National Healthcare NHC Form 10-Q filing Q2 FY2026

The following table sets forth the Company’s unaudited interim condensed consolidated statements of operations by business segment (in thousands):

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 and six months ended June 30, 2026 and 2025.

Percentage of Net Operating Revenues

Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025

Results for the quarter ended June 30, 2026 compared to the second quarter of 2025 include an 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 June 30, 2026, GAAP net income attributable to NHC was $40,319,000 compared to net income of $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 June 30, 2026 was $27,551,000 compared to $25,710,000 for the same period in 2025, an increase of 7.2%.

Net operating revenues

Net patient revenues increased $15,010,000, or 4.1%, compared to the same period last 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

Total costs and expenses for the three months ended June 30, 2026 compared to the same period of 2025 increased $18,270,000, or 5.4% to $359,090,000 from $340,820,000.

Salaries, wages, and benefits increased $15,368,000, or 6.8%, to $241,902,000 from $226,534,000. Salaries, wages, and benefits as a percentage of net operating revenues was 59.3% compared to 60.4% 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 $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.

Other income

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.

Income taxes

The income tax provision for the three months ended June 30, 2026 is $13,472,000 (an effective income tax rate of 24.9%).

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.

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 operating revenues

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

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%).

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.

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

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, 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.

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

Operating Activities

Net cash provided by operating activities for the six months ended June 30, 2026 was $105,802,000 as compared to $102,074,000 in the same period last year. Cash provided by operating activities consisted of net income of $76,640,000 and adjustments for non–cash items of $19,029,000. There was cash provided by working capital in the amount of $9,474,000 and $32,831,000 for the six months ended June 30, 2026 and 2025, respectively.

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

Investing Activities

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.

Cash used for property and equipment additions was $22,167,000 and $16,341,000 for the six months ended June 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 six months ended June 30, 2026, we contributed capital of $6,984,000 for two joint venture, multi-family developments that are under construction in Nashville, Tennessee compared to $3,205,000 for the same period in the prior year. Proceeds from the sale of marketable securities, net of purchases, resulted in cash provided by investing activities of $2,292,000 for the six months ended June 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.

Financing Activities

Net cash used in financing activities totaled $64,154,000 for the six months ended June 30, 2026 compared to $45,732,000 for the six months ended June 30, 2025. During 2026, cash of $40,000,000 was used to pay down the outstanding principal balance of the long-term debt compared to $27,000,000 for the same period in the prior year. Cash used for dividend payments to common stockholders totaled $19,930,000 and $18,854,000 for the six months ended June 30, 2026 and 2025, respectively. Proceeds from the issuance of common stock totaled $19,459,000 and $6,462,000 for the six months ended June 30, 2026 and 2025, respectively. We repurchased common shares outstanding in the amount of $23,561,000 and $6,384,000 for the six months ended June 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.

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 $39,209,000 and unrestricted marketable equity securities of $170,981,000. We also have unencumbered real estate and the borrowing capacity on our 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 $39,209,000, our unrestricted marketable equity securities of $170,981,000, and the additional borrowing capacity on our unencumbered assets and 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.

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Commitment and Contingencies

Governmental Regulations

Laws and regulations governing 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 June 30, 2026, we have available for sale marketable debt securities in the amount of $119,367,000. 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.

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 June 30, 2026, the fair value of our marketable equity securities is approximately $190,378,000. Of the $190.4 million equity securities portfolio, our investment in NHI comprises approximately $124.4 million, or 65.3%, 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 $19.0 million. At June 30, 2026, our equity securities had net unrealized gains of $146.9 million. Of the $146.9 million of net unrealized gains, $99.6 million is related to our investment in NHI.

FILINGSOURCEITEMBOUNDARYBEGIN Item 4. Controls and Procedures FILINGSOURCEITEMBOUNDARYENDItem 4. Controls and Procedures.

As of June 30, 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 June 30, 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.

PART II. OTHER INFORMATION

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 17 to Interim Condensed Consolidated Financial Statements included in this Form 10-Q.

FILINGSOURCEITEMBOUNDARYBEGIN Item 1A. Risk Factors FILINGSOURCEITEMBOUNDARYENDItem 1A. 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.

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

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FILINGSOURCEITEMBOUNDARYBEGIN Item 6. Exhibits FILINGSOURCEITEMBOUNDARYENDItem 6. Exhibits.

(a) List of exhibits

EXHIBIT INDEX

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