What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-07 compared with 2024-08-08 · 101 added, 99 removed, 275 unchanged (42% of the section changed)

29 unchanged sentences

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.

12 unchanged sentences

A primary area of management focus continues to be the rates of occupancy within our skilled nursing facilities.

The overall census in owned and leased skilled nursing facilities for the three months ending June 30, 2024 was 89.0% compared to 87.9% for the same period a year ago.

For the six months ended June 30, 2024, overall census in our owned and leased skilled nursing facilities was 88.7% compared to 87.7% for the same period a year ago.

The overall census in owned and leased skilled nursing facilities for the three months ending September 30, 2024 was 88.3% compared to 88.1% for the same period a year ago.

For the nine months ended September 30, 2024, overall census in our owned and leased skilled nursing facilities was 88.6% compared to 87.8% for the same period a year ago.

Due to America’s healthcare labor shortage, the challenge of maintaining desirable patient census levels has been amplified.

6 unchanged sentences

The Company has always strived for patient-centered care and quality outcomes as precursors to outstanding financial performance.

The tables below summarize NHC's overall performance in these Five-Star ratings versus the skilled nursing industry as of June 30, 2024:

The tables below summarize NHC's overall performance in these Five-Star ratings versus the skilled nursing industry as of September 30, 2024:

Industry Ratings

21 unchanged sentences

Lawrenceburg, TN

Wytheville, VA

On August 1, 2024, the Company purchased the White Oak portfolio, including its long-term care pharmacy.

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 total portfolio consists of 1,928 licensed beds, 48 assisted living units, and 302 independent living units.

The White Oak portfolio consists of 15 skilled nursing facilities, two assisted living facilities, and four independent living facilities.

The White Oak 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.

Accrued Risk Reserves

Our accrued professional liability and workers’ compensation reserves totaled $109,254,000 at June 30, 2024 and are a primary area of management focus.

Our accrued professional liability and workers’ compensation reserves totaled $110,204,000 at September 30, 2024 and are a primary area of management focus.

We have set aside restricted cash and cash equivalents and marketable securities to fund our estimated professional liability and workers’ compensation liabilities.

7 unchanged sentences

The rule includes a 3.0% market basket rate increase, a 3.6% market basket forecast error adjustment, less a 0.2% productivity adjustment, as well as a negative 2.3%, or approximately $789 million, decrease in 2024 SNF Payment Prospective Systems rates as a result of the second phase of the Patient Driven Payment Model parity adjustment recalibration.

In July 2024, CMS released its final rule outlining fiscal year 2025 Medicare payment rates and policy changes for skilled nursing facilities, which will begin on October 1, 2024.

In July 2024, CMS released its final rule outlining fiscal year 2025 Medicare payment rates and policy changes for skilled nursing facilities, which began on October 1, 2024.

The fiscal year 2025 rule equates to a net 4.2% increase in Medicare Part A payments to SNFs in fiscal year 2025 compared to 2024 levels.

4 unchanged sentences

CMS also finalized its proposal to adopt a data validation process for the SNF QRP beginning the same year.

For the first six months of 2024, our average Medicare per diem rate for skilled nursing facilities increased 5.0% as compared to the same period in 2023.

For the first nine months of 2024, our average Medicare per diem rate for skilled nursing facilities increased 4.9% as compared to the same period in 2023.

Medicaid – Skilled Nursing Facilities

5 unchanged sentences

We estimate the resulting increase in revenue for the 2025 fiscal year will be approximately $500,000 annually, or $125,000 per quarter.

Effective July 1, 2024 and for the fiscal year 2025, the state of Missouri implemented specific individual nursing facility increases.

We estimate the resulting increase in revenue for the 2025 fiscal year will be approximately $1,784,000 annually, or $446,000 per quarter.

Effective July 1, 2024 and for the fiscal year 2025, the state of Missouri has proposed specific individual nursing facility increases, subject to approval from Centers for Medicare and Medicaid Services ("CMS").

Upon CMS' approval, we estimate the resulting increase in revenue for the 2025 fiscal year will be approximately $6,600,000 annually, or $1,650,000 per quarter.

We have also received from many of the states in which we operate a supplemental Medicaid payment to help mitigate the inflationary labor and medical supplies costs resulting from the pandemic.

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.

For the first six months of 2024, our average Medicaid per diem increased 8.1% compared to the same period in 2023.

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 $15,3620,000 in net patient revenues for these supplemental Medicaid payments for the nine months ended September 30, 2024 and 2023, respectively.

For the first nine months of 2024, our average Medicaid per diem increased 10.2% compared to the same period in 2023.

State Medicaid plans subject to budget constraints are of particular concern to us.

37 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

Other revenues

Government stimulus income

Net operating revenues and grant income

Net operating revenues

Costs and expenses:

3 unchanged sentences

Total costs and expenses

Income from operations

Income/(loss) from operations

Non-operating income

1 unchanged sentence

Income before income taxes

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Net patient revenues

8 unchanged sentences

Non-operating income

Unrealized gains on marketable equity securities

Income before income taxes

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

11 unchanged sentences

Income before income taxes

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Net patient revenues

15 unchanged sentences

Specifically, the Company believes the presentation of non-GAAP financial information that excludes the unrealized gains or losses on our marketable equity securities, operating results for newly opened facilities or agencies not at full capacity, gains on sale of unconsolidated companies, share-based compensation expense, acquisition-related expenses, and the recognition of the employee retention credit is helpful in allowing investors to assess the Company’s operations more accurately.

The operating results for newly opened facilities or agencies not at full capacity include newly constructed healthcare facilities or agencies that are still considered in the start-up phase, which are two hospice agencies for the three and six months ended June 30, 3024.

For the three and six months ended June 30, 2023, included are two behavioral health hospitals, two homecare agencies, and two hospice agencies.

The acquisition-related expenses represent expenses incurred to acquire the White Oak portfolio that are not capitalizable.

For the three and nine months ended September 30, 2023, included are two behavioral health hospitals, two homecare agencies, and two hospice agencies.

The acquisition-related expenses represent expenses incurred to acquire the White Oak portfolio.

The tables below provide reconciliations of GAAP to non-GAAP items (dollars in thousands, except per share data):

Three Months Ended

Six Months Ended

Nine Months Ended

Net income attributable to National Healthcare Corporation

Non-GAAP adjustments:

Unrealized gains on marketable equity securities

Unrealized (gains)/losses on marketable equity securities

Operating results for newly opened facilities or agencies not at full capacity

3 unchanged sentences

Employee retention credit

Income tax provision on non-GAAP adjustments

Income tax expense/(benefit) on non-GAAP adjustments

Non-GAAP Net income

1 unchanged sentence

Non-GAAP adjustments:

Unrealized gains on marketable equity securities

Unrealized (gains)/losses on marketable equity securities

Operating results for newly opened facilities or agencies not at full capacity

5 unchanged sentences

Results of Operations

The following table and discussion set forth items from the interim condensed consolidated statements of operations as a percentage of net operating revenues and grant income for the three and six months ended June 30, 2024 and 2023.

Percentage of Net Operating Revenues

Three Months Ended

Six Months Ended

Net operating revenues

Nine Months Ended

Net operating revenues and grant income

Costs and expenses:

6 unchanged sentences

Non–operating income

Unrealized gains on marketable equity securities

Unrealized gains/(losses) on marketable equity securities

Income before income taxes

Income tax provision

Net (income)/loss attributable to noncontrolling interest

Net income attributable to noncontrolling interest

Net income attributable to stockholders of NHC

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

Results for the quarter ended June 30, 2024 compared to the second quarter of 2023 include a 6.4% increase in net operating revenues and grant income.

For the quarter ended June 30, 2024, GAAP net income attributable to NHC was $26,844,000 compared to $16,281,000 for the same period in 2023.

Excluding the unrealized gains in our marketable equity securities portfolio and other non-GAAP adjustments, adjusted net income for the quarter ended June 30, 2024 was $15,612,000 compared to $13,658,000 for the same period in 2023.

The increase in adjusted net income for the three months ended June 30, 2024 compared to the same period of 2023 was primarily due to the per diem increases in our skilled nursing and assisted living facilities and the continued reduction of nurse agency staffing expense within our operations.

During the three months ended June 30, 2024, the Company recognized $9,445,000 related to the Employee Retention Credit (“ERC”) that 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.

During the second quarter of 2024, all conditions related to the assistance were met and the credit was recognized as government stimulus income.

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

Results for the quarter ended September 30, 2024 compared to the third quarter of 2023 include a 17.9% increase in net operating revenues.

For the quarter ended September 30, 2024, GAAP net income attributable to NHC was $42,789,000 compared to $10,388,000 for the same period in 2023.

Excluding the unrealized gains and losses in our marketable equity securities portfolio and other non-GAAP adjustments, adjusted net income for the quarter ended September 30, 2024 was $19,910,000 compared to $13,250,000 for the same period in 2023.

The increase in adjusted net income for the three months ended September 30, 2024 compared to the same period of 2023 was primarily due to the per diem increases in our skilled nursing facilities and the continued reduction of nurse agency staffing expense within our operations.

On August 1, 2024, the Company purchased the White Oak portfolio, including its long-term care pharmacy.

The White Oak portfolio consists of 15 skilled nursing facilities, two assisted living facilities, and four independent living facilities.

The White Oak 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.

Net operating revenues

2 unchanged sentences

Overall, the composite skilled nursing facility per diem increased 7.8% compared to the same quarter a year ago.

Our Medicare per diem rates increased 5.3% and managed care per diem rates increased 0.7% compared to the same quarter a year ago.

Our Medicare per diem rates increased 4.8% and managed care per diem rates decreased 6.0% compared to the same quarter a year ago.

Medicaid and private pay per diem rates increased 13.1% and 14.1%, respectively, compared to the same quarter a year ago.

For the three months ended June 30, 2024 and 2023, respectively, $2,585,000 and $6,247,000 have been included in our net patient revenues for supplemental Medicaid payments that are in addition to our Medicaid skilled nursing per diems.

New operations, which include one skilled nursing facility acquired May 1, 2023, three assisted living facilities that we began operating on July 1, 2023, three hospice agencies and one homecare agency, have attributed to an increase of $5,241,000 in net patient revenues for the quarter ended June 30, 2024 compared to the same quarter in the prior year.

For the three months ended September 30, 2024 and 2023, respectively, $5,267,000 and $4,232,000 have been included in our net patient revenues for supplemental Medicaid payments that are in addition to our Medicaid skilled nursing per diems.

White Oak, which was acquired on August 1, 2024, as noted above, attributed to an increase of $37,299,000 in net patient revenues for the quarter ended September 30, 2024 compared to the same quarter in the prior year.

On March 1, 2024, the Company exited a lease and transferred the operations of two skilled nursing facilities (included assisted living units) and one memory care facility located in Missouri.

The exiting of these operations resulted in net patient revenues decreasing $8,974,000 for the quarter ended June 30, 2024 compared to the same quarter in the prior year.

The exiting of these operations resulted in net patient revenues decreasing $7,861,000 for the quarter ended September 30, 2024 compared to the same quarter in the prior year.

Other revenues decreased $44,000, or 0.4%, compared to the same quarter last year, as further detailed in Note 5 to our interim condensed consolidated financial statements.

Total costs and expenses

Total costs and expenses for the three months ended June 30, 2024 compared to the same period of 2023 increased $9,533,000, or 3.5%, to $278,138,000 from $268,605,000.

Salaries, wages, and benefits as a percentage of net operating revenues was 59.9% compared to 62.0% for the three months ended June 30, 2024 and 2023, respectively.

Total costs and expenses for the three months ended September 30, 2024 compared to the same period of 2023 increased $43,691,000, or 15.9%, to $319,151,000 from $275,460,000.

Salaries, wages, and benefits as a percentage of net operating revenues was 62.7% compared to 63.3% for the three months ended September 30, 2024 and 2023, respectively.

We continue to work diligently to find solutions to reduce and eliminate the agency nurse staffing within our healthcare operations.

Our agency staffing expense decreased approximately 57% for the three months ended June 30, 2024 compared to the same period of 2023.

New operations, which include one skilled nursing facility acquired May 1, 2023, three assisted living facilities that we began operating on July 1, 2023, three hospice agencies and one homecare agency, have attributed to an increase of $2,728,000 in salaries, wages, and benefits for the quarter ended June 30, 2024 compared to the same quarter in the prior year.

Our agency staffing expense decreased approximately 60% for the three months ended September 30, 2024 compared to the same period of 2023.

White Oak, which was acquired on August 1, 2024, as noted above, attributed to an increase of $24,511,000 in salaries, wages, and benefits for the quarter ended September 30, 2024 compared to the same quarter in the prior year.

On March 1, 2024, the Company exited the lease and transferred the operations of two skilled nursing facilities (included assisted living units) and one memory care facility located in Missouri.

The exiting of these operations resulted in salaries, wages, and benefits decreasing $6,174,000 for the quarter ended June 30, 2024 compared to the same quarter in the prior year.

Other operating expenses as a percentage of net operating revenues was 26.0% and 25.9% for the three months ended June 30, 2024 and 2023, respectively.

New operations, which include one skilled nursing facility acquired May 1, 2023, three assisted living facilities that we began operating on July 1, 2023, three hospice agencies and one homecare agency, have attributed to an increase of $2,084,000 in other operating expenses for the quarter ended June 30, 2024 compared to the same quarter in the prior year.

For the second quarter of 2024, we also incurred acquisition-related expenses of $2,194,000 related to the August 1, 2024 acquisition of the White Oak portfolio.

The exiting of these operations resulted in salaries, wages, and benefits decreasing $6,148,000 for the quarter ended September 30, 2024 compared to the same quarter in the prior year.

Other operating expenses as a percentage of net operating revenues was 24.3% and 25.1% for the three months ended September 30, 2024 and 2023, respectively.

White Oak, which was acquired on August 1, 2024, as noted above, attributed to an increase of $8,238,000 in other operating expenses for the quarter ended September 30, 2024 compared to the same quarter in the prior year.

On March 1, 2024, the Company exited the lease and transferred the operations of two skilled nursing facilities (included assisted living units) and one memory care facility located in Missouri.

The exiting of these operations resulted in other operating expenses decreasing $2,299,000 for the quarter ended June 30, 2024 compared to the same quarter in the prior year.

The exiting of these operations resulted in other operating expenses decreasing $2,316,000 for the quarter ended September 30, 2024 compared to the same quarter in the prior year.

Non–operating income increased by $127,000 compared to the same period last year, as further detailed in Note 6 to our interim condensed consolidated financial statements.

The income tax provision for the three months ended June 30, 2024 is $9,494,000 (an effective income tax rate of 25.9%).

The income tax provision for the three months ended September 30, 2024 is $15,338,000 (an effective income tax rate of 26.4%).

Noncontrolling interest

3 unchanged sentences

The carrying amount of the noncontrolling interest is adjusted based on an allocation of subsidiary earnings based on ownership interest.

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

Results for the six months ended June 30, 2024 compared to the same period of 2023 include an 8.3% increase in net operating revenues and grant income.

For the six months ended June 30, 2024, GAAP net income attributable to NHC was $53,057,000 compared to $28,004,000 for the same period in 2023.

Excluding the unrealized gains in our marketable equity securities portfolio and other non-GAAP adjustments, adjusted net income for the quarter ended June 30, 2024 was $30,998,000 compared to $25,729,000 for the same period in 2023.

The increase in adjusted net income for the six months ended June 30, 2024 compared to the same period of 2023 was primarily due to the per diem increases in our skilled nursing and assisted living facilities and the continued reduction of nurse agency staffing expense within our operations.

During the six months ended June 30, 2024, the Company recognized $9,445,000 related to the ERC that 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.

During the second quarter of 2024, all conditions related to the assistance were met and the credit was recognized as government stimulus income.

Net operating revenues

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

Results for the nine months ended September 30, 2024 compared to the same period of 2023 include an 11.6% increase in net operating revenues and grant income.

For the nine months ended September 30, 2024, GAAP net income attributable to NHC was $95,846,000 compared to $38,392,000 for the same period in 2023.

Excluding the unrealized gains in our marketable equity securities portfolio and other non-GAAP adjustments, adjusted net income for the nine months ended September 30, 2024 was $50,909,000 compared to $38,978,000 for the same period in 2023.

The increase in adjusted net income for the nine months ended September 30, 2024 compared to the same period of 2023 was primarily due to the per diem increases in our skilled nursing facilities and the continued reduction of nurse agency staffing expense within our operations.

On August 1, 2024, the Company purchased the White Oak portfolio, including its long-term care pharmacy.

The White Oak portfolio consists of 15 skilled nursing facilities, two assisted living facilities, and four independent living facilities.

The White Oak 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.

Net operating revenues and grant income

Net patient revenues increased $89,798,000, or 11.2%, compared to the same period last year.

The total census at owned and leased skilled nursing facilities for the six months ended June 30, 2024 averaged 88.7%, compared to an average of 87.7% for the same period a year ago.

The total census at owned and leased skilled nursing facilities for the nine months ended September 30, 2024 averaged 88.6%, compared to an average of 87.8% for the same period a year ago.

Overall, the composite skilled nursing facility per diem increased 7.7% compared to the same period a year ago.

Our Medicare per diem rates increased 5.0% and managed care per diem rates increased 3.3% compared to the same period a year ago.

Our Medicare per diem rates increased 4.9% and managed care per diem rates decreased 0.1% compared to the same period a year ago.

Medicaid and private pay per diem rates increased 10.2% and 12.9%, respectively, compared to the same period a year ago.

For the six months ended June 30, 2024 and 2023, respectively, $6,047,000 and $11,130,000 have been included in our net patient revenues for supplemental Medicaid payments that are in addition to our Medicaid skilled nursing per diems.

New operations, which include one skilled nursing facility acquired May 1, 2023, three assisted living facilities that we began operating on July 1, 2023, three hospice agencies and one homecare agency, have attributed to an increase of $9,803,000 in net patient revenues for the six months ended June 30, 2024 compared to the same period in the prior year.

For the nine months ended September 30, 2024 and 2023, respectively, $11,314,000 and $15,362,000 have been included in our net patient revenues for supplemental Medicaid payments that are in addition to our Medicaid skilled nursing per diems.

White Oak, which was acquired on August 1, 2024, as noted above, attributed to an increase of $37,299,000 in net patient revenues for the nine months ended September 30, 2024 compared to the same period in the prior year.

On March 1, 2024, the Company exited a lease and transferred the operations of two skilled nursing facilities (included assisted living units) and one memory care facility located in Missouri.

The exiting of these operations resulted in net patient revenues decreasing $10,869,000 for the six months ended June 30, 2024 compared to the same period in the prior year.

The exiting of these operations resulted in net patient revenues decreasing $18,799,000 for the nine months ended September 30, 2024 compared to the same period in the prior year.

Other revenues decreased $1,841,000, or 5.1%, compared to the same period last year, as further detailed in Note 5 to our interim condensed consolidated financial statements.

During the nine months ended September 30, 2024, the Company recognized $9,445,000 related to the Employee Retention Credit (“ERC”) that 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.

During the second quarter of 2024, all conditions related to the assistance were met and the credit was recognized as government stimulus income.

Total costs and expenses

Total costs and expenses for the six months ended June 30, 2024 compared to the same period of 2023 increased $31,529,000, or 6.0%, to $559,685,000 from $528,156,000.

Salaries, wages, and benefits as a percentage of net operating revenues was 60.8% compared to 62.1% for the six months ended June 30, 2024 and 2023, respectively.

Total costs and expenses for the nine months ended September 30, 2024 compared to the same period of 2023 increased $75,220,000, or 9.4%, to $878,836,000 from $803,616,000.

Salaries, wages, and benefits as a percentage of net operating revenues was 61.5% compared to 62.5% for the nine months ended September 30, 2024 and 2023, respectively.

We continue to work diligently to find solutions to reduce and eliminate the agency nurse staffing within our healthcare operations.

Our agency staffing expense decreased approximately 54% for the six months ended June 30, 2024 compared to the same period of 2023.

New operations, which include one skilled nursing facility acquired May 1, 2023, three assisted living facilities that we began operating on July 1, 2023, three hospice agencies and one homecare agency, have attributed to an increase of $5,487,000 in salaries, wages, and benefits for the six months ended June 30, 2024 compared to the same period in the prior year.

Our agency staffing expense decreased approximately 55% for the nine months ended September 30, 2024 compared to the same period of 2023.

White Oak, which was acquired on August 1, 2024, as noted above, attributed to an increase of $24,511,000 in salaries, wages, and benefits for the nine months ended September 30, 2024 compared to the same period in the prior year.

On March 1, 2024, the Company exited the lease and transferred the operations of two skilled nursing facilities (included assisted living units) and one memory care facility located in Missouri.

The exiting of these operations resulted in salaries, wages, and benefits decreasing $7,973,000 for the six months ended June 30, 2024 compared to the same period in the prior year.

Other operating expenses as a percentage of net operating revenues was 26.0% and 26.2% for the six months ended June 30, 2024 and 2023, respectively.

New operations, which include one skilled nursing facility acquired May 1, 2023, three assisted living facilities that we began operating on July 1, 2023, three hospice agencies and one homecare agency, have attributed to an increase of $4,018,000 in other operating expenses for the six months ended June 30, 2024 compared to the same quarter in the prior year.

For the six months ended June 30, 2024, we also incurred acquisition-related expenses of $2,194,000 related to the August 1, 2024 acquisition of the White Oak portfolio.

The exiting of these operations resulted in salaries, wages, and benefits decreasing $14,097,000 for the nine months ended September 30, 2024 compared to the same period in the prior year.

Other operating expenses as a percentage of net operating revenues was 25.4% and 25.8% for the nine months ended September 30, 2024 and 2023, respectively.

White Oak, which was acquired on August 1, 2024, as noted above, attributed to an increase of $8,238,000 in other operating expenses for the nine months ended September 30, 2024 compared to the same period in the prior year.

On March 1, 2024, the Company exited the lease and transferred the operations of two skilled nursing facilities (included assisted living units) and one memory care facility located in Missouri.

The exiting of these operations resulted in other operating expenses decreasing $2,145,000 for the six months ended June 30, 2024 compared to the same quarter in the prior year.

The exiting of these operations resulted in other operating expenses decreasing $4,452,000 for the nine months ended September 30, 2024 compared to the same quarter in the prior year.

Non–operating income increased by $2,749,000 compared to the same period last year, as further detailed in Note 6 to our interim condensed consolidated financial statements.

The income tax provision for the six months ended June 30, 2024 is $18,956,000 (an effective income tax rate of 26.2%).

The income tax provision for the nine months ended September 30, 2024 is $34,294,000 (an effective income tax rate of 26.3%).

Liquidity, Capital Resources, and Financial Condition

3 unchanged sentences

The following is a summary of our sources and uses of cash flows (dollars in thousands) :

Six Months Ended

Nine Months Ended

Six Month Change

2 unchanged sentences

Cash used in investing activities

Cash used in financing activities

Cash provided by/(used in) financing activities

Cash, cash equivalents, restricted cash, and restricted cash equivalents, at end of period

Operating Activities

Net cash provided by operating activities for the six months ended June 30, 2024 was $60,307,000 as compared to $53,178,000 in the same period last year.

Net cash provided by operating activities for the nine months ended September 30, 2024 was $94,514,000 as compared to $85,483,000 in the same period last year.

Cash provided by operating activities consisted of net income of $96,057,000 and adjustments for non–cash items of $9,070,000.

There was cash provided by working capital in the amount of $4,052,000 for the six months ended June 30, 2024 compared to $9,999,000 for the same period a year ago.

Included in the adjustments for non-cash items are depreciation and amortization expense, equity in earnings of unconsolidated investments, unrealized gains on our marketable equity securities, gain on sale of an unconsolidated company, deferred taxes, and stock compensation.

There was cash provided by working capital in the amount of $7,015,000 for the nine months ended September 30, 2024 compared to $20,645,000 for the same period a year ago.

Included in the adjustments for non-cash items are depreciation and amortization expense, equity in earnings of unconsolidated investments, unrealized gains on our marketable equity securities, gains on sales of investments, deferred taxes, and stock compensation.

Investing Activities

Net cash used in investing activities totaled $990,000 for the six months ended June 30, 2024, compared to $2,247,000 for the six months ended June 30, 2023.

Cash used for property and equipment additions was $13,788,000 and $12,789,000 for the six months ended June 30, 2024, and 2023, respectively.

Proceeds from the sale of marketable securities, net of purchases, resulted in cash provided by investing activity of $15,764,000 and $13,645,000 for the six months ended June 30, 2024 and 2023, respectively.

Net cash used in investing activities totaled $225,048,000 for the nine months ended September 30, 2024, compared to $7,382,000 for the nine months ended September 30, 2023.

Cash used for property and equipment additions was $19,944,000 and $19,300,000 for the nine months ended September 30, 2024, and 2023, respectively.

On August 1, 2024, the acquisition of White Oak Senior Living resulted in cash used of $215,896,000.

Proceeds from the sale of marketable securities, net of purchases, resulted in cash provided by investing activity of $15,040,000 and $14,815,000 for the nine months ended September 30, 2024 and 2023, respectively.

In January 2024, the Company sold its 50% joint venture ownership interest in a homecare agency resulting in proceeds from the sale of $2,100,000.

For the six months ended June 30, 2024, we contributed capital of $4,856,000 to a joint venture, multi-family development that is under construction in Franklin, Tennessee.

For the nine months ended September 30, 2024, we contributed capital of $8,370,000 to a joint venture, multi-family development that is under construction in Franklin, Tennessee.

Financing Activities

Net cash used in financing activities totaled $19,680,000 for the six months ended June 30, 2024 compared to $22,891,000 for the six months ended June 30, 2023.

We made principal payments under our finance lease obligations in the amount of $860,000 and $2,455,000 for the six months ended June 30, 2024 and 2023, respectively.

Net cash provided by financing activities totaled $119,640,000 for the nine months ended September 30, 2024 compared to net cash used of $32,711,000 for the nine months ended September 30, 2023.

The funding for the White Oak acquisition was provided by the Company’s cash on hand and borrowings under the credit facility of approximately $150,000,000.

During the third quarter of 2024, cash of $3,000,000 was used to pay down the outstanding principal balance on our credit facility.

We made principal payments under our finance lease obligations in the amount of $860,000 and $3,711,000 for the nine months ended September 30, 2024 and 2023, respectively.

Cash used for dividend payments to common stockholders totaled $27,545,000 in the current year period compared to $26,520,000 for the same period a year ago.

Cash provided by the issuance of common stock totaled $11,239,000 for the six months ended June 30, 2024.

We repurchased common shares outstanding in the amount of $11,402,000 and $2,482,000 for the six months ended June 30, 2024 and 2023, respectively.

Cash provided by the issuance of common stock totaled $13,471,000 for the nine months ended September 30, 2024 compared to $260,000 for the same period a year ago.

We repurchased common shares outstanding in the amount of $13,502,000 and $2,482,000 for the nine months ended September 30, 2024 and 2023, respectively.

Short – term liquidity

We expect to meet our short-term liquidity requirements primarily from our cash flows from operating activities and our new $200 million credit facility, which was effective August 1, 2024.

In addition to cash flows from operations, our current cash on hand of $136,214,000, our marketable equity and debt securities of $133,805,000, and our borrowing capacity on the $200 million credit facility are expected to be adequate to meet our contractual obligations, operating liquidity, and our growth and development plans in the next twelve months.

We expect to meet our short-term liquidity requirements primarily from our cash flows from operating activities.

In addition to cash flows from operations, our current cash on hand of $84,807,000, our marketable equity securities of $164,754,000, and our borrowing capacity on the $50 million available line of credit are expected to be adequate to meet our contractual obligations, operating liquidity, and our growth and development plans in the next twelve months.

We also have substantial value in our unencumbered real estate assets, which could potentially be used as collateral in future borrowing opportunities.

Long – term liquidity

We expect to meet our long-term liquidity requirements primarily from our cash flows from operating activities, our current cash on hand of $136,214,000, our marketable equity and debt securities of $133,805,000, and our borrowing capacity on the new $200 million credit facility.

We expect to meet our long-term liquidity requirements primarily from our cash flows from operating activities, our current cash on hand of $84,807,000, our marketable equity securities of $164,754,000, and our borrowing capacity on the $50 million available line of credit.

We also have substantial value in our unencumbered real estate assets, which could potentially be used as collateral in future borrowing opportunities.

7 unchanged sentences

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What changed 10-Q

Item 2. Management’s Discussion and Analysis