What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-28 compared with 2024-02-16 · 107 added, 111 removed, 263 unchanged (45% of the section changed)

1 unchanged sentence

National HealthCare Corporation, which we also refer to as NHC or the Company, is a leading provider of post–acute care and senior health care services.

At December 31, 2023, we operate or manage 68 skilled nursing facilities with 8,732 1icensed beds, 26 assisted living facilities with 1,501 units, five independent living facilities, three behavioral health hospitals, 35 homecare agencies, and 30 hospice agencies located in 8 states.

At December 31, 2024, we operate or manage 80 skilled nursing facilities with 10,341 1icensed beds, 26 assisted living facilities with 1,413 units, nine independent living facilities, three behavioral health hospitals, 34 homecare agencies, and 33 hospice agencies located in 9 states.

In addition, we provide management services, accounting and financial services, and insurance services to third party operators of healthcare properties.

We also own the real estate of 10 healthcare properties and lease these properties to third party operators.

Legislation and Government Stimulus Due to COVID-19

government enacted several laws beginning in March 2020 designed to help the nation respond to the COVID-19 pandemic.

The new laws impacted healthcare providers in a variety of ways, but the largest legislation from a monetary relief perspective was the CARES Act.

Through the CARES Act, as well as the PPPCHE, the federal government allocated $178 billion to the Public Health and Social Services Emergency Fund, which is referred to as the Provider Relief Fund.

The Provider Relief Fund is administered through grants and other mechanisms to skilled nursing providers, home health providers, hospitals, and other Medicare and Medicaid enrolled providers to cover unreimbursed health care related expenses or lost revenue attributable to the public health emergency resulting from COVID-19.

The Provider Relief Fund grants come with terms and condition certifications in which all providers are required to submit documents to ensure the funds are used for healthcare-related expenses or lost revenue attributable to COVID-19.

The Company recorded $0, $11,457,000 and $63,360,000 of government stimulus income from the Provider Relief Funds for the years ended December 31, 2023, 2022 and 2021, respectively.

The grant income was determined on a systemic basis in line with the recognition of specific expenses and lost revenues for which the grants are intended to compensate.

The Company’s assessment of whether the terms and conditions for amounts received have been met for income recognition and the Company’s related income calculation considered all frequently asked questions and other interpretive guidance issued to date by HHS.

Executive Summary

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The overall census (based on operational beds) in owned and leased skilled nursing facilities for 2024 was 88.6% compared to 87.9% in 2023 and 83.8% in 2022.

The pandemic caused an increased strain on America's healthcare workforce, which has created the challenge of maintaining desirable patient census levels.

Management has undertaken a number of steps in order to best position our current and future operations.

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

Management has undertaken a number of steps in order to best position our current and future health care facilities.

This includes working internally to examine and improve systems to be most responsive to referral sources and payors, as well as find creative initiatives to retain and attract qualified healthcare professionals.

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Quality of Patient Care

CMS introduced the Five-Star Quality Rating System to help consumers, their families and caregivers compare skilled nursing facilities more easily.

The Centers for Medicare and Medicaid Services (“CMS”) introduced the Five-Star Quality Rating System to help consumers, their families and caregivers compare skilled nursing facilities more easily.

The Five-Star Quality Rating System gives each skilled nursing operation a rating ranging between one and five stars in various categories (five stars being the best).

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

In July 2022, CMS launched its enhanced Five-Star Quality Rating System which integrates weekend staffing rates for nurses and information on annual turnover among nurses and administrators.

The tables below summarize NHC's overall performance in these Five-Star ratings versus the skilled nursing industry as of December 31, 2024:

Industry Ratings

Total number of skilled nursing facilities, end of period

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New Operations

Morristown, TN

Lawrenceburg, TN

Wytheville, VA

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.

Accrued Risk Reserves

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Other revenues

Net operating revenues

Government grant income

Net operating revenues and grant income

Costs and Expenses:

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Other revenues

Government stimulus income

Net operating revenues and grant income

Net operating revenues

Costs and Expenses:

3 unchanged sentences

Depreciation and amortization

Recovery of assets

Total costs and expenses

Income before non-operating income

Income (loss) before non-operating income

Non-operating income

Unrealized losses on marketable equity securities

Income (loss) before income taxes

Unrealized gains on marketable equity securities

Income before income taxes

Year Ended December 31, 2022

1 unchanged sentence

Other revenues

Government stimulus income

Government grant income

Net operating revenues and grant income

4 unchanged sentences

Depreciation and amortization

Impairment of assets

Recovery of assets

Total costs and expenses

Income (loss) before non-operating income

Income before non-operating income

Non-operating income

Gain on acquisition of equity method investment

Unrealized losses on marketable equity securities

Income before income taxes

Income (loss) before income taxes

Non-GAAP Financial Presentation

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The presentation of this additional non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.

Specifically, the Company believes the presentation of non-GAAP financial information should exclude the following items:

the unrealized gains or losses on our marketable equity securities, operating results for start-up healthcare operations not at full capacity, any gains on the acquisition of equity method investments, gains on the sale of property and equipment, stock-based compensation expense, and impairments or recoveries of long-lived assets and notes receivable.

The operating results for the start-up operations not at full capacity include the following:

for the year ended December 31, 2023, included are operations that began from 2021 to 2023, which is two behavioral health hospitals, two homecare agencies, and two hospice agencies.

For the year ended December 31, 2022, included are facilities that began operations from 2020 to 2022, which is two behavioral health hospitals, one hospice agency, and one homecare agency.

For the year ended December 31, 2021, included are facilities that began operations from 2019 to 2021, which is two behavioral health hospitals and one memory care facility.

Specifically, the Company believes the presentation of non-GAAP financial information that excludes the unrealized gains or losses on our marketable equity securities, stock-based compensation expense, operating results for start-up healthcare operations not at full capacity, acquisition related expenses, the recognition of the employee retention credit, gains on sales of unconsolidated companies, gains on the sale of property and equipment, and impairments or recoveries of long-lived assets 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 include two hospice agencies for the year ended December 31, 2024.

For the year ended December 31, 2023, included are two behavioral health hospitals, two homecare agencies, and two hospice agencies.

For the year ended December 31, 2022, included are two behavioral health hospitals, one hospice agency, and one homecare agency.

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

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Unrealized (gains) losses on marketable equity securities

Gain on sale of property and equipment

Gain on acquisition of equity method investment

Stock-based compensation expense

Operating results for newly-opened operations not at full capacity

Acquisition-related expenses

Employee retention credit

Gain on sale of unconsolidated company

Gain on sale of property and equipment

Impairment (recovery) of assets

4 unchanged sentences

Unrealized (gains) losses on marketable equity securities

Gain on sale of property and equipment

Gain on acquisition of equity method investment

Stock-based compensation expense

Operating results for newly-opened operations not at full capacity

Acquisition-related expenses

Employee retention credit

Gain on sale of unconsolidated company

Gain on sale of property and equipment

Impairment (recovery) of assets

6 unchanged sentences

Other revenues

Government stimulus income

Government grant income

Net operating revenues and grant income

8 unchanged sentences

Non–operating income

Gain on acquisition of equity method investment

Unrealized gains (losses) on marketable equity securities

1 unchanged sentence

Income tax provision

Net loss attributable to noncontrolling interest

Net income (loss) attributable to noncontrolling interest

Net income attributable to common stockholders of NHC

3 unchanged sentences

Other revenues

Government stimulus income

Government grant income

Net operating revenues and grant income

8 unchanged sentences

Non–operating income

Gain on acquisition of equity method investment

Unrealized gains (losses) on marketable equity securities

4 unchanged sentences

2024 Compared to 2023

Results for the year ended December 31, 2023 compared to 2022 include a 5.1% increase in net operating revenues and grant income.

The net operating revenues increase was primarily driven by the continued occupancy increase in our skilled nursing facilities, as well as increases in skilled nursing per diems from some of our governmental payors.

Excluding the government stimulus income and the seven skilled nursing facilities in Massachusetts and New Hampshire in which we ceased operations in September 2022, same-facility net operating revenues increased 11.3% as compared to the same period a year ago.

Net operating revenues and grant income for the year ended December 31, 2024 totaled $1,307,382,000 compared to $1,141,544,000 for the year ended December 31, 2023, an increase of 14.5%.

The net operating revenues increase was primarily driven by the August 1, 2024 acquisition of White Oak Manor ("White Oak").

For the year ended December 31, 2024, GAAP net income attributable to NHC was $101,927,000 compared to net income of $66,798,000 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 was $76,862,000 for the year ended December 31, 2024 compared to $54,934,000 for the same period a year ago.

The increase in non-GAAP earnings for the year ended December 31, 2023 compared to the same period in the prior year was primarily due to the continued occupancy increase in our skilled nursing facilities, skilled nursing per diem increases from some of our government payors, and the continued reduction of nurse agency staffing expense within our operations.

The increase in non-GAAP earnings for the year ended December 31, 2024 compared to 2023 was primarily due to the skilled nursing per diem increases from some of our government payors, the continued reduction of nurse agency staffing expense within our operations, and the White Oak operations being accretive to earnings.

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 totaled $1,087,614,000 an increase of $58,529,000, or 5.7%, compared to the prior year.

Included in net patient revenues for the years ended December 31, 2023 and 2022, respectively, is $20,214,000 and $19,442,000 of supplemental Medicaid payments that were received to help mitigate the inflationary labor and medical supplies costs caused by the pandemic.

Net patient revenues totaled $1,251,759,000 in 2024, an increase of $164,145,000, or 15.1%, compared to 2023.

The overall average census in owned and leased skilled nursing facilities for 2024 was 88.6% compared to 87.9% in 2023.

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Medicaid and private pay per diem rates increased 8.6% and 12.3%, respectively, in 2024 compared to 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, two behavioral health hospitals, two hospice agencies and two homecare agencies, have attributed to an increase of $25,821,000 in net patient revenues for the year ended December 31, 2023 compared to the same period last year.

In September 2022, the Company transferred the operations of seven skilled nursing facilities located in Massachusetts and New Hampshire, which resulted in net patient revenues decreasing $48,820,000 for the year ended December 31, 2023 compared to the same period last year.

Other revenues in 2023 were $53,930,000, an increase of $8,734,000, or 19.3%, as further detailed in Note 4 to our consolidated financial statements.

In 2023, we contributed land to a newly-formed limited liability company resulting in an equity interest in the new entity.

White Oak, with five months of operations since the acquisition date, attributed to an increase of $96,052,000 in net patient revenues for the year ended December 31, 2024 compared to 2023.

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 $26,929,000 for the year ended December 31, 2024 compared to the prior year.

Also included in net patient revenues for the years ended December 31, 2024 and 2023, respectively, is $12,749,000 and $20,214,000 of supplemental Medicaid payments that were received to help mitigate the healthcare workforce crisis and the inflationary labor market.

Other revenues in 2024 were $46,178,000, a decrease of $7,752,000, or 14.4%, as further detailed in Note 4 to our consolidated financial statements.

In December 2023, we contributed land to a newly-formed limited liability company resulting in an equity interest in the new joint venture.

The fair value of the land contributed to the entity was $8,000,000 and the related cost basis in the land was $1,770,000, which resulted in a gain of $6,230,000.

For the years ended December 31, 2023 and 2022, respectively, we recorded $0 and $11,457,000 in government stimulus income related to funds received from the CARES Act Provider Relief Fund.

During the year ended December 31, 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 grant income.

Total costs and expenses

Total costs and expenses for 2023 increased $30,568,000, or 2.9%, to $1,084,410,000 from $1,053,842,000 in 2022.

Total costs and expenses were $1,221,622,000 for 2024, an increase of $137,212,000, or 12.7%, from $1,084,410,000 in 2023.

Salaries, wages, and benefits increased $98,586,000, or 13.8%, to $810,930,000 from $712,344,000.

Salaries, wages, and benefits as a percentage of net operating revenues and grant income was 62.0% compared to 62.4% for the years ended December 31, 2024 and 2023, respectively.

The White Oak operations attributed to an increase of $63,223,000 in salaries, wages, and benefits for the year ended December 31, 2024 compared to 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 $20,169,000 for the year ended December 31, 2024 compared to the prior year.

We continue to face workforce and labor shortages within all of our operations.

The labor and workforce shortages have resulted in us contracting with agency nurse staffing companies.

The agency nurse staffing companies charge inflated hourly rates;

therefore, we are working diligently to find solutions to reduce and eliminate the agency nurse staffing within our healthcare operations.

For the year ended December 31, 2024 our agency nurse staffing expenses decreased $19,962,000, or approximately 66.2%, compared to the same period a year ago.

New operations, which include one skilled nursing facility acquired May 1, 2023, three assisted living facilities that we began operating on July 1, 2023, two behavioral health hospitals, two hospice agencies and two homecare agencies, have attributed to an increase in salaries, wages, and benefits of $13,565,000 for the year ended December 31, 2023 compared to the same period last year.

In September 2022, the Company transferred the operations of seven skilled nursing facilities located in Massachusetts and New Hampshire, which resulted in salaries, wages, and benefits decreasing $31,920,000 for the year ended December 31, 2023 compared to the same period last year.

Other operating expenses decreased $1,189,000, or 0.4%, to $288,183,000 for the year ended December 31, 2023 compared to $289,372,000 for the prior year.

Other operating expenses increased $33,207,000, or 11.5%, to $321,390,000 for the year ended December 31, 2024 compared to $288,183,000 for the prior year.

Other operating expenses as a percentage of net operating revenues and grant income was 24.6% and 25.2% for the years ended December 31, 2024 and 2023, respectively.

The ten new operations listed above attributed to an increase in other operating expenses of $9,082,000 for the year ended December 31, 2023 compared to the same period last year.

The transfer of the operations of the seven skilled nursing facilities located in Massachusetts and New Hampshire, as noted above, resulted in other operating expenses decreasing $15,025,000 for the year ended December 31, 2023 compared to the prior year.

The White Oak operations attributed to an increase of $20,554,000 in other operating expenses for the year ended December 31, 2024 compared to 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 $7,101,000 for the year ended December 31, 2024 compared to the prior year.

We continue to face inflationary pressures in certain categories within other operating expenses as well, such as food/dietary supplies and drugs/pharmaceutical supplies.

Facility rent expense increased $1,657,000, or 4.0%, to $43,182,000.

Depreciation and amortization increased 3.8% to $42,034,000.

Interest expense decreased $239,000 to $324,000 in 2023 from $563,000 in 2022.

At December 31, 2023, we have no outstanding long-term debt.

Depreciation and amortization decreased 0.1% to $41,985,000.

Interest expense increased $3,811,000 to $4,135,000 in 2024 from $324,000 in 2023.

At December 31, 2024, we have outstanding long-term debt of $137,000,000 due to the White Oak acquisition.

In 2023, we didn't have any outstanding long-term debt.

Non–operating income increased by $3,030,000, or 18.2% to $19,690,000 compared to the prior year, as further detailed in Note 5 to our consolidated financial statements.

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2023 Compared to 2022

Results for the year ended December 31, 2022 compared to 2021 include a 1.1% increase in net operating revenues and grant income.

The net operating revenues and grant income increase is primarily driven by the June 2021 acquisition of Caris hospice and the continued occupancy increase in our skilled nursing facilities.

These increases were offset by the reduction in government stimulus income of $51.9 million for the year ended December 31, 2022 compared to 2021.

Net operating revenues and grant income for the year ended December 31, 2023 totaled $1,141,544,000 compared to $1,085,738,000 for the year ended December 31, 2022, an increase of 5.1%.

Excluding the government grant income and the seven skilled nursing facilities in Massachusetts and New Hampshire in which we ceased operations in September 2022, same-facility net operating revenues increased 11.3% in 2023 as compared to the prior year.

The net operating revenues increase was primarily driven by the continued occupancy increase in our skilled nursing facilities and increases in skilled nursing per diems from some of our governmental payors.

For the year ended December 31, 2023, GAAP net income attributable to NHC was $66,798,000 compared to net income of $22,445,000 for the same period in 2022.

The large decrease in our reported GAAP net income for 2022 was primarily due to the $95.2 million gain recorded in 2021 from the acquisition of Caris.

Excluding the gain on the Caris acquisition, as well as the unrealized losses in our marketable equity securities portfolio and the other non-GAAP adjustments, non-GAAP net income for the year ended December 31, 2022 was $37,323,000 compared to $62,645,000 for the year ended December 31, 2021.

The decrease in adjusted net income for the year ended December 31, 2022 compared to 2021 is primarily due to the $51.9 million less government stimulus income recorded during the 2022 period.

We also continue to incur inflationary wage pressures within all areas of our operations.

Excluding the unrealized gains and losses in our marketable equity securities portfolio and other non-GAAP adjustments, adjusted net income was $54,934,000 for the year ended December 31, 2023 compared to $37,323,000 in the prior year.

Net operating revenues and grant income

Net patient revenues totaled $1,029,085,000, an increase of $63,543,000, or 6.6%, compared to the prior year.

Included in net patient revenues for the year ended December 31, 2022 and 2021, respectively, is $19,442,000 and $20,482,000 of supplemental Medicaid payments that were received to help mitigate the incremental costs in fighting the pandemic.

Net patient revenues totaled $1,087,614,000 in 2023, an increase of $58,529,000, or 5.7%, compared to the prior year.

The overall average census in owned and leased skilled nursing facilities for 2023 was 87.9% compared to 83.8% in 2022.

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Medicaid and private pay per diem rates increased 9.4% and 5.5%, respectively, in 2023 compared to 2022.

In June 2021, the Company acquired the remaining ownership interest in Caris, which resulted in net patient revenues increasing $31,566,000 for the year ended December 31, 2022 compared to the prior year.

In September 2022, the Company transferred the operations of seven skilled nursing facilities located in Massachusetts and New Hampshire resulting in net patient revenues decreasing $18,732,000 for the year ended December 31, 2022 compared to the prior year.

Other revenues in 2022 were $45,196,000, a decrease of $204,000, or 0.4%, as further detailed in Note 4 to our consolidated financial statements.

For the years ended December 31, 2022 and 2021, respectively, we recorded $11,457,000 and $63,360,000 in government stimulus income related to funds received from the CARES Act Provider Relief Fund.

Other revenues in 2023 were $53,930,000, an increase of $8,734,000, or 19.3%, as further detailed in Note 4 to our consolidated financial statements.

In December 2023, we contributed land to a newly-formed limited liability company resulting in an equity interest in the new joint venture.

The fair value of the land contributed to the entity was $8,000,000 and the related cost basis in the land was $1,770,000, which resulted in a gain of $6,230,000.

For the years ended December 31, 2023 and 2022, respectively, we recorded $0 and $11,457,000 in government grant income related to funds received from the CARES Act Provider Relief Fund.

Total costs and expenses

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Salaries, wages, and benefits as a percentage of net operating revenues and grant income was 62.4% compared to 63.2% for the years ended December 31, 2023 and 2022, respectively.

Our Caris acquisition in June 2021 increased salaries, wages, and benefits $19,040,000 for the year ended December 31, 2022 compared to 2021.

We continue to face workforce and labor shortages within all of our operations, which increases wage pressure in regards to retaining and attracting qualified healthcare partners (employees).

The labor and workforce challenges have resulted in us contracting with agency nurse staffing companies.

We continue to face workforce and labor shortages within all of our operations.

The labor and workforce shortages have resulted in us contracting with agency nurse staffing companies.

The agency nurse staffing companies charge inflated hourly rates;

therefore, we are working diligently to find solutions to reduce and eliminate the agency nurse staffing within our healthcare operations.

For the year ended December 31, 2022, our agency nurse staffing expenses were $68,875,000 compared to $36,391,000 for the 2021 year.

In September 2022, the Company transferred the operations of seven skilled nursing facilities located in Massachusetts and New Hampshire resulting in salaries, wages, and benefits decreasing $18,053,000 for the year ended December 31, 2022 compared to the prior year.

Other operating expenses increased $22,618,000, or 8.5%, to $289,372,000 for the year ended December 31, 2022 compared to $266,754,000 for the prior year.

For the year ended December 31, 2023 our agency nurse staffing expenses decreased $30,682,000, or approximately 44.5%, compared to the prior year.

New operations, which include one skilled nursing facility acquired May 1, 2023, three assisted living facilities that we began operating on July 1, 2023, two behavioral health hospitals, two hospice agencies and two homecare agencies, have attributed to an increase in salaries, wages, and benefits of $13,565,000 for the year ended December 31, 2023 compared to the prior year.

Other operating expenses decreased $1,189,000, or 0.4%, to $288,183,000 for the year ended December 31, 2023 compared to $289,372,000 for the prior year.

Other operating expenses as a percentage of net operating revenues and grant income was 25.2% and 26.7% for the years ended December 31, 2023 and 2022, respectively.

Our Caris acquisition increased other operating expenses $10,190,000 for the year ended December 31, 2022 compared to the prior year.

The ten new operations listed above attributed to an increase in other operating expenses of $9,082,000 for the year ended December 31, 2023 compared to the prior year.

We incurred increased expenses from our professional liability actuarial report in the fourth quarter of 2022 compared to the prior year of $3,284,000.

We also continue to face inflationary pressures in certain categories within other operating expenses as well, such as food/dietary supplies and drugs/pharmaceutical supplies.

Facility rent expense increased $548,000, or 1.3%, to $41,525,000.

Depreciation and amortization decreased 0.4% to $40,489,000.

Depreciation and amortization increased 3.8% to $42,034,000.

Interest expense decreased $239,000 to $324,000 in 2023 from $563,000 in 2022.

At December 31, 2023, we have no outstanding long-term debt.

During 2022, we had a note receivable recovery of $3,728,000.

Non–operating income decreased by $6,633,000, or 37.3% to $11,141,000 compared to the prior year, as further detailed in Note 5 to our consolidated financial statements.

The decrease in our non-operating income is due to the June 2021 acquisition of Caris.

Prior to the June 2021 acquisition date, Caris was our most significant equity method investment with a 75.1% non-controlling ownership interest.

From the respective acquisition date, Caris’ financial information is now included in the Company’s consolidated financial statements and is no longer accounted for as an equity method investment.

In June 2021, a gain of $95,202,000 was recorded on the acquisition of the remaining ownership interest of Caris.

We previously held a noncontrolling interest in the partnership.

Upon acquiring the remaining ownership interest in Caris, we valued the business and our previously held equity position (75.1%) based upon Caris' fair value at the acquisition date.

We recorded unrealized losses in the amount of $15,806,000 for the decrease in fair value of our marketable equity securities portfolio for the year ended December 31, 2022.

Non–operating income increased by $5,519,000, or 49.5% to $16,660,000 compared to the prior year, as further detailed in Note 5 to our consolidated financial statements.

We recorded unrealized gains in the amount of $14,944,000 for the increase in fair value of our marketable equity securities portfolio for the year ended December 31, 2023.

The marketable equity securities portfolio consists mainly of publicly-traded healthcare REIT’s and other blue-chip public companies held within our insurance companies.

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Our primary uses of cash include salaries, wages and other operating costs of our healthcare operations, the cost of additions to and acquisitions of real property, facility rent expenses, and dividend distributions.

These sources and uses of cash are reflected in our interim condensed consolidated statements of cash flows and are discussed in further detail below.

These sources and uses of cash are reflected in our consolidated statements of cash flows and are discussed in further detail below.

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

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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

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Cash provided by operating activities consisted of net income of $102,086,000 and adjustments for non–cash items of $32,027,000.

There was cash provided by working capital in the amount of $17,396,000 for the year ended December 31, 2023 compared to cash used for working capital needs in the amount of $73,697,000 in 2022.

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

There was cash used for working capital needs in the amount of $25,717,000 for the year ended December 31, 2024, which was primarily driven by the White Oak acquisition.

In 2023, there was cash provided by working capital in the amount of $17,396,000.

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

Investing Activities

Net cash used in investing activities totaled $236,693,000 for the year ended December 31, 2024, as compared to $17,568,000 and $5,978,000 for the years ended December 31, 2023 and 2022, respectively.

On August, 1, 2024, the acquisition of White Oak resulted in cash used of $215,896,000, as described in Note 2 to our consolidated financial statements.

Cash used for property and equipment additions was $27,600,000, $27,901,000, and $30,200,000 for the years ended December 31, 2024, 2023 and 2022, respectively.

On May 1, 2023, we acquired the assets of a 66-bed skilled nursing facility in Nashville, Tennessee for approximately $2,700,000.

In 2023, the Company had investments in unconsolidated companies of $4,661,000, of which the primary investment is a multi-family development in Franklin, Tennessee.

For the year ended December 31, 2024, we contributed capital of $14,298,000 to a joint venture, multi-family development that is under construction in Franklin, Tennessee.

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.

Proceeds from the sale of marketable securities, net of purchases, resulted in cash proceeds of $16,913,000, $17,895,000, and $16,168,000 in 2024, 2023, and 2022, respectively.

For the year ended December 31, 2022, the Company collected notes receivable of $3,879,000 and received proceeds from the sale of property and equipment of $4,175,000.

Financing Activities

Net cash provided by financing activities totaled $100,344,000 for the year ended December 31, 2024.

Net cash used in financing activities totaled $42,545,000 and $47,642,000 for the years ended December 31, 2023 and 2022, respectively.

Principal payments made under finance lease obligations was $4,985,000, $4,695,000, and $4,423,000 for the years ended December 31, 2023, 2022, and 2021, respectively.

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

During the third and fourth quarters of 2024, cash of $13,000,000 was used to pay down the outstanding principal balance of the long-term debt.

Dividends paid to common stockholders was $36,964,000, $35,560,000, and $34,604,000 for the years ended December 31, 2024, 2023 and 2022, respectively.

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We repurchased common shares outstanding in the amount of $13,502,000, $2,482,000, and $9,903,000 for the years ended December 31, 2024, 2023, and 2022, respectively.

Principal payments made under finance lease obligations was $860,000, $4,985,000, and $4,695,000 for the years ended December 31, 2024, 2023, and 2022, respectively.

The finance lease obligations terminated during the first quarter of 2024.

Short – term liquidity

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

In addition to cash flows from operations, we have current cash on hand of $107,076,000 and unrestricted marketable equity and debt securities of $116,544,000.

We also have unencumbered real estate, as well the borrowing capacity on our $50 million credit facility, that can be used to meet our contractual obligations and growth and development plans in the next twelve months.

In addition to cash flows from operations, we have current cash on hand of $76,121,000 and unrestricted marketable equity securities of $140,064,000.

We also have unencumbered real estate and the borrowing capacity on our $50 million available line of credit.

We believe these various resources are adequate to meet our contractual obligations and growth and development plans in the next twelve months.

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 $107,076,000, our unrestricted marketable equity and debt securities of $116,544,000, and our borrowing capacity on the $50 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 $76,121,000, our unrestricted marketable equity securities of $140,064,000, 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.

At December 31, 2023, we do not have any long-term debt.

Our ability to obtain long-term debt to meet our long–term contractual obligations and to finance our operating requirements, growth and development plans will depend upon our future performance, which will be affected by business, economic, financial and other factors, including potential changes in state and federal government payment rates for health care, customer demand, success of our marketing efforts, pressures from competitors, and the state of the economy, including the state of financial and credit markets, as well as many unforeseen factors.

Our ability to obtain long-term debt to meet our long–term contractual obligations and to finance our operating requirements, growth and development plans will depend upon our future performance.

Our future performance will be affected by business, economic, financial and other factors, including potential changes in state and federal government payment rates for health care, customer demand, success of our marketing efforts, pressures from competitors, and the state of the economy, including the state of financial and credit markets, as well as many unforeseen factors.

Contingencies

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New Accounting Pronouncements

The Company did not adopt any new accounting standards during 2023.

See Note 1 to the consolidated financial statements for the impact of any new accounting standards.

Application of Critical Accounting Policies

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

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

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

Revenue Recognition – Third Party Payors

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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-K

Item 7. Management’s Discussion and Analysis