The following table sets forth the Company’s unaudited interim condensed consolidated statements of operations by business segment (in thousands):
Three Months Ended March 31, 2026
| Line item | Inpatient Services | Homecare and Hospice | All Other | Total |
|---|---|---|---|---|
| Revenues: | ||||
| Net patient revenues | $330,330 | $39,475 | - | $369,805 |
| Other revenues | 386 | - | 11,630 | 12,016 |
| Net operating revenues | 330,716 | 39,475 | 11,630 | 381,821 |
| Costs and expenses: | ||||
| Salaries, wages, and benefits | 197,092 | 24,655 | 13,327 | 235,074 |
| Other operating | 81,080 | 6,500 | 3,657 | 91,237 |
| Rent | 9,085 | 625 | 1,933 | 11,643 |
| Depreciation and amortization | 10,412 | 130 | 1,072 | 11,614 |
| Total costs and expenses | 297,669 | 31,910 | 19,989 | 349,568 |
| Income/(loss) from operations | 33,047 | 7,565 | (8,359) | 32,253 |
| Non-operating income | - | - | 3,757 | 3,757 |
| Interest expense | (269) | - | - | (269) |
| Unrealized gains on marketable equity securities | - | - | 9,074 | 9,074 |
| Income before income taxes | $32,778 | $7,565 | $4,472 | $44,815 |
Three Months Ended March 31, 2025
| Line item | Inpatient Services | Homecare and Hospice | All Other | Total |
|---|---|---|---|---|
| Revenues: | ||||
| Net patient revenues | $325,478 | $36,129 | - | $361,607 |
| Other revenues | 373 | - | 11,717 | 12,090 |
| Net operating revenues | 325,851 | 36,129 | 11,717 | 373,697 |
| Costs and expenses: | ||||
| Salaries, wages, and benefits | 192,437 | 22,404 | 13,289 | 228,130 |
| Other operating | 81,870 | 7,258 | 3,329 | 92,457 |
| Rent | 8,834 | 608 | 1,923 | 11,365 |
| Depreciation and amortization | 10,062 | 130 | 786 | 10,978 |
| Total costs and expenses | 293,203 | 30,400 | 19,327 | 342,930 |
| Income/(loss) from operations | 32,648 | 5,729 | (7,610) | 30,767 |
| Non-operating income | - | - | 4,079 | 4,079 |
| Interest expense | (2,106) | - | - | (2,106) |
| Unrealized gains on marketable equity securities | - | - | 10,982 | 10,982 |
| Income before income taxes | $30,542 | $5,729 | $7,451 | $43,722 |
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 for the three months ended March 31, 2026 and 2025.
Percentage of Net Operating Revenues
| Line item | Three Months Ended March 312026 | Three Months Ended March 312025 |
|---|---|---|
| Net operating revenues | 100.0% | 100.0% |
| Costs and expenses: | ||
| Salaries, wages, and benefits | 61.6 | 61.0 |
| Other operating | 23.9 | 24.7 |
| Facility rent | 3.1 | 3.1 |
| Depreciation and amortization | 3.0 | 3.0 |
| Total costs and expenses | 91.6 | 91.8 |
| Income from operations | 8.4 | 8.2 |
| Non–operating income | 1.0 | 1.1 |
| Interest expense | (0.1) | (0.6) |
| Unrealized gains on marketable equity securities | 2.4 | 3.0 |
| Income before income taxes | 11.7 | 11.7 |
| Income tax provision | (2.2) | (3.1) |
| Net income | 9.5 | 8.6 |
| Net income attributable to noncontrolling interest | (0.1) | (0.0) |
| Net income attributable to stockholders of NHC | 9.4% | 8.6% |
Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025
Results for the quarter ended March 31, 2026 compared to the first quarter of 2025 include a 2.2% increase in net operating revenues.
For the quarter ended March 31, 2026, GAAP net income attributable to NHC was $35,857,000 compared to net income of $32,205,000 for the same period in 2025. Excluding the unrealized gains in our marketable equity securities portfolio and other non-GAAP adjustments, adjusted net income for the quarter ended March 31, 2026 was $30,089,000 compared to $24,838,000 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.
Net operating revenues
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.
Other revenues decreased $74,000, or 0.6%, 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 March 31, 2026 compared to the same period of 2025 increased $6,638,000, or 1.9% to $349,568,000 from $342,930,000.
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.
Other operating expenses decreased $1,220,000, or 1.3%, to $91,237,000 for the 2026 period compared to $92,457,000 for the 2025 period. Other operating expenses as a percentage of net operating revenues was 23.9% and 24.7% for the three months ended March 31, 2026 and 2025, respectively.
Other income
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.
Income taxes
The income tax provision for the three months ended March 31, 2026 is $8,712,000 (an effective income tax rate of 19.4%). 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.
Noncontrolling interest
The noncontrolling interest in subsidiaries is presented within total equity of the Company’s consolidated balance sheets. The Company presents the noncontrolling interest and the amount of consolidated net income attributable to NHC in its consolidated statements of operations. The Company’s earnings per share is calculated based on net income attributable to NHC’s stockholders. The carrying amount of the noncontrolling interest is adjusted based on an allocation of subsidiary earnings based on ownership interest.
Non-GAAP Financial Presentation
The Company is providing certain non-GAAP financial measures as the Company believes that these figures are helpful in allowing investors to more accurately assess the ongoing nature of the Company’s operations and measure the Company’s performance more consistently across periods. Therefore, the Company believes this information is meaningful in addition to the information contained in the GAAP presentation of financial information. 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 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):
| Line item | Three Months Ended March 312026 | Three Months Ended March 312025 |
|---|---|---|
| Net income attributable to National Healthcare Corporation | $35,857 | $32,205 |
| Non-GAAP adjustments | ||
| Unrealized gains on marketable equity securities | (9,074) | (10,982) |
| Share-based compensation expense | 1,280 | 1,027 |
| Income tax expense on non-GAAP adjustments | 2,026 | 2,588 |
| Non-GAAP Net income | $30,089 | $24,838 |
| GAAP diluted earnings per share | $2.27 | $2.07 |
| Non-GAAP adjustments | ||
| Unrealized gains on marketable equity securities | (0.57) | (0.71) |
| Share-based compensation expense | 0.08 | 0.06 |
| Income tax expense on non-GAAP adjustments | 0.13 | 0.17 |
| Non-GAAP diluted earnings per share | $1.91 | $1.59 |
Liquidity, Capital Resources, and Financial Condition
Our primary sources of cash include revenues from the operations of our healthcare and senior living facilities, management and accounting services, rental income, and investment income. Our primary uses of cash include salaries, wages and other operating costs of our healthcare and senior living facilities, the cost of additions to and acquisitions of real property, facility rent expenses, and dividend distributions. These sources and uses of cash are reflected in our interim condensed consolidated statements of cash flows and are discussed in further detail below.
The following is a summary of our sources and uses of cash flows (dollars in thousands):
| Line item | Three Months Ended March 312026 | Three Months Ended March 312025 | Three Month Change$ | Three Month Change% |
|---|---|---|---|---|
| Cash, cash equivalents, restricted cash, and restricted cash equivalents, at beginning of period | $112,187 | $96,922 | $15,265 | 15.7% |
| Cash provided by operating activities | 62,533 | 39,255 | 23,278 | 59.3 |
| Cash used in investing activities | (13,888) | (7,323) | (6,565) | (89.6) |
| Cash used in financing activities | (54,504) | (12,693) | (41,811) | (329.4) |
| Cash, cash equivalents, restricted cash, and restricted cash equivalents, at end of period | $106,328 | $116,161 | $(9,833) | (8.5 |
Operating Activities
Net cash provided by operating activities for the three months ended March 31, 2026 was $62,533,000 as compared to $39,255,000 in the same period last year. Cash provided by operating activities consisted of net income of $36,103,000 and adjustments for non–cash items of $6,891,000. There was cash provided by working capital in the amount of $19,712,000 for the three months ended March 31, 2026 compared to $4,827,000 for the same period a year ago.
Included in the adjustments for non-cash items are depreciation expense, equity in losses of unconsolidated investments, unrealized gains on our marketable equity securities, deferred taxes, and stock compensation.
Investing Activities
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 and $6,137,000 for the three months ended March 31, 2026, and 2025, respectively. For the three months ended March 31, 2026, we contributed capital of $3,594,000 for two joint venture, multi-family developments that are under construction in Nashville, Tennessee compared to $2,419,000 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 for the three months ended March 31, 2025.
Financing Activities
Net cash used in financing activities totaled $54,504,000 for the three months ended March 31, 2026 compared to $12,693,000 for the three months ended March 31, 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 for the same period in the prior year. Cash used for dividend payments to common stockholders totaled $9,941,000 and $9,420,000 for the three months ended March 31, 2026 and 2025, respectively. Proceeds from the issuance of common stock totaled $12,268,000 and $1,278,000 for the three months ended March 31, 2026 and 2025, respectively. We repurchased common shares outstanding in the amount of $16,321,000 and $1,722,000 for the three months ended March 31, 2026 and 2025, respectively. The repurchased common shares were all from employee stock option exercises and were not from repurchases on the open market.
Short–term liquidity
We expect to meet our short-term liquidity requirements primarily from our cash flows from operating activities. In addition to cash flows from operations, we have current cash on hand of $85,526,000 and unrestricted marketable equity securities of $172,826,000. We also have unencumbered real estate and the borrowing capacity on our $50 million available line of credit. We believe these various resources are adequate to meet our contractual obligations and growth and development plans in the next twelve months.
Long–term liquidity
We expect to meet our long-term liquidity requirements primarily from our cash flows from operating activities, our current cash on hand of $85,526,000, our unrestricted marketable equity securities of $172,826,000, and the borrowing capacity on our unencumbered real estate.
Our ability to meet our long–term contractual obligations, and to finance our operating requirements and growth 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 healthcare, 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.
Commitment and Contingencies
Governmental Regulations
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.
FILINGSOURCEITEMBOUNDARYBEGIN Item 3. Quantitative and Qualitative Disclosures About Market Risk FILINGSOURCEITEMBOUNDARYENDItem 3. Quantitative and Qualitative Disclosures About Market Risk.
Market risk represents the potential economic loss arising from adverse changes in the fair value of financial instruments. Currently, our exposure to market risk relates primarily to our fixed–income and equity portfolios. These investment portfolios are exposed primarily to, but not limited to, interest rate risk, credit risk, equity price risk, and concentration risk. We also have exposure to market risk that includes our cash and cash equivalents. The Company's senior management has established comprehensive risk management policies and procedures to manage these market risks.
Interest Rate Risk
The fair values of our fixed–income investments fluctuate in response to changes in market interest rates. Increases and decreases in prevailing interest rates generally translate into decreases and increases, respectively, in the fair values of those instruments. Additionally, the fair values of interest rate sensitive instruments may be affected by the creditworthiness of the issuer, prepayment options, the liquidity of the instrument and other general market conditions. At March 31, 2026, we have available for sale marketable debt securities in the amount of $122,832,000. The fixed maturity portfolio is comprised of investments with primarily short–term and intermediate–term maturities. The fixed maturity portfolio allows our insurance company subsidiaries to achieve an adequate risk–adjusted return while maintaining sufficient liquidity to meet obligations.
Our cash and cash equivalents consist of highly liquid investments with a maturity of less than three months when purchased. As a result of the short–term nature of our cash instruments, a hypothetical 1% change in interest rates would have minimal impact on our future earnings and cash flows related to these instruments.
Our credit facility exposes us to variability in interest payments due to changes in Secured Overnight Financing Rate ("SOFR") interest rates. We manage our exposure to this interest rate risk by monitoring available financing alternatives. Our credit agreement requires principal and interest payments to be paid through maturity, pursuant to the amortization schedule.
We do not currently use any derivative instruments to hedge our interest rate exposure. We have not used derivative instruments for trading purposes and the use of such instruments in the future would be subject to approvals by the Investment Committee of the Board of Directors.
Credit Risk
Credit risk is managed by diversifying the fixed maturity portfolio to avoid concentrations in any single industry group or issuer and by limiting investments in securities with lower credit ratings.
Equity Price and Concentration Risk
Our marketable equity securities are recorded at their fair market value based on quoted market prices. Thus, there is exposure to equity price risk, which is the potential change in fair value due to a change in quoted market prices. At March 31, 2026, the fair value of our marketable equity securities is approximately $189,450,000. Of the $189.5 million equity securities portfolio, our investment in NHI comprises approximately $131.9 million, or 70.0%, of the total fair value. We manage our exposure to NHI by closely monitoring the financial condition, performance, and outlook of the company. Hypothetically, a 10% change in quoted market prices would result in a related increase or decrease in the fair value of our equity investments of approximately $18.9 million. At March 31, 2026, our equity securities had net unrealized gains of $146.0 million. Of the $146.0 million of net unrealized gains, $107.1 million is related to our investment in NHI.
FILINGSOURCEITEMBOUNDARYBEGIN Item 4. Controls and Procedures FILINGSOURCEITEMBOUNDARYENDItem 4. Controls and Procedures.
As of March 31, 2026, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s management, including the CEO and CFO, concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2026.
During the period covered by this report, there have been no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
FILINGSOURCEITEMBOUNDARYBEGIN Item 1. Legal Proceedings FILINGSOURCEITEMBOUNDARYENDItem 1. Legal Proceedings.
For a discussion of prior, current, and pending litigation of material significance to NHC, please see Note 16 of this Form 10–Q.
FILINGSOURCEITEMBOUNDARYBEGIN Item 1A. Risk Factors FILINGSOURCEITEMBOUNDARYENDItem 1A. Risk Factors.
During the three months ended March 31, 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.
FILINGSOURCEITEMBOUNDARYBEGIN Item 2. Unregistered Sales of Equity Securities and Use of Proceeds FILINGSOURCEITEMBOUNDARYENDItem 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Not applicable
FILINGSOURCEITEMBOUNDARYBEGIN Item 3. Defaults Upon Senior Securities FILINGSOURCEITEMBOUNDARYENDItem 3. Defaults Upon Senior Securities.
None
FILINGSOURCEITEMBOUNDARYBEGIN Item 4. Mine Safety Disclosures FILINGSOURCEITEMBOUNDARYENDItem 4. Mine Safety Disclosures.
Not applicable
FILINGSOURCEITEMBOUNDARYBEGIN Item 5. Other Information FILINGSOURCEITEMBOUNDARYENDItem 5. Other Information.
None
FILINGSOURCEITEMBOUNDARYBEGIN Item 6. Exhibits FILINGSOURCEITEMBOUNDARYENDItem 6. Exhibits.
(a) List of exhibits
EXHIBIT INDEX
Exhibit No. Description
3.1.1 Certificate of Incorporation of National HealthCare Corporation (Incorporated by reference to Exhibit 3.1 to the Registrant’s registration statement on Form S-4 (File No. 333-37185) dated October 3, 1997.) 3.1.2 Certificate of Amendment to the Certificate of Incorporation of National HealthCare Corporation (Incorporated by reference to Exhibit 3.5 to the quarterly report on Form 10-Q filed on August 3, 2017.) 3.4 Restated Bylaws as amended February 14, 2013 (Incorporated by reference to Exhibit 3.5 to the quarterly report on Form 10-Q filed on May 8, 2013.) 4.1 Form of Common Stock (Incorporated by reference to Exhibit 4.1 to the quarterly report on Form 10-Q filed on August 3, 2017.) 31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer 31.2 Rule 13a-14(a)/15d-14(a) Certification of Principal Accounting Officer (32) Certification pursuant to 18 U.S.C. Section 1350 by Chief Executive Officer and Principal Accounting Officer 101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document (104) Cover Page Interactive File (embedded within the Inline XBRL document and include in Exhibit 101)
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