What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-06 compared with 2025-08-07 · 102 added, 101 removed, 255 unchanged (44% of the section changed)

10 unchanged sentences

changes in Medicare and Medicaid payment levels and methodologies and the application of such methodologies by the government and its fiscal intermediaries;

liabilities and other claims asserted against us, including patient care liabilities, as well as the resolution of current litigation (see Note 16:

Contingencies and Commitments);

liabilities and other claims asserted against us, including patient care liabilities, as well as the resolution of current litigation (see Note 16 to Interim Condensed Consolidated Financial Statements included in this Form 10-Q);

the status of our lease with National Health Investors, Inc.

("NHI"), including allegations of non-monetary default by NHI and the expiration of the current term at December 31, 2026;

the ability to attract and retain qualified personnel;

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National HealthCare Corporation (“NHC” or the “Company”) is a leading provider of senior health care services.

As of June 30, 2025, we operate or manage, through certain affiliates, 80 skilled nursing facilities with a total of 10,329 licensed beds, 26 assisted living facilities with 1,413 units, nine independent living facilities, three behavioral health hospitals, 34 homecare agencies, and 33 hospice agencies.

As of September 30, 2025, we operate or manage, through certain affiliates, 80 skilled nursing facilities with a total of 10,329 licensed beds, 26 assisted living facilities with 1,413 units, nine independent living facilities, three behavioral health hospitals, 34 homecare agencies, and 33 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.

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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, 2025 was 89.4% compared to 89.0% for the same period a year ago.

For the six months ended June 30, 2025, overall census in our owned and leased skilled nursing facilities was 89.3% compared to 88.7% for the same period a year ago.

The overall census in owned and leased skilled nursing facilities for the three months ending September 30, 2025 was 90.0% compared to 88.3% for the same period a year ago.

For the nine months ended September 30, 2025, overall census in our owned and leased skilled nursing facilities was 89.6% compared to 88.6% 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.

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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, 2025:

The tables below summarize NHC's overall performance in these Five-Star ratings versus the skilled nursing industry as of September 30, 2025:

Industry Ratings

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Wytheville, VA

On August 1, 2024, the Company purchased White Oak Management, Inc.

On August 1, 2024, the Company purchased the assets of White Oak Management, Inc.

("White Oak").

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

The White Oak portfolio consisted of 15 skilled nursing facilities, two assisted living facilities, four independent living facilities, and a long-term care pharmacy.

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 $108,982,000 at June 30, 2025 and are a primary area of management focus.

Our accrued professional liability and workers’ compensation reserves totaled $114,032,000 at September 30, 2025 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.

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The rule includes a market basket increase of 3.3%, an increase of 0.6% to the market basket forecast error adjustment, and a negative 0.7% productivity adjustment.

This final rule also changes CMS’ enforcement policies to impose more equitable and consistent civil monetary penalties ("CMPs") for health and safety violations as part of the agency’s ongoing work to increase the safety and care provided in America’s nursing homes.

These figures do not incorporate the SNF Value Based Purchasing (“VBP”) reduction for certain SNFs subject to the net reduction in payments under the SNF VBP;

those adjustments are estimated to total $208.4 million in fiscal year 2026.

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

The rule included a market basket increase of 3.0%, an increase of 1.7% to the market basket forecast error adjustment, and a negative 0.5% productivity adjustment.

This final rule also changed CMS’ enforcement policies to impose more equitable and consistent civil monetary penalties ("CMPs") for health and safety violations as part of the agency’s ongoing work to increase the safety and care provided in America’s nursing homes.

CMS revised the regulation to expand the type of CMPs that can be imposed to allow for more per instance and per day CMPs to be imposed, as appropriate.

1 unchanged sentence

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

In July 2025, CMS released its final rule outlining fiscal year 2026 Medicare payment rates and policy changes for skilled nursing facilities, which will begin on October 1, 2025.

The fiscal year 2026 rule equates to a net 3.2% increase in Medicare Part A payments to SNFs in fiscal year 2026 compared to 2025 levels.

The rule includes a market basket increase of 3.3%, an increase of 0.6% to the market basket forecast error adjustment, and a negative 0.7% productivity adjustment.

These figures do not incorporate the SNF Value Based Purchasing (“VBP”) reduction for certain SNFs subject to the net reduction in payments under the SNF VBP;

those adjustments are estimated to total $208.4 million in fiscal year 2026.

For the first six months of 2025, our average Medicare per diem rate for skilled nursing facilities increased 5.8% as compared to the same period in 2024.

For the first nine months of 2025, our average Medicare per diem rate for skilled nursing facilities increased 5.9% as compared to the same period in 2024.

Medicaid – Skilled Nursing Facilities

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We estimate the resulting increase in revenue for the 2026 fiscal year will be approximately $4,200,000 annually, or $1,050,000 per quarter.

For the first six months of 2025, our average Medicaid per diem increased 7.2% compared to the same period in 2024.

For the first nine months of 2025, our average Medicaid per diem increased 3.6% compared to the same period in 2024.

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

7 unchanged sentences

In November 2024, CMS released its final rule outlining fiscal year 2025 Medicare payment rates.

CMS projects payments to home health agencies in fiscal year 2025 will increase by 0.5% or $85 million, relative to the prior year.

CMS projected payments to home health agencies in fiscal year 2025 will increase by 0.5% or $85 million, relative to the prior year.

This increase reflects a 2.7% home health payment update, reduced by a 1.8% decrease that reflects the permanent behavior adjustment and an estimated 0.4% decrease that reflects the updated fixed-dollar loss ratio for outlier payments.

4 unchanged sentences

This update includes a 3.2% market basket update, reduced by a 0.8 percentage point cut for productivity.

The rule also includes several reductions that CMS proposes as necessary to achieve budget neutral implementation of PDGM, including a 4.1% permanent reduction to the standard payment rate to prevent future overpayments, as well as a temporary but indefinite 5.0% reduction to recoup past overpayments.

CMS also proposes a 0.5% reduction related to high-cost outlier payments.

In addition to the proposed permanent adjustment, CMS also proposes to apply a 5.0% temporary adjustment on a prospective basis to account for retrospective PDGM overpayments.

CMS states they are not proposing a future reduction would be applied after fiscal year 2026, but they will continue to analyze claims data each year for further temporary adjustments.

CMS states the CMS also proposes a 0.5% reduction related to high-cost outlier payments.

Medicare – Hospice

In August 2025, CMS released its final rule outlining fiscal year 2026 Medicare payment rates.

CMS issued a rate increase of 2.6%, or $750 million, effective October 1, 2025.

This increase results from the proposed 3.3% inpatient hospital market basket percentage increase reduced by a proposed 0.7% point productivity adjustment, required by law.

The FY2026 hospice payment update also includes an update to the statutory aggregate cap amount, which limits the overall payments per patient that are made annually.

The proposed hospice cap amount for FY2026 is $35,361.

In July 2024, CMS released its final rule outlining fiscal year 2025 Medicare payment rates.

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The cap amount for FY2025 is $34,465.

In April 2025, CMS released its proposed rule outlining fiscal year 2026 Medicare payment rates.

CMS issued a rate increase of 2.4%, or $695 million, effective October 1, 2025.

This increase results from the proposed 3.2% inpatient hospital market basket percentage increase reduced by a proposed 0.8% point productivity adjustment, required by law.

The FY2026 hospice payment update also includes an update to the statutory aggregate cap amount, which limits the overall payments per patient that are made annually.

The proposed hospice cap amount for FY2026 is $35,293.

Segment Reporting

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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, 2025

Three Months Ended September 30, 2025

Net patient revenues

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Interest expense

Unrealized losses on marketable equity securities

Income/(loss) before income taxes

Three Months Ended June 30, 2024

Unrealized gains on marketable equity securities

Income before income taxes

Three Months Ended September 30, 2024

Net patient revenues

Other revenues

Government stimulus income

Net operating revenues and grant income

4 unchanged sentences

Total costs and expenses

Income from operations

Income/(loss) from operations

Non-operating income

2 unchanged sentences

Income before income taxes

Six Months Ended June 30, 2025

Nine Months Ended September 30, 2025

Net patient revenues

Other revenues

Net operating revenues and grant income

Net operating revenues

Costs and expenses:

8 unchanged sentences

Income before income taxes

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

Net patient revenues

13 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, 2025 and 2024.

Percentage of Net Operating Revenues

Three Months Ended

Six Months Ended

Nine Months Ended

Net operating revenues and grant income

8 unchanged sentences

Interest expense

Unrealized gains/(losses) on marketable equity securities

Unrealized gains on marketable equity securities

Income before income taxes

Income tax provision

Net income attributable to noncontrolling interest

Net (income)/loss attributable to noncontrolling interest

Net income attributable to stockholders of NHC

Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024

Results for the quarter ended June 30, 2025 compared to the second quarter of 2024 include a 24.7% increase in net operating revenues and grant income.

Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024

Results for the quarter ended September 30, 2025 compared to the third quarter of 2024 include a 12.5% increase in net operating revenues.

The net operating revenues increase was due to a 8.7% increase in same-facility net operating revenues, as well as the August 1, 2024 acquisition of White Oak.

For the quarter ended June 30, 2025, GAAP net income attributable to NHC was $23,722,000 compared to net income of $26,844,000 for the same period in 2024.

Excluding the unrealized gains and losses in our marketable equity securities portfolio and other non-GAAP adjustments, adjusted net income for the quarter ended June 30, 2025 was $25,710,000 compared to $15,612,000 for the same period in 2024, an increase of 64.7%.

The increase in non-GAAP earnings for the three months ended June 30, 2025 compared to the same period in 2024 was primarily due to the continued increase in skilled nursing census, skilled nursing per diem increases from some of our government payors, the continued reduction of agency staffing expense, and the White Oak operations being accretive to earnings.

For the quarter ended September 30, 2025, GAAP net income attributable to NHC was $39,239,000 compared to net income of $42,789,000 for the same period in 2024.

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, 2025 was $24,744,000 compared to $19,910,000 for the same period in 2024, an increase of 24.3%.

The increase in non-GAAP earnings for the three months ended September 30, 2025 compared to the same period in 2024 was primarily due to the continued increase in skilled nursing census, skilled nursing per diem increases from some of our government payors, the continued reduction of agency staffing expense, and the White Oak operations being accretive to earnings.

Net operating revenues and grant income

1 unchanged sentence

The total census at owned and leased skilled nursing facilities for the quarter averaged 90.0%, compared to an average of 88.3% for the same quarter a year ago.

Overall, the composite skilled nursing facility per diem increased 6.7% compared to the same quarter a year ago.

Our Medicare per diem rates increased 6.4% and managed care per diem rates increased 8.5% compared to the same quarter a year ago.

Medicaid and private pay per diem rates increased 8.3% and 9.1%, respectively, compared to the same quarter a year ago.

For the three months ended June 30, 2025 and 2024, respectively, $1,812,000 and $2,585,000 have been included in our net patient revenues for supplemental Medicaid payments.

The White Oak operations attributed to an increase of $56,855,000 in net patient revenues for the quarter ended June 30, 2025 compared to the same period in 2024.

Overall, the composite skilled nursing facility per diem was flat compared to the same quarter a year ago.

Our Medicare per diem rates increased 6.1% and managed care per diem rates decreased 7.1% compared to the same quarter a year ago.

The average managed care per diem is lower due to the delayed timing of incentive quality payments from our NHC Advantage managed care program.

Excluding the incentive quality payments from NHC Advantage, the average Medicare Advantage skilled nursing per diem increased 2.7% during the third quarter of 2025 compared to the same period a year ago.

Medicaid per diem rates decreased 1.9% and private pay per diem rates increased 3.5% compared to the same quarter a year ago.

For the three months ended September 30, 2025 and 2024, respectively, $1,838,000 and $5,267,000 have been included in our net patient revenues for supplemental Medicaid payments.

The White Oak operations attributed to an increase of $20,026,000 in net patient revenues for the quarter ended September 30, 2025 compared to the same period in 2024.

Other revenues increased $148,000, or 1.3%, compared to the same quarter last year, as further detailed in Note 4 to our interim condensed consolidated financial statements.

Total costs and expenses

Total costs and expenses for the three months ended June 30, 2025 compared to the same period of 2024 increased $62,682,000, or 22.5% to $340,820,000 from $278,138,000.

Total costs and expenses for the three months ended September 30, 2025 compared to the same period of 2024 increased $34,874,000, or 11.0% to $352,283,000 from $317,409,000.

Salaries, wages, and benefits increased $19,781,000, or 9.3%, to $233,176,000 from $213,395,000.

Salaries, wages, and benefits as a percentage of net operating revenues was 60.4% compared to 59.9% for the three months ended June 30, 2025 and 2024, respectively.

Salaries, wages, and benefits as a percentage of net operating revenues was 60.9% compared to 62.7% for the three months ended September 30, 2025 and 2024, respectively.

Although we continue to face workforce and labor shortages within all of our operations, we are working diligently to find solutions to reduce and eliminate agency nurse staffing expense within our healthcare operations.

For the second quarter of 2025, our agency nurse staffing expense was $981,000 compared to $4,098,000 for the second quarter of 2024.

The White Oak operations attributed to an increase of $37,564,000 in salaries, wages, and benefits for the three months ended June 30, 2025 compared to the same period in the prior year.

For the third quarter of 2025, our agency nurse staffing expense was $1,207,000 compared to $3,099,000 for the third quarter of 2024.

The White Oak operations attributed to an increase of $13,158,000 in salaries, wages, and benefits for the three months ended September 30, 2025 compared to the same period in the prior year.

Other operating expenses increased $14,095,000, or 17.1%, to $96,604,000 for the 2025 period compared to $82,509,000 for the 2024 period.

Other operating expenses as a percentage of net operating revenues was 24.5% and 26.0% for the three months ended June 30, 2025 and 2024, respectively.

The White Oak operations attributed to an increase of $12,815,000 in other operating expenses for the three months ended June 30, 2025 as compared to the same period in the prior year.

During the second quarter of 2025, we contributed land to a newly-formed limited liability company resulting in an equity interest in the new entity.

The fair value of the land contributed to the new entity was $5,625,000.

The related cost basis of the contributed land was $2,019,000, which resulted in a gain of $3,606,000.

This gain was netted with other operating expenses resulting in a decrease of $3,606,000 in other operating expenses as compared to the same period in the prior year.

Other operating expenses as a percentage of net operating revenues was 25.2% and 24.3% for the three months ended September 30, 2025 and 2024, respectively.

The White Oak operations attributed to an increase of $5,357,000 in other operating expenses for the three months ended September 30, 2025 as compared to the same period in the prior year.

We also incurred unfavorable claims activity within our professional liability captive insurance company during the third quarter of 2025.

The unfavorable claims activity resulted in additional other operating expenses of $4,219,000 for the third quarter of 2025 compared to the same period in the prior year.

Non–operating income increased by $436,000 compared to the same period last year, as further detailed in Note 5 to our interim condensed consolidated financial statements.

The income tax provision for the three months ended June 30, 2025 is $8,055,000 (an effective income tax rate of 25.0%).

The income tax provision for the three months ended September 30, 2025 is $13,400,000 (an effective income tax rate of 24.6%).

Noncontrolling interest

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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, 2025 Compared to Six Months Ended June 30, 2024

Results for the six months ended June 30, 2025 compared to the same period of 2024 include a 25.2% increase in net operating revenues and grant income.

Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

Results for the nine months ended September 30, 2025 compared to the same period of 2024 include a 20.6% increase in net operating revenues and grant income.

The net operating revenues increase was due to a 9.2% increase in same-facility net operating revenues, as well as the August 1, 2024 acquisition of White Oak.

For the six months ended June 30, 2025, GAAP net income attributable to NHC was $55,927,000 compared to net income of $53,057,000 for the same period in 2024.

Excluding the unrealized gains in our marketable equity securities portfolio and other non-GAAP adjustments, adjusted net income for the six months ended June 30, 2025 was $50,549,000 compared to $30,998,000 for the same period in 2024, an increase of 63.1%.

The increase in non-GAAP earnings for the six months ended June 30, 2025 compared to the same period in 2024 was primarily due to the continued increase in skilled nursing census, skilled nursing per diem increases from some of our government payors, the continued reduction of agency staffing expense, and the White Oak operations being accretive to earnings.

For the nine months ended September 30, 2025, GAAP net income attributable to NHC was $95,166,000 compared to net income of $95,846,000 for the same period in 2024.

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, 2025 was $75,293,000 compared to $50,909,000 for the same period in 2024, an increase of 47.9%.

The increase in non-GAAP earnings for the nine months ended September 30, 2025 compared to the same period in 2024 was primarily due to the continued increase in skilled nursing census, skilled nursing per diem increases from some of our government payors, the continued reduction of agency staffing expense, and the White Oak operations being accretive to earnings.

Net operating revenues and grant income

Net patient revenues increased $201,530,000, or 22.5%, compared to the same period last year.

The total census at owned and leased skilled nursing facilities for the six months ended June 30, 2025 averaged 89.3%, compared to an average of 88.7% for the same period a year ago.

The total census at owned and leased skilled nursing facilities for the nine months ended September 30, 2025 averaged 89.6%, compared to an average of 88.6% for the same period a year ago.

Overall, the composite skilled nursing facility per diem increased 3.7% compared to the same period a year ago.

Our Medicare per diem rates increased 5.9% and managed care per diem rates increased 2.0% compared to the same period a year ago.

The average managed care per diem is lower due to the delayed timing of incentive quality payments from our NHC Advantage managed care program.

Excluding the incentive quality payments from NHC Advantage, the average Medicare Advantage skilled nursing per diem increased 5.3% for the nine months ending September 30, 2025 compared to the same period a year ago.

Medicaid and private pay per diem rates increased 3.6% and 7.2%, respectively, compared to the same period a year ago.

For the six months ended June 30, 2025 and 2024, respectively, $3,684,000 and $6,047,000 have been included in our net patient revenues for supplemental Medicaid payments.

The White Oak operations attributed to an increase of $113,580,000 in net patient revenues for the six months ended June 30, 2025 compared to the same period in 2024.

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

The exiting of these operations in 2024 resulted in net patient revenues decreasing $5,579,000 for the six months ended June 30, 2025 compared to the same period a year ago.

For the nine months ended September 30, 2025 and 2024, respectively, $5,522,000 and $11,314,000 have been included in our net patient revenues for supplemental Medicaid payments.

The White Oak operations attributed to an increase of $133,606,000 in net patient revenues for the nine months ended September 30, 2025 compared to the same period in 2024.

Other revenues increased $1,151,000, or 3.4%, compared to the same period last year, as further detailed in Note 4 to our interim condensed consolidated financial statements.

Total costs and expenses

Total costs and expenses for the six months ended June 30, 2025 compared to the same period of 2024 increased $124,111,000, or 22.2% to $683,750,000 from $559,639,000.

Total costs and expenses for the nine months ended September 30, 2025 compared to the same period of 2024 increased $158,985,000, or 18.1% to $1,036,033,000 from $877,048,000.

Salaries, wages, and benefits increased $111,231,000, or 19.3%, to $687,840,000 from $576,609,000.

Salaries, wages, and benefits as a percentage of net operating revenues was 60.7% compared to 60.8% for the six months ended June 30, 2025 and 2024, respectively.

Salaries, wages, and benefits as a percentage of net operating revenues was 60.8% compared to 61.5% for the nine months ended September 30, 2025 and 2024, respectively.

For the six months ended June 30, 2025, our agency nurse staffing expense was $2,468,000 compared to $9,384,000 for the same period of 2024.

The White Oak operations attributed to an increase of $74,583,000 in salaries, wages, and benefits for the six months ended June 30, 2025 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 and one memory care facility located in Missouri.

The exiting of these operations in 2024 resulted in salaries, wages and benefits decreasing $4,009,000 for the six months ended June 30, 2025 compared to the same period of 2024.

For the nine months ended September 30, 2025, our agency nurse staffing expense was $3,675,000 compared to $12,483,000 for the same period of 2024.

The White Oak operations attributed to an increase of $87,741,000 in salaries, wages, and benefits for the nine months ended September 30, 2025 compared to the same period in the prior year.

Other operating expenses increased $42,912,000, or 18.0%, to $281,004,000 for the 2025 period compared to $238,092,000 for the 2024 period.

Other operating expenses as a percentage of net operating revenues was 24.6% and 26.0% for the six months ended June 30, 2025 and 2024, respectively.

The White Oak operations attributed to an increase of $25,584,000 in other operating expenses for the six months ended June 30, 2025 as compared to the same period in the prior year.

The three exited Missouri operations during the first quarter of 2024 resulted in other operating expenses decreasing $2,281,000 for the six months ended June 30, 2025 compared to the same period last year.

Other operating expenses as a percentage of net operating revenues was 24.8% and 25.4% for the nine months ended September 30, 2025 and 2024, respectively.

The White Oak operations attributed to an increase of $30,941,000 in other operating expenses for the nine months ended September 30, 2025 as compared to the same period in the prior year.

We have also incurred unfavorable claims activity within our professional liability captive insurance company during 2025.

The unfavorable claims activity resulted in additional other operating expenses of $6,685,000 for the nine months ending September 30, 2025 compared to the same period in the prior year.

During the second quarter of 2025, we contributed land to a newly-formed limited liability company resulting in an equity interest in the new entity.

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

The income tax provision for the six months ended June 30, 2025 is $19,487,000 (an effective income tax rate of 25.7%).

The income tax provision for the nine months ended September 30, 2025 is $32,887,000 (an effective income tax rate of 25.2%).

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 that excludes the unrealized gains or losses on our marketable equity securities, gains on sale of unconsolidated companies, gains on sale of property and equipment, and share-based compensation expense is helpful in allowing investors to assess the Company’s operations more accurately.

Specifically, the Company believes the presentation of non-GAAP financial information that excludes the unrealized gains or losses on our marketable equity securities, gains on sales of assets, and share-based compensation expense is helpful in allowing investors to assess the Company’s operations more accurately.

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)/losses on marketable equity securities

Unrealized gains on marketable equity securities

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

4 unchanged sentences

Employee retention credit

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

Income tax expense on non-GAAP adjustments

Non-GAAP Net income

1 unchanged sentence

Non-GAAP adjustments:

Unrealized (gains)/losses on marketable equity securities

Unrealized gains on marketable equity securities

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

4 unchanged sentences

Employee retention credit

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

Income tax expense on non-GAAP adjustments

Non-GAAP diluted earnings per share

1 unchanged sentence

Our primary sources of cash include revenues from the operations of our healthcare and senior living facilities, management and accounting services, rental income, and investment income.

Our primary uses of cash include salaries, wages and other operating costs of our healthcare and senior living facilities, 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.

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

Six Months Ended

Six Month Change

Nine Months Ended

Nine Month Change

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

1 unchanged sentence

Cash used in investing activities

Cash used in financing activities

Cash (used in)/provided by 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, 2025 was $102,074,000 as compared to $60,307,000 in the same period last year.

Net cash provided by operating activities for the nine months ended September 30, 2025 was $168,271,000 as compared to $94,514,000 in the same period last year.

Cash provided by operating activities consisted of net income of $97,412,000 and adjustments for non–cash items of $8,384,000.

There was cash provided by working capital in the amount of $32,831,000 for the six months ended June 30, 2025 compared to $4,052,000 for the same period a year ago.

There was cash provided by working capital in the amount of $62,731,000 for the nine months ended September 30, 2025 compared to $7,015,000 for the same period a year ago.

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

Investing Activities

Net cash used in investing activities totaled $22,902,000 for the six months ended June 30, 2025, compared to $990,000 for the six months ended June 30, 2024.

Cash used for property and equipment additions was $16,341,000 and $13,788,000 for the six months ended June 30, 2025, and 2024, respectively.

Purchases, net of proceeds from sales, of marketable securities resulted in cash used in investing activities of $3,821,000 for the six months ended June 30, 2025.

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

For the six months ended June 30, 2025, we contributed capital of $2,419,000 to a joint venture, multi-family development that is under construction in Franklin, Tennessee compared to $4,856,000 for the same period in the prior year.

We also contributed capital of $786,000 to a joint venture, multi-family development in Hermitage, Tennessee during the second quarter of 2025.

Net cash used in investing activities totaled $20,924,000 for the nine months ended September 30, 2025, compared to $225,048,000 for the nine months ended September 30, 2024.

Cash used for property and equipment additions was $26,049,000 and $19,944,000 for the nine months ended September 30, 2025 and 2024, respectively.

In 2025, we contributed capital of $3,123,000 for two joint venture, multi-family developments that are under construction in Nashville, Tennessee compared to $8,370,000 for the same period in the prior year.

Proceeds from the sale of marketable securities, net of purchases, resulted in cash provided by investing activities of $7,736,000 for the nine months ended September 30, 2025 compared to $15,040,000 for the same period a year ago.

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

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

Financing Activities

Net cash used in financing activities totaled $45,732,000 for the six months ended June 30, 2025 compared to $19,680,000 for the six months ended June 30, 2024.

During the first six months of 2025, cash of $27,000,000 was used to pay down the outstanding principal balance of the long-term debt.

Net cash used in financing activities totaled $92,735,000 for the nine months ended September 30, 2025 compared to cash provided by financing activities in the amount of $119,640,000 for the nine months ended September 30, 2024.

During the first nine months of 2025, cash of $63,875,000 was used to pay down the outstanding principal balance of the long-term debt.

Cash used for dividend payments to common stockholders totaled $28,773,000 in the current year period compared to $27,545,000 for the same period a year ago.

Proceeds from the issuance of common stock totaled $6,462,000 and $11,239,000 for the six months ended June 30, 2025 and 2024, respectively.

We repurchased common shares outstanding in the amount of $6,384,000 and $11,402,000 for the six months ended June 30, 2025 and 2024, respectively.

Proceeds from the issuance of common stock totaled $9,415,000 and $13,471,000 for the nine months ended September 30, 2025 and 2024, respectively.

We repurchased common shares outstanding in the amount of $9,566,000 and $13,502,000 for the nine months ended September 30, 2025 and 2024, respectively.

In 2024, the funding for the White Oak acquisition was provided by the Company’s cash on hand and borrowings under the credit facility of $150,000,000.

Short – term liquidity

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What changed 10-Q

Item 2. Management’s Discussion and Analysis