gains on marketable equity securities

9,124 4,650 23,523 6,036

Income before income taxes

4 unchanged sentences

Net (income)/loss attributable to noncontrolling interest

( 262 ) 364 ( 300 ) 802

Net income attributable to National HealthCare Corporation

13 unchanged sentences

Three Months Ended

Six Months Ended

$ 27,106 $ 15,917 $ 53,357 $ 27,202

2 unchanged sentences

30 ( 1,378 ) ( 442 ) 580

Reclassification adjustment for realized gains on sales of marketable debt securities

Reclassification adjustment for realized losses on sales of marketable debt securities

1,398 20 1,388 20

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

( 296 ) 158 ( 251 ) ( 121 )

Other comprehensive income/(loss), net of tax

1 unchanged sentence

Net (income)/loss attributable to noncontrolling interest

( 262 ) 364 ( 300 ) 802

Comprehensive income attributable to National HealthCare Corporation

62 unchanged sentences

24,291 22,991

Contract liabilities

Dividends payable

31 unchanged sentences

(unaudited – in thousands)

Three Months Ended

Six Months Ended

Cash Flows From Operating Activities:

5 unchanged sentences

( 651 ) ( 1,756 )

Distributions from unconsolidated investments

Unrealized gains on marketable equity securities

( 23,523 ) ( 6,036 )

(Gains)/losses on sale of marketable securities

Realized (gains)/losses on sale of marketable securities

Gain on sale of unconsolidated company

11 unchanged sentences

Amounts due to third party payors

( 151 ) ( 972 )

Accrued risk reserves

Contract liabilities

Other current liabilities

Other noncurrent liabilities

( 8,328 ) 6,870

Net cash provided by operating activities

60,307 53,178

Cash Flows From Investing Activities:

1 unchanged sentence

( 13,788 ) ( 12,789 )

Proceeds from sale of unconsolidated company

Acquisition of skilled nursing facility

Proceeds from the sale of unconsolidated company

Investments in notes receivable

( 210 ) ( 403 )

Investments in unconsolidated companies

Collections of notes receivable

Purchases of marketable securities

9 unchanged sentences

( 18,137 ) ( 17,481 )

Issuance of common stock

Issuance of common shares

Repurchase of common shares

4 unchanged sentences

( 19,680 ) ( 22,891 )

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

Net Increase in Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents

39,637 28,040

14 unchanged sentences

(in thousands, except share and per share amounts)

For the three months ended March 31, 2024 :

Comprehensive

Stockholders’

For the six months ended June 30, 2024 :

Capital in Excess

Retained Earnings

Accumulated Other Comprehensive Loss

Non-controlling Interest

Total Stockholders' Equity

Balance at January 1, 2024

13 unchanged sentences

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)

– – – 26,844 – 262 27,106

Other comprehensive income

– – – – 1,132 – 1,132

Stock–based compensation

– – 1,176 – – – 1,176

Shares sold – options exercised

38,849 – 2,827 – – – 2,827

Repurchase of common shares

( 15,636 ) – ( 1,502 ) – – – ( 1,502 )

Dividends declared to common stockholders ($ 0.61 per share)

– – – ( 9,408 ) – – ( 9,408 )

Balance at June 30, 2024

15,422,937 154 229,410 722,162 ( 5,909 ) 2,028 947,845

For the six months ended June 30, 2023:

Capital in Excess

Retained Earnings

Accumulated Other Comprehensive Loss

Non-controlling Interest

Total Stockholders' Equity

Balance at January 1, 2023

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

Net income/(loss)

– – – 11,723 – ( 438 ) 11,285

11 unchanged sentences

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

– – – 16,281 – ( 364 ) 15,917

Other comprehensive loss

– – – – ( 1,200 ) – ( 1,200 )

Stock–based compensation

– – 772 – – – 772

Shares sold – options exercised

100 – 6 – – – 6

Dividends declared to common stockholders ($ 0.59 per share)

– – – ( 9,039 ) – – ( 9,039 )

Balance at June 30, 2023

15,320,543 $ 153 $ 225,926 $ 666,896 $ ( 9,053 ) $ 2,436 $ 886,358

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

March 31, 2024

June 30, 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.

As of June 30, 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, 34 homecare agencies, and 30 hospice agencies.

We operate specialized care units within certain of our healthcare centers such as Alzheimer's disease care units and sub-acute nursing units.

36 unchanged sentences

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

Bad debt expense was $ 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.

Bad debt expense was $ 2,053,000 and $ 4,524,000 for the three and six months ended June 30, 2024, respectively.

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

As of June 30, 2024 and December 31, 2023, the Company has recorded allowance for doubtful accounts of $ 10,074,000 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, management and accounting services to other long–term care providers, and rental income.

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

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

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 Standards ("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.

During the second quarter of 2024, all conditions related to the Employee Retention Credit ("ERC") were met and the credit was recognized as government stimulus income.

The ERC was established by the CARES Act and intended to help businesses retain their workforce and avoid layoffs during the pandemic.

The ERC provided a per employee credit to eligible businesses based on a percentage of qualified wages and health insurance benefits paid to employees.

The qualified wages and health insurance benefits paid by the Company were related to the second, third and fourth quarters of 2020.

Segment Reporting

10 unchanged sentences

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

Costs that could be classified as "general and administrative" by the Company would include its corporate office costs, excluding stock-based compensation, which were $ 6,164,000 and $ 5,653,000 for the three months ended March 31, 2024 and 2023, respectively.

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 $ 7,226,000 and $ 13,390,000 for the three and six months ended June 30, 2024, respectively.

General and administrative costs were $ 4,995,000 and $ 10,648,000 for the three and six months ended June 30, 2023, respectively.

The increased general and administrative costs incurred during 2024 are due to acquisition-related expenses for the White Oak Senior Living portfolio.

See Note 16 - Subsequent Events for additional detail regarding the acquisition.

Long-Term Leases

29 unchanged sentences

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

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

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

Accrued Risk Reserves

10 unchanged sentences

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

The coverages include both primary policies and excess policies.

The coverage includes both primary policies and excess policies.

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

8 unchanged sentences

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

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

As of June 30, 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.

2 unchanged sentences

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

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

Noncontrolling Interest

17 unchanged sentences

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

Reclassifications

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

Note 3 – Net Patient Revenues

4 unchanged sentences

Three Months Ended

Six Months Ended

Net patient revenues:

3 unchanged sentences

34,533 32,845 68,103 64,683

Total net patient revenues

Total net patient revenue

$ 279,918 $ 269,605 $ 565,741 $ 527,612

9 unchanged sentences

Three Months Ended

Six Months Ended

33 % 35 % 33 % 35 %

10 % 9 % 10 % 10 %

29 % 30 % 29 % 29 %

Private Pay and Other

28 % 26 % 28 % 26 %

100 % 100 % 100 % 100 %

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

22 unchanged sentences

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

We have recorded $ 2,585,000 and $ 6,247,000 in net patient revenues for these supplemental Medicaid payments for the three months ended June 30, 2024 and 2023, respectively.

We have recorded $ 6,047,000 and $ 11,130,000 in net patient revenues for these supplemental Medicaid payments for the six months ended June 30, 2024 and 2023, respectively.

Third Party Payors

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

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

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

5 unchanged sentences

We believe that any differences between the net revenues recorded, and final determination will not materially affect the consolidated financial statements.

We have made provisions of approximately $ 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.

We have made provisions of approximately $ 18,218,000 and $ 18,369,000 as of June 30, 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

5 unchanged sentences

Three Months Ended

Six Months Ended

Rental income

1 unchanged sentence

Management and accounting services fees

4,081 5,763 8,518 9,860

Insurance services

816 882 1,688 1,930

370 367 455 734

Total other revenues

5 unchanged sentences

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.

We recognized management fees and interest on management fees from these facilities of $ 1,346,000 and $ 1,276,000 for the three months ended June 30, 2024 and 2023, respectively.

We recognized management fees and interest on management fees of $ 2,666,000 and $ 2,466,000 from these facilities for the six months ended June 30, 2024 and 2023, respectively.

Insurance Services

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

For workers’ compensation insurance services, the premium revenues reflected in the interim condensed consolidated statements of operations for the three months ended June 30, 2024 and 2023 were $ 527,000 and $ 570,000 , respectively.

The premium revenues reflected in the interim condensed consolidated statements of operations for the six months ended June 30, 2024 and 2023 were $ 1,109,000 and $ 1,307,000 , 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.

For professional liability insurance services, the premium revenues reflected in the interim condensed consolidated statements of operations for the three months ended June 30, 2024 and 2023 were $ 289,000 and $ 312,000 , respectively.

The premium revenues reflected in the interim condensed consolidated statements of operations for the six months ended June 30, 2024 and 2023 were $ 579,000 and $ 623,000 , 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".

2 unchanged sentences

Three Months Ended

Six Months Ended

Dividends and net realized gains and losses on sales of securities

1 unchanged sentence

Interest income

2,648 1,794 5,186 3,349

Equity in earnings of unconsolidated investments

584 221 651 1,756

Gain on sale of unconsolidated company

13 unchanged sentences

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

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

Net patient revenues

2 unchanged sentences

324 - 10,971 11,295

Government stimulus income - - 9,445 9,445

Net operating revenues and grant income

245,709 34,533 20,416 300,658

Costs and expenses:

Salaries, wages, and benefits

148,059 21,296 10,721 180,076

Other operating

66,813 6,394 4,947 78,154

8,262 567 1,741 10,570

Depreciation and amortization

8,383 186 769 9,338

Total costs and expenses

231,517 28,443 18,178 278,138

Income from operations

14,192 6,090 2,238 22,520

Non-operating income

- - 4,956 4,956

Unrealized gains on marketable equity securities

- - 9,124 9,124

Income before income taxes

$ 14,192 $ 6,090 $ 16,318 $ 36,600

Three Months Ended June 30, 2023

Net patient revenues

$ 236,760 $ 32,845 $ - $ 269,605

Other revenues

326 - 12,651 12,977

Net operating revenues

18 unchanged sentences

$ 10,782 $ 5,634 $ 5,907 $ 22,323

Three Months Ended March 31, 2023

Six Months Ended June 30, 2024

Net patient revenues

2 unchanged sentences

339 - 22,309 22,648

Government stimulus income - - 9,445 9,445

Net operating revenues and grant income

497,977 68,103 31,754 597,834

Costs and expenses:

Salaries, wages, and benefits

298,949 42,305 21,960 363,214

Other operating

135,496 12,367 7,720 155,583

16,374 1,133 3,411 20,918

Depreciation and amortization

18,013 374 1,537 19,924

Total costs and expenses

468,878 56,179 34,628 559,685

Income/(loss) from operations

29,099 11,924 ( 2,874 ) 38,149

Non-operating income

- - 10,641 10,641

Unrealized gains on marketable equity securities

- - 23,523 23,523

Income before income taxes

$ 29,099 $ 11,924 $ 31,290 $ 72,313

Six Months Ended June 30, 2023

Net patient revenues

$ 462,929 $ 64,683 $ - $ 527,612

Other revenues

597 - 23,936 24,533

Net operating revenues

20 unchanged sentences

Operating Leases

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.

At June 30, 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.

2 unchanged sentences

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

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

Total facility rent expense to NHI was $ 9,814,000 and $ 9,124,000 for the three months ended June 30, 2024 and 2023, respectively.

Total facility rent expense to NHI was $ 19,286,000 and $ 18,419,000 for the six months ended June 30, 2024 and 2023, respectively.

Minimum Lease Payments

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

The following table summarizes the maturity of our operating lease liabilities as of June 30, 2024 ( in thousands ):

Total minimum lease payments

8 unchanged sentences

Three Months Ended

Six Months Ended

Weighted average common shares outstanding

14 unchanged sentences

$ 1.73 $ 1.06 $ 3.42 $ 1.83

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.

For the six months ended June 30, 2024 and 2023, 233,486 and 641,310 , respectively, of 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

5 unchanged sentences

Marketable securities consist of the following (in thousands) :

March 31, 2024

June 30, 2024

December 31, 2023

19 unchanged sentences

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

March 31, 2024

June 30, 2024

December 31, 2023

2 unchanged sentences

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

March 31, 2024

June 30, 2024

December 31, 2023

Within 1 year

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

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

6 to 10 years

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

Over 10 years

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.

Gross unrealized gains related to marketable equity securities are $ 107,735,000 and $ 84,514,000 as of June 30, 2024 and December 31, 2023, respectively.

Gross unrealized losses related to marketable equity securities are $ 625,000 and $ 928,000 as of June 30, 2024 and December 31, 2023, respectively.

For the three months ended June 30, 2024 and 2023, the Company recognized net unrealized gains of $ 9,124,000 and $ 4,650,000 , respectively, for the changes in fair market value of the marketable equity securities in the interim condensed consolidated statements of operations.

For the six months ended June 30, 2024 and 2023, the Company recognized net unrealized gains of $ 23,523,000 and 6,036,000 , 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 $ 142,000 and $ 326,000 as of June 30, 2024 and December 31, 2023, respectively.

Gross unrealized losses related to available for sale marketable debt securities are $ 6,808,000 and $ 7,937,000 as of June 30, 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.

The Company has not recognized any credit related impairments for the six months ended June 30, 2024 and 2023.

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 six months ended June 30, 2024 and 2023 were $ 34,662,000 and $ 28,051,000 , respectively.

Investment gains of $ 350,000 and investment losses of $ 561,000 were realized on these sales during the six months ended June 30, 2024 and 2023, respectively.

Note 10 – Fair Value Measurements

8 unchanged sentences

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The following table summarizes fair value measurements by level at March 31, 2024 and December 31, 2023 for assets and liabilities measured at fair value on a recurring basis (in thousands) :

The following table summarizes fair value measurements by level at June 30, 2024 and December 31, 2023 for assets and liabilities measured at fair value on a recurring basis (in thousands) :

Fair Value Measurements Using

March 31, 2024

June 30, 2024

For Identical

35 unchanged sentences

Note 11 – Goodwill and Other Intangible Assets

At March 31, 2024, the Company reviewed the carrying value of goodwill for impairment indicators.

At June 30, 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.

2 unchanged sentences

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

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

At June 30, 2024, the following table represents the activity related to our goodwill by segment ( in thousands ):

January 1, 2024

$ 3,741 $ 164,554 $ – $ 168,295

March 31, 2024

June 30, 2024

$ 3,741 $ 164,554 $ – $ 168,295

1 unchanged sentence

Note 12 - Stock Repurchase Program

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 .

During the six months ended June 30, 2024, the Company repurchased 116,767 shares of its common stock for a total cost of $ 11,402,000 .

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

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

1 unchanged sentence

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 totaled $ 1,175,000 and $ 772,000 for the three months ended June 30, 2024 and 2023, respectively.

Stock-based compensation totaled $ 1,969,000 and $ 1,411,000 for the six months ended June 30, 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.

At June 30, 2024, the Company had $ 6,962,000 of unrecognized compensation cost related to unvested stock–based compensation awards.

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

Stock Options

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

The following table summarizes the significant assumptions used to value the options granted for the six months ended June 30, 2024 and for the year ended December 31, 2023.

Risk–free interest rate

5 unchanged sentences

2.63 % 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.

The following table summarizes our outstanding stock options for the six months ended June 30, 2024 and for the year ended December 31, 2023.

Exercise Price

13 unchanged sentences

( 176,623 ) 63.53 –

Options outstanding at March 31, 2024

Options cancelled

( 25,702 ) 74.47 –

Options exercisable at March 31, 2024

Options outstanding at June 30, 2024

684,195 74.65 $ 23,089,169

March 31, 2024

Options exercisable at June 30, 2024

187,856 64.05 $ 8,331,795

June 30, 2024

Exercise Prices

4 unchanged sentences

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.

The Company's income tax provision as a percentage of our income before income taxes was 25.9 % and 28.7 % for the three months ended June 30, 2024 and 2023, respectively.

The Company's income tax provision as a percentage of our income before income taxes was 26.2 % and 28.5 % for the six months ended June 30, 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.

For the three months ended March 31, 2024 and 2023, the accrual of state income tax was the most significant reconciling item.

For the three months and six months ended June 30, 2024, the accrual of state income tax was the most significant reconciling item.

For the three and six months ended June 30, 2023, the accrual of state income tax was the only significant reconciling items.

Our quarterly income tax provision, and our estimate of our annual effective income tax rate, is subject to variation due to several factors, including volatility based on the amount of pre-tax income or loss.

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

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.

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

The credit facility contains customary events of default and remedies.

As of 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 15 – Contingencies and Commitments

Accrued Risk Reserves

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.

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 $ 109,254,000 and $ 103,259,000 at June 30, 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.

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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.

Civil Investigative Demand

On or about May 21, 2024, Caris Healthcare, L.P.

(“Caris”) received a Civil Investigative Demand (“CID”) from the U.S.

Attorney’s Office for the Eastern District of Tennessee.

The CID requests the production of certain medical records for patients at Caris’ Nashville office and other documents related to the billing for hospice services for the period of January 1, 2019, through the date of the CID.

The Company is cooperating with respect to the requests and remains in the process of responding to the CID.

Governmental Regulations

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

Note 16 – Subsequent Events

White Oak Senior Living Asset Acquisition

On August 1, 2024, the Company purchased the White Oak Senior Living (“White Oak”) portfolio including its long-term care pharmacy for a purchase price of approximately $ 221,400,000 .

White Oak’s portfolio consists of six skilled nursing facilities in North Carolina, three of which are continuing care retirement centers, and including one leased facility.

The portfolio also includes nine skilled nursing facilities in South Carolina, one of which also includes assisted and independent living units.

The acquisition represents both an expansion of NHC’s operations into a new state and a strategic advancement of its growth in its existing operational footprint.

NHC currently operates multiple skilled nursing facilities in South Carolina, as well as a long-term care pharmacy.

The following table contains unaudited pro forma interim condensed consolidated statements of operations information for the three months and six months ended June 30, 2024 and 2023, assuming that the White Oak acquisition closed on January 1, 2023 (in thousands) .

Three Months Ended

Six Months Ended

Net patient revenues

$ 334,906 $ 318,606 $ 675,324 $ 624,381

Net operating revenues and grant income 355,631 331,738 707,393 649,370

Total costs and expenses

332,379 319,253 667,183 630,599

Income from operations

23,252 12,485 40,210 18,771

Non-operating income

4,956 3,696 10,641 8,019

Income before income taxes

37,332 20,831 74,374 32,826

Net income attributable to NHC

$ 27,386 $ 15,177 $ 54,582 $ 24,143

New $200 Million Credit Facility

On August 1, 2024, the Company entered into a $ 200,000,000 senior credit facility with a five -year term consisting of a $ 50,000,000 revolving facility and a $ 150,000,000 term facility (the “Credit Facility”).

The Credit Facility is for general corporate purposes, including working capital and acquisitions.

The loans bear interest at either (i) Term Secured Overnight Financing Rate (“SOFR”) for interest periods of one, three or six months, plus the applicable margin or, at NHC’s option, (ii) the Base Rate plus the applicable margin.

The applicable margin is an interest rate per annum between 1.30 % and 1.65 % for Term SOFR loans and between .30% and .65% for Base Rate loans, depending upon the Company meeting certain conditions.

NHC’s obligations under the Credit Facility are unsecured.

The Credit Facility contains customary representations and warranties, financial covenants, and other customary affirmative and negative covenants.

The Credit Facility also contains customary events of default.

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