NHC 10-K & 10-Q changes, risk factors and insider trading
National Healthcare Corp. · NYSE · Services-Skilled Nursing Care Facilities · CIK 1047335 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
Largest changes
“Failure to resolve the current disputes with NHI or a failure to secure renewal of the Master Lease on acceptable terms could result in the loss of our right to occupy and operate some or all of the affected facilities, or subject us to damages, acceleration of rent, or other remedies in favor of NHI. Even if a default is ultimately determined not to have occurred, the process of resolving such disputes may result in significant legal and other expenses and could distract management from other priorities. …”see in full comparison
“The status of our lease with National Health Investors, Inc. creates uncertainties and risks to our future operations. A significant portion of our skilled nursing and independent living facilities are subject to a long-term Master Agreement to Lease with National Health Investors, Inc. (“NHI”), which we refer to as the Master Lease. On July 29, 2025, NHI notified us of alleged non-compliance with certain non-monetary provisions of the Master Lease. …”see in full comparison
“In October 2025, we provided NHI with a notice of our intent to exercise our right to extend the Master Lease for an additional five-year term beginning January 1, 2027. Under the Master Lease, the base rent for any renewal term is to be the fair rental value of the leased property as negotiated between the parties, without regard to improvements we made voluntarily at our expense. There is no assurance, however, that we will reach agreement with NHI on the base rent or other renewal terms. …”see in full comparison
Federal minimum staffing mandates may adversely affect our labor costs, ability to maintain desired levels of patient census and profitability. In April 2024, CMS issued the Staffing Rule, establishing minimum staffing standards for SNFs. The Staffing Rule contains three primary staffing requirements whichsee in full comparisonarewould be phased in over the next several years.Due to pending legislation in both the House of Representatives and the Senate, industry litigation filed to dispute the Staffing Rule's validity and enforceability, as well as the long phase-in of the requirements, the exact effectsImplementation of the Staffing Rulecannotwasbeimpaireddetermined.by the passage of the One Big Beautiful Bill Act (“OBBB”) on July 4, 2025, which prohibited HHS from implementing, administering, or enforcing the Staffing Rule until October 1, 2034. Future developments may significantly alteror even haltthe implementation of the Staffing Rule.However, we expect that the Staffing Rule in its current form will have adverse financial consequences upon our business.
“During 2024, we expanded our operations with the acquisition of the White Oak Senior Living portfolio. This growth has placed and will continue to place significant demands on our management resources. Our ability to manage our growth effectively and to successfully integrate this acquisition into our existing business will require us to expand our operation, financial and management information systems.”see in full comparison
The industry trend toward value-based purchasing may negatively impact our revenues.see in full comparisonThere continues to be a growing trend in the healthcare industry among both government and commercial payors toward value-based purchasing of healthcare services.Value-based purchasing programs emphasize quality and efficiency of services, rather than volume of services. For example, CMS reimburses SNF providers using the PDPM, a payment methodology that classifies patients into payment groups based on clinical factors using diagnosis codes rather than by volume of services. In addition, CMS requires SNFs, home health agencies and hospices to report quality data in order to receive full reimbursement. Failure to report quality data or poor performance may negatively impact the amount of reimbursement received. CMS publishes quality measure data online through its Care Compare website, to allow the public to search and compare data for Medicare-certified providers.
Full comparison: every changed paragraph (9)
We depend on reimbursement from Medicare, Medicaid and other third–party payors, and reimbursement rates from such payors may be reduced. We derive a substantial portion of our revenue from third–party payors, including the Medicare and Medicaid programs. Third–party payor programs are highly regulated and are subject to frequent and substantial changes. Changes in the reimbursement rate or methods of payment from third–party payors, including the Medicare and Medicaid programs, or the implementation of other measures to reduce reimbursements for our services has in the past, and could in the future, result in a substantial reduction in our revenues and operating margins. For example, the Budget Control Act of 2011 requires automatic spending reductions to reduce the federal deficit, imposing Medicare spending reductions of up to 2% per fiscal year, with a uniform percentage across all Medicare programs. CMS began imposing a 2% reduction on Medicare claims in 2013, with temporary suspensions and these1% cuts in 2020 – 2022. These reductions have been extended through 2030.
The industry trend toward value-based purchasing may negatively impact our revenues. There continues to be a growing trend in the healthcare industry among both government and commercial payors toward value-based purchasing of healthcare services. Value-based purchasing programs emphasize quality and efficiency of services, rather than volume of services. For example, CMS reimburses SNF providers using the PDPM, a payment methodology that classifies patients into payment groups based on clinical factors using diagnosis codes rather than by volume of services. In addition, CMS requires SNFs, home health agencies and hospices to report quality data in order to receive full reimbursement. Failure to report quality data or poor performance may negatively impact the amount of reimbursement received. CMS publishes quality measure data online through its Care Compare website, to allow the public to search and compare data for Medicare-certified providers.
The status of our lease with National Health Investors, Inc. creates uncertainties and risks to our future operations. A significant portion of our skilled nursing and independent living facilities are subject to a long-term Master Agreement to Lease with National Health Investors, Inc. (“NHI”), which we refer to as the Master Lease. On July 29, 2025, NHI notified us of alleged non-compliance with certain non-monetary provisions of the Master Lease. On September 8, 2025, NHI formally alleged that the tenant under the lease, our wholly owned subsidiary NHC/OP, L.P., is in default as a result of alleged non-compliance with four non-monetary provisions, and indicated that failure to cure the alleged defaults within the applicable cure period would constitute an “Event of Default,” entitling NHI to pursue any remedies available under the agreement, including termination. We dispute that any default has occurred and we continue to communicate with NHI to resolve these matters. For a further discussion of our response to NHI’s allegations, please see Note 6 - Long-Term Leases to Interim Condensed Consolidated Financial Statements included in this Form 10-Q.
In October 2025, we provided NHI with a notice of our intent to exercise our right to extend the Master Lease for an additional five-year term beginning January 1, 2027. Under the Master Lease, the base rent for any renewal term is to be the fair rental value of the leased property as negotiated between the parties, without regard to improvements we made voluntarily at our expense. There is no assurance, however, that we will reach agreement with NHI on the base rent or other renewal terms. Further, if NHI asserts that an “Event of Default” has occurred or raises other objections to our extension notice, NHI may seek to terminate our occupancy of the leased properties.
Failure to resolve the current disputes with NHI or a failure to secure renewal of the Master Lease on acceptable terms could result in the loss of our right to occupy and operate some or all of the affected facilities, or subject us to damages, acceleration of rent, or other remedies in favor of NHI. Even if a default is ultimately determined not to have occurred, the process of resolving such disputes may result in significant legal and other expenses and could distract management from other priorities. The loss of these facilities or an increase in lease-related expenses could have a material adverse effect on our business, future results of operations, cash flows, financial condition, and liquidity.
The staffing level required to receive a 5-star rating in the CMS Nursing Home Five Star Quality Rating System is determined based on analysis of the relationship between staffing levels and measures of nursing home quality. CMS continues to increase its quality measure thresholds, which is regularly increased every six months, making it more difficult to achieve upward and five-star ratings. CMS increased its quality measure thresholds in 2022, making it more difficult for facilities to obtain or maintain four-and-five-star ratings. CMS places a strong emphasis on registered nurse (“RN”) staffing. CMS posts information on nursing home staffing measures on the Care Compare website including staff turnover rates and weekend staffing levels. This new data has been incorporated into the Nursing Home Five Star Quality Rating System.
Federal minimum staffing mandates may adversely affect our labor costs, ability to maintain desired levels of patient census and profitability. In April 2024, CMS issued the Staffing Rule, establishing minimum staffing standards for SNFs. The Staffing Rule contains three primary staffing requirements which arewould be phased in over the next several years. Due to pending legislation in both the House of Representatives and the Senate, industry litigation filed to dispute the Staffing Rule's validity and enforceability, as well as the long phase-in of the requirements, the exact effectsImplementation of the Staffing Rule cannotwas beimpaired determined.by the passage of the One Big Beautiful Bill Act (“OBBB”) on July 4, 2025, which prohibited HHS from implementing, administering, or enforcing the Staffing Rule until October 1, 2034. Future developments may significantly alter or even halt the implementation of the Staffing Rule. However, we expect that the Staffing Rule in its current form will have adverse financial consequences upon our business.
During 2024, we expanded our operations with the acquisition of the White Oak Senior Living portfolio. This growth has placed and will continue to place significant demands on our management resources. Our ability to manage our growth effectively and to successfully integrate this acquisition into our existing business will require us to expand our operation, financial and management information systems.
We are required to comply with laws governing the transmission and privacy and security of health information. The Health Insurance Portability and Accountability Act of 1996, or ("HIPAA"), requires the use of uniform electronic data transmission standards for healthcare claims and payment transactions submitted or received electronically. In addition, as required by HIPAA, the HHS has issued privacy and security regulations that extensively regulate the use and disclosure of individually identifiable health information (known as Protected Health Information, or PHI) and require covered entities, including healthcare providers and health plans, and vendors known as "business associates," to implement administrative, physical and technical safeguards to protect the security of PHI. Covered entities must report breaches of unsecured PHI without unreasonable delay to affected individuals, HHS and, in the case of larger breaches, the media. The privacy, security and breath notification regulations have imposed, and will continue to impose, significant compliance costs on our operations.
Management's Discussion & Analysis (MD&A)
New heading “2025 Compared to 2024”
New heading “Net operating revenues and grant income”
Removed heading “2023 Compared to 2022”
Removed heading “Revenue Recognition – Third Party Payors”
Largest changes
“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.”see in full comparison
“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.”see in full comparison
“White Oak, acquired on August 1, 2024 and with a full year of operations in 2025, attributed to $227,545,000 in net patient revenues for the year ended December 31, 2025 compared to $96,052,000 for the year ended December 31, 2024. Also included in net patient revenues for the years ended December 31, 2025 and 2024, respectively, is $7,246,000 and $12,749,000 of supplemental Medicaid payments that were received to help mitigate the healthcare workforce crisis and the inflationary labor market.”see in full comparison
“Medicare and Medicaid program revenues, as well as certain Managed Care program revenues, are subject to audit and retroactive adjustment by government representatives or their agents. Settlements with third-party payors for retroactive adjustments due to audits, reviews or investigations are considered variable consideration and are included in the determination of the estimated transaction price for providing patient care. …”see in full comparison
Full comparison: every changed paragraph (61)
On August 1, 2024, the Company purchased the assets of White Oak portfolio,Management, includingInc. its(“White long-term care pharmacy.Oak”). The White Oak portfolio consistsconsisted of 15 skilled nursing facilities, two assisted living facilities, and four independent living facilities.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.
The Company’s CODM evaluates performance including pretax earnings and allocates capital resources to each segment based on an operating model that is designed to improve the quality of patient care and profitability of the Company, while enhancing long-term shareholder value. The CODM does not review assets by segment in his resource allocation and therefore, assets by segment are not disclosed below.
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.
2025 Compared to 2024
Net operating revenues and stimulus income for the year ended December 31, 2025 totaled $1,517,781,000 compared to $1,307,382,000 for the year ended December 31, 2024, an increase of 16.1%. The net operating revenues increase was due to an 8.4% increase in same-facility net operating revenues, as well as the August 1, 2024 acquisition of White Oak Manor ("White Oak").
For the year ended December 31, 2025, GAAP net income attributable to NHC was $120,015,000 compared to net income of $101,927,000 for the same period in 2024. Excluding the unrealized gains in our marketable equity securities portfolio and other non-GAAP adjustments, adjusted net income was $104,067,000 for the year ended December 31, 2025 compared to $76,862,000 for the same period a year ago. The increase in non-GAAP earnings for the year ended December 31, 2025 compared to 2024 was primarily due to the continued increase in skilled nursing census, skilled nursing per diem increases from some of our governmental payors, the continued reduction of agency staffing expense, 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 patient revenues totaled $1,469,631,000 in 2025, an increase of $217,872,000, or 17.4%, compared to 2024.
The overall average census in owned and leased skilled nursing facilities for 2025 was 89.7% compared to 88.6% in 2024. The composite skilled nursing facility per diem increased 4.0% in 2025 compared to 2024. Medicare and managed care per diem rates increased 5.1% and 3.9%, respectively, in 2025 compared to 2024. Medicaid and private pay per diem rates increased 3.5% and 6.8%, respectively, in 2025 compared to 2024.
White Oak, acquired on August 1, 2024 and with a full year of operations in 2025, attributed to $227,545,000 in net patient revenues for the year ended December 31, 2025 compared to $96,052,000 for the year ended December 31, 2024. Also included in net patient revenues for the years ended December 31, 2025 and 2024, respectively, is $7,246,000 and $12,749,000 of supplemental Medicaid payments that were received to help mitigate the healthcare workforce crisis and the inflationary labor market.
Other revenues in 2025 were $48,150,000, an increase of $1,972,000, or 4.3%, as further detailed in Note 3 to our consolidated financial statements.
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 were $1,389,429,000 for 2025, an increase of $171,942,000, or 14.1%, from $1,217,487,000 in 2024.
Salaries, wages, and benefits increased $110,150,000, or 13.6%, to $921,080,000 in 2025 from $810,930,000 in 2024. Salaries, wages, and benefits as a percentage of net operating revenues and stimulus income was 60.7% compared to 62.0% for the years ended December 31, 2025 and 2024, respectively.
The White Oak operations attributed to an increase of $87,199,000 in salaries, wages, and benefits for the year ended December 31, 2025 compared to the prior year.
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 expenses within our healthcare operations. The labor and workforce shortages have resulted in us contracting with agency nurse staffing companies. For the year ended December 31, 2025 our agency nurse staffing expenses decreased $9,335,000, or approximately 66.6%, compared to the same period a year ago.
Other operating expenses increased $55,812,000, or 17.4%, to $377,202,000 for the year ended December 31, 2025 compared to $321,390,000 for the prior year. Other operating expenses as a percentage of net operating revenues and stimulus income was 24.9% and 24.6% for the years ended December 31, 2025 and 2024, respectively.
The White Oak operations attributed to an increase of $32,737,000 in other operating expenses for the year ended December 31, 2025 compared to 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 $17,563,000 for the year ended December 31, 2025 compared to the same period a year ago.
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.
Facility rent expense increased $3,045,000, or 7.1%, to $46,227,000 in 2025. Depreciation and amortization increased 7.0% to $44,920,000 in 2025. Interest expense increased $2,236,000 to $6,371,000 in 2025 from $4,135,000 in 2024 related to the outstanding long-term debt due to the White Oak acquisition in August 2024.
Non–operating income decreased by $1,583,000, or 8.0% to $18,107,000 in 2025 compared to the prior year, as further detailed in Note 4 to our consolidated financial statements.
We recorded unrealized gains in the amount of $22,344,000 for the increase in fair value of our marketable equity securities portfolio for the year ended December 31, 2025. The marketable equity securities portfolio consists mainly of publicly-traded healthcare REIT’s and other blue-chip public companies held within our insurance companies.
The income tax provision for 2025 is $39,826,000 (an effective income tax rate of 24.5%).
Net operating revenues and grantstimulus 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, 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.
Net operating revenues and grant income
Salaries, wages, and benefits increased $98,586,000, or 13.8%, to $810,930,000 in 2024 from $712,344,000.$712,344,000 in 2023. 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.
Facility rent expense increased $1,657,000, or 4.0%, to $43,182,000.$43,182,000 in 2024. Depreciation and amortization decreased 0.1% to $41,985,000.$41,985,000 in 2024. 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 in 2024 compared to the prior year, as further detailed in Note 5 to our consolidated financial statements.
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, gains on sale of property and equipment, operating results for start-up healthcare operations not at full capacity, acquisition related expenses, the recognition of the employee retention credit, and gains on sales of unconsolidated companies is helpful in allowing investors to assess the Company’s operations more accurately.
2023 Compared to 2022
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. 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. 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.
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. The composite skilled nursing facility per diem increased 6.7% in 2023 compared to 2022. Medicare and managed care per diem rates increased 3.3% and 5.9%, respectively, in 2023 compared to 2022. Medicaid and private pay per diem rates increased 9.4% and 5.5%, respectively, in 2023 compared to 2022.
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 prior 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 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.
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 for 2023 increased $30,568,000, or 2.9%, to $1,084,410,000 from $1,053,842,000 in 2022.
Salaries, wages, and benefits increased $26,175,000, or 3.8%, to $712,344,000 from $686,169,000. 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.
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, 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. 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 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.
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. 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.
Facility rent expense increased $548,000, or 1.3%, to $41,525,000. 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.
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.
The income tax provision for 2023 is $23,450,000 (an effective income tax rate of 26.4%).
Net cash provided by operating activities for the year ended December 31, 20242025 was $107,303,000$185,078,000 as compared to $111,216,000$107,303,000 and $8,742,000$111,216,000 for the years ended December 31, 20232024 and 2022,2023, respectively. Cash provided by operating activities consisted of net income of $102,086,000$122,606,000 and adjustments for non–cash items of $32,027,000.$30,244,000. There was cash usedprovided forby working capital needs in the amount of $25,717,000$33,395,000 for the year ended December 31, 2024, which was primarily driven by the White Oak acquisition.2025. In 2023,2024, there was cash providedused byfor working capital in the amount of $17,396,000.$25,717,000.
Included in the adjustments for non-cash items are depreciation expense, equity in earnings of unconsolidated investments, unrealized lossesgains on our marketable equity securities, gain on the sale of anproperty unconsolidatedand company,equipment, deferred taxes, and stock compensation.
Net cash used in investing activities totaled $236,693,000$33,858,000 for the year ended December 31, 2024,2025, as compared to $17,568,000$236,693,000 and $5,978,000$17,568,000 for the years ended December 31, 20232024 and 2022,2023, 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 $36,446,000, $27,600,000, $27,901,000, and $30,200,000$27,901,000 for the years ended December 31, 2024,2025, 20232024 and 2022,2023, respectively. For the year ended December 31, 2024,2025, we contributed capital of $14,298,000$5,629,000 tofor atwo joint venture, multi-family developmentdevelopments that isare under construction in Franklin,Nashville, Tennessee.Tennessee Incompared Januaryto 2024,$14,298,000 for the Companysame sold its 50% joint venture ownership interestperiod in a homecare agency resulting in proceeds from the saleprior of $2,100,000.year. Proceeds from the sale of marketable securities, net of purchases, resulted in cash proceeds of $7,705,000, $16,913,000, $17,895,000, and $16,168,000$17,895,000 in 2025, 2024, and 2023, and 2022, respectively.
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.
Net cash used in financing activities totaled $135,955,000 for the year ended December 31, 2025. 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 yearsyear ended December 31, 20232023. and 2022, 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 wasCash used to pay down the outstanding principal balance of theour long-term debt.debt was $97,000,000 and $13,000,000 for the years ended December 31, 2025 and 2024, respectively. Dividends paid to common stockholders was $38,704,000, $36,964,000, $35,560,000, and $34,604,000$35,560,000 for the years ended December 31, 2024,2025, 20232024 and 2022,2023, respectively. Proceeds from the issuance of common stock totaled $14,214,000, $14,268,000, $313,000, and $2,114,000$313,000 for 2024,2025, 20232024 and 2022,2023, respectively. We repurchased common shares outstanding in the amount of $14,730,000, $13,502,000, $2,482,000, and $9,903,000$2,482,000 for the years ended December 31, 2025, 2024, and 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.
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.
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.
The Company determines the transaction price based on established billing rates reduced by explicit price concessions provided to third party payors. Explicit price concessions are based on contractual agreements and historical experience. 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 in the consolidated statements of operationsoperations.
Revenue Recognition – Third Party Payors
Medicare and Medicaid program revenues, as well as certain Managed Care program revenues, are subject to audit and retroactive adjustment by government representatives or their agents. Settlements with third-party payors for retroactive adjustments due to audits, reviews or investigations are considered variable consideration and are included in the determination of the estimated transaction price for providing patient care. These settlements are estimated based on the terms of the payment agreement with the payor, correspondence from the payor and the Company’s historical settlement activity, including an assessment to ensure that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the retroactive adjustment is subsequently resolved.
What changed in the latest 10-Q
Risk Factors
During the six months ended June 30, 2026, there were no material changes to the risk factors that were disclosed in Item 1A of National HealthCare Corporation’s Annual Report on Form 10-K for the year ended December 31, 2025.
Full comparison: every changed paragraph (1)
During the threesix months ended MarchJune 31,30, 2026, there were no material changes to the risk factors that were disclosed in Item 1A of National HealthCare Corporation’s Annual Report on Form 10-K for the year ended December 31, 2025.
Management's Discussion & Analysis (MD&A)
New heading “Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025”
Largest changes
“Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025”see in full comparison
“Salaries, wages, and benefits increased $6,944,000, or 3.0%, to $235,074,000 from $228,130,000. Salaries, wages, and benefits as a percentage of net operating revenues was 61.6% compared to 61.0% for the three months ended March 31, 2026 and 2025, 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. …”see in full comparison
see in full comparisonNet cash used in investing activities totaled $13,888,000 for the three months ended March 31, 2026, compared to $7,323,000 for the three months ended March 31, 2025.Cash used for property and equipment additions was$9,640,000$22,167,000 and$6,137,000$16,341,000 for thethreesix months endedMarchJune31,30, 2026, and 2025, respectively. The increase in property additions in 2026 was primarily due to the continued development and construction of an assisted living and memory care facility in Tullahoma, Tennessee. For thethreesix months endedMarchJune31,30, 2026, we contributed capital of$3,594,000$6,984,000 for two joint venture, multi-family developments that are under construction in Nashville, Tennessee compared to$2,419,000$3,205,000 for the same period in the prior year.Cash used for purchases of marketable securities, net of proceeds, resulted in cash used of $654,000 for the three months ended March 31, 2026.Proceeds from the sale of marketable securities, net of purchases, resulted in cash provided by investing activities of$1,226,000$2,292,000 for thethreesix months endedMarchJune31,30, 2026. Cash used for purchases of marketable securities, net of proceeds, resulted in cash used of $3,821,000 for the six months ended June 30, 2025.
Insee in full comparisonAprilJuly 2026, CMS released itsproposedfinal rule outlining fiscal year 2027 Medicare payment rates and policy changes for skilled nursing facilities, which will begin on October 1, 2026. The fiscal year 2027 proposal equates to a net 2.4% increase in Medicare Part A payments to SNFs in fiscal year 2027 compared to 2026 levels. The rule includes a market basket increase of3.2%3.3% minus a0.8%0.9% productivity adjustment.Additionally,CMShasalsosignaledfinalizedthatitsitproposalsbelievesrelatedcase-mixtoindexesthehaveSNFincreasedQualityatReporting Program, including the removal of two measures related to COVID-19 vaccination, arateshortenedthatdataexceedsreportingwhattimeline,changesandinthepatient health status alone would justify. The agency is specifically pointingrequirement tosignificantsubmitincreasesassessmentindatacodedforconditionsallsincepatientsPDPMregardlesswasofimplemented in 2019. To restore budget neutrality, CMS is considering two approaches: a blanket 4.3% reduction in case-mix indexes, or varying adjustment factors applied individually across the five PDPM components (OT, PT, SLP, non-therapy ancillary, and nursing). Applied against the proposed 2.4% rate increase, a 3.6% system-wide reduction under this framework could represent a net negative reimbursement outcome.payer.
“Other revenues increased $18,105,000, or 156.6%, compared to the same quarter last year, as further detailed in Note 5 to our interim condensed consolidated financial statements. During the second quarter of 2026, we recognized management fees of $18,325,000 previously earned for management services prior to 2025, but these management fees were not previously recognized as such revenues. These revenues did not previously meet the recognition criteria of ASC Topic 606, Revenue from Contracts with Customers, because the underlying consideration was constrained. …”see in full comparison
“Other revenues increased $18,031,000, or 76.2%, compared to the same period last year, as further detailed in Note 5 to our interim condensed consolidated financial statements. During the second quarter of 2026, we recognized management fees of $18,325,000 previously earned for management services prior to 2025, but these management fees were not previously recognized as such revenues. These revenues did not previously meet the recognition criteria of ASC Topic 606, Revenue from Contracts with Customers, because the underlying consideration was constrained. …”see in full comparison
Full comparison: every changed paragraph (60)
National HealthCare Corporation (“NHC” or the “Company”) is a leading provider of senior health care services. As of MarchJune 31,30, 2026, we operate or manage, through certain affiliates, 80 skilled nursing facilities with a total of 10,323 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. In addition, we provide insurance services, management and accounting services, and we lease properties to operators of skilled nursing and assisted living facilities. We operate in 9 states and are located primarily in the southeastern United States.
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 MarchJune 31,30, 2026 was 90.1% compared to 89.4% for the same period a year ago. For the six months ended June 30, 2026, overall census in our owned and leased skilled nursing facilities was 90.0% compared to 89.3% for the same period a year ago.
The tables below summarize NHC's overall performance in these Five-Star ratings versus the skilled nursing industry as of MarchJune 31,30, 2026:
We are undertaking to expand our senior health care operations while protecting our existing operations and markets. The following table lists our current construction andrecent development activities.
On June 1, 2026, the Company purchased the land, buildings, and other specified assets and assumed certain liabilities of five skilled nursing facilities from National Health Corporation (“National”) for a purchase price of $50,500,000. The operations have 639 licensed skilled nursing beds in the states of South Carolina and Tennessee.
On AprilJuly 21,1, 2026, NHCthe enteredCompany intopurchased athe Purchaseland, facilities, and Sale Agreement to acquire the real estateimprovements of thirty-two skilled nursing facilities and three independent living facilitiesfacilities, currently leased by us as tenant, from National Health Investors (“NHI”) for thea purchase price of $560$560,000,000. million.On NHCthe closing date of the transaction, the lease agreement with NHI is terminated. The Company currently operates and will continue to operate all of thesethe facilities, except four Florida skilled nursing facilities. The four Florida skilled nursing facilities will continue to be subject to a third-party operator’s lease after the closing of the transaction.
We also have two multi-family developments that are currently under construction, both of which we are noncontrolling owners. These developments are located in Franklin, Tennessee and Hermitage, Tennessee with 332 units and 315 units, respectively. Our capital contributions in these developments are included in the line item "Investments in unconsolidated companies" in our interim condensed consolidated balance sheets.
Our accrued professional liability and workers’ compensation reserves totaled $126,500,000$121,129,000 at MarchJune 31,30, 2026 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.
In AprilJuly 2026, CMS released its proposedfinal rule outlining fiscal year 2027 Medicare payment rates and policy changes for skilled nursing facilities, which will begin on October 1, 2026. The fiscal year 2027 proposal equates to a net 2.4% increase in Medicare Part A payments to SNFs in fiscal year 2027 compared to 2026 levels. The rule includes a market basket increase of 3.2%3.3% minus a 0.8%0.9% productivity adjustment. Additionally, CMS hasalso signaledfinalized thatits itproposals believesrelated case-mixto indexesthe haveSNF increasedQuality atReporting Program, including the removal of two measures related to COVID-19 vaccination, a rateshortened thatdata exceedsreporting whattimeline, changesand inthe patient health status alone would justify. The agency is specifically pointingrequirement to significantsubmit increasesassessment indata codedfor conditionsall sincepatients PDPMregardless wasof implemented in 2019. To restore budget neutrality, CMS is considering two approaches: a blanket 4.3% reduction in case-mix indexes, or varying adjustment factors applied individually across the five PDPM components (OT, PT, SLP, non-therapy ancillary, and nursing). Applied against the proposed 2.4% rate increase, a 3.6% system-wide reduction under this framework could represent a net negative reimbursement outcome.payer.
For the first threesix months of 2026, our average Medicare per diem rate for skilled nursing facilities increased 3.0%2.6% as compared to the same period in 2025.
For the first threesix months of 2026, our average Medicaid per diem increased 3.7%2.5% compared to the same period in 2025.
In July 2026, CMS released its proposed rule outlining fiscal year 2027 Medicare payment rates. The proposal includes a 2.4% update, which includes a 3.1% market basket update, reduced by a 1.0% point cut for productivity, as well as an 0.3% increase related to outlier payments. In addition, the agency proposes a temporary cut of 3.0% that it states is necessary to achieve budget-neutral implementation of the Patient-driven Groupings Model. CMS also proposes several policy changes related to provider enrollment provisions that it states would help reduce improper Medicare payments and protect beneficiaries. The provisions would affect any providers and suppliers participating in the Medicare program.
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 2026, CMS released its final rule outlining fiscal year 2027 Medicare payment rates. The final rule includes a 2.3% net increase, which includes a 3.2% market basket update and a 0.9% cut for productivity. The hospice cap would increase to $36,175. Also under the final rule, CMS finalized the fraud-based tool, the service and spending variation index (SSVI), which includes a comprehensive scoring system calculated using nine claims-based measures, each representing a different aspect of hospice utilization as well as nonhospice spending.
The following table and discussion set forth items from the interim condensed consolidated statements of operations as a percentage of net operating revenues for the three and six months ended MarchJune 31,30, 2026 and 2025.
Three Months Ended MarchJune 31,30, 2026 Compared to Three Months Ended MarchJune 31,30, 2025
Results for the quarter ended MarchJune 31,30, 2026 compared to the firstsecond quarter of 2025 include aan 2.2%8.8% increase in net operating revenues. The net operating revenues increase was due to a 3.0% increase in same-facility net operating revenues, as well as the June 1, 2026 acquisition of the five skilled nursing facilities from National Health Corporation.
For the quarter ended MarchJune 31,30, 2026, GAAP net income attributable to NHC was $35,857,000$40,319,000 compared to net income of $32,205,000$23,722,000 for the same period in 2025. Excluding the unrealized gains and losses in our marketable equity securities portfolio and other non-GAAP adjustments, adjusted net income for the quarter ended MarchJune 31,30, 2026 was $30,089,000$27,551,000 compared to $24,838,000$25,710,000 for the same period in 2025, an increase of 21.1%. The increase in non-GAAP earnings for the three months ended March 31, 2026 compared to the same period in 2025 was primarily due to a slight operating margin increase, a reduction of interest expense, and a favorable income tax rate for the quarter.7.2%.
Net patient revenues increased $8,198,000, or 2.3%, compared to the same period last year. When comparing net patient revenues for the first quarter of 2026 to the prior year period, the percentage increase was impacted due to a one-time Missouri retroactive Medicaid rate increase of $5,015,000 recorded in the first quarter of 2025. This retroactive Medicaid rate increase was for the service period of July 1, 2024 through December 31, 2024. For the three months ended March 31, 2026 and 2025, respectively, $1,784,000 and $1,872,000 have been included in our net patient revenues for supplemental Medicaid payments from the state of Tennessee.
The total census at owned and leased skilled nursing facilities for the quarter averaged 90.0%, compared to an average of 89.3% for the same quarter a year ago. Overall, the composite skilled nursing facility per diem increased 3.2% compared to the same quarter a year ago. Our Medicare and Managed Care per diem rates both increased 3.0%, respectively, compared to the same quarter a year ago. Medicaid and private pay per diem rates increased 3.7% and 3.8%, respectively, compared to the same quarter a year ago.
OtherNet patient revenues decreasedincreased $74,000,$15,010,000, or 0.6%,4.1%, compared to the same quarterperiod last year, as further detailed in Note 4 to our interim condensed consolidated financial statements.year.
The total census at owned and leased skilled nursing facilities for the quarter averaged 90.1%, compared to an average of 89.4% for the same quarter a year ago. Overall, the composite skilled nursing facility per diem increased 1.5% compared to the same quarter a year ago. Our Medicare and Managed Care per diem rates increased 2.2% and 2.9%, respectively, compared to the same quarter a year ago. Medicaid and private pay per diem rates increased 1.3% and 3.1%, respectively, compared to the same quarter a year ago. For the three months ended June 30, 2026 and 2025, respectively, $1,821,000 and $1,812,000 have been included in our net patient revenues for supplemental Medicaid payments from the state of Tennessee.
The operations of the five skilled nursing facilities that we acquired from National Health Corporation attributed to an increase of $5,999,000 in net patient revenues for the quarter ended June 30, 2026 compared to the same period in 2025.
Other revenues increased $18,105,000, or 156.6%, compared to the same quarter last year, as further detailed in Note 5 to our interim condensed consolidated financial statements. During the second quarter of 2026, we recognized management fees of $18,325,000 previously earned for management services prior to 2025, but these management fees were not previously recognized as such revenues. These revenues did not previously meet the recognition criteria of ASC Topic 606, Revenue from Contracts with Customers, because the underlying consideration was constrained. Upon the acquisition of the five skilled nursing facilities from National Health Corporation on June 1, 2026, the revenue recognition criteria was met and the management fees were paid and recognized in the current period.
Total costs and expenses for the three months ended MarchJune 31,30, 2026 compared to the same period of 2025 increased $6,638,000,$18,270,000, or 1.9%5.4% to $349,568,000$359,090,000 from $342,930,000.$340,820,000.
Salaries, wages, and benefits increased $6,944,000, or 3.0%, to $235,074,000 from $228,130,000. Salaries, wages, and benefits as a percentage of net operating revenues was 61.6% compared to 61.0% for the three months ended March 31, 2026 and 2025, 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 first quarter of 2026, our agency nurse staffing expense was $1,063,000 compared to $1,487,000 for the first quarter of 2025.
OtherSalaries, operatingwages, expensesand decreasedbenefits $1,220,000,increased $15,368,000, or 1.3%,6.8%, to $91,237,000$241,902,000 forfrom the$226,534,000. 2026Salaries, periodwages, comparedand to $92,457,000 for the 2025 period. Other operating expensesbenefits as a percentage of net operating revenues was 23.9%59.3% andcompared 24.7%to 60.4% for the three months ended MarchJune 31,30, 2026 and 2025, respectively.
The operations of the five skilled nursing facilities that we acquired from National Health Corporation attributed to an increase of $3,732,000 in salaries, wages, and benefits for the quarter ended June 30, 2026 compared to the same period in 2025.
Other operating expenses increased $2,532,000, or 2.8%, to $94,475,000 for the 2026 period compared to $91,943,000 for the 2025 period. Other operating expenses as a percentage of net operating revenues was 23.2% and 24.5% for the three months ended June 30, 2026 and 2025, respectively. The operations of the five skilled nursing facilities that we acquired from National Health Corporation attributed to an increase of $1,489,000 for the quarter ended June 30, 2026 compared to the same period in 2025.
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 in the prior year period.
Non–operating income decreased by $960,000 compared to the same period last year, as further detailed in Note 6 to our interim condensed consolidated financial statements. One of the drivers of the decrease in non-operating income are losses at the multi-family development in Franklin, Tennessee. The multi-family development is opening the apartment buildings in phases and some of the buildings are currently being leased. We have incurred losses of $589,000 for the second quarter of 2026 related to this development.
Non–operating income decreased by $322,000 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 MarchJune 31,30, 2026 is $8,712,000$13,472,000 (an effective income tax rate of 19.4%24.9%). For the three months ended March 31, 2026, the excess tax over book deductions for stock compensation was the most significant item impacting the effective income tax rate.
Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025
Results for the six months ended June 30, 2026 compared to the same period of 2025 include a 5.5% increase in net operating revenues. The net operating revenues increase was due to a 2.9% increase in same-facility net operating revenues, as well as the June 1, 2026 acquisition of the five skilled nursing facilities from National Health Corporation.
For the six months ended June 30, 2026, GAAP net income attributable to NHC was $76,176,000 compared to net income of $55,927,000 for the same period in 2025. Excluding the unrealized gains and losses in our marketable equity securities portfolio and other non-GAAP adjustments, adjusted net income for the six months ended June 30, 2026 was $57,640,000 compared to $50,549,000 for the same period in 2025, an increase of 14.0%.
Net patient revenues increased $23,208,000, or 3.2%, compared to the same period last year.
The total census at owned and leased skilled nursing facilities for the six months ended June 30, 2026 averaged 90.0%, compared to an average of 89.3% for the same period a year ago. Overall, the composite skilled nursing facility per diem increased 2.3% compared to the same period a year ago. Our Medicare per diem rates increased 2.6% and managed care per diem rates increased 2.9% compared to the same period a year ago. Medicaid and private pay per diem rates increased 2.5% and 3.4%, respectively, compared to the same period a year ago. For the six months ended June 30, 2026 and 2025, $3,605,000 and $3,684,000, respectively, have been included in our net patient revenues for supplemental Medicaid payments.
The operations of the five skilled nursing facilities that we acquired from National Health Corporation attributed to an increase of $5,999,000 in net patient revenues for the six months ended June 30, 2026 compared to the same period in 2025.
Other revenues increased $18,031,000, or 76.2%, compared to the same period last year, as further detailed in Note 5 to our interim condensed consolidated financial statements. During the second quarter of 2026, we recognized management fees of $18,325,000 previously earned for management services prior to 2025, but these management fees were not previously recognized as such revenues. These revenues did not previously meet the recognition criteria of ASC Topic 606, Revenue from Contracts with Customers, because the underlying consideration was constrained. Upon the acquisition of the five skilled nursing facilities from National Health Corporation on June 1, 2026, the revenue recognition criteria was met and the management fees were paid and recognized in the current period.
Total costs and expenses for the six months ended June 30, 2026 compared to the same period of 2025 increased $24,908,000, or 3.6% to $708,658,000 from $683,750,000.
Salaries, wages, and benefits increased $22,312,000, or 4.9%, to $476,976,000 from $454,664,000. Salaries, wages, and benefits as a percentage of net operating revenues was 60.4% compared to 60.7% for the six months ended June 30, 2026 and 2025, respectively.
The operations of the five skilled nursing facilities that we acquired from National Health Corporation attributed to an increase of $3,732,000 in salaries, wages, and benefits for the six months ended June 30, 2026 compared to the same period in 2025.
Other operating expenses increased $1,312,000, or 0.7%, to $185,712,000 for the 2026 period compared to $184,400,000 for the 2025 period. Other operating expenses as a percentage of net operating revenues was 23.5% and 24.6% for the six months ended June 30, 2026 and 2025, respectively. The operations of the five skilled nursing facilities that we acquired from National Health Corporation attributed to an increase of $1,489,000 for the six months ended June 30, 2026 compared to the same period in 2025.
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 in the prior year period.
Other income
Non–operating income decreased by $1,282,000 compared to the same period last year, as further detailed in Note 6 to our interim condensed consolidated financial statements. One of the drivers of the decrease in non-operating income are losses at the multi-family development in Franklin, Tennessee. The multi-family development is opening the apartment buildings in phases and some of the buildings are currently being leased. For the six months ending June 30, 2026, we have incurred losses of $935,000 related to this development.
Income taxes
The income tax provision for the six months ended June 30, 2026 is $22,184,000 (an effective income tax rate of 22.4%).
Specifically, the Company believes the presentation of non-GAAP financial information that excludes the unrealized gains or losses on our marketable equity securities and share-based compensation expense is helpful in allowing investors to assess the Company’s operations more accurately.
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, long-term debt payments, 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.
Net cash provided by operating activities for the threesix months ended MarchJune 31,30, 2026 was $62,533,000$105,802,000 as compared to $39,255,000$102,074,000 in the same period last year. Cash provided by operating activities consisted of net income of $36,103,000$76,640,000 and adjustments for non–cash items of $6,891,000.$19,029,000. There was cash provided by working capital in the amount of $19,712,000$9,474,000 and $32,831,000 for the threesix months ended MarchJune 31,30, 2026 comparedand to2025, $4,827,000 for the same period a year ago.respectively.
Included in the adjustments for non-cash items are depreciation expense, equity in lossesearnings of unconsolidated investments, unrealized gains on our marketable equity securities, gain on sale of property and equipment, deferred taxes, and stock compensation.
Net cash used in investing activities totaled $101,557,000 for the six months ended June 30, 2026, compared to $22,902,000 for the six months ended June 30, 2025. During 2026, the Company acquired five skilled nursing centers from National Health Corporation for $52,198,000, paid $20,000,000 into an escrow account to be used against the purchase price of the thirty-two skilled nursing facilities and three independent living facilities from NHI, and also purchased land in Mount Juliet, Tennessee for $2,500,000.
Net cash used in investing activities totaled $13,888,000 for the three months ended March 31, 2026, compared to $7,323,000 for the three months ended March 31, 2025. Cash used for property and equipment additions was $9,640,000$22,167,000 and $6,137,000$16,341,000 for the threesix months ended MarchJune 31,30, 2026, and 2025, respectively. The increase in property additions in 2026 was primarily due to the continued development and construction of an assisted living and memory care facility in Tullahoma, Tennessee. For the threesix months ended MarchJune 31,30, 2026, we contributed capital of $3,594,000$6,984,000 for two joint venture, multi-family developments that are under construction in Nashville, Tennessee compared to $2,419,000$3,205,000 for the same period in the prior year. Cash used for purchases of marketable securities, net of proceeds, resulted in cash used of $654,000 for the three months ended March 31, 2026. Proceeds from the sale of marketable securities, net of purchases, resulted in cash provided by investing activities of $1,226,000$2,292,000 for the threesix months ended MarchJune 31,30, 2026. Cash used for purchases of marketable securities, net of proceeds, resulted in cash used of $3,821,000 for the six months ended June 30, 2025.
Net cash used in financing activities totaled $54,504,000$64,154,000 for the threesix months ended MarchJune 31,30, 2026 compared to $12,693,000$45,732,000 for the threesix months ended MarchJune 31,30, 2025. During the first quarter of 2026, cash of $40,000,000 was used to pay down the outstanding principal balance of the long-term debt compared to $3,000,000$27,000,000 for the same period in the prior year. Cash used for dividend payments to common stockholders totaled $9,941,000$19,930,000 and $9,420,000$18,854,000 for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. Proceeds from the issuance of common stock totaled $12,268,000$19,459,000 and $1,278,000$6,462,000 for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. We repurchased common shares outstanding in the amount of $16,321,000$23,561,000 and $1,722,000$6,384,000 for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. The repurchased common shares were all from employee stock option exercises and were not from repurchases on the open market.
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 $85,526,000$39,209,000 and unrestricted marketable equity securities of $172,826,000.$170,981,000. 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.
We expect to meet our long-term liquidity requirements primarily from our cash flows from operating activities, our current cash on hand of $85,526,000,$39,209,000, our unrestricted marketable equity securities of $172,826,000,$170,981,000, and the additional borrowing capacity on our unencumbered assets and real estate.
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Laws and regulations governing the Medicare, Medicaid and other federal healthcare programs are complex and subject to interpretation. Management believes that it is following all applicable laws and regulations in all material respects. However, compliance with such laws and regulations can be subject to future government review and interpretation as well as significant regulatory action including fines, penalties, and exclusions from the Medicare, Medicaid, and other federal healthcare programs.
NHC insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 1 Form 4 filing (1 insider, 1 trade date, 949 shares, about $174.9K) and open-market sales in 10 filings (9 insiders, 14 trade dates, 41,498 shares, about $8.9M). Net open-market shares: -40,549 (purchases minus sales); net value about -$8.7M.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-22 | Dodson Vicki L |
Open-market sale | 4,834 | $225.00 | $1.1M |
| 2026-09-11 | Kidd Brian F |
Open-market sale | 6,813 | $225.70 | $1.5M |
| 2026-09-10 | Mccreary Josh A |
Open-market sale | 1,291 | $225.09 | $290.6K |
| 2026-09-10 | Mccreary Josh A |
Open-market sale | 789 | $223.78 | $176.6K |
| 2026-09-10 | Mccreary Josh A |
Open-market sale | 571 | $222.73 | $127.2K |
| 2026-09-10 | Mccreary Josh A |
Open-market sale | 68 | $225.59 | $15.3K |
| 2026-08-28 | Flatt Ben Anderson Sr |
Open-market sale | 1,000 | $222.50 | $222.5K |
| 2026-08-25 | Flatt Ben Anderson Sr |
Open-market sale | 1,000 | $227.00 | $227.0K |
| 2026-08-25 | Gifford David R. |
Open-market sale | 1,779 | $225.42 | $401.0K |
| 2026-08-20 | Flatt Ben Anderson Sr |
Open-market sale | 1,000 | $237.00 | $237.0K |
| 2026-08-20 | Gifford David R. |
Grant/award | 4,691 | $236.75 | $1.1M |
| 2026-08-20 | Gifford David R. |
Option exercise | 6,479 | $171.42 | $1.1M |
| 2026-08-19 | Flatt Ben Anderson Sr |
Open-market sale | 1,000 | $237.18 | $237.2K |
| 2026-08-19 | Flatt Stephen Fowler |
Open-market sale | 1,500 | $237.08 | $355.6K |
| 2026-08-17 | Flatt Ben Anderson Sr |
Open-market sale | 1,000 | $226.00 | $226.0K |
| 2026-08-14 | Flatt Ben Anderson Sr |
Open-market sale | 1,000 | $222.11 | $222.1K |
| 2026-08-13 | Gifford David R. |
Option exercise | 1,021 | $171.42 | $175.0K |
| 2026-08-12 | Flatt Ben Anderson Sr |
Open-market sale | 1,000 | $221.21 | $221.2K |
| 2026-06-22 | Hassan Emil E |
Open-market sale | 5,937 | $200.00 | $1.2M |
| 2026-06-16 | Kidd Brian F |
Gift | 500 | — | — |
| 2026-06-16 | Hassan Emil E |
Open-market sale | 1,563 | $199.98 | $312.6K |
| 2026-06-08 | Adams Robert G |
Option exercise | 4,000 | $69.19 | $276.8K |
| 2026-06-08 | Adams Robert G |
Gift | 4,000 | — | — |
| 2026-06-01 | Piercey Lisa |
Open-market purchase | 949 | $184.26 | $174.9K |
| 2026-05-22 | Flatt Ben Anderson Sr |
Shares withheld for tax | 2,739 | $196.00 | $536.8K |
| 2026-05-22 | Flatt Ben Anderson Sr |
Option exercise | 4,000 | $94.10 | $376.4K |
| 2026-05-21 | Laroche Richard F Jr |
Open-market sale | 7,500 | $195.14 | $1.5M |
| 2026-05-20 | Flatt Stephen Fowler |
Gift | 26 | — | — |
| 2026-05-19 | Shelly Timothy J. |
Open-market sale | 1,853 | $197.22 | $365.4K |
| 2026-05-14 | Flatt Stephen Fowler |
Option exercise | 5,000 | $94.10 | $470.5K |
| 2026-05-14 | Flatt Stephen Fowler |
Option exercise | 1,000 | $90.62 | $90.6K |
| 2026-05-14 | Flatt Stephen Fowler |
Shares withheld for tax | 4,492 | $197.96 | $889.2K |
| 2026-05-14 | Kidd Brian F |
Option exercise | 4,000 | $94.10 | $376.4K |
| 2026-05-14 | Kidd Brian F |
Option exercise | 500 | $90.62 | $45.3K |
| 2026-05-14 | Kidd Brian F |
Shares withheld for tax | 3,134 | $197.96 | $620.4K |
| 2026-05-06 | Trail Sandra Y. |
Option exercise | 3,140 | $55.75 | $175.1K |
| 2026-05-05 | Laroche Richard F Jr |
Option exercise | 7,500 | $71.64 | $537.3K |
| 2026-04-30 | Hassan Emil E |
Option exercise | 7,500 | $71.64 | $537.3K |
| 2026-04-22 | Dodson Vicki L |
Shares withheld for tax | 2,853 | $173.63 | $495.4K |
| 2026-04-22 | Dodson Vicki L |
Option exercise | 4,000 | $94.10 | $376.4K |
| 2026-04-09 | Flatt Ben Anderson Sr |
Shares withheld for tax | 2,109 | $176.81 | $372.9K |
| 2026-04-09 | Flatt Ben Anderson Sr |
Option exercise | 3,734 | $53.94 | $201.4K |
| 2026-04-09 | Flatt Ben Anderson Sr |
Shares withheld for tax | 1,909 | $176.81 | $337.5K |
Well-known investors holding NHC (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Renaissance Technologies | 2026-06-30 | 299,717 | $63.3M | 0.09% | Reduced 11% |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 27,107 | $5.7M | 0.0% | Reduced 10% |
| Two Sigma Investments | 2026-06-30 | 6,629 | $1.4M | 0.0% | Reduced 92% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 7,942 | $1.3M | — | Sold out |
| Gotham Asset Management (Joel Greenblatt) | 2026-06-30 | 1,507 | $240.7K | — | Sold out |