Business Context and Reporting Period
Company: National HealthCare Corporation (NHC)
Filing Type: Form 10-K (Annual Report)
Period Ended: December 31, 2025
Business Overview: NHC operates a continuum of post-acute and senior healthcare services, including skilled nursing facilities (SNFs), assisted living, independent living, homecare, hospice, and behavioral health hospitals. As of December 31, 2025, the company operated or managed 80 SNFs (10,329 licensed beds), 26 assisted living facilities, 9 independent living facilities, 3 behavioral health hospitals, 34 homecare agencies, and 33 hospice agencies across 9 states. The company also provides management services and leases real estate to third-party operators.
Key Financial Metrics
| Metric | 2025 | 2024 | Change |
|---|---|---|---|
| Net Operating Revenues | $1,517.8 million | $1,307.4 million | +16.1% |
| Net Income (GAAP) | $120.0 million | $101.9 million | +17.7% |
| Adjusted Net Income (Non-GAAP) | $104.1 million | $76.9 million | +35.4% |
| Diluted EPS (GAAP) | $7.67 | $6.53 | +17.5% |
| Operating Margin | 8.4% | 6.9% | +150 bps |
| Long-Term Debt | $40.0 million | $137.0 million | -$97.0 million |
| Cash & Equivalents | $92.8 million | $76.1 million | +$16.7 million |
| Operating Cash Flow | $185.1 million | $107.3 million | +72.5% |
Note: 2024 results included $9.4 million in government stimulus income (Employee Retention Credit) which was not present in 2025.
Material Changes vs. Prior Period
- Revenue Growth: Net patient revenues increased 17.4% to $1.47 billion, driven by an 8.4% increase in same-facility revenues and the full-year impact of the White Oak Management acquisition (completed August 2024). White Oak contributed $227.5 million in net patient revenues in 2025.
- Occupancy Improvements: Overall census in owned and leased skilled nursing facilities rose to 89.7% in 2025, compared to 88.6% in 2024. Assisted living occupancy increased to 84.3% from 81.1%.
- Cost Management: Agency nurse staffing expenses decreased by approximately 66.6% ($9.3 million) compared to 2024, reflecting successful efforts to reduce reliance on temporary staffing despite labor shortages.
- Debt Reduction: The company significantly reduced its long-term debt by $97 million, paying down the credit facility used to finance the White Oak acquisition. Total long-term debt stands at $40 million.
- Unrealized Gains: GAAP net income included $22.3 million in unrealized gains on marketable equity securities, primarily related to the company's investment in National Health Investors (NHI). This compares to $31.0 million in 2024.
Guidance, Outlook, Risks, and Contingencies
Management Commentary and Outlook
Management expects to meet short-term liquidity requirements through operating cash flows, current cash on hand ($92.8 million), unrestricted marketable securities ($163.0 million), and a $50 million available line of credit. The company continues to focus on expanding post-acute operations while protecting existing markets. Medicare payment rates for 2026 are projected to increase by 3.2% for SNFs, while home health payments are projected to decrease by 1.3%.
Key Risks and Contingencies
- Lease Dispute with NHI: National Health Investors (NHI), the lessor of 32 SNFs and 3 independent living centers, alleged non-compliance with four non-monetary provisions of the Master Lease in July 2025 and formally alleged default in September 2025. NHC disputes the default. Failure to resolve this could result in the loss of occupancy rights for these facilities, which would have a material adverse effect on operations.
- Regulatory and Reimbursement Risk: The company is heavily dependent on Medicare and Medicaid reimbursement. Changes in payment methodologies (e.g., Value-Based Purchasing) and state budget constraints pose ongoing risks to margins.
- Self-Insurance Reserves: NHC is self-insured for workers' compensation and professional liability. Accrued risk reserves totaled $121.6 million at year-end. Unfavorable claims activity in 2025 resulted in an additional $17.6 million in operating expenses. Future claims could exceed reserves.
- Staffing Shortages: Continued competition for qualified nurses and healthcare professionals may drive up labor costs and impact the ability to maintain census levels.
Investor Verification Checklist
- Lease Resolution Status: Verify the current status of the dispute with National Health Investors (NHI) regarding the Master Lease and any potential impact on the occupancy of 35 leased facilities.
- Reimbursement Rate Changes: Monitor the implementation of 2026 Medicare payment updates, specifically the 3.2% increase for SNFs and the 1.3% decrease for home health, and their impact on segment margins.
- Self-Insurance Adequacy: Review the actuarial assumptions used for the $121.6 million accrued risk reserve, given the $17.6 million increase in claims activity during 2025.
- White Oak Integration: Assess the long-term accretive nature of the White Oak acquisition, particularly regarding the integration of 15 new SNFs and the associated debt service costs.
- Investment Concentration: Note that approximately 69.1% of the company's marketable equity securities ($124.5 million) is invested in NHI, creating a concentration risk tied to the performance of the lessor.