What changed in this filing

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Item 1. Financial Statements

2024-11-07 compared with 2024-08-08 · 202 added, 275 removed, 709 unchanged (40% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Net patient revenues

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

Other revenues

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

Government stimulus income

Net operating revenues and grant income

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

Cost and expenses:

Salaries, wages, and benefits

180,076 175,294 363,214 343,118

Other operating

78,154 73,234 155,583 144,723

Facility rent

10,570 9,901 20,918 19,993

Depreciation and amortization

9,338 10,083 19,924 20,131

Total costs and expenses

278,138 268,605 559,685 528,156

Income from operations

22,520 13,977 38,149 23,989

Other income:

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

Unrealized gains/(losses) on marketable equity securities

Income before income taxes

36,600 22,323 72,313 38,044

Income tax provision

( 9,494 ) ( 6,406 ) ( 18,956 ) ( 10,842 )

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

Net (income)/loss attributable to noncontrolling interest

( 262 ) 364 ( 300 ) 802

Net income attributable to National HealthCare Corporation

$ 26,844 $ 16,281 $ 53,057 $ 28,004

Earnings per share attributable to National HealthCare Corporation stockholders:

$ 1.74 $ 1.06 $ 3.45 $ 1.83

$ 1.73 $ 1.06 $ 3.42 $ 1.83

Weighted average common shares outstanding:

15,391,535 15,297,435 15,371,150 15,317,319

15,555,612 15,322,344 15,530,624 15,339,240

Dividends declared per common share

$ 0.61 $ 0.59 $ 1.20 $ 1.16

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

3 unchanged sentences

Three Months Ended

Six Months Ended

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

Nine Months Ended

Other comprehensive income/(loss):

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

30 ( 1,378 ) ( 442 ) 580

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

1,132 ( 1,200 ) 695 479

Net (income)/loss attributable to noncontrolling interest

( 262 ) 364 ( 300 ) 802

Comprehensive income attributable to National HealthCare Corporation

$ 27,976 $ 15,081 $ 53,752 $ 28,483

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:

41 unchanged sentences

(in thousands, except share and per share amounts)

September 30,

Liabilities and Stockholders ’ Equity

14 unchanged sentences

Dividends payable

Long-term debt due within one year

Total current liabilities

247,946 214,476

Long-term debt

Operating lease liabilities, less current portion

28 unchanged sentences

(unaudited – in thousands)

Six Months Ended

Nine Months Ended

Cash Flows From Operating Activities:

$ 53,357 $ 27,202

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

Depreciation and amortization

19,924 20,131

Equity in earnings of unconsolidated investments

( 651 ) ( 1,756 )

Distributions from unconsolidated investments

Unrealized gains on marketable equity securities

( 23,523 ) ( 6,036 )

Realized (gains)/losses on sale of marketable securities

4 unchanged sentences

Accounts receivable

( 842 ) ( 1,274 )

Prepaid expenses and other assets

1 unchanged sentence

Trade accounts payable

2,588 ( 2,438 )

Accrued payroll

( 1,873 ) ( 5,181 )

Amounts due to third party payors

( 151 ) ( 972 )

Accrued risk reserves

1 unchanged sentence

Other noncurrent liabilities

( 8,328 ) 6,870

Net cash provided by operating activities

60,307 53,178

Cash Flows From Investing Activities:

Purchases of property and equipment

( 13,788 ) ( 12,789 )

Acquisition of skilled nursing facility

Acquisition of White Oak Senior Living, net of cash acquired

Acquisition of other businesses, net of cash acquired

Proceeds from the sale of unconsolidated company

Investments in notes receivable

( 210 ) ( 403 )

Investments in unconsolidated companies

Purchases of marketable securities

( 18,898 ) ( 14,406 )

Proceeds from sale of marketable securities

34,662 28,051

Net cash used in investing activities

( 990 ) ( 2,247 )

Cash Flows From Financing Activities:

Borrowings under credit facility

Repayments under credit facility

Principal payments under finance lease obligations

( 860 ) ( 2,455 )

Dividends paid to common stockholders

( 18,137 ) ( 17,481 )

Noncontrolling interest contributions

Issuance of common shares

Repurchase of common shares

( 11,402 ) ( 2,482 )

Entrance fee refunds

( 520 ) ( 479 )

Net cash used in financing activities

( 19,680 ) ( 22,891 )

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

39,637 28,040

Net cash provided by/(used in) financing activities

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

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

125,968 74,865

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

$ 165,605 $ 102,905

Balance Sheet Classifications:

Cash and cash equivalents

$ 136,214 $ 78,492

Restricted cash and cash equivalents

29,391 24,413

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

$ 165,605 $ 102,905

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

2 unchanged sentences

(in thousands, except share and per share amounts)

For the six months ended June 30, 2024 :

For the nine months ended September 30, 2024 :

Capital in Excess

Retained Earnings

Accumulated Other Comprehensive Loss

Non-controlling Interest

Total Stockholders' Equity

Comprehensive

Stockholders'

Balance at January 1, 2024

26 unchanged sentences

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

Net income/(loss)

– – – 42,789 – ( 89 ) 42,700

Contributions attributable to noncontrolling interest

Other comprehensive income

– – – – 3,056 – 3,056

Stock–based compensation

– – 1,093 – – – 1,093

Shares sold – options exercised

34,417 2,232 – – – 2,232

Repurchase of common shares

( 16,384 ) – ( 2,100 ) – – – ( 2,100 )

Dividends declared to common stockholders ($ 0.61 per share)

– – – ( 9,419 ) – – ( 9,419 )

Balance at September 30, 2024

15,440,970 $ 154 $ 230,635 $ 755,532 $ ( 2,853 ) $ 3,328 986,796

For the nine months ended September 30, 2023 :

Comprehensive

Stockholders’

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

Net income/(loss)

– – – 16,281 – ( 364 ) 15,917

9 unchanged sentences

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

Net income/(loss)

– – – 10,388 – ( 267 ) 10,121

Other comprehensive loss

– – – – ( 1,061 ) – ( 1,061 )

Stock–based compensation

– – 708 – – – 708

Shares sold – options exercised

4,017 – 254 – – – 254

Dividends declared to common stockholders ($ 0.59 per share)

– – – ( 9,040 ) – – ( 9,040 )

Balance at September 30, 2023

15,324,560 153 226,888 668,244 ( 10,114 ) 2,169 887,340

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

June 30, 2024

September 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 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.

As of September 30, 2024, we operate or manage, through certain affiliates, 80 skilled nursing facilities with a total of 10,349 licensed beds, 26 assisted living facilities with 1,413 units, nine independent living facilities, three behavioral health hospitals, 34 homecare agencies, and 32 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 $ 2,053,000 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.

Bad debt expense was $ 2,574,000 and $ 7,098,000 for the three and nine months ended September 30, 2024, respectively.

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

As of September 30, 2024 and December 31, 2023, the Company has recorded allowance for doubtful accounts of $ 10,859,000 and $ 8,054,000 , respectively, as our best estimate of expected losses inherent in the accounts receivable balance.

Other Revenues

9 unchanged sentences

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.

For the nine months ended September 30, 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.

13 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 $ 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.

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 $ 6,288,000 and $ 19,678,000 for the three and nine months ended September 30, 2024, respectively.

General and administrative costs were $ 5,661,000 and $ 16,309,000 for the three and nine months ended September 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.

See Note 3 - Acquisition of White Oak Senior Living for additional detail regarding the acquisition.

Long-Term Leases

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.

10 unchanged sentences

Property and Equipment

Property and equipment are recorded at cost.

Property and equipment are recorded at cost or fair value, if acquired.

Depreciation is provided by the straight-line method over the expected useful lives of the assets estimated as follows:

2 unchanged sentences

Business Combinations

We account for acquisitions using the acquisition method of accounting in accordance with ASC 805, Business Combinations.

We account for transactions that represent business combinations using the acquisition method of accounting in accordance with FASB ASC Topic 805, Business Combinations (Topic 805 ).

Acquisitions are accounted for as purchases and are included in our consolidated financial statements from their respective acquisition dates.

Assets acquired and liabilities assumed, if any, are measured at fair value on the acquisition date using the appropriate valuation method.

Goodwill generated from acquisitions is recognized for the excess of the purchase price over the fair value of tangible and identifiable intangible assets acquired and liabilities assumed.

Such fair values that are not finalized for reporting periods following the acquisition date are estimated and recorded as provisional amounts during the measurement period.

The measurement period is defined as the date through which all information required to identify and measure the consideration transferred, the assets acquired, the liabilities assumed and any noncontrolling interests has been obtained, limited to one year from the acquisition date.

Goodwill generated from business combinations is recognized for the excess of the purchase price over the fair value of tangible and identifiable intangible assets acquired and liabilities assumed.

In determining the fair value of identifiable assets, we use various valuation techniques.

22 unchanged sentences

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.

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

Residents at these retirement centers 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 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.

4 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 June 30, 2024, and December 31, 2023, we have recorded a future service obligation liability in the amount of $ 1,606,000 .

As of September 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.

21 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 – Acquisition of White Oak Senior Living

On August 1, 2024, the Company purchased certain assets and assumed certain liabilities of the White Oak Senior Living (“White Oak”) portfolio for a purchase price of $ 221,400,000 .

The White Oak portfolio consists of 22 healthcare operations, which includes 15 skilled nursing facilities, two assisted living facilities, four independent living facilities, and a long-term care pharmacy.

The operations have 1,928 licensed skilled nursing beds, 48 assisted living units, and 302 independent living units in the states of South Carolina and North Carolina ( 2,278 total beds/units).

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

The Company utilized widely accepted income-based, market-based, and cost-based valuation approaches to perform the preliminary purchase price allocation.

The Company has performed a preliminary valuation analysis of the fair market value of White Oak’s assets acquired and liabilities assumed.

The final valuation of the assets acquired and liabilities assumed was not complete as of September 30, 2024, but will be finalized within the allowable measurement period.

The following table summarizes the allocation of the preliminary purchase price as of the transaction’s closing date ( in thousands ):

Cash and cash equivalents

Prepaid expenses and other assets

Property and equipment

Deferred tax asset

Operating lease right-of-use assets 11,380

Intangible assets

Total assets acquired

Operating lease liabilities, current portion 424

Accrued payroll

Other current liabilities

Operating lease liabilities, less current portion 10,956

Other noncurrent liabilities

Total liabilities assumed

Net identifiable assets acquired

Total estimated fair value of the acquisition

The indefinite-lived intangible assets acquired include the trade name of White Oak and the skilled nursing certificates of need and licenses.

The goodwill is recorded in the inpatient services segment and is attributed to the workforce acquired and reputation of the business as part of the transaction.

We expect the goodwill to be deductible for income tax purposes.

For the three and nine months ended September 30, 2024, White Oak contributed net operating revenues of $ 37,305,000 and income before income taxes of $ 1,557,000 that are included in the Company’s interim condensed consolidated statements of operations.

The Company recognized $ 637,000 and $ 2,831,000 in acquisition-related expenses for the three and nine months ended September 30, 2024, respectively, in connection with the White Oak acquisition.

These costs related to legal and other professional fees, which were included as a component of other operating expenses in the interim condensed consolidated statements of operations.

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

The pro forma financial information includes various assumptions, including those related to the preliminary purchase price allocation of assets acquired and liabilities assumed.

The pro forma financial information may vary in future quarters based on the final valuations and analysis of the fair value of the assets acquired and liabilities assumed (in thousands) .

Three Months Ended

Nine Months Ended

Net operating revenues and grant income

$ 358,334 $ 337,817 $ 1,065,418 $ 987,186

Income before income taxes

58,881 14,087 134,777 49,113

Net income attributable to NHC

$ 43,413 $ 10,431 $ 99,121 $ 34,064

Note 4 – Net Patient Revenues

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Net patient revenues:

Inpatient services

$ 245,385 $ 236,760 $ 497,638 $ 462,929

Homecare and hospice

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

Total net patient revenue

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

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

8 unchanged sentences

Three Months Ended

Six Months Ended

33 % 35 % 33 % 35 %

10 % 9 % 10 % 10 %

29 % 30 % 29 % 29 %

Nine Months Ended

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 $ 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.

We have recorded $ 5,267,000 and $ 4,232,000 in net patient revenues for these supplemental Medicaid payments for the three months ended September 30, 2024 and 2023, respectively.

We have recorded $ 11,314,000 and $ 15,362,000 in net patient revenues for these supplemental Medicaid payments for the nine months ended September 30, 2024 and 2023, respectively.

Third Party Payors

7 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 $ 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.

We have made provisions of approximately $ 18,815,000 and $ 18,369,000 as of September 30, 2024 and December 31, 2023, respectively, for various Medicare, Medicaid, and Managed Care claims reviews and current and prior year cost reports.

Note 5 – Other Revenues

5 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Rental income

$ 6,028 $ 5,965 $ 11,987 $ 12,009

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

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

Rental Income

3 unchanged sentences

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

We recognized management fees and interest on management fees from these facilities of $ 1,346,000 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.

We recognized management fees and interest on management fees from these facilities of $ 1,348,000 and $ 1,243,000 for the three months ended September 30, 2024 and 2023, respectively.

We recognized management fees and interest on management fees of $ 4,014,000 and $ 3,968,000 from these facilities for the nine months ended September 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 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.

For workers’ compensation insurance services, the premium revenues reflected in the interim condensed consolidated statements of operations for the three months ended September 30, 2024 and 2023 were $ 529,000 and $ 678,000 , respectively.

The premium revenues reflected in the interim condensed consolidated statements of operations for the nine months ended September 30, 2024 and 2023 were $ 1,638,000 and $ 1,985,000 , 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 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.

For professional liability insurance services, the premium revenues reflected in the interim condensed consolidated statements of operations for the three months ended September 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 nine months ended September 30, 2024 and 2023 were $ 868,000 and $ 935,000 , 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

Nine Months Ended

Dividends and net realized gains and losses on sales of securities

$ 1,724 $ 1,681 $ 3,780 $ 2,914

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

Total non-operating income

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

Gain on sale of unconsolidated company

10 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 June 30, 2024

Three Months Ended September 30, 2024

Net patient revenues

$ 245,385 $ 34,533 $ - $ 279,918

Other revenues

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

Net operating revenues

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

Income/(loss) from operations

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

Three Months Ended September 30, 2023

Net patient revenues

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

Other revenues

326 - 12,651 12,977

Net operating revenues

237,086 32,845 12,651 282,582

Costs and expenses:

Salaries, wages, and benefits

144,666 20,494 10,134 175,294

Other operating

64,535 5,990 2,709 73,234

7,857 543 1,501 9,901

Depreciation and amortization

9,153 184 746 10,083

Total costs and expenses

226,304 27,211 15,090 268,605

Income/(loss) from operations

10,782 5,634 ( 2,439 ) 13,977

Non-operating income

- - 3,696 3,696

Unrealized gains on marketable equity securities

- - 4,650 4,650

Income before income taxes

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

Six Months Ended June 30, 2024

Unrealized losses on marketable equity securities

Income/(loss) before income taxes

Nine Months Ended September 30, 2024

Net patient revenues

$ 497,638 $ 68,103 $ - $ 565,741

Other revenues

339 - 22,309 22,648

Government stimulus income

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

Nine Months Ended September 30, 2023

Net patient revenues

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

Other revenues

597 - 23,936 24,533

Net operating revenues

463,526 64,683 23,936 552,145

Costs and expenses:

Salaries, wages, and benefits

283,605 40,737 18,776 343,118

Other operating

128,245 11,488 4,990 144,723

15,709 1,101 3,183 19,993

Depreciation and amortization

18,271 369 1,491 20,131

Total costs and expenses

446,021 53,695 28,440 528,156

Income/(loss) from operations

17,505 10,988 ( 4,504 ) 23,989

Non-operating income

- - 8,019 8,019

Unrealized gains on marketable equity securities

- - 6,036 6,036

Income before income taxes

$ 17,505 $ 10,988 $ 9,551 $ 38,044

Note 8 – Long-Term Leases

Operating Leases

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.

At September 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 $ 9,814,000 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.

Total facility rent expense to NHI was $ 10,085,000 and $ 9,300,000 for the three months ended September 30, 2024 and 2023, respectively.

Total facility rent expense to NHI was $ 29,371,000 and $ 27,719,000 for the nine months ended September 30, 2024 and 2023, respectively.

Minimum Lease Payments

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

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

Total minimum lease payments

8 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Weighted average common shares outstanding

14 unchanged sentences

$ 2.73 $ 0.68 $ 6.15 $ 2.50

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.

For the three and nine months ending September 30, 2024, we did not exclude any stock options from the calculation of diluted weighted average shares of common stock outstanding.

For the three and nine months ending September 30, 2023, 637,409 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 10 – Investments in Marketable Securities

5 unchanged sentences

Marketable securities consist of the following (in thousands) :

June 30, 2024

September 30, 2024

December 31, 2023

1 unchanged sentence

Marketable equity securities

$ 30,176 $ 133,317 $ 30,176 $ 111,117

Corporate debt securities

494 488 2,497 2,441

Treasury securities

– – 2,990 2,986

Restricted investments available for sale:

Marketable equity securities

17,597 21,566 24,134 26,779

Corporate debt securities

57,688 55,536 59,586 57,731

Asset-based securities

18,421 16,924 19,388 17,659

Treasury securities

46,019 43,094 46,771 42,863

State and municipal securities

3,839 3,753 4,106 4,047

$ 174,234 $ 274,678 $ 189,648 265,623

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

June 30, 2024

September 30, 2024

December 31, 2023

NHI Common Stock

1,630,642 $ 24,734 $ 110,443 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) :

June 30, 2024

September 30, 2024

December 31, 2023

2 unchanged sentences

Over 10 years

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.

Gross unrealized gains related to marketable equity securities are $ 140,177,000 and $ 84,514,000 as of September 30, 2024 and December 31, 2023, respectively.

Gross unrealized losses related to marketable equity securities are $ 300,000 and $ 928,000 as of September 30, 2024 and December 31, 2023, respectively.

For the three months ended September 30, 2024 and 2023, the Company recognized net unrealized gains of $ 32,767,000 and net unrealized losses of $ 3,093,000 , 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, 2024 and 2023, the Company recognized net unrealized gains of $ 56,290,000 and 2,943,000 , 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 $ 1,104,000 and $ 326,000 as of September 30, 2024 and December 31, 2023, respectively.

Gross unrealized losses related to available for sale marketable debt securities are $ 4,253,000 and $ 7,937,000 as of September 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 six months ended June 30, 2024 and 2023.

The Company has not recognized any credit related impairments for the nine months ended September 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.

Proceeds from the sale of available for sale marketable securities during the nine months ended September 30, 2024 and 2023 were $ 39,776,000 and $ 36,578,000 , respectively.

Investment gains of $ 331,000 and investment losses of $ 603,000 were realized on these sales during the nine months ended September 30, 2024 and 2023, respectively.

Note 11 – 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 June 30, 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 September 30, 2024 and December 31, 2023 for assets and liabilities measured at fair value on a recurring basis (in thousands) :

Fair Value Measurements Using

June 30, 2024

September 30, 2024

For Identical

Cash and cash equivalents

$ 136,214 $ 136,214 $ – $ –

Restricted cash and cash equivalents

29,391 29,391 – –

Marketable equity securities

154,883 154,883 – –

Corporate debt securities

56,024 40,169 15,855 –

Asset–backed securities

16,924 – 16,446 478

Treasury securities

43,094 43,094 – –

State and municipal securities

3,753 – 3,753 –

Total financial assets

$ 440,283 $ 403,751 $ 36,054 $ 478

Fair Value Measurements Using

2 unchanged sentences

Cash and cash equivalents

$ 107,076 $ 107,076 $ – $ –

Restricted cash and cash equivalents

18,892 18,892 – –

Marketable equity securities

137,896 137,896 – –

Corporate debt securities

60,171 42,860 17,311 –

Asset–backed securities

17,659 – 17,210 449

Treasury securities

45,850 45,850 – –

State and municipal securities

4,047 – 4,047 –

Total financial assets

$ 391,591 $ 352,574 $ 38,568 $ –

Note 12 – Goodwill and Other Intangible Assets

At June 30, 2024, the Company reviewed the carrying value of goodwill for impairment indicators.

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

See Note 3 – Acquisition of White Oak Senior Living for further detail describing the goodwill and indefinite-lived intangible asset additions in 2024.

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

January 1, 2024

September 30, 2024

Indefinite-lived intangible assets consist of the following (in thousands) :

September 30, 2024

December 31, 2023

$ 15,836 $ 4,340

June 30, 2024

Certificates of need

Licenses 2,212 2,166

$ 19,805 $ 7,038

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 ).

As part of the White Oak Senior Living acquisition, we recorded indefinite-lived intangible assets that consisted of the trade name ($11,496,000) and certificates of need and licenses ($1,271,000).

Note 13 - Stock Repurchase Program

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 .

During the nine months ended September 30, 2024, the Company repurchased 133,151 shares of its common stock for a total cost of $ 13,502,000 .

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 .

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 $ 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 totaled $ 1,093,000 and $ 708,000 for the three months ended September 30, 2024 and 2023, respectively.

Stock-based compensation totaled $ 3,062,000 and $ 2,119,000 for the nine months ended September 30, 2024 and 2023, respectively.

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

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

At September 30, 2024, the Company had $ 5,752,000 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 six months ended June 30, 2024 and for the year ended December 31, 2023.

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

September 30,

Risk–free interest rate

4.40 % 4.52 %

Expected volatility

24.1 % 29.3 %

Expected life, in years

Expected dividend yield

2.63 % 4.41 %

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

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

Exercise Price

15 unchanged sentences

( 33,202 ) 79.34 –

Options outstanding at June 30, 2024

Options outstanding at September 30, 2024

642,389 74.93 $ 32,658,000

Options exercisable at June 30, 2024

Options exercisable at September 30, 2024

153,439 63.87 $ 9,498,000

June 30, 2024

September 30, 2024

Exercise Prices

3 unchanged sentences

Life in Years

331,037 53.94 - 69.19 58.88 3.0

311,352 71.64 - 96.03 92.00 4.1

642,389 74.93 3.5

Note 15 – Long-Term Debt

Long–term debt consists of the following ( dollars in thousands ):

Interest rate at

September 30,

Credit facility, interest payable monthly

Variable, 6.8%

Less current portion

Total long-term debt

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

The revolving line of credit contains a commitment fee equal to 0.25 % of the unused borrowing capacity.

There are no amounts outstanding on the revolving line of credit at September 30, 2024.

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.

As of September 30, 2024, the Company is compliant with all financial covenants.

Based on level 2 inputs, the carrying value of the Company's long-term debt is considered to approximate the fair value of such debt based upon the interest rates that the Company believes it can currently obtain for similar debt.

The aggregate maturities of long–term debt for the five years subsequent to September 30, 2024 are as follows (in thousands) :

Long–Term Debt

Note 16 – Income Taxes

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.

The Company's income tax provision as a percentage of our income before income taxes was 26.4 % and 27.9 % for the three months ended September 30, 2024 and 2023, respectively.

The Company's income tax provision as a percentage of our income before income taxes was 26.3 % and 28.3 % for the nine months ended September 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 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.

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

For the three and nine months ended September 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.

4 unchanged sentences

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 we have recognized for reported claims and estimates for incurred but unreported claims totals $ 110,204,000 and $ 103,259,000 at September 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.

50 unchanged sentences

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

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 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