Note 5 - Long-Term Leases

3 Months Ended

Mar. 31, 2014

Leases [Abstract]

Leases of Lessee Disclosure [Text Block]

Note 5 – Long-Term Leases

Capital Leases

Effective March 1, 2014, NHC began leasing and operating three senior healthcare facilities in the state of Missouri under three separate lease agreements. Two of the healthcare facilities are skilled nursing facilities that also include assisted living facilities and the third healthcare facility is a memory care facility. Each of the leases is a ten year lease with two, five year renewal options. Under the terms of the leases, base rent totals $5,200,000 annually with rent thereafter escalating by 4% of the increase in facility revenue over the 2014 base year. The leases also contain certain non-performance default provisions which result in capital lease classification. However, the initial measurement and recording of the capital lease assets and obligations does not include any expected payments under such default provisions, as the Company does not expect to incur an obligation to such payments.

Fixed assets recorded under the capital leases, which are included in property and equipment in the interim condensed consolidated balance sheets, are as follows:

	March 31, 2014			December 31, 2013
	(in thousands)
Buildings and personal property	$	39,032		$	−
Accumulated amortization		(327	)		−
	$	38,705		$	−

Operating Leases

At March 31, 2014, NHC leases from NHI the real property of 35 skilled nursing facilities, seven assisted living facilities and three independent living facilities under two separate lease agreements. Base rent expense under both lease agreements totals $34,200,000 annually with rent thereafter escalating by 4% of the increase in facility revenue over the base year. Total facility rent expense to NHI was $9,133,000 and $9,083,000 for the three months ended March 31, 2014 and 2013, respectively.

Minimum Lease Payments

The approximate future minimum lease payments required under all leases that have remaining non-cancelable lease terms at March 31, 2014 are as follows:

	Operating Leases		Capital Leases
	(in thousands)
2015	$	34,200	$	5,200
2016		34,200		5,200
2017		34,200		5,200
2018		34,200		5,200
2019		34,200		5,200
Thereafter		270,800		25,567
Total minimum lease payments	$	441,800	$	51,567
Less: Amounts representing interest				(12,773	)
Present value of minimum lease payments				38,794
Less: Current portion				(2,953	)
Long-term capital lease obligations			$	35,841