NATIONAL HEALTHCARE CORP

Previous wording

A primary area of management focus continues to be the rates of occupancy within our skilled nursing facilities. The overall census in owned and leased skilled nursing facilities for the three months ending June 30, 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.

Current wording

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 September 30, 2026 was 90.4% compared to 90.0% for the same period a year ago. For the nine months ended September 30, 2026, overall census in our owned and leased skilled nursing facilities was 90.1% compared to 89.6% for the same period a year ago.

Previous wording

We are undertaking to expand our senior care operations while protecting our existing operations and markets. The following table lists our recent development activities.

Current wording

We are undertaking to expand our senior care operations while protecting our existing operations and markets. The following table lists our activities that are currently under development.

Previous wording

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.

Current wording

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 for a purchase price of $50,500,000. The operations have 639 licensed skilled nursing beds in the states of South Carolina and Tennessee.

Previous wording

On July 1, 2026, the Company purchased the land, facilities, and improvements of thirty-two skilled nursing facilities and three independent living facilities, currently leased by us as tenant, from National Health Investors (“NHI”) for a purchase price of $560,000,000. On the closing date of the transaction, the lease agreement with NHI is terminated. The Company currently operates and will continue to operate all of the 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.

Current wording

On July 1, 2026, the Company purchased the land, facilities, and improvements of thirty-two skilled nursing facilities and three independent living facilities, currently leased by us as tenant, from NHI for a purchase price of $560,000,000. On the closing date of the transaction, the lease agreement with NHI terminated. The Company currently operates all of the facilities, except four Florida skilled nursing facilities. The four Florida skilled nursing facilities are leased to a third-party operator.

Previous wording

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.

Current wording

We also have two multi-family developments that are either under construction or in the lease-up phase, 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.

Previous wording

Our accrued professional liability and workers’ compensation reserves totaled $121,129,000 at June 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.

Current wording

Our accrued professional liability and workers’ compensation reserves totaled $126,765,000 at September 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.

Previous wording

In July 2026, CMS released its final 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 3.3% minus a 0.9% productivity adjustment. CMS also finalized its proposals related to the SNF Quality Reporting Program, including the removal of two measures related to COVID-19 vaccination, a shortened data reporting timeline, and the requirement to submit assessment data for all patients regardless of payer.

Current wording

In July 2026, CMS released its final rule outlining fiscal year 2027 Medicare payment rates and policy changes for skilled nursing facilities, which began 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 3.3% minus a 0.9% productivity adjustment. CMS also finalized its proposals related to the SNF Quality Reporting Program, including the removal of two measures related to COVID-19 vaccination, a shortened data reporting timeline, and the requirement to submit assessment data for all patients regardless of payer.

Previous wording

For the first six months of 2026, our average Medicare per diem rate for skilled nursing facilities increased 2.6% as compared to the same period in 2025.

Current wording

For the first nine months of 2026, our average Medicare per diem rate for skilled nursing facilities increased 2.3% as compared to the same period in 2025.

Previous wording

Effective October 1, 2025 and for the fiscal year 2026, the state of South Carolina implemented specific individual nursing facility increases. We estimate the resulting increase in revenue for the 2026 fiscal year will be approximately $4,200,000 annually, or $1,050,000 per quarter.

Current wording

Effective October 1, 2026 and for the fiscal year 2027, the state of South Carolina implemented specific individual nursing facility increases. We estimate the resulting increase in revenue for the 2027 fiscal year will be approximately $7,000,000 annually, or $1,750,000 per quarter.

Previous wording

For the first six months of 2026, our average Medicaid per diem increased 2.5% compared to the same period in 2025.

Current wording

For the first nine months of 2026, our average Medicaid per diem increased 2.4% compared to the same period in 2025.

Previous wording

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.

Current wording

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 nine months ended September 30, 2026 and 2025.

Previous wording

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%.

Current wording

Results for the quarter ended September 30, 2026 compared to the third quarter of 2025 include an 6.6% increase in net operating revenues. For the quarter ended September 30, 2026, GAAP net income attributable to NHC was $13,637,000 compared to net income of $39,239,000 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 September 30, 2026 was $28,154,000 compared to $24,744,000 for the same period in 2025, an increase of 13.8%.

Previous wording

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.

Current wording

The total census at owned and leased skilled nursing facilities for the quarter averaged 90.4%, compared to an average of 90.0% for the same quarter a year ago. Overall, the composite skilled nursing facility per diem increased 5.0% compared to the same quarter a year ago. Our Medicare and Managed Care per diem rates increased 1.7% and 20.1%, respectively, compared to the same quarter a year ago. Medicaid and private pay per diem rates increased 2.3% and 5.5%, respectively, compared to the same quarter a year ago. For the three months ended September 30, 2026 and 2025, respectively, $0 and $1,838,000 have been included in our net patient revenues for supplemental Medicaid payments from the state of Tennessee.

Previous wording

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.

Current wording

Total costs and expenses for the three months ended September 30, 2026 compared to the same period of 2025 increased $15,056,000, or 4.3% to $367,339,000 from $352,283,000.

Previous wording

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.

Current wording

Salaries, wages, and benefits increased $18,761,000, or 8.0%, to $251,937,000 from $233,176,000. Salaries, wages, and benefits as a percentage of net operating revenues was 61.8% compared to 60.9% for the three months ended September 30, 2026 and 2025, respectively.

Previous wording

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.

Current wording

The operations of the five skilled nursing facilities that we acquired from National attributed to an increase of $10,901,000 in salaries, wages, and benefits for the quarter ended September 30, 2026 compared to the same period in 2025.

Previous wording

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.

Current wording

Other operating expenses increased $2,857,000, or 3.0%, to $99,461,000 for the 2026 period compared to $96,604,000 for the 2025 period. Other operating expenses as a percentage of net operating revenues was 24.4% and 25.2% for the three months ended September 30, 2026 and 2025, respectively. The operations of the five skilled nursing facilities that we acquired from National attributed to an increase of $5,193,000 for the quarter ended September 30, 2026 compared to the same period in 2025.

Previous wording

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.

Current wording

Non–operating income decreased by $1,023,000 compared to the same period last year, as further detailed in Note 6 to our interim condensed consolidated financial statements. The primary driver 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 we are currently in the lease-up phase. We have incurred losses of $743,000 during the third quarter of 2026 related to this development.

Previous wording

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

Current wording

The income tax provision for the three months ended September 30, 2026 is $5,498,000 (an effective income tax rate of 27.9%).

Previous wording

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%.

Current wording

Results for the nine months ended September 30, 2026 compared to the same period of 2025 include a 5.9% increase in net operating revenues. For the nine months ended September 30, 2026, GAAP net income attributable to NHC was $89,813,000 compared to net income of $95,166,000 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 nine months ended September 30, 2026 was $85,795,000 compared to $75,293,000 for the same period in 2025, an increase of 13.9%.

Previous wording

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.

Current wording

The total census at owned and leased skilled nursing facilities for the nine months ended September 30, 2026 averaged 90.1%, compared to an average of 89.6% for the same period a year ago. Overall, the composite skilled nursing facility per diem increased 3.2% compared to the same period a year ago. Our Medicare per diem rates increased 2.3% and managed care per diem rates increased 8.1% compared to the same period a year ago. Medicaid and private pay per diem rates increased 2.4% and 4.1%, respectively, compared to the same period a year ago. For the nine months ended September 30, 2026 and 2025, $3,605,000 and $5,522,000, respectively, have been included in our net patient revenues for supplemental Medicaid payments.

Previous wording

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.

Current wording

Other revenues increased $16,884,000, or 47.8%, 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 on June 1, 2026, the revenue recognition criteria was met and the management fees were paid and recognized in the current period.

Previous wording

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.

Current wording

Total costs and expenses for the nine months ended September 30, 2026 compared to the same period of 2025 increased $39,964,000, or 3.9% to $1,075,997,000 from $1,036,033,000.

Previous wording

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.

Current wording

Salaries, wages, and benefits increased $41,073,000, or 6.0%, to $728,913,000 from $687,840,000. Salaries, wages, and benefits as a percentage of net operating revenues was 60.9% compared to 60.8% for the nine months ended September 30, 2026 and 2025, respectively. The operations of the five skilled nursing facilities that we acquired from National attributed to an increase of $14,632,000 in salaries, wages, and benefits for the nine months ended September 30, 2026 compared to the same period in 2025.

Previous wording

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.

Current wording

Other operating expenses increased $4,169,000, or 1.5%, to $285,173,000 for the 2026 period compared to $281,004,000 for the 2025 period. Other operating expenses as a percentage of net operating revenues was 23.8% and 24.8% for the nine months ended September 30, 2026 and 2025, respectively. The operations of the five skilled nursing facilities that we acquired from National attributed to an increase of $6,681,000 for the nine months ended September 30, 2026 compared to the same period in 2025.

Previous wording

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.

Current wording

Non–operating income decreased by $2,305,000 compared to the same period last year, as further detailed in Note 6 to our interim condensed consolidated financial statements. The primary driver 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 we are currently in the lease-up phase. For the nine months ending September 30, 2026, we have incurred losses of $1,678,000 related to this development.

Previous wording

The income tax provision for the six months ended June 30, 2026 is $22,184,000 (an effective income tax rate of 22.4%).

Current wording

The income tax provision for the nine months ended September 30, 2026 is $27,682,000 (an effective income tax rate of 23.4%).

Previous wording

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.

Current wording

Net cash provided by operating activities for the nine months ended September 30, 2026 was $204,953,000 as compared to $168,271,000 in the same period last year. Cash provided by operating activities consisted of net income of $90,821,000 and adjustments for non–cash items of $50,305,000. There was cash provided by working capital in the amount of $64,038,000 and $62,731,000 for the nine months ended September 30, 2026 and 2025, respectively.

Previous wording

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.

Current wording

Net cash used in investing activities totaled $658,448,000 for the nine months ended September 30, 2026, compared to $20,924,000 for the nine months ended September 30, 2025. During 2026, the Company acquired five skilled nursing centers from National for $52,198,000, acquired thirty-two skilled nursing facilities and three independent living facilities from NHI for $564,340,000, and also purchased land in Mount Juliet, Tennessee for $2,500,000.

Previous wording

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.

Current wording

Cash used for property and equipment additions was $35,654,000 and $26,049,000 for the nine months ended September 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 nine months ended September 30, 2026, we contributed capital of $6,983,000 for one of the joint venture, multi-family developments that is under construction in Nashville, Tennessee compared to $3,123,000 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 $4,227,000 and $7,736,000 for the nine months ended September 30, 2026 and 2025, respectively.

Previous wording

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.

Current wording

Net cash provided by financing activities totaled $427,629,000 for the nine months ended September 30, 2026 compared to net cash used in financing activities of $92,735,000 for the nine months ended September 30, 2025. The funding for the NHI acquisition was provided by the Company’s cash on hand and borrowings of $530,000,000. During 2026, cash of $67,937,000 was used to pay down the outstanding principal balance of the long-term debt compared to $63,875,000 for the same period in the prior year. Cash used for dividend payments to common stockholders totaled $30,423,000 and $28,773,000 for the nine months ended September 30, 2026 and 2025, respectively. Proceeds from the issuance of common stock totaled $20,766,000 and $9,415,000 for the nine months ended September 30, 2026 and 2025, respectively. We repurchased common shares outstanding in the amount of $24,672,000 and $9,566,000 for the nine months ended September 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.

Previous wording

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.

Current wording

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 $66,795,000 and unrestricted marketable equity securities of $154,530,000. 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.

Previous wording

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.

Current wording

We expect to meet our long-term liquidity requirements primarily from our cash flows from operating activities, our current cash on hand of $66,795,000, our unrestricted marketable equity securities of $154,530,000, and our borrowing capacity on our available line of credit. We also have substantial value in our unencumbered real estate assets, which could potentially be used as collateral in future borrowing opportunities.