National HealthCare : NHC YE2023 Annual Report

ANNUAL REPORT

20

23

HEALTHCARE CENTERS

NHC provides Skilled Nursing, Rehabilitation Services and Long-Term Care.

AL, GA, KY, MO, SC, TN, VA

8,732

Beds

BEHAVIORAL HEALTH

NHC provides inpatient geriatric and adult psychiatric treatment.

3	MO, TN

Hospitals

96

Beds

SENIOR LIVING

Assisted Living	Independent Living
1,501	5
Units	Communities
AL, FL, KY, MO, SC, TN	475
	Units
	MO, TN

MANAGED
FL, SC, TN
SERVICES AND
FINANCIAL/
ACCOUNTING
SERVICES

POST-ACUTE	Home Care
NHC provides Nursing
Services, Physical Therapy,
Occupational Therapy,
Speech Therapy, and	35
Hospice Services.
Agencies

FL, SC, TN

Hospice	GA, MO, SC, TN, VA

30

Agencies

NETWORK PHARMACY

AL, GA, KY, MO, SC, TN, VA

Medicare Advantage

Institutional Special

Needs Plan

1,200

Members

MO, SC, TN

1

EXPANDING OUR

CONTINUUM

OF CARE

NHC Heartland in Nashville, Tennessee

New Caris Hospice Agency in Cedar Bluff, Virginia

288 Assisted Living Units in Vero Beach,	New NHC HomeCare Agency in Tallahassee, Florida
Merritt Island, and Stuart, Florida

2

FULFILLING

MY PURPOSE

10,400 Partners Named

BETTER WAY

CHAMPIONS

IN 2023

for Commitment to our 20 Promises.

Lynn, Administrator

Better Way Champion

Samantha, Speech Language Pathologist	Tanautika, Hospice
Better Way Champion	Better Way Champion

3

Lauren, Registered Dietitian

My Purpose is to ensure our patients receive delicious meals based on their preferences and provide nourishment to their bodies.

Anabel, Housekeeping and Laundry

My Purpose is to be a team player by showing appreciation, helping with patients' needs, and making them feel acknowledged even in small ways.

Shianne, Nurse Unit Manager

My Purpose is to lead my team by providing organization, positivity, and support every day I come to work.

Lynda, CNA

My Purpose is to help my patients with any or all of the daily living they need to keep them safe and healthy.

4

LETTER TO

SHAREHOLDERS

Dear Shareholder,

When we think about the last four years, a Dolly Parton quote comes to mind - "Storms make trees take deeper roots." That adage seems apropos to NHC.

After three years of a devastating pandemic followed by an unprecedented workforce crisis, the storm clouds have given way to brighter skies, and NHC's roots are deeper than ever! 2023 saw our company rebound on virtually every front. Consider these highlights:

Customer Satisfaction

• Customer Satisfaction is the focal point of our culture. NHC's skilled nursing facilities ("SNF's") registered an average Net Promoter Score ("NPS") of 63.1, up from 50.5 in 2022. By comparison, the national health care average was 34.0.
• Thirty-five(35) of our SNF's had NPS scores of 50-69.9, which NPS defines as "Excellent." Another twenty-one (21) of our SNF's had scores of 70+, defined by NPS as "World Class."

Quality Care - as of December 31, 2023

• NHC's sixty-eight (68) SNF's had an average CMS 5-Star rating of 3.57. By contrast, the industry average was 2.86.
• Fifty-eightpercent (58%) of NHC's SNF's were rated 4- or 5-Star by CMS. Nationally, only 36% of skilled nursing facilities were rated 4- or 5-Star.
• NHC's thirty-five (35) home health agencies had an average CMS 5-Star rating of 4.54, the highest in our history! Comparatively, the national average for home health agencies was 3.5.
• Ninety-sevenpercent (97%) of NHC's home health agencies were rated 4- or 5-Star by CMS.

Financial Performance -

2023 Highlights

• Net patient revenues in 2023 totaled $1,087,614,000, compared to $1,029,085,000 for the year ended December 31, 2022,
  an increase of 5.7%.
• Total net operating revenues and grant income were $1,141,544,000 in 2023, compared
  to $1,085,738,000 for the previous year, an increase of 5.1%.
• Excluding unrealized gains/losses for marketable securities, NHC pre-tax income was $75,304,000 in 2023, compared to $45,505,000 in 2022 - a 65.5% increase. Each NHC service line saw an increase in pre-tax earnings.
• As of December 31, 2023, NHC shareholder equity was $908,752,000 compared to $874,276,000 at the end of 2022, an increase of 3.9%.
• Census improved in our SNF's from 84.9% in Q4 2022 to 88.2% in Q4 2023.

Investor Satisfaction

• In 2023, the NHC stock price grew from $59.67 (1/1/23) to $92.42 (12/31/23), an increase of 54.9%.
• Our one-year Total Shareholder Return ("TSR") was 61.3%. Our three-year average TSR was 18.0%.
• The dividend for calendar year 2023 was $2.34 per common share compared to $2.26 per common share in 2022, an increase of 3.5%.

Growth and Development

• During 2023, NHC continued to stabilize operations at two new behavioral hospitals - the Knoxville Center for Behavioral Medicine (64 beds) and the Maryland Heights Center for Behavioral Health (16 beds) - both of which opened mid-2022.

5

• In May 2023, NHC purchased Lakeshore Heartland, a 66-bed skilled nursing facility in Nashville, TN, from Lakeshore Senior Living Communities.
• In July 2023, NHC assumed operations for three (3) assisted living facilities (288 total units) in Florida. These buildings had previously been leased to Solaris Foundation, Inc.
• Also in 2023, NHC opened a new Homecare agency office in Tallahassee, Florida, and Caris Healthcare opened a new hospice agency office in Cedar Bluff, Virginia.

Conclusion

The "storms" of 2020 - 2022 were, indeed, severe, but because of these trials, NHC's "roots" grew deeper. Our Core Values "roots" are:

Commitment to Godly Excellence

Act with Compassion and Integrity

Respect and Value People

Enhance Quality of Life

By daily embracing and embodying these values, NHC's 14,000+ Partners have blessed the lives of thousands of patients in 2023 and made our company stronger than ever before.

Thank you for your confidence and investment in our work.

Sincerely,

Stephen F. Flatt	Robert G. Adams
Chief Executive Officer	Chairman of the Board

Robert G. Adams

Chairman of the Board

Stephen F. Flatt

Chief Executive Officer

6

NHC Board of Directors

O F F I C E R S A N D D I R E C T O R S

Corporate Officers

Stephen F. Flatt	B. Anderson Flatt, Sr.	Josh A. McCreary
Chief Executive Officer	Senior Vice President,	Senior Vice President, General Counsel,
R. Michael Ussery	Chief Information Officer	and Secretary
Brian F. Kidd	Leroy E. McIntosh, Jr.
President and Chief Operating Officer
Vicki L. Dodson	Senior Vice President,	Senior Vice President, Ancillary Services
Chief Financial Officer	and Service Line Strategy
Senior Vice President, Patient Services

Board of Directors

Robert G. Adams	W. Andrew Adams	Emil E. Hassan*
Chairman of the Board	Independent Director	Independent Director
Dr. J. Paul Abernathy*	Ernest G. Burgess, III*	Chairman, Compensation Committee
Richard F. LaRoche, Jr.*
Independent Director	Independent Director
Chairman - Nominating and	Stephen F. Flatt	Independent Director
Corporate Governance Committee	Chairman, Audit Committee
Inside Director
		Sandra Y. Trail*
		Independent Director

7

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

• ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
  For the fiscal year ended December 31, 2023

OR

• TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

to

Commission File No. 001-13489

(Exact name of registrant as specified in its Corporate Charter)

Delaware				52-2057472
(State of Incorporation)				(I.R.S. Employer Identification No.)
		100 E. Vine Street
	Murfreesboro, Tennessee 37130
	(Address of principal executive offices)
	Telephone Number: 615-890-2020
Securities registered pursuant to Section 12(b) of the Act.
Title of Each Class		Trading Symbol(s)	Name of Each Exchange on which Registered
Shares of Common Stock		NHC	NYSE-American

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes □ No ☒ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes □ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ☒ No □

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such period that the registrant was required to submit such files). Yes ☒ No □

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of ''large accelerated filer,'' ''accelerated filer,'' ''smaller reporting company,'' and ''emerging growth company'' in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒

Accelerated filer □

Non-accelerated filer □

Smaller reporting company □

Emerging growth company □

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. □

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. □

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to (§240.10D-1(b).□

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes □ No ☒

The aggregate market value of Common Stock held by non-affiliates on June 30, 2023 (based on the closing price of such shares on the NYSE American) was approximately $546.0 million. For purposes of the foregoing calculation only, all directors, named executive officers and persons known to the Registrant to be holders of 5% or more of the Registrant's Common Stock have been deemed affiliates of the Registrant.

The number of shares of Common Stock outstanding as of February 14, 2024 was 15,349,989.

Documents Incorporated by Reference

The following documents are incorporated by reference into Part III, Items 10, 11, 12, 13 and 14 of this Form 10-K: The Registrant's definitive proxy statement for its 2024 shareholder's meeting.

	PART 1
ITEM 1.	Business	2
ITEM 1A.	Risk Factors	12
ITEM 1B.	Unresolved Staff Comments	24
ITEM 1C.	Cybersecurity	24
ITEM 2.	Properties	25
ITEM 3.	Legal Proceedings	30
ITEM 4.	Mine Safety Disclosures	30
	PART II
ITEM 5.	Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases
	of Equity Securities	31
ITEM 6.	[Reserved]	32
ITEM 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations . . .	33
ITEM 7A.	Quantitative and Qualitative Disclosure About Market Risk	45
ITEM 8.	Financial Statements and Supplementary Data	46
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . .	80
ITEM 9A.	Controls and Procedures	80
ITEM 9B.	Other Information	82
ITEM 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	82
	PART III
ITEM 10.	Directors, Executive Officers and Corporate Governance	83
ITEM 11.	Executive Compensation	83
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
	Matters	83
ITEM 13.	Certain Relationships and Related Transactions and Director Independence	83
ITEM 14.	Principal Accountant Fees and Services	83
	PART IV
ITEM 15.	Exhibits and Financial Statement Schedules	84
	Exhibit Index	85
ITEM 16.	Form 10-K Summary	88
	Signatures	89