What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-28 compared with 2024-02-16 · 206 added, 174 removed, 1047 unchanged (27% of the section changed)

44 unchanged sentences

Other revenues

Government stimulus income

Government grant income

Net operating revenues and grant income

4 unchanged sentences

Depreciation and amortization

Impairment (recovery) of assets

Recovery of note receivable

Total costs and expenses

2 unchanged sentences

Non-operating income

Gain on acquisition of equity method investment

Unrealized gains (losses) on marketable equity securities

65 unchanged sentences

Dividends payable

Long-term debt due within one year

Total current liabilities

234,797 214,476

Finance lease obligations, less current portion

Long-term debt

Operating lease liabilities, less current portion

17 unchanged sentences

Accumulated other comprehensive loss

( 4,716 ) ( 6,604 )

Total National HealthCare Corporation stockholders’ equity

16 unchanged sentences

(Gains) losses on sale of marketable securities

Gain on acquisition of equity method investment

Gain on sale of unconsolidated company

Gain on sale of property and equipment

17 unchanged sentences

Purchases of property and equipment

Proceeds from the sale of property and equipment

Acquisition of skilled nursing facility

Acquisition of White Oak Manor, net of cash acquired

Acquisition of other businesses, net of cash acquired

Investments in unconsolidated companies

Acquisition of equity method investment

Proceeds from sale of assets

(Investments in) collections of notes receivable

3 unchanged sentences

Cash Flows From Financing Activities:

Borrowings under credit facility

Repayments under credit facility

Debt issuance costs

Principal payments under finance lease obligations

2 unchanged sentences

Repurchase of common shares

Noncontrolling interest contributions (distributions)

Noncontrolling interest contributions

Entrance fee deposits (refunds)

Net cash used in financing activities

Net cash provided by / (used in) financing activities

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

12 unchanged sentences

Cash payments for income taxes

Non-cash activities include:

Noncontrolling interest contribution of land

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

19 unchanged sentences

– – – ( 34,859 ) – – ( 34,859 )

– – ( 32,536 )

Balance at January 1, 2023

1 unchanged sentence

– – – 66,798 – ( 1,510 ) 65,288

Contributions attributable to noncontrolling interest

– – – – – 250 250

Other comprehensive loss

Other comprehensive income

– – – 2,928 – 2,928

7 unchanged sentences

– – – ( 35,863 ) – – ( 35,863 )

– – ( 34,859 )

Balance at January 1, 2024

1 unchanged sentence

– – – 101,927 – 159 102,086

Contributions attributable to noncontrolling interest

– – – – – 1,115 1,115

9 unchanged sentences

– – – ( 37,333 ) – – ( 37,333 )

– – ( 35,863 )

Balance at December 31, 2024

15,450,003 $ 154 $ 232,530 $ 752,193 $ ( 4,716 ) $ 3,002 $ 983,163

$ 1,728 $ 910,480

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

30 unchanged sentences

Additionally, there may be ancillary services which are not included in the daily rates for routine services, but instead are treated as separate performance obligations satisfied at a point in time when those services are rendered.

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

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

5 unchanged sentences

Other Revenues

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

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

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

7 unchanged sentences

We account for government grants in accordance with International Accounting Standard (“IAS”) 20, Accounting for Government Grants and Disclosure of Government Assistance , and as such, we recognize grant income on a systematic basis in line with the recognition of specific expenses and lost revenues for which the grants are intended to compensate.

For the year ended December 31, 2024, all conditions related to the Employee Retention Credit ("ERC") were met and the credit was recognized as government grant income.

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

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

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

Segment Reporting

10 unchanged sentences

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

Costs that could be classified as "general and administrative" by the Company would include its corporate office costs, excluding stock-based compensation, which were $ 21,412,000 , $ 20,651,000 , and $ 20,160,000 for the years ended December 31, 2023, 2022, and 2021, 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 $ 26,236,000 , $ 21,412,000 , and $ 20,651,000 for the years ended December 31, 2024, 2023, and 2022, respectively.

Included in general and administrative costs during 2024 are acquisition-related expenses for the White Oak Senior Living portfolio.

See Note 2 - Acquisition of White Oak Senior Living for additional detail regarding the acquisition.

Cash and Cash Equivalents

17 unchanged sentences

For the year ended December 31, 2022, the Company recorded a recovery of a note receivable of $ 3,728,000 due to the borrower paying off the note.

For the year ended December 31, 2021, the Company recorded a credit loss provision for this same note receivable of $3,728,00 due to the financial instability of the borrower.

The recovery and credit loss provision of the note receivable is recorded in the consolidated statements of operations under the line item “impairment (recovery) of assets”.

The recovery of the note receivable is recorded in the consolidated statements of operations under the line item “recovery of note receivable”.

Property and Equipment

10 unchanged sentences

If recognition of impairment is necessary, it is measured as the amount by which the carrying amount of the property exceeds the estimated fair value of the property.

Management has evaluated long-lived assets and determined there were impairment charges of $ 0 , $ 0 , and $ 4,497,000 during the years ended December 31, 2023, 2022, and 2021, respectively.

The 2021 impairment charges were recorded in the consolidated statements of operations under the line item “impairment of assets” and were due to the August 2022 exit of the seven skilled nursing facilities in Massachusetts and New Hampshire.

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.

15 unchanged sentences

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations.

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

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

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

In accordance with ASC Topic 350, Intangibles - Goodwill and Other ("ASC 350" ), the guidance provides the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value.

If, based on a review of qualitative factors, it is more likely than not that the fair value of a reporting unit is less than its carrying value, the Company performs a goodwill impairment test by comparing the carrying value of each reporting unit to its respective fair value.

The Company determines the estimated fair value of each reporting unit using a discounted cash flow analysis.

The fair value of the reporting unit is implied fair value of goodwill.

In the event a reporting unit's carrying value exceeds its fair value, an impairment loss will be recognized.

An impairment loss is measured by the difference between the carrying value of the reporting unit and its fair value.

The Company elected to perform a qualitative assessment during both fiscal years 2024 and 2023 and determined for both periods that no indicators of impairment existed.

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

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

Accrued Risk Reserves

8 unchanged sentences

Continuing Care Contracts and Refundable Entrance Fees

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

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

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

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

Residents may enter into continuing care contracts with us.

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

19 unchanged sentences

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

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

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

Stock – Based Compensation

23 unchanged sentences

We evaluate the need to provide reserves for potential credit losses on our financial instruments based on management's periodic review of the portfolio on an instrument-by-instrument basis.

Accounting Guidance Not Yet Adopted

Recently Adopted Accounting Guidance

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

3 unchanged sentences

This ASU is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

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

Note 2 – Coronavirus Pandemic ("COVID- 19" )

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

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

The laws impacted healthcare providers in a variety of ways, but the largest legislation from a monetary relief perspective was the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act").

Through the CARES Act, as well as the Paycheck Protection Program and Health Care Enhancement Act ("PPPCHE"), the federal government allocated $178 billion to the Public Health and Social Services Emergency Fund, which is referred to as the Provider Relief Fund.

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

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

The Company recorded $ 0 , $ 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 the U.S.

Department of Health and Human Services (“HHS”).

We have also received supplemental Medicaid payments from many of the states in which we operate to help mitigate the incremental labor and medical supply costs resulting from the public health emergency.

We have recorded $ 20,214,000 , $ 19,442,000 and $ 20,482,000 in net patient revenues for these supplemental Medicaid payments for the years ended December 31, 2023, 2022 and 2021, respectively.

The Company has adopted the standard and has included the appropriate disclosures in our notes to the financial statements.

Recent Accounting Guidance Not Yet Adopted

In October 2023, the FASB issued ASU 2023 - 06, " Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative ," which amends U.S.

GAAP to include certain disclosure requirements that are currently required under SEC Regulation S- X or Regulation S-K.

each amendment will be effective on the date on which the SEC removes the related disclosure requirement from SEC Regulation S- X or Regulation S-K.

The adoption is not expected to have a material impact on the Company's financial statements as these requirements were previously incorporated under the SEC Regulations.

In December 2023, the FASB issued ASU 2023 - 09 " Income Taxes (Topic 740 ):

Improvements to Income Tax Disclosures ," which requires companies to disclose disaggregated jurisdictional and categorical information for the tax rate reconciliation, income taxes paid and other income tax related amounts.

ASU 2023 - 09 is effective for annual periods beginning with the Company's fiscal year 2025, with early adoption permitted.

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

In November 2024, the FASB issued ASU 2024 - 03 " Disaggregation of Income Statement Expenses ," which requires the Company to disaggregate key expense categories such as employee compensation and depreciation within its financial statements.

ASU 2024 - 03 is effective for annual periods beginning with the Company's fiscal year 2027, and interim periods with the Company's fiscal year 2028, with early adoption permitted.

We are currently evaluating the impact this ASU will have on the company's financial statements and related 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 2 – 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 , subject to the adjustments set forth in the agreement.

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 purchase price allocation.

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

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

Cash and cash equivalents

Prepaid expenses and other assets

Property and equipment

Operating lease right-of-use assets

Intangible assets

Total assets acquired

Operating lease liabilities, current portion

Accrued payroll

Other current liabilities

Operating lease liabilities, less current portion

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 year ended December 31, 2024, White Oak contributed net operating revenues of $ 96,065,000 and income before income taxes of $ 4,974,000 that are included in the Company’s statements of operations.

The Company recognized $ 3,266,000 in acquisition-related expenses for the year ended December 31, 2024 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 consolidated statements of operations.

The following table contains unaudited pro forma consolidated statements of operations information for the years ended December 31, 2024, 2023, and 2022, assuming the White oak acquisition closed on January 1, 2022 (in thousands) .

Year Ended December 31,

Net operating revenues and grant income

$ 1,434,768 $ 1,342,207 $ 1,273,974

Income before income taxes

140,779 86,698 22,213

Net income attributable to NHC

$ 105,321 $ 63,778 $ 16,264

Note 3 – Net Patient Revenues

47 unchanged sentences

This revenue is recorded on an accrual basis based upon the date of services at amounts equal to its established or estimated per-visit rates.

State Relief Supplemental Funding

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

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

We have recorded $ 12,749,000 , $ 20,214,000 and $ 19,442,000 in net patient revenues for these supplemental Medicaid payments for the years ended December 31, 2024, 2023, and 2022, respectively.

Third Party Payors

33 unchanged sentences

Variable lease payments

1,048 998 412

Total rental income

22 unchanged sentences

Gain on Sale of Property and Equipment

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

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

The fair value of the land contributed to the new entity was $ 8,000,000 .

9 unchanged sentences

10,104 8,383 5,134

Gain on sale of unconsolidated company

Total non-operating income

$ 19,690 $ 16,660 $ 11,141

Caris HealthCare, L.P.

( “ Caris ” )

On June 11, 2021, the Company acquired the remaining 24.9 % equity interest in Caris HealthCare, L.P.

Prior to the June 11, 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.

Gain on sale of unconsolidated company

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

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

Note 6 – Business Segments

12 unchanged sentences

1,315 – 44,863 46,178

Net operating revenues

Government grant income

– – 9,445 9,445

Net operating revenues and grant income

1,112,615 140,459 54,308 1,307,382

Costs and Expenses:

7 unchanged sentences

37,988 737 3,260 41,985

4,135 – – 4,135

Total costs and expenses

13 unchanged sentences

1,141 – 52,789 53,930

Government stimulus income

11,457 – – 11,457

Net operating revenues and grant income

Net operating revenues

957,218 131,537 52,789 1,141,544

8 unchanged sentences

38,172 786 3,076 42,034

Recovery of assets

– – ( 3,728 )

Total costs and expenses

914,876 107,097 62,437 1,084,410

Income before non-operating income

Income (loss) before non-operating income

42,342 24,440 ( 9,648 ) 57,134

1 unchanged sentence

– – 16,660 16,660

Unrealized losses on marketable equity securities

Unrealized gains on marketable equity securities

– – 14,944 14,944

Income (loss) before income taxes

Income before income taxes

$ 42,342 $ 24,440 $ 21,956 $ 88,738

4 unchanged sentences

136 – 45,060 45,196

Government stimulus income

Government grant income

11,457 – – 11,457

10 unchanged sentences

36,522 691 3,276 40,489

Impairment of assets

Recovery of assets

– – ( 3,728 ) ( 3,728 )

1 unchanged sentence

901,673 107,025 45,144 1,053,842

Income (loss) before non-operating income

Income before non-operating income

10,151 21,829 ( 84 ) 31,896

1 unchanged sentence

– – 11,141 11,141

Gain on acquisition of equity method investment

– – 95,202 95,202

Unrealized losses on marketable equity securities

– – ( 15,806 ) ( 15,806 )

Income before income taxes

Income (loss) before income taxes

$ 10,151 $ 21,829 $ ( 4,749 ) $ 27,231

5 unchanged sentences

The annual base rent was $ 32,625,000 in 2024.

The annual base rent is $ 32,625,000 in 2024, $ 32,225,000 in 2025, and $ 31,975,000 in 2026 with the lease term expiring at December 31, 2026.

The annual base rent is $ 32,225,000 in 2025 and $ 31,975,000 in 2026 with the lease term expiring at December 31, 2026.

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

1 unchanged sentence

We have a right of first refusal with NHI to purchase any of the properties should NHI receive an offer from an unrelated party during the term of the lease or up to 180 days after termination of the related lease.

Finance Leases

Effective March 1, 2014, NHC began leasing and operating three senior healthcare facilities in the state of Missouri under three separate lease agreements.

Two of the healthcare facilities are skilled nursing facilities that also include assisted living facilities and the third healthcare facility is a memory care facility.

Each of the leases is a ten -year lease with two five–year renewal options.

Under the terms of the leases, base rent totals $ 5,200,000 annually with rent thereafter escalating by 4 % of the increase in facility revenue over the 2014 base year.

With the ten -year lease term ending on March 1, 2024, we have chosen not to renew or extend the leases and will be exiting these three healthcare operations at that time.

Fixed assets recorded under the finance leases, which are included in property and equipment in the consolidated balance sheets, are as follows (in thousands) :

Buildings and personal property

$ 39,001 $ 39,011

Accumulated amortization

$ 647 $ 4,529

Lease Classification

The Company recorded the following on the consolidated balance sheets ( in thousands ):

Right-of-Use Assets

Balance Sheet Classification

Finance lease assets

Net property and equipment

$ 647 $ 4,529

Operating lease right-of use assets

Operating lease right-of-use assets

94,201 120,521

$ 94,848 $ 125,050

Lease Liabilities

Balance Sheet Classification

Finance lease liabilities

Finance lease obligations, current portion

$ 860 $ 4,985

Operating lease liabilities

Operating lease liabilities, current portion

29,352 29,075

Finance lease liabilities

Finance lease obligations, less current portion

Operating lease liabilities

Operating lease liabilities, less current portion

63,175 91,016

$ 93,387 $ 125,936

Weighted-average remaining lease terms and discount rates were as follows:

Weighted-average remaining lease terms (in years)

Weighted-average discount rate

Minimum Lease Payments

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

Total minimum lease payments

amounts representing interest

Present value of future minimum lease payments

current portion

Noncurrent lease liabilities

As of December 31, 2024 and 2023, the weighted average remaining lease term is 3.7 years and 3.0 years, respectively.

As of December 31, 2024 and 2023, the weighted average discount rate used to determine lease liabilities is 7.0 % and 6.6 %, respectively.

Lease costs recorded in the consolidated statement of operations are as follows (in thousands):

Finance lease costs:

Depreciation of leased assets

$ 3,882 $ 3,878 $ 3,905

Interest of lease liabilities

Total finance lease costs

4,097 4,412 4,712

Operating lease costs:

7 unchanged sentences

43,182 41,525 40,977

Total lease costs

$ 45,622 $ 45,389 $ 45,530

Minimum Lease Payments

The following table summarizes the maturity of our finance and operating lease liabilities as of December 31, 2023 ( in thousands ):

$ 867 $ 34,442

Total minimum lease payments

$ 867 $ 101,768

amounts representing interest

Present value of future minimum lease payments

current portion

Noncurrent lease liabilities

Supplemental cash flow data were as follows (in thousands) :

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows for operating leases

$ 36,198 $ 36,051 $ 36,079

Operating cash flows for finance leases

Financing cash flows for finance leases

4,985 4,695 4,423

Cash paid for amounts included in the measurement of lease liabilities were $ 35,394,000 , $ 36,198,000 and $ 36,051,000 for the years ended December 31, 2024, 2023 and 2022, respectively.

Note 8 – Earning Per Share

17 unchanged sentences

$ 6.53 $ 4.34 $ 1.45

In the above table, options to purchase 588,534 , 375,638 , and 291,946 shares of our common stock have been excluded for the years ended December 31, 2023, 2022, and 2021, respectively, due to their anti-dilutive impact.

For the years ended December 31, 2024 and 2023, there were no stock options excluded from the calculation of diluted weighted average shares of common stock outstanding.

For the year ended December 31, 2022, 375,638 stock options were excluded from the calculation of diluted weighted average shares of common stock outstanding because the inclusion of these securities would have an anti-dilutive effect.

Note 9 – Investments in Marketable Securities

7 unchanged sentences

– – 2,497 2,441

Asset-backed securities

Treasury securities

27 unchanged sentences

646 502 642 479

$ 125,118 $ 119,804 $ 135,338 $ 127,727

Gross unrealized gains related to marketable equity securities are $ 115,259,000 and $ 84,514,000 as of December 31, 2024 and 2023, respectively.

Gross unrealized losses related to marketable equity securities are $ 715,000 and $ 928,000 as of December 31, 2024 and 2023, respectively.

For the year ended December 31, 2023, the Company recognized net unrealized gains of $ 14,944,000 .

For the years ended 2022, and 2021 the Company recognized net unrealized losses of $ 15,806,000 , and $ 13,863,000 , respectively, in the consolidated statements of operations.

For the years ended December 31, 2024 and 2023, the Company recognized net unrealized gains of $ 30,958,000 and $ 14,944,000 , respectively, in the consolidated statements of operations.

For the year ended December 31, 2022, the Company recognized net unrealized losses of $ 15,806,000 in the consolidated statements of operations.

Gross unrealized gains related to available for sale marketable debt securities are $ 135,000 and $ 326,000 as of December 31, 2024 and 2023, respectively.

4 unchanged sentences

Proceeds from the sale of available for sale marketable securities during the years ended December 31, 2024, 2023, and 2022 were $ 51,970,000 , $ 47,396,000 , and $ 49,961,000 , respectively.

Net investment losses of $ 667,000 and $ 1,326,000 and net investment gains of $ 1,042,000 were realized on these sales during the years ended December 31, 2023, 2022, and 2021, respectively.

Net investment gains of $ 1,093,000 and net investment losses of $ 667,000 and $ 1,326,000 were realized on these sales during the years ended December 31, 2024, 2023, and 2022, respectively.

Note 10 – Fair Value Measurements

75 unchanged sentences

Accumulated depreciation

( 597,447 ) ( 608,352 )

Net property and equipment

6 unchanged sentences

Year Ended December 31, 2024

Homecare and Hospice

January 1, 2023

2 unchanged sentences

3,741 164,554 – 168,295

2,183 – – 2,183

December 31, 2024

$ 5,924 $ 164,554 $ – $ 170,478

As part of the Caris acquisition in June 2021, we also recorded indefinite-lived intangible assets that consisted of the trade name ($ 4,340,000 ) and certificates of need and licenses ($ 2,698,000 ).

As part of the White Oak acquisition (Note 2 ) in 2024, we recorded goodwill in the amount of $ 2,183,000 .

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

$ 15,896 $ 4,340

Certificates of need

$ 19,864 $ 7,038

As part of the White Oak acquisition (Note 2 ) in 2024, we recorded indefinite-lived intangible assets that consisted of the trade name ($ 11,556,000 ) and certificates of need and licenses ($ 1,270,000 ).

Note 13 – Income Taxes

18 unchanged sentences

Accrued expenses

Financial reporting depreciation in excess of tax depreciation

Tax basis in excess of book basis of fixed assets

Stock based compensation

5 unchanged sentences

valuation allowance

( 517 ) ( 594 )

Deferred tax assets less valuation allowance

2 unchanged sentences

Unrealized gains on marketable securities

$ ( 28,581 ) $ ( 19,971 )

Deferred gain on sale of assets, net

( 2,055 ) ( 2,055 )

Book basis in excess of tax basis of intangible assets

( 5,655 ) ( 3,387 )

Book basis in excess of tax basis of securities

( 4,042 ) ( 3,393 )

Book basis in excess of tax basis of fixed assets

Long–term investments

( 2,652 ) ( 8,753 )

Operating lease assets

( 20,254 ) ( 24,087 )

Total deferred tax liabilities

$ ( 69,818 ) $ ( 61,646 )

Net deferred tax liability

$ ( 35,550 ) $ ( 17,200 )

A reconciliation of income tax expense and the amount computed by applying the statutory federal income tax rate to income before income taxes is as follows (in thousands) :

2 unchanged sentences

$ 28,646 $ 18,635 $ 5,719

Increase (decrease) in income taxes resulting from:

Increase in income taxes resulting from:

State, net of federal benefit

6,349 4,600 1,034

Nontaxable revaluation gain

– – ( 19,758 )

Unrecognized tax benefits

1 unchanged sentence

Expiration of statute of limitations

( 932 ) ( 1,491 ) ( 1,032 )

Tax (expense) benefit of noncontrolling interest

( 34 ) 317 518

Total increases (decreases)

( 397 ) 162 285

Total increases

5,676 4,815 1,535

Effective income tax expense

16 unchanged sentences

Additions (reductions) for tax positions of prior years

( 1,097 ) ( 273 ) 900 627

Reductions for statute of limitation expirations

( 240 ) ( 760 ) ( 512 ) ( 1,272 )

Balance, December 31, 2022

3 unchanged sentences

Additions (reductions) for tax positions of prior years

( 198 ) 324 1,583 1,907

Reductions for statute of limitation expirations

( 361 ) ( 1,030 ) ( 823 ) ( 1,853 )

Balance, December 31, 2023

5 unchanged sentences

Reductions for statute of limitation expirations

( 232 ) ( 592 ) ( 572 ) ( 1,164 )

Balance, December 31, 2024

8 unchanged sentences

During 2024, the Company purchased 133,151 shares of its common stock for a total cost of $ 13,502,000 .

During 2023, the Company purchased 44,349 shares of its common stock for a total cost of $ 2,482,000 .

During 2022, the Company purchased 148,547 shares of its common stock for a total cost of $ 9,903,000 .

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

8 unchanged sentences

The exercise price of any non–qualified options granted will not be less than 100% of the fair market value of the shares of common stock on the date granted unless so determined by the Committee.

In May 2020, our stockholders approved the 2020 Omnibus Equity Incentive Plan (the “2020 Equity Incentive Plan”) pursuant to which 2,500,000 shares of our common stock were available to grant for restricted stock, stock appreciation rights, stock options, and employee stock purchase plans.

The employee stock purchase plan allows employees to purchase our shares of stock through payroll deductions.

At December 31, 2024, 1,503,127 shares were available for future grants under the 2020 Equity Incentive Plan.

Additionally, we have an employee stock purchase plan that allows employees to purchase our shares of stock through payroll deductions.

The plan allows employees to terminate participation at any time.

Compensation expense is recognized only for the awards that ultimately vest.

30 unchanged sentences

Options exercised

( 32,597 ) 64.49 −

Options cancelled

( 199,451 ) 75.98 −

Options outstanding at December 31, 2022

3 unchanged sentences

Options exercised

( 103,481 ) 64.72 −

Options cancelled

( 52,407 ) 60.58 −

Options outstanding at December 31, 2023

3 unchanged sentences

Options exercised

( 219,973 ) 64.73 −

Options cancelled

( 35,102 ) 79.20 −

Options outstanding at December 31, 2024

6 unchanged sentences

631,242 $ 74.73 3.3

Note 16 – Credit Facility

In May 2023, we entered into an unsecured $ 50,000,000 credit facility that has a 364 -day maturity date.

Loans bear interest at the one -month secured overnight financing rate (“SOFR”) plus 1.25 %.

If we maintain certain aggregate deposit levels within the financial institution, the credit facility shall bear interest at one -month SOFR plus 1.10 %.

The credit facility is available for general corporate purposes, including working capital and acquisitions.

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

The credit facility contains customary events of default and remedies.

As of December 31, 2023, we have no outstanding balance on the credit facility.

Note 16 – Long-Term Debt

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

Interest rate

September 30,

Credit facility, interest payable monthly

Variable, 6.1%

$ 137,000 $ –

Less current portion

Long-term debt, less current portion

$ 129,500 $ –

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 December 31, 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 December 31, 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 December 31, 2024 are as follows (in thousands) :

Long–Term Debt

Note 17 – Contingencies and Guarantees

46 unchanged sentences

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

The Plaintiffs have 90 days from the entry of the dismissal Order to file a Petition for a Writ of Certiorari with the United States Supreme Court requesting a review;

otherwise, the Order affirming dismissal issued by the Eleventh Circuit will be final.

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

Civil Investigative Demand

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

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

Attorney’s Office for the Eastern District of Tennessee.

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

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

From time to time, the Company enters into certain types of contracts that contingently require it to indemnify parties against third -party claims.

These contracts primarily include (i) certain real estate leases, under which the Company may be required to indemnify property owners or prior facility operators for post-transfer liabilities and other claims arising from the Company’s use of the applicable premises, (ii) operations transfer agreements, in which the Company agrees to indemnify past operators of facilities against certain liabilities arising from the transfer of the operation and/or the operation thereof after the transfer to the Company or its subsidiary, (iii) certain lending agreements, under which the Company may be required to indemnify the lender against various claims and liabilities, (iv) certain agreements by and between the Company and/or its subsidiaries or affiliates, and (v) certain agreements with the Company officers, directors and others, under which the Company may be required to indemnify such persons for liabilities arising out of the nature of their relationship to the Company and/or its subsidiaries and affiliates.

The terms of such obligations vary by contract and, in most instances, do not expressly state or include a specific or maximum dollar amount.

Generally, amounts under these contracts cannot be reasonably estimated until a specific claim is asserted.

Consequently, because no specific indemnity claims have been asserted, no liabilities have been recorded for these obligations on the consolidated balance sheets for any of the periods presented.

Governmental Regulations

25 unchanged sentences

National ’ s Ownership of Our Stock

At December 31, 2023 and 2022, National owns 1,084,763 shares, or approximately 7.1 %, of our outstanding common stock.

At December 31, 2024 and 2023, National owns 1,030,887 and 1,084,763 shares, respectively, of our outstanding common stock.

This accounts for 6.7 % and 7.1 %, respectively, of the total outstanding shares of common stock.

Consolidation Considerations

6 unchanged sentences

NHC does not have a variable interest in National as a whole.

Note 19 – Variable Interest Entity

Accounting guidance requires that a variable interest entity (“VIE”), according to the provisions of ASC Topic 810, Consolidation , must be consolidated by the primary beneficiary.

The primary beneficiary is the party that has both the power to direct activities of a VIE that most significantly impact the entity’s economic performance and the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE.

We perform ongoing qualitative analysis to determine if we are the primary beneficiary of a VIE.

At December 31, 2023 and 2022, we are the primary beneficiary of one VIE and therefore consolidate that entity.

Springfield, Missouri Lease

In December 2010, we signed an operating agreement to lease Springfield Rehabilitation and Health Care Center, a 120–bed skilled nursing facility located in Springfield, Missouri.

The terms of the lease include a ten -year lease and include five additional, five -year lease options as well as a purchase option.

The operating lease agreement was established on the same date third party owners purchased the real estate of the 120–bed skilled nursing facility.

The third -party owners purchased the real estate for $ 4,500,000 , which is the amount NHC loaned the owners to purchase the facility under the terms of the lease agreement and the mortgage note.

The risks and rewards associated with the operations of the facility and any appreciation or deprecation in the value of the real estate of the facility is borne by NHC.

A mortgage note receivable from the third -party owners of $ 11,047,000 at December 31, 2023 and 2022 is eliminated in our consolidated financial statements.

Land and buildings and improvements of $ 11,047,000 at December 31, 2023 and 2022 have been recorded in our consolidated financial statements, as well as the operations of the facility because we are the primary beneficiary in the relationship.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 8. Financial Statements and Supplementary Data