10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019
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 number    001–13489
(Exact name of registrant as specified in its Charter)
Delaware		52–2057472
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization		Identification No.)
100 E. Vine Street
Murfreesboro, TN 37130
(Address of principal executive offices)
(Zip Code)
(615) 890–2020
Registrant's telephone number, including area code
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 [x] No [  ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 [X ]	Accelerated filer  [  ]
Non–accelerated filer  [  ]	Smaller reporting company [  ]
	Emerging growth company [  ]
If an emerging growth company, indicate by check mark 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 is a shell company (as is defined in Rule 12b–2 of the Exchange Act). Yes [  ]   No [x]
15,306,290 shares of common stock of the registrant were outstanding as of May 1, 2019.

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common	NHC	NYSE American

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
		Page
Item 1.	Financial Statements	3
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	37
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Mine Safety Disclosures	38
Item 5.	Other Information	38
Item 6.	Exhibits	39

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

NATIONAL HEALTHCARE CORPORATION

Interim Condensed Consolidated Statements of Operations

(in thousands, except share and per share amounts)

(unaudited)

	Three Months Ended March 31
	2019			2018
Revenues:
Net patient revenues	$	236,111		$	231,692
Other revenues		12,174			11,269
Net operating revenues		248,285			242,961
Cost and expenses:
Salaries, wages and benefits		141,388			140,095
Other operating		69,432			65,172
Facility rent		10,238			10,229
Depreciation and amortization		10,517			10,342
Interest		926			1,240
Total costs and expenses		232,501			227,078
Income from operations		15,784			15,883
Other income (expense):
Non–operating income (expense)		6,001			(3,065	)
Unrealized gains (losses) on marketable equity securities		6,838			(15,517	)
Income (loss) before income taxes		28,623			(2,699	)
Income tax provision		(7,392	)		(200	)
Net income (loss)		21,231			(2,899	)
Net loss attributable to noncontrolling interest		38			108
Net income (loss) attributable to National HealthCare Corporation	$	21,269		$	(2,791	)
Earnings (loss) per share attributable to National HealthCare Corporation stockholders:
Basic	$	1.39		$	(0.18	)
Diluted	$	1.39		$	(0.18	)
Weighted average common shares outstanding:
Basic		15,256,189			15,216,635
Diluted		15,324,125			15,216,635
Dividends declared per common share	$	0.50		$	0.48

 The accompanying notes to interim condensed consolidated financial statements are an integral part of these consolidated statements.

3

NATIONAL HEALTHCARE CORPORATION

Interim Condensed Consolidated Statements of Comprehensive Income

(unaudited – in thousands)

	Three Months Ended March 31
	2019			2018
Net income (loss)	$	21,231		$	(2,899	)
Other comprehensive income (loss):
Unrealized gains (losses) on investments in restricted marketable debt securities		3,225			(2,798	)
Reclassification adjustment for realized gains on sale of securities		-			(11	)
Income tax (expense) benefit related to items of other comprehensive income (loss)		(677	)		590
Other comprehensive gain (loss), net of tax		2,548			(2,219	)
Net loss attributable to noncontrolling interest		38			108
Comprehensive income (loss) attributable to National HealthCare Corporation	$	23,817		$	(5,010	)

The accompanying notes to interim condensed consolidated financial statements are an integral part of these consolidated statements.

4

NATIONAL HEALTHCARE CORPORATION

Interim Condensed Consolidated Balance Sheets

(in thousands)

	March 31, 2019			December 31, 2018
	unaudited
Assets
Current Assets:
Cash and cash equivalents	$	38,194		$	43,247
Restricted cash and cash equivalents, current portion		14,785			9,967
Marketable equity securities		147,061			140,223
Restricted marketable debt securities, current portion		13,486			18,676
Accounts receivable		100,619			97,274
Inventories		6,953			7,470
Prepaid expenses and other assets		4,598			3,863
Notes receivable, current portion		1,417			1,289
Total current assets		327,113			322,009
Property and Equipment:
Property and equipment, at cost		987,763			979,088
Accumulated depreciation and amortization		(454,959	)		(444,438	)
Net property and equipment		532,804			534,650
Other Assets:
Restricted cash and cash equivalents, less current portion		1,720			1,706
Restricted marketable securities, less current portion		159,321			153,917
Deposits and other assets		5,895			5,602
Operating lease right-of-use assets		220,134			-
Goodwill		20,995			20,995
Notes receivable, less current portion		9,538			9,707
Investments in unconsolidated companies		34,777			32,362
Total other assets		452,380			224,289
Total assets	$	1,312,297		$	1,080,948

The accompanying notes to interim condensed consolidated financial statements are an integral part of these consolidated statements.

5

NATIONAL HEALTHCARE CORPORATION

Interim Condensed Consolidated Balance Sheets (continued)

(in thousands, except share and per share amounts)

	March 31, 2019			December 31, 2018
	unaudited
Liabilities and Stockholders’ Equity
Current Liabilities:
Trade accounts payable	$	19,318		$	19,759
Finance lease obligations, current portion		6,780			3,924
Operating lease liabilities, current portion		23,353			--
Accrued payroll		45,888			67,618
Amounts due to third party payors		16,293			16,108
Accrued risk reserves, current portion		28,271			28,643
Other current liabilities		22,407			14,249
Dividends payable		7,652			7,623
Total current liabilities		169,962			157,924
Long–term debt		55,000			55,000
Finance lease obligations, less current portion		18,110			19,128
Operating lease liabilities, less current portion		196,781			--
Accrued risk reserves, less current portion		70,271			67,381
Refundable entrance fees		8,078			8,078
Obligation to provide future services		2,172			2,172
Deferred income taxes		20,830			18,550
Other noncurrent liabilities		15,306			15,204
Deferred revenue		5,072			3,054
Total liabilities		561,582			346,491
Equity:
Common stock, $.01 par value; 45,000,000 shares authorized; 15,303,990 and 15,255,002 shares, respectively, issued and outstanding		153			153
Capital in excess of par value		219,566			219,435
Retained earnings		530,052			516,435
Accumulated other comprehensive loss		(197	)		(2,745	)
Total National HealthCare Corporation stockholders’ equity		749,574			733,278
Noncontrolling interest		1,141			1,179
Total equity		750,715			734,457
Total liabilities and equity	$	1,312,297		$	1,080,948

The accompanying notes to interim condensed consolidated financial statements are an integral part of these consolidated statements.

6

NATIONAL HEALTHCARE CORPORATION

Interim Condensed Consolidated Statements of Cash Flows

(unaudited – in thousands)

	Three Months Ended March 31
	2019			2018
Cash Flows From Operating Activities:
Net income (loss)	$	21,231		$	(2,899	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		10,517			10,342
Equity in (earnings) losses of unconsolidated investments		(2,321	)		6,586
Distributions from unconsolidated investments		31			2,254
Unrealized (gains) losses on marketable equity securities		(6,838	)		15,517
Gains on sale of restricted marketable debt securities		-			(11	)
Deferred income taxes		1,603			(5,206	)
Stock–based compensation		424			428
Changes in operating assets and liabilities:
Accounts receivable		(3,345	)		1,761
Income tax receivable		-			3,938
Inventories		517			(113	)
Prepaid expenses and other assets		(1,008	)		(631	)
Trade accounts payable		(441	)		737
Accrued payroll		(21,730	)		(22,619	)
Amounts due to third party payors		185			(234	)
Accrued risk reserves		2,498			2,971
Other current liabilities		8,158			(1,882	)
Other noncurrent liabilities		102			337
Deferred revenue		2,018			2,030
Net cash provided by operating activities		11,601			13,306
Cash Flows From Investing Activities:
Additions to property and equipment		(5,874	)		(7,100	)
Investments in notes receivable		(312	)		-
Investments in unconsolidated companies		(125	)		-
Collections of notes receivable		353			431
Purchase of restricted marketable debt securities		(3,565	)		(2,694	)
Sale of restricted marketable debt securities		6,576			3,535
Net cash used in investing activities		(2,947	)		(5,828	)
Cash Flows From Financing Activities:
Principal payments under finance lease obligations		(959	)		(903	)
Dividends paid to common stockholders		(7,623	)		(7,297	)
Issuance of common shares		579			1,067
Repurchase of common shares		(872	)		(867	)
Entrance fee refunds		-			(159	)
Net cash used in financing activities		(8,875	)		(8,159	)
Net Decrease in Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents		(221	)		(681	)
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents, Beginning of Period		54,920			67,421
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents, End of Period	$	54,699		$	66,740
Balance Sheet Classifications:
Cash and cash equivalents	$	38,194		$	54,962
Restricted cash and cash equivalents		16,505			11,778
Total Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents	$	54,699		$	66,740

The accompanying notes to interim condensed consolidated financial statements are an integral part of these consolidated statements.

7

NATIONAL HEALTHCARE CORPORATION

Interim Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share and per share amounts)

(unaudited)

	Common Stock					Capital in Excess of			Retained Earnings			Accumulated Other Comprehensive			Non- controlling			Total Stockholders’
	Shares			Amount		Par Value			Earnings			Income			Interest			Equity
Balance at January 1, 2018		15,212,133		$	152	$	215,659		$	419,423		$	67,504		$	694		$	703,432
Reclassification due to new accounting standards		–			–		–			68,201			(68,201	)		–			–
Net loss attributable to National HealthCare Corporation		–			–		–			(2,791	)		–			–			(2,791	)
Net loss attributable to noncontrolling interest		–			–		–			–			–			(108	)		(108	)
Other comprehensive loss		–			–		–			–			(2,219	)		–			(2,219	)
Stock–based compensation		–			–		428			–			–			–			428
Shares sold – options exercised		21,906			–		1,067			–			–			–			1,067
Repurchase of common shares		(14,506	)		–		(867	)		–			–			–			(867	)
Dividends declared to common stockholders ($0.48 per share)		–			–		–			(7,305	)		–			–			(7,305	)
Balance at March 31, 2018		15,219,533		$	152	$	216,287		$	477,528		$	(2,916	)	$	586			691,637
Balance at January 1, 2019		15,255,002		$	153	$	219,435		$	516,435		$	(2,745	)	$	1,179		$	734,457
Net income attributable to National HealthCare Corporation		–			–		–			21,269			–			–			21,269
Net loss attributable to noncontrolling interest		–			–		–			–			–			(38	)		(38	)
Other comprehensive income		–			–		–			–			2,548			–			2,548
Stock–based compensation		–			–		424			–			–			–			424
Shares sold – options exercised		59,384			–		579			–			–			–			579
Repurchase of common shares		(10,396	)		–		(872	)		–			–			–			(872	)
Dividends declared to common stockholders ($0.50 per share)		–			–		–			(7,652	)		–			–			(7,652	)
Balance at March 31, 2019		15,303,990		$	153	$	219,566		$	530,052		$	(197	)	$	1,141			750,715

The accompanying notes to interim condensed consolidated financial statements are an integral part of these consolidated statements.

8

NATIONAL HEALTHCARE CORPORATION

Notes to Interim Condensed Consolidated Financial Statements

March 31, 2019

(unaudited)

Note 1 – Description of Business

National HealthCare Corporation (“NHC” or the “Company”) is a leading provider of senior health care services. As of March 31, 2019, we operate or manage, through certain affiliates, 75 skilled nursing facilities with a total of 9,510 licensed beds, 25 assisted living facilities, five independent living facilities, one behavioral health hospital, and 35 homecare programs. We operate specialized care units within certain of our healthcare centers such as Alzheimer's disease care units and sub-acute nursing units. We also have a noncontrolling ownership interest in a hospice care business that services NHC owned skilled nursing facilities and others. In addition, we provide insurance services, management and accounting services, and we lease properties to operators of skilled nursing and assisted living facilities. We operate in 10 states and are located primarily in the southeastern United States.

Note 2 – Summary of Significant Accounting Policies

The listing below is not intended to be a comprehensive list of all our significant accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by generally accepted accounting principles (“GAAP”), with limited need for management’s judgment in their application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. See our audited December 31, 2018 consolidated financial statements and notes thereto which contain accounting policies and other disclosures required by GAAP. Our audited December 31, 2018 consolidated financial statements are available at our web site: www.nhccare.com.

Basis of Presentation

The unaudited interim condensed consolidated financial statements to which these notes are attached include all normal, recurring adjustments which are necessary to fairly present the financial position, results of operations and cash flows of NHC. All significant intercompany transactions and balances have been eliminated in consolidation. The consolidated financial statements include the accounts of all entities controlled by NHC. The Company presents noncontrolling interest within the equity section of its consolidated balance sheets. The Company presents the amount of consolidated net income that is attributable to NHC and the noncontrolling interest in its consolidated statements of operations.

We assume that users of these interim financial statements have read or have access to the audited December 31, 2018 consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations and that the adequacy of additional disclosure needed for a fair presentation, except in regard to material contingencies, may be determined in that context. Accordingly, footnotes and other disclosures which would substantially duplicate the disclosure contained in our most recent annual report to stockholders have been omitted. This interim financial information is not necessarily indicative of the results that may be expected for a full year for a variety of reasons.

Estimates and Assumptions

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and could cause our reported net income to vary significantly from period to period.

9

Recently Adopted Accounting Guidance

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, "Leases (Topic 842)." The objective of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those annual periods and is to be applied either retrospectively to each prior reporting period presented in the financial statements or retrospectively at the beginning of the period of adoption.

The Company adopted the standard as of January 1, 2019, electing the transition method that allows it to apply the standard as of the adoption date and record a cumulative adjustment in retained earnings, if applicable. We did not have a cumulative adjustment to retained earnings. The interim condensed consolidated financial statements for the period ending March 31, 2019, are presented under the new standard, while comparative years presented are not adjusted and continue to be reported in accordance with our historical accounting policy.

On June 20, 2018, the FASB issued ASU No. 2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-based Payment Accounting.” ASU No. 2018-07 simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most of the guidance on such payments to nonemployees is aligned with the requirements for share-based payments granted to employees. On January 1, 2019, the Company early adopted the provisions of ASU No. 2018-07 and this standard did not have an impact on our consolidated financial statements.

On August 28, 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.” ASU No. 2018-13 changes the fair value measurement disclosure requirements of Accounting Standards Codification (“ASC”) 820. Entities are no longer required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but they will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. On January 1, 2019, the Company early adopted the provisions of ASU No. 2018-13 and this standard did not have a material impact on our consolidated financial statements.

Recent Accounting Guidance Not Yet Adopted 

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments.” ASU No. 2016-13 adds to U.S. GAAP an impairment model that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses. The ASU is also intended to reduce the complexity of U.S. GAAP by decreasing the number of credit impairment models that entities use to account for debt instruments. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those annual periods, with early adoption permitted for fiscal years beginning after December 15, 2018. We are currently evaluating the impact this standard will have on our policies and procedures and internal control framework.

Net Patient Revenues and Accounts Receivable

Net patient revenues are derived from services rendered to patients for skilled and intermediate nursing, rehabilitation therapy, assisted living and independent living, and home health care services. Net patient revenue is reported at the amount that reflects the consideration to which the Company expects to be entitled in exchange for providing patient services. These amounts are due from patients, governmental programs, and other third-party payors, and include variable consideration for retroactive revenue adjustments due to settlement of audits, reviews, and investigations.

The Company recognizes revenue as its performance obligations are completed. Routine services are treated as a single performance obligation satisfied over time as services are rendered. These routine services represent a bundle of services that are not capable of being distinct. The performance obligations are satisfied over time as the patient simultaneously receives and consumes the benefits of the healthcare services provided. Additionally, there may be ancillary services which are not included in the daily rates for routine services, but instead are treated as separate performance obligations satisfied at a point in time when those services are rendered.

10

The Company determines the transaction price based on established billing rates reduced by contractual adjustments provided to third party payors. Contractual adjustments are based on contractual agreements and historical experience. The Company considers the patient's ability and intent to pay the amount of consideration upon admission. Subsequent changes resulting from a patient’s ability to pay are recorded as bad debt expense, which is included as a component of other operating expenses in the interim condensed consolidated statements of operations. Bad debt expense was $1,047,000 and $959,000 for the three months ended March 31, 2019 and 2018, respectively. As of March 31, 2019, and December 31, 2018, the Company has recorded allowance for doubtful accounts of $5,169,000 and $4,610,000, respectively, as our best estimate of probable losses inherent in the accounts receivable balance.

Other Revenues

Other revenues include revenues from the provision of insurance services, management and accounting services to other long–term care providers, and rental income. Our insurance revenues consist of premiums that are generally paid in advance and then amortized into income over the policy period. We charge for management services based on a percentage of net revenues. We charge for accounting services based on a monthly fee or a fixed fee per bed of the healthcare center under contract. We record other revenues as the performance obligations are satisfied based on the terms of our contractual arrangements.

Segment Reporting

In accordance with the provisions of ASC 280, “Segment Reporting”, the Company is required to report financial and descriptive information about its reportable operating segments. The Company has two reportable operating segments: (1) inpatient services, which includes the operation of skilled nursing facilities, assisted and independent living facilities, and one behavioral health hospital, and (2) homecare services. The Company also reports an “all other” category that includes revenues from rental income, management and accounting services fees, insurance services, and costs of the corporate office. See Note 6 for further disclosure of the Company’s operating segments.

Other Operating Expenses

Other operating expenses include the costs of care and services that we provide to the residents of our facilities and the costs of maintaining our facilities. Our primary patient care costs include drugs, medical supplies, purchased professional services, food, and professional liability insurance and licensing fees. The primary facility costs include utilities and property insurance.

General and Administrative Costs

With the Company being a healthcare provider, the majority of our expenses are "cost of revenue" items. Costs that could be classified as "general and administrative" by the Company would include its corporate office costs, excluding stock-based compensation, which were $5,144,000 and $6,678,000 for the three months ended March 31, 2019 and 2018, respectively.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is provided by the straight-line method over the expected useful lives of the assets estimated as follows: buildings and improvements, 20-40 years and equipment and furniture, 3-15 years. Leasehold improvements are amortized over periods that do not exceed the non-cancelable respective lease terms using the straight-line method.

Finance leases are recorded at cost. Finance leases are amortized in accordance with the provision codified within ASC 842, Leases. Amortization of finance lease assets is included in depreciation and amortization expense.

11

Accrued Risk Reserves  

We are self–insured for risks related to health insurance and have wholly–owned limited purpose insurance companies that insure risks related to workers’ compensation and general and professional liability insurance claims. The accrued risk reserves include a liability for reported claims and estimates for incurred but unreported claims. Our policy is to engage an external, independent actuary to assist in estimating our exposure for claims obligations (for both asserted and unasserted claims). We reassess our accrued risk reserves on a quarterly basis.

Professional liability remains an area of particular concern to us. The long-term care industry has seen an increase in personal injury/wrongful death claims based on alleged negligence by skilled nursing facilities and their employees in providing care to residents. As of March 31, 2019, we and/or our managed centers are defendants in 63 such claims. It remains possible that those pending matters plus potential unasserted claims could exceed our reserves, which could have a material adverse effect on our consolidated financial position, results of operations and cash flows. It is also possible that future events could cause us to make significant adjustments or revisions to these reserve estimates and cause our reported net income to vary significantly from period to period.

We are principally self-insured for incidents occurring in all centers owned or leased by us. The coverages include both primary policies and excess policies. In all years, settlements, if any, in excess of available insurance policy limits and our own reserves would be expensed by us.

Continuing Care Contracts and Refundable Entrance Fee

We have one continuing care retirement center (“CCRC”) within our operations. Residents at this retirement center may enter into continuing care contracts with us. The contracts provide that 10% of the resident entry fee becomes non-refundable upon occupancy, and the remaining refundable portion of the entry fee is calculated using the lessor of the price at which the apartment is re-assigned or 90% of the original entry fee, plus 40% of any appreciation if the apartment exceeds the original resident’s entry fee.

Non-refundable fees are included as a component of the transaction price and are amortized into revenue over the actuarily determined remaining life of the resident, which is the expected period of occupancy by the resident. We pay the refundable portion of our entry fees to residents when they relocate from our community and the apartment is re-occupied. Refundable entrance fees are not included as part of the transaction price and are classified as non-current liabilities in our consolidated balance sheets. As of March 31, 2019, and December 31, 2018, we have recorded a refundable entrance fee in the amount of $8,078,000.

Obligation to Provide Future Services

We annually estimate the present value of the cost of future services and the use of facilities to be provided to the current CCRC residents and compare that amount with the balance of non-refundable deferred revenue from entrance fees received. If the present value of the cost of future services exceeds the related anticipated revenues, a liability is recorded (obligation to provide future services) with a corresponding charge to income. As of March 31, 2019, and December 31, 2018, we have recorded a future service obligation in the amount of $2,172,000.

Other Noncurrent Liabilities

Other noncurrent liabilities include reserves primarily related to various uncertain income tax positions.

Deferred Revenue

Deferred revenue includes the deferred gain on the sale of assets to National Health Corporation (“National”), the non-refundable portion (10%) of CCRC entrance fees being amortized over the remaining life expectancies of the residents, and premiums received within our workers’ compensation and professional liability companies in which the performance obligations have not been satisfied.

Noncontrolling Interest

The noncontrolling interest in a subsidiary is presented within total equity in the Company's interim condensed consolidated balance sheets. The Company presents the noncontrolling interest and the amount of consolidated net income attributable to NHC in its interim condensed 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.

12

Variable Interest Entities

We have equity interests in unconsolidated limited liability companies that operate various post-acute and senior healthcare businesses. We analyze our investments in these limited liability companies to determine if the company is considered a variable interest entity (“VIE”) and would require consolidation. To the extent that we own interests in a VIE and we (i) are the sole entity that has the power to direct the activities of the VIE and (ii) have the obligation or rights to absorb the VIE's losses or receive its benefits, then we would be determined to be the primary beneficiary and would consolidate the VIE. To the extent we own interests in a VIE, then at each reporting period, we re-assess our conclusions as to which, if any, party within the VIE is considered the primary beneficiary.

The Company's maximum exposure to losses in its investments in unconsolidated VIEs cannot be quantified and may or may not be limited to its investment in the unconsolidated VIE. The investments in unconsolidated VIEs are classified as “investments in limited liability companies” in the consolidated balance sheets.

Note 3 – Net Patient Revenues

The Company disaggregates revenue from contracts with customers by service type and by payor.

Revenue by Service Type

The Company’s net patient services can generally be classified into the following two categories: (1) inpatient services, which includes the operation of skilled nursing facilities, assisted and independent living facilities, and a behavioral health hospital, and (2) homecare services.

	Three Months Ended March 31
	2019		2018
Net patient revenues:
Inpatient services	$	221,635	$	216,351
Homecare		14,476		15,341
Total net patient revenue	$	236,111	$	231,692

For inpatient services, revenue is recognized on a daily basis as each day represents a separate contract and performance obligation. For homecare, revenue is recognized when services are provided based on the number of days of service rendered in the episode or on a per-visit basis. Typically, patients and third-party payors are billed monthly after services are performed or the patient is discharged, and payments are due based on contract terms.

As our performance obligations relate to contracts with a duration of one year or less, the Company is not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period. The Company has minimal unsatisfied performance obligations at the end of the reporting period as our patients are typically under no obligation to remain admitted in our facilities or under our care.  As the period between the time of service and time of payment is typically one year or less, the Company did not adjust for the effects of a significant financing component.

13

Revenue by Payor

Certain groups of patients receive funds to pay the cost of their care from a common source. The following table sets forth sources of net patient revenues for the periods indicated:

	Three Months Ended March 31
Source	2019			2018
Medicare		36	%		36	%
Managed Care		12	%		13	%
Medicaid		26	%		25	%
Private Pay and Other		26	%		26	%
Total		100	%		100	%

Medicare covers skilled nursing services for beneficiaries who require nursing care and/or rehabilitation services following a hospitalization of at least three consecutive days. For each eligible day a Medicare beneficiary is in a skilled nursing facility, Medicare pays the facility a daily payment, subject to adjustment for certain factors such as a wage index in the geographic area. The payment covers all services provided by the skilled nursing facility for the beneficiary that day, including room and board, nursing, therapy and drugs, as well as an estimate of capital–related costs to deliver those services.

For homecare services, Medicare pays based on the acuity level of the patient and based on episodes of care. An episode of care is defined as a length of care up to 60 days with multiple continuous episodes allowed. The services covered by the episode payment include all disciplines of care, in addition to medical supplies, within the scope of the home health benefit. We are allowed to make a request for anticipated payment at the start of care equal to 60% of the expected payment for the initial episode. The remaining balance due is paid following the submission of the final claim at the end of the episode. Deferred revenue is recorded for payments received for which the related services have not yet been provided.

Medicaid is operated by individual states with the financial participation of the federal government. The states in which we operate currently use prospective cost–based reimbursement systems. Under cost–based reimbursement systems, the skilled nursing facility is reimbursed for the reasonable direct and indirect allowable costs it incurred in a base year in providing routine resident care services as defined by the program.

Private pay, managed care, and other payment sources include commercial insurance, individual patient funds, managed care plans and the Veterans Administration. Private paying patients, private insurance carriers and the Veterans Administration generally pay based on the healthcare center's charges or specifically negotiated contracts. For private pay patients in skilled nursing, assisted living and independent living facilities, the Company bills for room and board charges, with the remittance being due on receipt of the statement and generally by the 10th day of the month the services are performed.

Certain managed care payors for homecare services pay on a per-visit basis. This non-episodic based revenue is recorded on an accrual basis based upon the date of services at amounts equal to its established or estimated per-visit rates.     

Third Party Payors

Laws and regulations governing the Medicare and Medicaid programs are complex and subject to interpretation. Noncompliance with such laws and regulations can be subject to regulatory actions including fines, penalties, and exclusion from the Medicare and Medicaid programs. We believe that we are following all applicable laws and regulations.

Medicare and Medicaid program revenues, as well as certain Managed Care program revenues, are subject to audit and retroactive adjustment by government representatives or their agents. The Medicare PPS methodology requires that patients be assigned to Resource Utilization Groups ("RUGs") based on the acuity level of the patient to determine the amount paid to us for patient services. The assignment of patients to the various RUG categories is subject to post–payment review by Medicare intermediaries or their agents. Settlements with third-party payors for retroactive adjustments due to audits, reviews or investigations are considered variable consideration and are included in the determination of the estimated transaction price for providing patient care. These settlements are estimated based on the terms of the payment agreement with the payor, correspondence from the payor and the Company’s historical settlement activity, including an assessment to ensure that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the retroactive adjustment is subsequently resolved. Estimated settlements are adjusted in future periods as adjustments become known, or as years are settled or are no longer subject to such audits, reviews, and investigations. We believe that any differences between the net revenues recorded and final determination will not materially affect the consolidated financial statements. We have made provisions of approximately $16,293,000 and $16,108,000 as of March 31, 2019 and December 31, 2018, respectively, for various Medicare, Medicaid, and Managed Care claims reviews and current and prior year cost reports.

14

Note 4 – Other Revenues

Other revenues are outlined in the table below. Revenues from insurance services include premiums for workers’ compensation and professional liability insurance policies that our wholly–owned insurance subsidiaries have written for certain healthcare operators to which we provide management or accounting services. Revenues from management and accounting services include fees provided to manage and provide accounting services to other healthcare operators. Revenues from rental income include health care real estate properties owned by us and leased to third party operators. "Other" revenues include miscellaneous health care related earnings.

	Three Months Ended March 31
(in thousands)	2019		2018
Insurance services	$	1,524	$	1,692
Management and accounting services fees		4,751		3,708
Rental income		5,608		5,532
Other		291		337
Total other revenues	$	12,174	$	11,269

Insurance Services

For workers’ compensation insurance services, the premium revenues reflected in the interim condensed consolidated statements of operations for the three months ended March 31, 2019 and 2018 were $847,000 and $1,019,000, respectively. Associated losses and expenses are reflected in the interim condensed consolidated statements of operations as "Salaries, wages and benefits."

For professional liability insurance services, the premium revenues reflected in the interim condensed consolidated statements of operations for the three months ended March 31, 2019 and 2018 were $677,000 and $673,000, respectively. Associated losses and expenses including those for self–insurance are included in the interim condensed consolidated statements of operations as "Other operating costs and expenses".

Management Fees from National

We manage five skilled nursing facilities owned by National. For the three months ended March 31, 2019 and 2018, we recognized management fees and interest on management fees of $1,854,000 and $1,014,000 from these centers, respectively.

Rental Income

The Company leases real estate assets consisting of skilled nursing facilities and assisted living facilities to third party operators. Additionally, we sublease four Florida skilled nursing facilities included in our lease from National Health Investors (“NHI”) as noted in Note 7 – Long Term Leases.

15

The following table sets forth the undiscounted cash flows for future minimum lease payments receivable for leases in effect at March 31, 2019 (in thousands):

2020	$	21,891
2021		22,192
2022		22,927
2023		22,868
2024		22,730
Thereafter		40,614
Total future minimum lease payments	$	153,222

Note 5 – Non–Operating Income

Non–operating income includes equity in earnings of unconsolidated investments, dividends and other realized gains and losses on sales of marketable securities, and interest income.

Our most significant equity method investment is a 75.1% non–controlling ownership interest in Caris HealthCare L.P. (“Caris”), a business that specializes in hospice care services. For the three months ended March 31, 2018, Caris’ equity in earnings were negatively impacted by $8,228,000 for the settlement of a Qui Tam legal matter and legal fees related to the settlement.

	Three Months Ended March 31
(in thousands)	2019		2018
Equity in earnings of unconsolidated investments	$	2,321	$	(6,586	)
Dividends and net realized gains and losses on sales of securities		1,931		1,803
Interest income		1,749		1,718
Total non-operating income	$	6,001	$	(3,065	)

Note 6 – Business Segments

The Company has two reportable operating segments: (1) inpatient services, which includes the operation of skilled nursing facilities, assisted and independent living facilities, and our behavioral health hospital; and (2) homecare services. These reportable operating segments are consistent with information used by the Company’s Chief Executive Officer, as chief operating decision maker (“CODM”), to assess performance and allocate resources.

The Company also reports an “all other” category that includes revenues from rental income, management and accounting services fees, insurance services, and costs of the corporate office. For additional information on these reportable segments see Note 2 – Summary of Significant Accounting Policies.

16

The Company’s CODM evaluates performance and allocates capital resources to each segment based on an operating model that is designed to improve the quality of patient care and profitability of the Company while enhancing long-term shareholder value. The CODM does not review assets by segment in his resource allocation and therefore, assets by segment are not disclosed below.

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

	Three Months Ended March 31, 2019
	Inpatient Services		Homecare		All Other			Total
Revenues:
Net patient revenues	$	221,635	$	14,476	$	-		$	236,111
Other revenues		231		-		11,943			12,174
Net operating revenues		221,866		14,476		11,943			248,285
Costs and expenses:
Salaries, wages and benefits		126,101		8,026		7,261			141,388
Other operating		62,629		4,252		2,551			69,432
Rent		8,291		462		1,485			10,238
Depreciation and amortization		9,653		61		803			10,517
Interest		348		-		578			926
Total costs and expenses		207,022		12,801		12,678			232,501
Income (loss) from operations		14,844		1,675		(735	)		15,784
Non-operating income		-		-		6,001			6,001
Unrealized gains on marketable equity securities		-		-		6,838			6,838
Income before income taxes	$	14,844	$	1,675	$	12,104		$	28,623

17

	Three Months Ended March 31, 2018
	Inpatient Services		Homecare		All Other			Total
Revenues:
Net patient revenues	$	216,351	$	15,341	$	-		$	231,692
Other revenues		271		-		10,998			11,269
Net operating revenues		216,622		15,341		10,998			242,961
Costs and expenses:
Salaries, wages and benefits		123,380		8,030		8,685			140,095
Other operating		57,835		5,279		2,058			65,172
Rent		8,258		487		1,484			10,229
Depreciation and amortization		9,461		38		843			10,342
Interest		396		-		844			1,240
Total costs and expenses		199,330		13,834		13,914			227,078
Income (loss) from operations		17,292		1,507		(2,916	)		15,883
Non-operating loss		-		-		(3,065	)		(3,065	)
Unrealized losses on marketable equity securities		-		-		(15,517	)		(15,517	)
Income (loss) before income taxes	$	17,292	$	1,507	$	(21,498	)	$	(2,699	)

Note 7 – Long-Term Leases

The Company’s lease portfolio primarily consists of finance and operating real estate leases for certain skilled nursing facilities, assisted and independent living facilities, homecare offices, and pharmacy warehouses. The original terms of the leases typically range from two to fifteen years. Several of the real estate leases include renewal options which vary in length and may not include specific rent renewal amounts. We determine if an arrangement is a lease at inception of a contract. We determine the lease term by assuming exercise of renewal options that are reasonably certain.

On January 1, 2019, the Company recorded right-of-use assets and liabilities on the condensed consolidated balance sheets for non-cancelable real estate operating leases with original or remaining lease terms in excess of one year. Leases with a lease term of 12 months or less at inception are not recorded on our condensed consolidated balance sheets and are expensed on a straight-line basis over the lease term in our condensed consolidated statement of operations. Finance leases remain on the condensed consolidated balance sheets as required by previous accounting guidance.

Operating lease right-of-use assets and liabilities are recorded at the present value of the lease payments over the lease term. The present value of the lease payments are discounted using the incremental borrowing rate associated with each lease. As most of our leases do not provide implicit rates, we have used incremental borrowing rates that were calculated based on information available at the later of the lease commencement date or the adoption date, January 1, 2019. The variable components of the lease payment that fluctuate with the operations of a health facility are not included in determining the right-of-use assets and lease liabilities. Rather, these variable components are expensed as incurred.

Accounting Policy Elections

The Company has elected the package of practical expedients offered in the transition guidance which allows management not to reassess lease identification, lease classification, and initial direct costs. The Company has elected the accounting policy practical expedient to exclude recording short-term leases, for all asset classes, as right-of-use assets and lease liabilities on the condensed consolidated balance sheets. Finally, the Company has elected the accounting policy practical expedient to recognize lease components and non-lease components together and not as separate parts of a lease for real estate leases.

18

Operating Leases with NHI

At March 31, 2019, we leased from NHI the real property of 35 skilled nursing facilities, seven assisted living centers and three independent living centers under two separate lease agreements. As part of the first lease agreement, we sublease four Florida skilled nursing facilities to a third-party operator.

On January 1, 2007, a 15–year lease extension began which included three additional five–year renewal options. In December 2012, NHC extended the lease agreement through the first of the three additional five–year renewal options, which extended the lease date through 2026. The two additional five–year renewal options on the lease still remain. Under the terms of the lease, base rent totals $30,750,000 with rent thereafter escalating by 4% of the increase in facility revenue over a 2007 base year.

In September 2013 and under the second lease agreement, NHC began operating seven skilled nursing facilities in New Hampshire and Massachusetts. The 15-year lease term consists of base rent of $3,450,000 annually with rent escalating by 4% of the increase in facility revenue over a 2014 base year. Additionally, NHC has the option to purchase the seven facilities from NHI in the 13th year of the lease for a purchase price of $49,000,000.

Base rent expense under both NHI lease agreements totals $34,200,000. Percentage rent under the leases is based on a quarterly calculation of revenue increases and is payable on a quarterly basis. Percentage rent expense under both leases for the periods ending March 31, 2019 and 2018 was $965,000 and $928,000, respectively.

We have a right of first refusal with NHI to purchase any of the properties should NHI receive an offer from an unrelated party during the term of the lease or up to 180 days after termination of the related lease.

Finance 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.

Lease Classification

At March 31, 2019, the Company recorded the following on the condensed consolidated balance sheets (in thousands):

Right-of-Use Assets	Balance Sheet Classification	March 31, 2019
Finance lease assets	Net property and equipment	$	21,881
Operating lease right-of-use assets	Operating lease right-of-use assets		220,134
Total		$	242,015

19

Lease Liabilities	Balance Sheet Classification	March 31, 2019
Current:
Finance lease liabilities	Finance lease obligations, current portion	$	6,780
Operating lease liabilities	Operating lease liabilities, current portion		23,353
Noncurrent:
Finance lease liabilities	Finance lease obligations, less current portion		18,110
Operating lease liabilities	Operating lease liabilities, less current portion		196,781
Total		$	245,024

Weighted-average remaining lease terms and discount rates at March 31, 2019 were as follows:

Weighted-average remaining lease terms (in years)
Finance	4.9
Operating	7.9
Weighted-average discount rate
Finance	6.0	%
Operating	6.0	%

Lease Costs

For the three months ended March 31, 2019, the lease costs recorded in the condensed consolidated statement of operations are as follows (in thousands):

Finance lease costs:
Depreciation of leased assets	$	981
Interest of lease liabilities		348
Total finance lease costs		1,329
Operating lease costs:
Operating lease costs		9,086
Variable lease costs		965
Short-term lease costs		187
Total operating lease costs		10,238
Total lease costs	$	11,567

20

Minimum Lease Payments

The following table summarizes the maturity of our finance and operating lease liabilities as of March 31, 2019 (in thousands):

	Finance Leases			Operating Leases
2020	$	7,998		$	35,733
2021		5,200			35,443
2022		5,200			35,112
2023		5,200			34,688
2024		4,767			34,403
Thereafter		--			99,877
Total minimum lease payments		28,365			275,256
Less: amounts representing interest		(3,475	)		(55,122	)
Present value of future minimum lease payments		24,890			220,134
Less: current portion		(6,780	)		(23,353	)
Noncurrent lease liabilities	$	18,110		$	196,781

Other

Supplemental cash flow data for the three months ended March 31, 2019 was as follows (in thousands):

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	9,086
Operating cash flows for finance leases		348
Financing cash flows for finance leases		959

Note 8 – Earnings per Share

Basic net income (loss) per share is computed based on the weighted average number of common shares outstanding for each period presented. Diluted net income (loss) per share reflects the potential dilution that would have occurred if securities to issue common stock were exercised, converted, or resulted in the issuance of common stock that would have then shared in our earnings.

The following table summarizes the earnings (losses) and the weighted average number of common shares used in the calculation of basic and diluted earnings (loss) per share (in thousands, except for share and per share amounts):

	Three Months Ended March 31
	2019		2018
Basic:
Weighted average common shares outstanding		15,256,189		15,216,635
Net income (loss) attributable to National HealthCare Corporation	$	21,269	$	(2,791	)
Earnings (loss) per common share, basic	$	1.39	$	(0.18	)
Diluted:
Weighted average common shares outstanding		15,256,189		15,216,635
Effects of dilutive instruments		67,936		-
Weighted average common shares outstanding		15,324,125		15,216,635
Net income (loss) attributable to National HealthCare Corporation	$	21,269	$	(2,791	)
Earnings (loss) per common share, diluted	$	1.39	$	(0.18	)

In the above table, options to purchase 8,475 shares of our common stock have been excluded for the quarter ended March 31, 2019, due to their anti–dilutive impact.  The impact of potentially dilutive securities (1,238,855) for the three months ended March 31, 2018, were not considered because the effect would be anti-dilutive in that period.

21

Note 9 – Investments in Marketable Securities

Our investments in marketable equity securities are carried at fair value with the changes in unrealized gains and losses recognized in our results of operations at each measurement date. Our investments in marketable debt securities are classified as available for sale securities and carried at fair value with the unrealized gains and losses recognized through accumulated other comprehensive income at each measurement date. Realized gains and losses from securities sales are recognized in results of operations upon disposition of the securities using the specific identification method on a trade date basis. Refer to Note 10 for a description of the Company's methodology for determining the fair value of marketable securities.

Marketable securities and restricted marketable securities consist of the following (in thousands):

	March 31, 2019				December 31, 2018
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Investments available for sale:
Marketable equity securities	$	30,176	$	147,061	$	30,176	$	140,223
Restricted investments available for sale:
Corporate debt securities		66,649		66,819		69,439		67,632
Asset-based securities		64,601		64,504		62,772		62,068
U.S. Treasury securities		20,091		19,748		22,038		21,457
State and municipal securities		21,715		21,736		21,818		21,436
	$	203,232	$	319,868	$	206,243	$	312,816

Included in the marketable equity securities are the following (in thousands, except share amounts):

	March 31, 2019						December 31, 2018
	Shares		Cost		Fair Value		Shares		Cost		Fair Value
NHI Common Stock		1,630,642	$	24,734	$	128,087		1,630,642	$	24,734	$	123,179

The amortized cost and estimated fair value of debt securities classified as available for sale, by contractual maturity, are as follows (in thousands):

	March 31, 2019				December 31, 2018
	Cost		Fair Value		Cost		Fair Value
Maturities:
Within 1 year	$	11,081	$	11,054	$	11,448	$	11,401
1 to 5 years		95,001		95,229		98,487		97,430
6 to 10 years		66,974		66,524		64,932		62,527
Over 10 years		--		--		1,200		1,235
	$	173,056	$	172,807	$	176,067	$	172,593

Gross unrealized gains related to marketable equity securities are $116,906,000 and $110,081,000 as of March 31, 2019 and December 31, 2018, respectively. Gross unrealized losses related to marketable equity securities are $21,000 and $34,000 as of March 31, 2019 and December 31, 2018, respectively. For the three months ended March 31, 2019 and 2018, the Company recognized net unrealized gains of $6,838,000 and net unrealized losses of $15,517,000, respectively, for the changes in fair market value of the marketable equity securities in the interim condensed consolidated statement of operations.

22

Gross unrealized gains related to available for sale debt securities are $1,089,000 and $335,000 as of March 31, 2019 and December 31, 2018, respectively. Gross unrealized losses related to available for sale debt securities are $1,338,000 and $3,809,000 as of March 31, 2019 and December 31, 2018, respectively.

For the marketable securities in gross unrealized loss positions, (a) it is more likely than not that the Company will not be required to sell the investment securities before recovery of the unrealized losses, and (b) the Company expects that the contractual principal and interest will be received on the investment securities. As a result, the Company recognized no other-than-temporary impairment during the three months ended March 31, 2019 or for the year ended December 31, 2018.

Proceeds from the sale of available for sale debt securities during the three months ended March 31, 2019 and 2018 were $6,576,000 and $3,535,000, respectively. Investment gains of $0 and $11,000 were realized on these sales during the three months ended March 31, 2019 and 2018, respectively. No sales were reported for marketable equity securities for the three months ended March 31, 2019 and 2018, respectively.

Note 10 – Fair Value Measurements

The accounting standard for fair value measurements provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. Fair value is defined as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. This accounting standard establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs that may be used to measure fair value:

Level 1 – The valuation is based on quoted prices in active markets for identical instruments.

Level 2 – The valuation is based on observable inputs such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model–based valuation techniques for which all significant assumptions are observable in the market.

Level 3 – The valuation is based on unobservable inputs that are supported by minimal or no market activity and that are significant to the fair value of the instrument. Level 3 valuations are typically performed using pricing models, discounted cash flow methodologies, or similar techniques that incorporate management’s own estimates of assumptions that market participants would use in pricing the instrument, or valuations that require significant management judgment or estimation.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The following table summarizes fair value measurements by level at March 31, 2019 and December 31, 2018 for assets and liabilities measured at fair value on a recurring basis (in thousands):

	Fair Value Measurements Using
March 31, 2019	Fair Value		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents	$	38,194	$	38,194	$	–	$	–
Restricted cash and cash equivalents		16,505		16,505		–		–
Marketable equity securities		147,061		147,061		–		–
Corporate debt securities		66,819		49,600		17,219		–
Mortgage–backed securities		64,504		–		64,504		–
U.S. Treasury securities		19,748		19,748		–		–
State and municipal securities		21,736		–		21,736		–
Total financial assets	$	374,567	$	271,108	$	103,459	$	–

23

	Fair Value Measurements Using
December 31, 2018	Fair Value		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents	$	43,247	$	43,247	$	–	$	–
Restricted cash and cash equivalents		11,673		11,673		–		–
Marketable equity securities		140,223		140,223		–		–
Corporate debt securities		67,632		47,921		19,711		–
Asset - backed securities		62,068		–		62,068		–
U.S. Treasury securities		21,457		21,457		–		–
State and municipal securities		21,436		–		21,436		–
Total financial assets	$	367,736	$	264,521	$	103,215	$	–

Note 11 – Long–Term Debt

Long–term debt consists of the following:

	Weighted Average Interest Rate		Maturity		March 31, 2019		December 31, 2018
	Variable				(dollars in thousands)
Credit facility, interest payable monthly		3.9%		2020	$	55,000	$	55,000
Less current portion						–		–
Total long-term debt					$	55,000	$	55,000

The available borrowing capacity of the credit facility is $110,000,000. The credit facility has a maturity date of October 2020. Loans bear interest at either (i) LIBOR plus 1.40% or (ii) the base rate plus 0.40%.

Note 12 - Stock Repurchase Program

In August 2018, the Board of Directors authorized a common stock purchase program. The program will allow for repurchases of up to $25 million of its common stock. During the quarter ended March 31, 2019, the Company repurchased 10,396 shares of its common stock for a total cost of $872,000. The shares were funded from cash on hand and were cancelled and returned to the status of authorized but unissued.

Note 13 – Stock–Based Compensation

NHC recognizes stock–based compensation expense for all stock options granted over the requisite service period using the fair value at the date of grant using the Black–Scholes pricing model. Stock–based compensation totaled $424,000 and $428,000 for the three months ended March 31, 2019 and 2018, respectively. Stock–based compensation is included in “Salaries, wages and benefits” in the interim condensed consolidated statements of operations.

At March 31, 2019, the Company had $5,343,000 of unrecognized compensation cost related to unvested stock–based compensation awards. This unrecognized compensation cost will be amortized over an approximate three-year period.

24

Stock Options

The following table summarizes the significant assumptions used to value the options granted for the three months ended March 31, 2019 and for the year ended December 31, 2018.

	March 31, 2019		December 31, 2018
Risk–free interest rate		2.60%		2.46%
Expected volatility		18.1%		16.1%
Expected life, in years		1.0		3.0
Expected dividend yield		2.65%		3.29%

The following table summarizes our outstanding stock options for the three months ended March 31, 2019 and for the year ended December 31, 2018.

	Number of Shares			Weighted Average Exercise Price		Aggregate Intrinsic Value
Options outstanding at January 1, 2018		1,239,407		$	71.19	$	–
Options granted		110,265			61.39		–
Options exercised		(68,291	)		54.31		–
Options cancelled		(118,000	)		72.11		–
Options outstanding at December 31, 2018		1,163,381			71.16		–
Options granted		8,475			77.72		–
Options exercised		(318,152	)		72.36		–
Options outstanding at March 31, 2019		853,704		$	70.77	$	4,374,000
Options exercisable at March 31, 2019		178,729		$	64.42	$	2,048,000

Options Outstanding March 31, 2019	Exercise Prices			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years
159,668	$52.93	-	$62.78		61.11		2.6
694,036	$72.94	-	$77.72		73.00		2.9
853,704					70.77		2.8

Note 14 – Income Taxes

The income tax provision for the three months ended March 31, 2019 is $7,392,000 (an effective income tax rate of 25.8%). The income tax provision and effective tax rate for the three months ended March 31, 2019 were unfavorably impacted by adjustments to unrecognized tax benefits of $200,000 but was favorably impacted by a tax benefit of $228,000 relating to the exercise of stock options. The income tax provision for the three months ended March 31, 2019 was favorably impacted by the higher pre-tax book income resulting from the unrealized gain of $6,838,000 for the market value increase in our marketable equity securities portfolio.  The income tax provision for the three months ended March 31, 2018 was $200,000 (an effective income tax rate of -7.4%). The income tax provision and effective tax rate for the three months ended March 31, 2018 were unfavorably impacted by nondeductible expenses of $855,000 (primarily the non-deductible portion of the estimated potential settlement of the Caris HealthCare, L.P. Qui Tam legal matter) or -31.7% of income before taxes. The income tax provision for the three months ended March 31, 2018 was also unfavorably impacted by the lower pre-tax book income resulting from the unrealized loss of $15,517,000 for the market value decrease in our marketable equity securities portfolio. Prior to 2018, such market value changes ran through the balance sheet and did not impact our income statement.

Interest and penalties expense related to U.S. federal and state income tax returns are included within income tax expense.

The Company is no longer subject to U.S. federal and state examinations by tax authorities for years before 2015 (with certain state exceptions).

25

Note 15 – Contingencies and Commitments

Accrued Risk Reserves

We are self–insured for risks related to health insurance and have wholly–owned limited purpose insurance companies that insure risks related to workers’ compensation and general and professional liability insurance claims both for our owned and leased entities and certain of the entities to which we provide management or accounting services. The liability we have recognized for reported claims and estimates for incurred but unreported claims totals $98,542,000 and $96,024,000 at March 31, 2019 and December 31, 2018, respectively. The liability is included in accrued risk reserves in the interim condensed consolidated balance sheets and is subject to adjustment for actual claims incurred. It is possible that these claims plus unasserted claims could exceed our insurance coverages and our reserves, which could have a material adverse effect on our consolidated financial position, results of operations and cash flows.

As a result of the terms of our insurance policies and our use of wholly–owned limited purpose insurance companies, we have retained significant insurance risk with respect to workers’ compensation and general and professional liability. We consider the professional services of independent actuaries to assist us in estimating our exposures for claims obligations (for both asserted and unasserted claims) related to deductibles and exposures in excess of coverage limits, and we maintain reserves for these obligations. Such estimates are based on many variables including historical and statistical information and other factors.

Workers’ Compensation

For workers’ compensation, we utilize a wholly–owned Tennessee domiciled property/casualty insurance company to write coverage for NHC affiliates and for third–party customers. Policies are written for a duration of twelve months and cover only risks related to workers’ compensation losses. All customers are companies which operate in the senior care industry. Business is written on a direct basis. Direct business coverage is written for statutory limits and the insurance company’s losses in excess of $1,000,000 per claim are covered by reinsurance.

General and Professional Liability Lawsuits and Insurance

The senior care industry has experienced increases in both the number of personal injury/wrongful death claims and in the severity of awards based upon alleged negligence by nursing facilities and their employees in providing care to residents. As of March 31, 2019, we and/or our managed centers are currently defendants in 63 such claims.

Insurance coverage for both periods includes both primary policies and excess policies. The primary coverage is in the amount of $1.0 million per incident, $3.0 million per location with an annual primary policy aggregate limit that is adjusted on an annual basis. For 2018 and 2019, the excess coverage is $9.0 million per occurrence. Additional insurance is purchased through third party providers that serve to supplement the coverage provided through our wholly–owned captive insurance company.

Financing Commitments

In conjunction with our management contract with National, we have entered into a line of credit arrangement whereby we may have amounts due from National from time to time. The maximum loan commitment under the line of credit is $2,000,000. At March 31, 2019, National did not have an outstanding balance on the line of credit.

26

Nutritional Support Services, L.P., Qui Tam Litigation

On June 19, 2018, a First Amended Complaint was filed naming Nutritional Support Services, L.P. (“NSS”), a wholly-owned subsidiary of the Company, as a defendant in the action captained U.S. ex rel. McClain v. Nutritional Support Services, L.P., No. 6:17-cv-2608-AMQ (D.S.C.), which was filed in the United States District Court for the District of South Carolina. The action alleges that NSS violated the False Claims Act by reporting a National Drug Code (“NDC”) number that did not correspond to the NDC for dispensed prescriptions. On April 16, 2018, the United States filed a Notice of Election to Decline Intervention with respect to the allegations asserted in this action. NSS intends to vigorously defend itself with respect to this action.

Governmental Regulations

Laws and regulations governing the 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.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Overview

National HealthCare Corporation (“NHC” or the “Company”) is a leading provider of senior health care services. We operate or manage, through certain affiliates, 75 skilled nursing facilities with a total of 9,510 licensed beds, 25 assisted living facilities, five independent living facilities, one behavioral health hospital and 35 homecare programs. We operate specialized care units within certain of our healthcare centers such as Alzheimer's disease care units and sub-acute nursing units. We also have a non-controlling ownership interest in a hospice care business that services NHC owned health care centers and others. In addition, we provide insurance services, management and accounting services, and we lease properties to operators of skilled nursing and assisted living facilities. We operate in 10 states and are located primarily in the southeastern United States.

Summary of Goals and Areas of Focus

Occupancy

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 March 31, 2019 was 90.2% compared to 89.6% for the same period a year ago. With the average length of stay decreasing for a skilled nursing patient, as well as the increased availability of assisted living facilities and home and community-based services, the challenge of maintaining desirable patient census levels has been amplified. Management has undertaken a number of steps in order to best position our current and future health care facilities. This includes working internally to examine and improve systems to be most responsive to referral sources and payors. Additionally, NHC is in various stages of partnerships with hospital systems, payors, and other post–acute alliances to better position ourselves so we are an active participant in the delivery of post-acute healthcare services.

Quality of Patient Care

CMS introduced the Five-Star Quality Rating System to help consumers, their families and caregivers compare skilled nursing facilities more easily. The Five-Star Quality Rating System gives each skilled nursing operation a rating ranging between one and five stars in various categories (five stars being the best). The Company has always strived for patient-centered care and quality outcomes as precursors to outstanding financial performance. In April 2019, CMS made significant changes to the Five-Star Quality Rating System.  The changes include revisions to the state survey inspection process, enhancements with staffing information and nurse staffing levels, and the implementation of new quality measures.  These changes will impact and potentially lower our overall quality ratings in future periods.  The table below summarizes our overall performance in these quality ratings:

	As of
	Mar. 31, 2019		Dec. 31, 2018		Dec. 31, 2017
Total number of skilled nursing facilities, end of period		75		75		76
Number of 4 and 5-star rated skilled nursing facilities		64		63		62
Percentage of 4 and 5-star rated skilled nursing facilities		85%		84%		82%

27

Development and Growth

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

Type of Operation	Description	Size	Location	Placed in Service
SNF	Bed Addition	30 beds	Springfield, MO	April, 2018
Behavioral Health Hospital	Acquisition	14 beds	Osage Beach, MO	August, 2018
Memory Care	New Facility	60 beds	Farragut, TN	January, 2019

Accrued Risk Reserves

Our accrued professional liability and workers’ compensation reserves totaled $98,542,000 at March 31, 2019 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.

As to exposure for professional liability claims, we have developed performance certification criteria to measure and bring focus to the patient care issues most likely to produce professional liability exposure, including in–house acquired pressure ulcers, significant weight loss and numbers of falls. These programs for certification, which we regularly modify and improve, have produced measurable improvements in reducing these incidents. Our experience is that achieving goals in these patient care areas improves both patient and employee satisfaction.

Government Program Financial Changes

Medicare – Skilled Nursing Facilities

On August 8, 2018, CMS issued a final rule outlining fiscal year 2019 Medicare payments and quality changes for skilled nursing facilities. The 2019 final rule, which began October 1, 2018, provided for an approximate 2.4% market basket update that was included in the Bipartisan Budget Act of 2018. The market basket increase is expected to increase overall payments to skilled nursing facilities in fiscal year 2019 by $820 million compared to fiscal year 2018 levels.

For the first three months of 2019, our average Medicare per diem rate for skilled nursing facilities decreased 0.01% as compared to the same period in 2018.

As part of the final rule and effective October 1, 2019, CMS plans to start using a new case-mix model, called the Patient-Driven Payment Model (“PDPM”), which focuses on a resident’s condition and care needs, rather than the amount of care provided, to determine reimbursement levels. The PDPM utilizes clinically relevant factors for determining Medicare payment by using ICD-10 diagnosis codes and other patient characteristics as the basis for patient classification. PDPM utilizes five case-mix adjusted payment components: physical therapy (PT), occupational therapy (OT), speech language pathology (SLP), nursing and social services (nursing) and non-therapy ancillary services (NTA). It also uses a sixth non-case mix component to cover utilization of SNF resources that do not vary depending on resident characteristics.

PDPM will replace the existing case-mix classification methodology, Resource Utilization Groups, Version IV. The structure of the PDPM moves Medicare towards a more value-based, unified post-acute care payment system. PDPM also removes therapy minutes as the basis for therapy payment and adjusts the SNF per diem payments to reflect varying costs throughout the stay, through the PT, OT and NTA components. In addition, PDPM is intended to reduce paperwork requirements for performing patient assessments. Under the new PDPM system, the payment to skilled nursing facilities will be based heavily on the patient’s condition rather than the specific services provided by each skilled nursing facility.

Medicaid – Skilled Nursing Facilities

Effective July 1, 2018 and for the fiscal year 2019, the state of Tennessee implemented specific individual nursing facility rate increases. We estimate the resulting increase in revenue for the 2019 fiscal year will be approximately $2,100,000 annually, or $525,000 per quarter.

28

Effective October 1, 2018 and for the fiscal year 2019, South Carolina implemented specific individual nursing facility rate changes. The resulting increase in revenue beginning October 1, 2018 will be approximately $2,200,000 annually, or $550,000 per quarter.

Effective July 1, 2018 and for the fiscal year 2019, the state of Missouri approved a Medicaid rate increase of $7.76 per patient day to Missouri skilled nursing providers. We estimate the resulting increase in revenue for the 2019 fiscal year will be approximately $2,000,000 annually, or $500,000 per quarter. 

For the first three months of 2019, our average Medicaid per diem increased 3.16% compared to the same period in 2018.

We face challenges with respect to states’ Medicaid payments, because many currently do not cover the total costs incurred in providing care to those patients. States will continue to control Medicaid expenditures and also look for adequate funding sources, including provider assessments. There are several pieces of legislation that include provisions designed to reduce Medicaid spending. These provisions include, among others, provisions strengthening the Medicaid asset transfer restrictions for persons seeking to qualify for Medicaid long-term care coverage, which could, due to the timing of the penalty period, increase facilities’ exposure to uncompensated care. Other provisions could increase state funding for home and community-based services, potentially having an impact on funding for nursing facilities.

Medicare – Homecare Programs

On November 13, 2018, CMS published a final rule which updates the Medicare HH PPS rates, including the conversion factor and case-mix weights for calendar years 2019 and 2020. Effective January 1, 2019, CMS estimates the net impact of the PPS rule results in a 2.2% increase ($420 million) in Medicare payments for agencies in 2019. The increase reflects the effects of a 2.2% home health payment update percentage; a 0.1% increase in payments due to decreasing the fixed-dollar-loss ratio in order to pay no more than 2.5% of total payments as outlier payments; and a 0.1% decrease in payments due to the new rural add-on policy mandated by the Bipartisan Budget Act of 2018.

Also published in the final rule and effective January 1, 2020, there will be an elimination of therapy thresholds for payment, implementation of the Patient-Driven Group Model (“PDGM”) case-mix methodology refinements and a change in the unit of payment from a sixty (60) day episode to a thirty (30) day episode period. These changes focus on providing value over volume of services to patients. Once the changes are implemented, home health payments will no longer be based on the number of visits provided, but rather the patient’s medical condition and care needs.

Segment Reporting

The Company has two reportable operating segments: (1) inpatient services, which includes the operation of skilled nursing facilities, assisted and independent living facilities, and our behavioral health hospital; and (2) homecare services. These reportable operating segments are consistent with information used by the Company’s Chief Executive Officer, as chief operating decision maker (“CODM”), to assess performance and allocate resources.

The Company also reports an “all other” category that includes revenues from rental income, management and accounting services fees, insurance services, and costs of the corporate office. For additional information on these reportable segments see Note 2 – Summary of Significant Accounting Policies.   

The Company’s CODM evaluates performance and allocates capital resources to each segment based on an operating model that is designed to improve the quality of patient care and profitability of the Company while enhancing long-term shareholder value. The CODM does not review assets by segment in his resource allocation and therefore, assets by segment are not disclosed below.

29

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

	Three Months Ended March 31, 2019
	Inpatient Services		Homecare		All Other			Total
Revenues:
Net patient revenues	$	221,635	$	14,476	$	-		$	236,111
Other revenues		231		-		11,943			12,174
Net operating revenues		221,866		14,476		11,943			248,285
Costs and expenses:
Salaries, wages and benefits		126,101		8,026		7,261			141,388
Other operating		62,629		4,252		2,551			69,432
Rent		8,291		462		1,485			10,238
Depreciation and amortization		9,653		61		803			10,517
Interest		348		-		578			926
Total costs and expenses		207,022		12,801		12,678			232,501
Income (loss) from operations		14,844		1,675		(735	)		15,784
Non-operating income		-		-		6,001			6,001
Unrealized gains on marketable equity securities		-		-		6,838			6,838
Income before income taxes	$	14,844	$	1,675	$	12,104		$	28,623

	Three Months Ended March 31, 2018
	Inpatient Services		Homecare		All Other			Total
Revenues:
Net patient revenues	$	216,351	$	15,341	$	-		$	231,692
Other revenues		271		-		10,998			11,269
Net operating revenues		216,622		15,341		10,998			242,961
Costs and expenses:
Salaries, wages and benefits		123,380		8,030		8,685			140,095
Other operating		57,835		5,279		2,058			65,172
Rent		8,258		487		1,484			10,229
Depreciation and amortization		9,461		38		843			10,342
Interest		396		-		844			1,240
Total costs and expenses		199,330		13,834		13,914			227,078
Income (loss) from operations		17,292		1,507		(2,916	)		15,883
Non-operating loss		-		-		(3,065	)		(3,065	)
Unrealized losses on marketable equity securities		-		-		(15,517	)		(15,517	)
Income (loss) before income taxes	$	17,292	$	1,507	$	(21,498	)	$	(2,699	)

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.

30

Specifically, the Company believes the presentation of non-GAAP financial information that excludes the unrealized gains or losses on our marketable equity securities, operating results for the newly constructed healthcare facilities not at full capacity, share-based compensation expense, and the legal costs and charges related to the settlement of a Qui Tam investigation within our Caris hospice partnership is helpful in allowing investors to more accurately access the Company’s operations.

The operating results for the newly constructed healthcare facilities not at full capacity for the three months ended March 31, 2019 include facilities that began operations from 2017 to 2019 (one skilled nursing facility, two assisted living facilities, and one memory care facility). For the three months ended March 31, 2018, included are facilities that began operations from 2016 to 2018 (two skilled nursing facilities and three assisted living facilities).

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

	Three Months Ended March 31
	2019			2018
Net income (loss) attributable to National Healthcare Corporation	$	21,269		$	(2,791	)
Non-GAAP adjustments
Unrealized (gains) losses on marketable equity securities		(6,838	)		15,517
Legal costs and charges related to Caris' legal investigation		-			8,228
Operating results for newly opened facilities not at full capacity		595			555
Share-based compensation expense		424			428
Provision of income taxes on non-GAAP adjustments		1,501			(5,575	)
Non-GAAP Net income	$	16,951		$	16,362
GAAP diluted earnings per share	$	1.39		$	(0.18	)
Non-GAAP adjustments
Unrealized (gains) losses on marketable equity securities		(0.33	)		0.76
Legal costs and charges related to Caris' legal investigation		-			0.45
Operating results for newly opened facilities not at full capacity		0.03			0.03
Share-based compensation expense		0.02			0.02
Non-GAAP diluted earnings per share	$	1.11		$	1.08

31

Results of Operations

The following table and discussion set forth items from the interim condensed consolidated statements of income as a percentage of net operating revenues for the three months ended March 31, 2019 and 2018.

Percentage of Net Operating Revenues

	Three Months Ended March 31
	2019			2018
Net operating revenues		100.0	%		100.0	%
Costs and expenses:
Salaries, wages and benefits		56.9			57.7
Other operating		28.0			26.8
Facility rent		4.1			4.2
Depreciation and amortization		4.2			4.3
Interest		0.4			0.5
Total costs and expenses		93.6			93.5
Income from operations		6.4			6.5
Non–operating income (loss)		2.4			(1.2	)
Unrealized gains (losses) on marketable equity securities		2.8			(6.4	)
Income (loss) before income taxes		11.6			(1.1	)
Income tax provision		(3.0	)		(0.1	)
Net income (loss)		8.6			(1.2	)
Net loss attributable to noncontrolling interest		0.0			0.0
Net income (loss) attributable to common stockholders of NHC		8.6	%		(1.1	)%

Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018

Results for the quarter ended March 31, 2019 compared to the first quarter of 2018 include a 2.2% increase in net operating revenues and a 862.1% increase in net income attributable to NHC. Excluding the unrealized gains in our marketable equity securities portfolio and the other non-GAAP adjustments, non-GAAP net income for the three months ended March 31, 2019 was $16,951,000 compared to $16,362,000 for the first quarter of 2018, which is an increase of 3.6%.

Net operating revenues

Net patient revenues increased $4,419,000, or 1.9%, compared to the same period last year.

The total census at owned and leased skilled nursing facilities for the quarter averaged 90.2% compared to an average of 89.6% for the same quarter a year ago. Medicare per diem rates decreased 1 basis point, or 0.01%, and managed care per diem rates decreased 1.5% compared to the quarter a year ago. Medicaid and private pay per diem rates increased 3.2% and 2.9%, respectively, compared to the quarter a year ago. Overall, the composite skilled nursing facility per diem at our owned and leased skilled nursing facilities decreased 0.4% compared to the quarter a year ago.

Beginning January 1, 2019, the Company’s Institutional Special Needs Plan (“I-SNP”) began offering and providing insurance and healthcare services in the state of Tennessee. Our I-SNP, which is called NHC Advantage, is a managed care insurance company that enrolls Medicare Advantage eligible individuals who are patients in our skilled nursing facilities. We believe the I-SNP will benefit our patients by providing nurse practitioners and care-coordination teams that will continue to enhance the patient-centered experience and our quality of care. We also believe our progressive improvement to patient care will continue to drive positive financial results for the Company. For the three months ended March 31, 2019, the I-SNP increased net patient revenues approximately $3,635,000 compared to the first quarter a year ago.

32

In August 2018, the Company acquired a controlling ownership interest in a 14-bed behavioral health hospital. For the three months ending March 31, 2019, this hospital increased net patient revenues approximately $1,591,000 compared to the first quarter of a year ago. In October 2018, we sold a skilled nursing facility in Madisonville, Kentucky. The sale of this facility decreased net patient revenues for the first quarter of 2019 by $1,583,000 compared to the first quarter of 2018.

Other revenues increased $905,000, or 8.0%, compared to the same quarter last year, as further detailed in Note 4 to our interim condensed consolidated financial statements. The increase in management fee revenue for the three months ended March 31, 2019 compared to the first quarter of 2018 is the primary reason for the increase in other revenues.

Total costs and expenses

Total costs and expenses for the first quarter of 2019 compared to the first quarter of 2018 increased $5,423,000 or 2.4%, to $232,501,000 from $227,078,000.

Salaries, wages and benefits increased $1,293,000, or 0.9%, to $141,388,000 from $140,095,000. Salaries, wages and benefits as a percentage of net operating revenues was 56.9% compared to 57.7% for the three months ended March 31, 2019 and 2018, respectively. The primary reason for salaries, wages and benefits being down as a percentage of net operating revenues is due to the October 2018 sale of the skilled nursing facility in Madisonville, Kentucky.

Other operating expenses increased $4,260,000, or 6.5%, to $69,432,000 for the 2019 period compared to $65,172,000 for the 2018 period. Other operating expenses as a percentage of net operating revenue was 28.0% compared to 26.8% for the three months ended March 31, 2019 and 2018, respectively. The increase in other operating expenses for the first quarter of 2019 compared to the first quarter of 2018 is due to the January 1, 2019 start of our I-SNP insurance plan, NHC Advantage. For the three months ended March 31, 2019, the I-SNP increased other operating expenses approximately $3,686,000 compared to the first quarter a year ago.

The decrease in interest expense is due from our long-term debt being paid down during 2018. At March 31, 2019, we have $55 million outstanding on our credit facility.

Other income (expense)

Non–operating income increased by $9,066,000 compared to the same period last year, as further detailed in Note 5 to our interim condensed consolidated financial statements. The increase in non-operating income is due from our equity in earnings investment in our Caris hospice operations. During the first quarter of 2018, Caris recorded a charge to earnings of $8,500,000 for the settlement of a Qui Tam investigation, of which 75.1% is included in the Company’s earnings. In total, with the $8.5 million settlement and legal expenses, Caris’ earnings negatively impacted NHC’s non-operating income by $8,228,000 for the first quarter of 2018.

Income taxes

The income tax provision for the three months ended March 31, 2019 is $7,392,000 (an effective income tax rate of 25.8%). Excluding nondeductible expenses, we expect our corporate income tax rate for 2019 to be approximately 26.0%.

Noncontrolling interest

The noncontrolling interest in a subsidiary 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.

33

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, 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):

	Three Months Ended March 31						Three Month Change
	2019			2018			$			%
Cash, cash equivalents, restricted cash and restricted cash equivalents, at beginning of period	$	54,920		$	67,421		$	(12,501	)		(18.5	)
Cash provided by operating activities		11,601			13,306			(1,705	)		(12.8	)
Cash used in investing activities		(2,947	)		(5,828	)		2,881			49.4
Cash used in financing activities		(8,875	)		(8,159	)		(716	)		(8.8	)
Cash, cash equivalents, restricted cash and restricted cash equivalents, at end of period	$	54,699		$	66,740		$	(12,041	)		(18.0	)

Operating Activities

Net cash provided by operating activities for the three months ended March 31, 2019 was $11,601,000 as compared to $13,306,000 in the same period last year. Cash provided by operating activities consisted of net income of $21,231,000 and adjustments for non–cash items of $3,385,000. There was cash used for working capital needs in the amount of $13,046,000 for the three months ended March 31, 2019 compared to $13,705,000 for the same period a year ago. We also received cash distributions from our unconsolidated investments of $31,000 during the three months ended March 31, 2019 compared to $2,254,000 for the first quarter a year ago.

Investing Activities

Net cash used in investing activities totaled $2,947,000 for the three months ended March 31, 2019 compared to $5,828,000 for the three months ended March 31, 2018. Cash used for property and equipment additions was $5,874,000 and $7,100,000 for the three months ended March 31, 2019 and 2018, respectively. The Company collected notes receivable of $353,000 and $431,000 for the three months ended March 31, 2019 and 2018, respectively. Sales of restricted marketable securities, net of purchases, resulted in cash of $3,011,000 and $841,000 for the three months ended March 31, 2019 and 2018, respectively.

Financing Activities 

Net cash used in financing activities totaled $8,875,000 and $8,159,000 for the three months ending March 31, 2019 and 2018, respectively. Cash used for dividend payments to common stockholders totaled $7,623,000 in the current year period compared to $7,297,000 for the same period a year ago. In the current period, $579,000 was provided by the issuance of common stock compared to $1,067,000 in the prior year period. In the current period, repurchases of common stock totaled $872,000 compared to $867,000 in the prior period.

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, our current cash on hand of $38,194,000, marketable securities of $147,061,000, and as needed, our borrowing capacity on the credit facility, are expected to be adequate to meet our contractual obligations, operating liquidity, and our growth and development plans in the next twelve months.

34

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 $38,194,000, marketable securities of $147,061,000 and our borrowing capacity on the credit facility. At March 31, 2019, the outstanding balance on the credit facility is $55,000,000; therefore, leaving $55,000,000 available for future borrowings. The maturity date on the credit facility is October 7, 2020. The credit facility is available for general corporate purposes, including working capital and acquisitions.

Our ability to refinance the credit agreement, to meet our long–term contractual obligations and to finance our operating requirements, and growth and development plans will depend upon our future performance, which 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.

Commitment and Contingencies

Nutritional Support Services, L.P., Qui Tam Litigation

On June 19, 2018, a First Amended Complaint was filed naming Nutritional Support Services, L.P. (“NSS”), a wholly-owned subsidiary of the Company, as a defendant in the action captioned U.S. ex rel. McClain v. Nutritional Support Services, L.P., No. 6:17-cv-2608-AMQ (D.S.C.), which was filed in the United States District Court for the District of South Carolina. The action alleges that NSS violated the False Claims Act by reporting a National Drug Code (“NDC”) number that did not correspond to the NDC for dispensed prescriptions. The plaintiffs are seeking unspecified damages.  On April 16, 2018, the United States filed a Notice of Election to Decline Intervention with respect to the allegations asserted in this action. NSS intends to vigorously defend itself with respect to this action.

Governmental Regulations

Laws and regulations governing the 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.

New Accounting Pronouncements

See Note 2 to the interim condensed consolidated financial statements for the impact of new accounting standards.

Forward–Looking Statements

References throughout this document to the Company include National HealthCare Corporation and its wholly–owned subsidiaries. In accordance with the Securities and Exchange Commissions “Plain English” guidelines, this Quarterly Report on Form 10–Q has been written in the first person. In this document, the words “we”, “our”, “ours” and “us” refer only to National HealthCare Corporation and its wholly–owned subsidiaries and not any other person.

This Quarterly Report on Form 10–Q and other information we provide from time to time, contains certain “forward–looking” statements as that term is defined by the Private Securities Litigation Reform Act of 1995. All statements regarding our expected future financial position, results of operations or cash flows, continued performance improvements, ability to service and refinance our debt obligations, ability to finance growth opportunities, ability to control our patient care liability costs, ability to respond to changes in government regulations, ability to execute our three–year strategic plan, and similar statements including, without limitations, those containing words such as “believes”, “anticipates”, “expects”, “intends”, “estimates”, “plans”, and other similar expressions are forward–looking statements.

35

Forward–looking statements involve known and unknown risks and uncertainties that may cause our actual results in future periods to differ materially from those projected or contemplated in the forward–looking statements as a result of, but not limited to, the following factors:

● national and local economic conditions, including their effect on the availability and cost of labor, utilities and materials;

● the effect of government regulations and changes in regulations governing the healthcare industry, including our compliance with such regulations;

● changes in Medicare and Medicaid payment levels and methodologies and the application of such methodologies by the government and its fiscal intermediaries;

● liabilities and other claims asserted against us, including patient care liabilities, as well as the resolution of current litigation (see Note 15: Contingencies and Commitments);

● the ability of third parties for whom we have guaranteed debt, if any, to refinance certain short-term debt obligations;

● the ability to attract and retain qualified personnel;

● the availability and terms of capital to fund acquisitions and capital improvements;

● the ability to refinance existing debt on favorable terms;

● the competitive environment in which we operate;

● the ability to maintain and increase census levels; and

● demographic changes.

See the notes to the quarterly financial statements, and “Item 1. Business” in our 2018 Annual Report on Form 10–K for a discussion of various governmental regulations and other operating factors relating to the healthcare industry and the risk factors inherent in them. This may be found on our web site at www.nhccare.com. You should carefully consider these risks before making any investment in the Company. These risks and uncertainties are not the only ones facing us. There may be additional risks that we do not presently know of or that we currently deem immaterial. If any of the risks actually occur, our business, financial condition or results of operations could be materially adversely affected. In that case, the trading price of our shares of stock could decline, and you may lose all or part of your investment. Given these risks and uncertainties, we can give no assurances that these forward–looking statements will, in fact, transpire and, therefore, caution investors not to place undue reliance on them.

Item 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, notes receivable, revolving credit facility, and long–term debt. The Company's senior management has established comprehensive risk management policies and procedures to manage these market risks.

36

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 March 31, 2019, we have available for sale marketable debt securities in the amount of $172,807,000. The fixed maturity portfolio is comprised of investments with primarily short–term and intermediate–term maturities. The portfolio composition allows flexibility in reacting to fluctuations of interest rates. The fixed maturity portfolio allows our insurance company subsidiaries to achieve an adequate risk–adjusted return while maintaining sufficient liquidity to meet obligations.

As of March 31, 2019, the Company has $55,000,000 of long–term debt that bears interest at variable interest rates. Based on our outstanding long–term debt, a 1% change in interest rates would change our annual interest cost by approximately $550,000.

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.

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 March 31, 2019, the fair value of our marketable equity securities is approximately $147,061,000. Of the $147.0 million equity securities portfolio, our investment in NHI comprises approximately $128.1 million, or 87%, 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 $14.7 million. At March 31, 2019, our equity securities had unrealized gains of $116.9 million. Of the $116.9 million of unrealized gains, $103.4 million is related to our investment in NHI.

Item 4. Controls and Procedures.

As of March 31, 2019, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Principal Accounting Officer (“PAO”), 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 PAO, concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2019.

The Company adopted the new lease accounting guidance in ASU 2016-02 on January 1, 2019 and began using new lease accounting software.  The implementation of the new lease accounting standard and lease accounting software included additions to our internal controls, policies and procedures.  There have been no other changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

37

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

For a discussion of prior, current and pending litigation of material significance to NHC, please see Note 15 of this Form 10–Q.

Item 1A. Risk Factors.

During the three months ended March 31, 2019, 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, 2018.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Not applicable

Item 3. Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosures.

Not applicable

Item 5. Other Information.

None

38

Item 6. Exhibits.

(a) List of exhibits

EXHIBIT INDEX

Exhibit No.	Description
3.1	Certificate of Incorporation of National HealthCare Corporation (Incorporated by reference to Exhibit 3.1 to the Registrant’s registration statement on Form S-4 (File No. 333-37185) dated October 3, 1997.)
3.2	Certificate of Amendment to the Certificate of Incorporation of National HealthCare Corporation (Incorporated by reference to Exhibit 3.5 to the quarterly report on Form 10-Q filed on August 3, 2017.)
3.3	Certificate of Designation Series B Junior Participating Preferred Stock (Incorporated by reference to Exhibit 3.1 to the Registrant’s registration statement on Form 8-A, dated August 3, 2007.)
3.4	Restated Bylaws as amended February 14, 2013 (Incorporated by reference to Exhibit 3.5 to the quarterly report on Form 10-Q filed on May 8, 2013.)
4.1	Form of Common Stock (Incorporated by reference to Exhibit 4.1 to the quarterly report on Form 10-Q filed on August 3, 2017.)
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certification of Principal Accounting Officer
32	Certification pursuant to 18 U.S.C. Section 1350 by Chief Executive Officer and Principal Accounting Officer
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

39

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	NATIONAL HEALTHCARE CORPORATION
	(Registrant)
Date: May 9, 2019	/s/ Stephen F. Flatt
	Stephen F. Flatt
	Chief Executive Officer
Date: May 9, 2019	/s/ Brian F. Kidd
	Brian F. Kidd
	Senior Vice President and Controller
	(Principal Accounting Officer)

40

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Stephen F. Flatt, certify that:

1. I have reviewed this quarterly report on Form 10-Q of National HealthCare Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an quarterly report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function);

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 9, 2019

 /s/ Stephen F. Flatt 

Stephen F. Flatt

Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Brian F. Kidd, certify that:

1. I have reviewed this quarterly report on Form 10-Q of National HealthCare Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an quarterly report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function);

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 9, 2019

 /s/ Brian F. Kidd 

Brian F. Kidd

Senior Vice President and Controller

(Principal Financial Officer)

EX-32

Exhibit 32

Certification of Quarterly Report on Form 10-Q

of National HealthCare Corporation

For the Quarter Ended March 31, 2019

The undersigned hereby certify, pursuant to 18 U.S.C. Section 906 of the Sarbanes-Oxley Act of 2002, that, to the undersigned's best knowledge and belief, the Quarterly Report on Form 10-Q for National HealthCare Corporation ("Issuer") for the period ending March 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the "Report"):

(a) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(b) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer.

This Certification accompanies the Quarterly Report on Form 10-Q of the Issuer for the quarterly period ended March 31, 2019.

This Certification is executed as of May 9, 2019.

/s/Stephen F. Flatt                                                          

Stephen F. Flatt

Chief Executive Officer

/s/ Brian F. Kidd                                                             

Brian F. Kidd

Principal Accounting Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2019	May 01, 2019
Document Information [Line Items]
Entity Registrant Name	NATIONAL HEALTHCARE CORP
Entity Central Index Key	0001047335
Trading Symbol	nhc
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	false
Entity Common Stock, Shares Outstanding (in shares)		15,306,290
Document Type	10-Q
Document Period End Date	Mar. 31, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Interim Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Revenues:
Net patient revenues	$ 236,111,000	$ 231,692,000
Other revenues	12,174,000	11,269,000
Net operating revenues	248,285,000	242,961,000
Cost and expenses:
Salaries, wages and benefits	141,388,000	140,095,000
Other operating	69,432,000	65,172,000
Facility rent	10,238,000	10,229,000
Depreciation and amortization	10,517,000	10,342,000
Interest	926,000	1,240,000
Total costs and expenses	232,501,000	227,078,000
Income from operations	15,784,000	15,883,000
Other income (expense):
Non–operating income (expense)	6,001,000	(3,065,000)
Unrealized gains (losses) on marketable equity securities	6,838,000	(15,517,000)
Income (loss) before income taxes	28,623,000	(2,699,000)
Income tax provision	(7,392,000)	(200,000)
Net income (loss)	21,231,000	(2,899,000)
Net loss attributable to noncontrolling interest	38,000	108,000
Net income (loss) attributable to National HealthCare Corporation	$ 21,269,000	$ (2,791,000)
Earnings (loss) per share attributable to National HealthCare Corporation stockholders:
Basic (in dollars per share)	$ 1.39	$ (0.18)
Diluted (in dollars per share)	$ 1.39	$ (0.18)
Weighted average common shares outstanding:
Basic (in shares)	15,256,189	15,216,635
Diluted (in shares)	15,324,125	15,216,635
Dividends declared per common share (in dollars per share)	$ 0.50	$ 0.48

XML

Interim Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Net income (loss)	$ 21,231	$ (2,899)
Other comprehensive income (loss):
Unrealized gains (losses) on investments in restricted marketable debt securities	3,225	(2,798)
Reclassification adjustment for realized gains on sale of securities		(11)
Income tax (expense) benefit related to items of other comprehensive income (loss)	(677)	590
Other comprehensive gain (loss), net of tax	2,548	(2,219)
Net loss attributable to noncontrolling interest	38	108
Comprehensive income (loss) attributable to National HealthCare Corporation	$ 23,817	$ (5,010)

XML

Interim Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Current Assets:
Cash and cash equivalents	$ 38,194,000	$ 43,247,000
Restricted cash and cash equivalents, current portion	14,785,000	9,967,000
Marketable equity securities	147,061,000	140,223,000
Restricted marketable debt securities, current portion	13,486,000	18,676,000
Accounts receivable	100,619,000	97,274,000
Inventories	6,953,000	7,470,000
Prepaid expenses and other assets	4,598,000	3,863,000
Notes receivable, current portion	1,417,000	1,289,000
Total current assets	327,113,000	322,009,000
Property and Equipment:
Property and equipment, at cost	987,763,000	979,088,000
Accumulated depreciation and amortization	(454,959,000)	(444,438,000)
Net property and equipment	532,804,000	534,650,000
Other Assets:
Restricted cash and cash equivalents, less current portion	1,720,000	1,706,000
Restricted marketable securities, less current portion	159,321,000	153,917,000
Deposits and other assets	5,895,000	5,602,000
Operating lease right-of-use assets	220,134,000
Goodwill	20,995,000	20,995,000
Notes receivable, less current portion	9,538,000	9,707,000
Investments in unconsolidated companies	34,777,000	32,362,000
Total other assets	452,380,000	224,289,000
Total assets	1,312,297,000	1,080,948,000
Current Liabilities:
Trade accounts payable	19,318,000	19,759,000
Finance lease obligations, current portion	6,780,000	3,924,000
Operating lease liabilities, current portion	23,353,000
Accrued payroll	45,888,000	67,618,000
Amounts due to third party payors	16,293,000	16,108,000
Accrued risk reserves, current portion	28,271,000	28,643,000
Other current liabilities	22,407,000	14,249,000
Dividends payable	7,652,000	7,623,000
Total current liabilities	169,962,000	157,924,000
Long-term debt	55,000,000	55,000,000
Finance lease obligations, less current portion	18,110,000	19,128,000
Operating lease liabilities, less current portion	196,781,000
Accrued risk reserves, less current portion	70,271,000	67,381,000
Refundable entrance fees	8,078,000	8,078,000
Obligation to provide future services	2,172,000	2,172,000
Deferred income taxes	20,830,000	18,550,000
Other noncurrent liabilities	15,306,000	15,204,000
Deferred revenue	5,072,000	3,054,000
Total liabilities	561,582,000	346,491,000
Equity:
Common stock, $.01 par value; 45,000,000 shares authorized; 15,303,990 and 15,255,002 shares, respectively, issued and outstanding	153,000	153,000
Capital in excess of par value	219,566,000	219,435,000
Retained earnings	530,052,000	516,435,000
Accumulated other comprehensive loss	(197,000)	(2,745,000)
Total National HealthCare Corporation stockholders’ equity	749,574,000	733,278,000
Noncontrolling interest	1,141,000	1,179,000
Total equity	750,715,000	734,457,000
Total liabilities and equity	$ 1,312,297,000	$ 1,080,948,000

XML

Interim Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares	Mar. 31, 2019	Dec. 31, 2018
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	45,000,000	45,000,000
Common stock, shares issued (in shares)	15,303,990	15,255,002
Common stock, shares outstanding (in shares)	15,303,990	15,255,002

XML

Interim Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Cash Flows From Operating Activities:
Net income (loss)	$ 21,231,000	$ (2,899,000)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	10,517,000	10,342,000
Equity in (earnings) losses of unconsolidated investments	(2,321,000)	6,586,000
Distributions from unconsolidated investments	31,000	2,254,000
Unrealized (gains) losses on marketable equity securities	(6,838,000)	15,517,000
Gains on sale of restricted marketable debt securities		(11,000)
Deferred income taxes	(1,603,000)	5,206,000
Stock–based compensation	424,000	428,000
Changes in operating assets and liabilities:
Accounts receivable	(3,345,000)	1,761,000
Income tax receivable		3,938,000
Inventories	517,000	(113,000)
Prepaid expenses and other assets	(1,008,000)	(631,000)
Trade accounts payable	(441,000)	737,000
Accrued payroll	(21,730,000)	(22,619,000)
Amounts due to third party payors	185,000	(234,000)
Accrued risk reserves	2,498,000	2,971,000
Other current liabilities	8,158,000	(1,882,000)
Other noncurrent liabilities	102,000	337,000
Deferred revenue	2,018,000	2,030,000
Net cash provided by operating activities	11,601,000	13,306,000
Cash Flows From Investing Activities:
Additions to property and equipment	(5,874,000)	(7,100,000)
Investments in notes receivable	(312,000)
Investments in unconsolidated companies	(125,000)
Collections of notes receivable	353,000	431,000
Purchase of restricted marketable debt securities	(3,565,000)	(2,694,000)
Sale of restricted marketable debt securities	6,576,000	3,535,000
Net cash used in investing activities	(2,947,000)	(5,828,000)
Cash Flows From Financing Activities:
Principal payments under finance lease obligations	(959,000)	(903,000)
Dividends paid to common stockholders	(7,623,000)	(7,297,000)
Issuance of common shares	579,000	1,067,000
Repurchase of common shares	(872,000)	(867,000)
Entrance fee refunds		(159,000)
Net cash used in financing activities	(8,875,000)	(8,159,000)
Net Decrease in Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents	(221,000)	(681,000)
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents, Beginning of Period	54,920,000	67,421,000
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents, End of Period	54,699,000	66,740,000
Balance Sheet Classifications:
Total Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents	$ 54,920,000	$ 67,421,000

XML

Interim Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Noncontrolling Interest [Member]	Total
Balance (in shares) at Dec. 31, 2017	15,212,133
Balance at Dec. 31, 2017	$ 152	$ 215,659	$ 419,423	$ 67,504	$ 694	$ 703,432
Reclassification due to new accounting standards at Dec. 31, 2017			68,201	(68,201)
Net income (loss) attributable to National HealthCare Corporation			(2,791)			(2,791)
Net loss attributable to noncontrolling interest					(108)	(108)
Other comprehensive income (loss)				(2,219)		(2,219)
Stock–based compensation		428				428
Shares sold – options exercised (in shares)	21,906
Shares sold – options exercised		1,067				1,067
Repurchase of common shares (in shares)	(14,506)
Repurchase of common shares		(867)				(867)
Dividends declared to common stockholders			(7,305)			(7,305)
Balance (in shares) at Mar. 31, 2018	15,219,533
Balance at Mar. 31, 2018	$ 152	216,287	477,528	(2,916)	586	691,637
Balance (in shares) at Dec. 31, 2017	15,212,133
Balance at Dec. 31, 2017	$ 152	215,659	419,423	67,504	694	703,432
Reclassification due to new accounting standards at Dec. 31, 2017			68,201	(68,201)
Shares sold – options exercised (in shares)						68,291
Balance (in shares) at Dec. 31, 2018	15,255,002
Balance at Dec. 31, 2018	$ 153	219,435	516,435	(2,745)	1,179	$ 734,457
Net income (loss) attributable to National HealthCare Corporation			21,269			21,269
Net loss attributable to noncontrolling interest					(38)	(38)
Other comprehensive income (loss)				2,548		2,548
Stock–based compensation		424				$ 424
Shares sold – options exercised (in shares)	59,384					318,152
Shares sold – options exercised		579				$ 579
Repurchase of common shares (in shares)	(10,396)
Repurchase of common shares		(872)				(872)
Dividends declared to common stockholders			(7,652)			(7,652)
Balance (in shares) at Mar. 31, 2019	15,303,990
Balance at Mar. 31, 2019	$ 153	$ 219,566	$ 530,052	$ (197)	$ 1,141	$ 750,715

XML

Interim Condensed Consolidated Statements of Stockholders' Equity (Unaudited) (Parentheticals) - $ / shares	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Common Stock [Member]
Dividends declared to common stockholders, per share (in dollars per share)	$ 0.50	$ 0.48
Dividends declared to common stockholders, per share (in dollars per share)	$ 0.50	$ 0.48

XML

Note 1 - Description of Business

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Note

1

–

Description of Business

National HealthCare Corporation

(“NHC” or the “Company”) is a leading provider of senior health care services. As of

March 31, 2019,

we operate or manage, through certain affiliates,

75

skilled nursing facilities with a total of

9,510

licensed beds,

25

assisted living facilities,

five

independent living facilities,

one

behavioral health hospital, and

35

homecare programs. We operate specialized care units within certain of our healthcare centers such as Alzheimer's disease care units and sub-acute nursing units. We also have a noncontrolling ownership interest in a hospice care business that services NHC owned skilled nursing facilities and others. In addition, we provide insurance services, management and accounting services, and we lease properties to operators of skilled nursing and assisted living facilities. We operate in

10

states and are located primarily in the southeastern United States.

XML

Note 2 - Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Significant Accounting Policies [Text Block]

Note

2

–

Summary of Significant Accounting Policies

The listing below is

not

intended to be a comprehensive list of all our significant accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by generally accepted accounting principles (“GAAP”), with limited need for management’s judgment in their application. There are also areas in which management’s judgment in selecting any available alternative would

not

produce a materially different result. See our audited

December 31, 2018

consolidated financial statements and notes thereto which contain accounting policies and other disclosures required by GAAP. Our audited

December 31, 2018

consolidated financial statements are available at our web site:

www.nhccare.com

.

Basis of Presentation

The unaudited interim condensed consolidated financial statements to which these notes are attached include all normal, recurring adjustments which are necessary to fairly present the financial position, results of operations and cash flows of NHC. All significant intercompany transactions and balances have been eliminated in consolidation. The consolidated financial statements include the accounts of all entities controlled by NHC. The Company presents noncontrolling interest within the equity section of its consolidated balance sheets. The Company presents the amount of consolidated net income that is attributable to NHC and the noncontrolling interest in its consolidated statements of operations.

We assume that users of these interim financial statements have read or have access to the audited

December 31, 2018

consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations and that the adequacy of additional disclosure needed for a fair presentation, except in regard to material contingencies,

may

be determined in that context. Accordingly, footnotes and other disclosures which would substantially duplicate the disclosure contained in our most recent annual report to stockholders have been omitted. This interim financial information is

not

necessarily indicative of the results that

may

be expected for a full year for a variety of reasons.

Estimates and Assumptions

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and could cause our reported net income to vary significantly from period to period.

Recently Adopted Accounting Guidance

In

February 2016,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

No.

2016

-

02,

"Leases (Topic

842

)." The objective of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU is effective for fiscal years beginning after

December 15, 2018,

including interim periods within those annual periods and is to be applied either retrospectively to each prior reporting period presented in the financial statements or retrospectively at the beginning of the period of adoption.

The Company adopted the standard as of

January 1, 2019,

electing the transition method that allows it to apply the standard as of the adoption date and record a cumulative adjustment in retained earnings, if applicable. We did

not

have a cumulative adjustment to retained earnings. The interim condensed consolidated financial statements for the period ending

March 31, 2019,

are presented under the new standard, while comparative years presented are

not

adjusted and continue to be reported in accordance with our historical accounting policy.

On

June 20, 2018,

the FASB issued ASU

No.

2018

-

07,

“Compensation – Stock Compensation (Topic

718

): Improvements to Nonemployee Share-based Payment Accounting.” ASU

No.

2018

-

07

simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most of the guidance on such payments to nonemployees is aligned with the requirements for share-based payments granted to employees. On

January 1, 2019,

the Company early adopted the provisions of ASU

No.

2018

-

07

and this standard did

not

have an impact on our consolidated financial statements.

On

August 28, 2018,

the FASB issued ASU

No.

2018

-

13,

“Fair Value Measurement (Topic

820

): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.” ASU

No.

2018

-

13

changes the fair value measurement disclosure requirements of Accounting Standards Codification (“ASC”)

820.

Entities are

no

longer required to disclose the amount of and reasons for transfers between Level

1

and Level

2

of the fair value hierarchy, but they will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level

3

fair value measurements. On

January 1, 2019,

the Company early adopted the provisions of ASU

No.

2018

-

13

and this standard did

not

have a material impact on our consolidated financial statements.

Recent Accounting Guidance

Not

Yet Adopted

 

In

June 2016,

the FASB issued ASU

No.

2016

-

13,

“Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments.” ASU

No.

2016

-

13

adds to U.S. GAAP an impairment model that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses. The ASU is also intended to reduce the complexity of U.S. GAAP by decreasing the number of credit impairment models that entities use to account for debt instruments. This ASU is effective for fiscal years beginning after

December 15, 2019,

including interim periods within those annual periods, with early adoption permitted for fiscal years beginning after

December 15, 2018.

We are currently evaluating the impact this standard will have on our policies and procedures and internal control framework.

Net Patient Revenues and Accounts Receivable

Net patient revenues are derived from services rendered to patients for skilled and intermediate nursing, rehabilitation therapy, assisted living and independent living, and home health care services. Net patient revenue is reported at the amount that reflects the consideration to which the Company expects to be entitled in exchange for providing patient services. These amounts are due from patients, governmental programs, and other

third

-party payors, and include variable consideration for retroactive revenue adjustments due to settlement of audits, reviews, and investigations.

The Company recognizes revenue as its performance obligations are completed. Routine services are treated as a single performance obligation satisfied over time as services are rendered. These routine services represent a bundle of services that are

not

capable of being distinct. The performance obligations are satisfied over time as the patient simultaneously receives and consumes the benefits of the healthcare services provided. Additionally, there

may

be ancillary services which are

not

included in the daily rates for routine services, but instead are treated as separate performance obligations satisfied at a point in time when those services are rendered.

The Company determines the transaction price based on established billing rates reduced by contractual adjustments provided to

third

party payors. Contractual adjustments are based on contractual agreements and historical experience. The Company considers the patient's ability and intent to pay the amount of consideration upon admission. Subsequent changes resulting from a patient’s ability to pay are recorded as bad debt expense, which is included as a component of other operating expenses in the interim condensed consolidated statements of operations. Bad debt expense was

$1,047,000

and

$959,000

for the

three

months ended

March 31, 2019

and

2018,

respectively. As of

March 31, 2019,

and

December 31, 2018,

the Company has recorded allowance for doubtful accounts of

$5,169,000

and

$4,610,000,

respectively, as our best estimate of probable losses inherent in the accounts receivable balance.

Other Revenues

Other revenues include revenues from the provision of insurance services, management and accounting services to other long–term care providers, and rental income. Our insurance revenues consist of premiums that are generally paid in advance and then amortized into income over the policy period. We charge for management services based on a percentage of net revenues. We charge for accounting services based on a monthly fee or a fixed fee per bed of the healthcare center under contract. We record other revenues as the performance obligations are satisfied based on the terms of our contractual arrangements.

Segment Reporting

In accordance with the provisions of ASC

280,

“Segment Reporting”, the Company is required to report financial and descriptive information about its reportable operating segments. The Company has

two

reportable operating segments: (

1

) inpatient services, which includes the operation of skilled nursing facilities, assisted and independent living facilities, and

one

behavioral health hospital, and (

2

) homecare services. The Company also reports an “all other” category that includes revenues from rental income, management and accounting services fees, insurance services, and costs of the corporate office. See Note

6

for further disclosure of the Company’s operating segments.

Other Operating Expenses

Other operating expenses include the costs of care and services that we provide to the residents of our facilities and the costs of maintaining our facilities. Our primary patient care costs include drugs, medical supplies, purchased professional services, food, and professional liability insurance and licensing fees. The primary facility costs include utilities and property insurance.

General and Administrative Costs

With the Company being a healthcare provider, the majority of our expenses are "cost of revenue" items. Costs that could be classified as "general and administrative" by the Company would include its corporate office costs, excluding stock-based compensation, which were

$5,144,000

and

$6,678,000

for the

three

months ended

March 31, 2019

and

2018,

respectively.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is provided by the straight-line method over the expected useful lives of the assets estimated as follows: buildings and improvements,

20

-

40

years and equipment and furniture,

3

-

15

years. Leasehold improvements are amortized over periods that do

not

exceed the non-cancelable respective lease terms using the straight-line method.

Finance leases are recorded at cost. Finance leases are amortized in accordance with the provision codified within ASC

842,

Leases

. Amortization of finance lease assets is included in depreciation and amortization expense.

Accrued Risk Reserves

  

We are self–insured for risks related to health insurance and have wholly–owned limited purpose insurance companies that insure risks related to workers’ compensation and general and professional liability insurance claims. The accrued risk reserves include a liability for reported claims and estimates for incurred but unreported claims. Our policy is to engage an external, independent actuary to assist in estimating our exposure for claims obligations (for both asserted and unasserted claims). We reassess our accrued risk reserves on a quarterly basis.

Professional liability remains an area of particular concern to us. The long-term care industry has seen an increase in personal injury/wrongful death claims based on alleged negligence by skilled nursing facilities and their employees in providing care to residents. As of

March 31, 2019,

we and/or our managed centers are defendants in

63

such claims. It remains possible that those pending matters plus potential unasserted claims could exceed our reserves, which could have a material adverse effect on our consolidated financial position, results of operations and cash flows. It is also possible that future events could cause us to make significant adjustments or revisions to these reserve estimates and cause our reported net income to vary significantly from period to period.

We are principally self-insured for incidents occurring in all centers owned or leased by us. The coverages include both primary policies and excess policies. In all years, settlements, if any, in excess of available insurance policy limits and our own reserves would be expensed by us.

Continuing Care Contracts and Refundable Entrance Fee

We have

one

continuing care retirement center (“CCRC”) within our operations. Residents at this retirement center

may

enter into continuing care contracts with us. The contracts provide that

10%

of the resident entry fee becomes non-refundable upon occupancy, and the remaining refundable portion of the entry fee is calculated using the lessor of the price at which the apartment is re-assigned or

90%

of the original entry fee, plus

40%

of any appreciation if the apartment exceeds the original resident’s entry fee.

Non-refundable fees are included as a component of the transaction price and are amortized into revenue over the actuarily determined remaining life of the resident, which is the expected period of occupancy by the resident. We pay the refundable portion of our entry fees to residents when they relocate from our community and the apartment is re-occupied. Refundable entrance fees are

not

included as part of the transaction price and are classified as non-current liabilities in our consolidated balance sheets. As of

March 31, 2019,

and

December 31, 2018,

we have recorded a refundable entrance fee in the amount of

$8,078,000.

Obligation to Provide Future Services

We annually estimate the present value of the cost of future services and the use of facilities to be provided to the current CCRC residents and compare that amount with the balance of non-refundable deferred revenue from entrance fees received. If the present value of the cost of future services exceeds the related anticipated revenues, a liability is recorded (obligation to provide future services) with a corresponding charge to income. As of

March 31, 2019,

and

December 31, 2018,

we have recorded a future service obligation in the amount of

$2,172,000.

Other Noncurrent Liabilities

Other noncurrent liabilities include reserves primarily related to various uncertain income tax positions.

D

eferred Revenue

Deferred revenue includes the deferred gain on the sale of assets to National Health Corporation (“National”), the non-refundable portion (

10%

) of CCRC entrance fees being amortized over the remaining life expectancies of the residents, and premiums received within our workers’ compensation and professional liability companies in which the performance obligations have

not

been satisfied.

Noncontrolling Interest

The noncontrolling interest in a subsidiary is presented within total equity in the Company's interim condensed consolidated balance sheets. The Company presents the noncontrolling interest and the amount of consolidated net income attributable to NHC in its interim condensed 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.

Variable Interest Entities

We have equity interests in unconsolidated limited liability companies that operate various post-acute and senior healthcare businesses. We analyze our investments in these limited liability companies to determine if the company is considered a variable interest entity (“VIE”) and would require consolidation. To the extent that we own interests in a VIE and we (i) are the sole entity that has the power to direct the activities of the VIE and (ii) have the obligation or rights to absorb the VIE's losses or receive its benefits, then we would be determined to be the primary beneficiary and would consolidate the VIE. To the extent we own interests in a VIE, then at each reporting period, we re-assess our conclusions as to which, if any, party within the VIE is considered the primary beneficiary.

The Company's maximum exposure to losses in its investments in unconsolidated VIEs cannot be quantified and

may

or

may

not

be limited to its investment in the unconsolidated VIE. The investments in unconsolidated VIEs are classified as “investments in limited liability companies” in the consolidated balance sheets.

XML

Note 3 - Net Patient Revenues

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

Note

3

–

Net Patient

Revenue

s

The Company disaggregates revenue from contracts with customers by service type and by payor.

Revenue by Service Type

The Company’s net patient services can generally be classified into the following

two

categories: (

1

) inpatient services, which includes the operation of skilled nursing facilities, assisted and independent living facilities, and a behavioral health hospital, and (

2

) homecare services.

	Three Months Ended March 31
	2019		2018
Net patient revenues:
Inpatient services	$	221,635	$	216,351
Homecare		14,476		15,341
Total net patient revenue	$	236,111	$	231,692

For inpatient services, revenue is recognized on a daily basis as each day represents a separate contract and performance obligation. For homecare, revenue is recognized when services are provided based on the number of days of service rendered in the episode or on a per-visit basis. Typically, patients and

third

-party payors are billed monthly after services are performed or the patient is discharged, and payments are due based on contract terms.

As our performance obligations relate to contracts with a duration of

one

year or less, the Company is

not

required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period. The Company has minimal unsatisfied performance obligations at the end of the reporting period as our patients are typically under

no

obligation to remain admitted in our facilities or under our care.  As the period between the time of service and time of payment is typically

one

year or less, the Company did 

not

adjust for the effects of a significant financing component.

Revenue by Payor

Certain groups of patients receive funds to pay the cost of their care from a common source. The following table sets forth sources of net patient revenues for the periods indicated:

	Three Months Ended March 31
Source	2019			2018
Medicare		36	%		36	%
Managed Care		12	%		13	%
Medicaid		26	%		25	%
Private Pay and Other		26	%		26	%
Total		100	%		100	%

Medicare covers skilled nursing services for beneficiaries who require nursing care and/or rehabilitation services following a hospitalization of at least

three

consecutive days. For each eligible day a Medicare beneficiary is in a skilled nursing facility, Medicare pays the facility a daily payment, subject to adjustment for certain factors such as a wage index in the geographic area. The payment covers all services provided by the skilled nursing facility for the beneficiary that day, including room and board, nursing, therapy and drugs, as well as an estimate of capital–related costs to deliver those services.

For homecare services, Medicare pays based on the acuity level of the patient and based on episodes of care. An episode of care is defined as a length of care up to

60

days with multiple continuous episodes allowed. The services covered by the episode payment include all disciplines of care, in addition to medical supplies, within the scope of the home health benefit. We are allowed to make a request for anticipated payment at the start of care equal to

60%

of the expected payment for the initial episode. The remaining balance due is paid following the submission of the final claim at the end of the episode. Deferred revenue is recorded for payments received for which the related services have

not

yet been provided.

Medicaid is operated by individual states with the financial participation of the federal government. The states in which we operate currently use prospective cost–based reimbursement systems. Under cost–based reimbursement systems, the skilled nursing facility is reimbursed for the reasonable direct and indirect allowable costs it incurred in a base year in providing routine resident care services as defined by the program.

Private pay, managed care, and other payment sources include commercial insurance, individual patient funds, managed care plans and the Veterans Administration. Private paying patients, private insurance carriers and the Veterans Administration generally pay based on the healthcare center's charges or specifically negotiated contracts. For private pay patients in skilled nursing, assisted living and independent living facilities, the Company bills for room and board charges, with the remittance being due on receipt of the statement and generally by the

10th

day of the month the services are performed.

Certain managed care payors for homecare services pay on a per-visit basis. This non-episodic based revenue is recorded on an accrual basis based upon the date of services at amounts equal to its established or estimated per-visit rates.     

Third Party Payors

Laws and regulations governing the Medicare and Medicaid programs are complex and subject to interpretation. Noncompliance with such laws and regulations can be subject to regulatory actions including fines, penalties, and exclusion from the Medicare and Medicaid programs. We believe that we are following all applicable laws and regulations.

Medicare and Medicaid program revenues, as well as certain Managed Care program revenues, are subject to audit and retroactive adjustment by government representatives or their agents. The Medicare PPS methodology requires that patients be assigned to Resource Utilization Groups ("RUGs") based on the acuity level of the patient to determine the amount paid to us for patient services. The assignment of patients to the various RUG categories is subject to post–payment review by Medicare intermediaries or their agents. Settlements with

third

-party payors for retroactive adjustments due to audits, reviews or investigations are considered variable consideration and are included in the determination of the estimated transaction price for providing patient care. These settlements are estimated based on the terms of the payment agreement with the payor, correspondence from the payor and the Company’s historical settlement activity, including an assessment to ensure that it is probable that a significant reversal in the amount of cumulative revenue recognized will

not

occur when the uncertainty associated with the retroactive adjustment is subsequently resolved. Estimated settlements are adjusted in future periods as adjustments become known, or as years are settled or are

no

longer subject to such audits, reviews, and investigations. We believe that any differences between the net revenues recorded and final determination will

not

materially affect the consolidated financial statements. We have made provisions of approximately

$16,293,000

and

$16,108,000

as of

March 31, 2019

and

December 31, 2018,

respectively, for various Medicare, Medicaid, and Managed Care claims reviews and current and prior year cost reports.

XML

Note 4 - Other Revenues

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Other Revenues [Text Block]

N

ote

4

–

Other Revenues

Other revenues are outlined in the table below. Revenues from insurance services include premiums for workers’ compensation and professional liability insurance policies that our wholly–owned insurance subsidiaries have written for certain healthcare operators to which we provide management or accounting services. Revenues from management and accounting services include fees provided to manage and provide accounting services to other healthcare operators. Revenues from rental income include health care real estate properties owned by us and leased to

third

party operators. "Other" revenues include miscellaneous health care related earnings.

	Three Months Ended March 31
(in thousands)	2019		2018
Insurance services	$	1,524	$	1,692
Management and accounting services fees		4,751		3,708
Rental income		5,608		5,532
Other		291		337
Total other revenues	$	12,174	$	11,269

Insurance Services

For workers’ compensation insurance services, the premium revenues reflected in the interim condensed consolidated statements of operations for the

three

months ended

March 31, 2019

and

2018

were

$847,000

and

$1,019,000,

respectively. Associated losses and expenses are reflected in the interim condensed consolidated statements of operations as "Salaries, wages and benefits."

For professional liability insurance services, the premium revenues reflected in the interim condensed consolidated statements of operations for the

three

months ended

March 31, 2019

and

2018

were

$677,000

and

$673,000,

respectively. Associated losses and expenses including those for self–insurance are included in the interim condensed consolidated statements of operations as "Other operating costs and expenses".

Management Fees from National

We manage

five

skilled nursing facilities owned by National. For the

three

months ended

March 31, 2019

and

2018,

we recognized management fees and interest on management fees of

$1,854,000

and

$1,014,000

from these centers, respectively.

Rental Income

The Company leases real estate assets consisting of skilled nursing facilities and assisted living facilities to

third

party operators. Additionally, we sublease

four

Florida skilled nursing facilities included in our lease from National Health Investors (“NHI”) as noted in Note

7

– Long Term Leases.

The following table sets forth the undiscounted cash flows for future minimum lease payments receivable for leases in effect at

March 31, 2019 (

in thousands

):

2020	$	21,891
2021		22,192
2022		22,927
2023		22,868
2024		22,730
Thereafter		40,614
Total future minimum lease payments	$	153,222

XML

Note 5 - Non-operating Income

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Other Nonoperating Income and Expense [Text Block]

Note

5

–

Non

–

Operating Income

Non–operating income includes equity in earnings of unconsolidated investments, dividends and other realized gains and losses on sales of marketable securities, and interest income.

Our most significant equity method investment is a

75.1%

non–controlling ownership interest in Caris HealthCare L.P. (“Caris”), a business that specializes in hospice care services. For the

three

months ended

March 31, 2018,

Caris’ equity in earnings were negatively impacted by

$8,228,000

for the settlement of a Qui Tam legal matter and legal fees related to the settlement.

	Three Months Ended March 31
(in thousands)	2019		2018
Equity in earnings of unconsolidated investments	$	2,321	$	(6,586	)
Dividends and net realized gains and losses on sales of securities		1,931		1,803
Interest income		1,749		1,718
Total non-operating income	$	6,001	$	(3,065	)

XML

Note 6 - Business Segments

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

Note

6

– Business Segments

The Company has

two

reportable operating segments: (

1

) inpatient services, which includes the operation of skilled nursing facilities, assisted and independent living facilities, and our behavioral health hospital; and (

2

) homecare services. These reportable operating segments are consistent with information used by the Company’s Chief Executive Officer, as chief operating decision maker (“CODM”), to assess performance and allocate resources.

The Company also reports an “all other” category that includes revenues from rental income, management and accounting services fees, insurance services, and costs of the corporate office. For additional information on these reportable segments see Note

2

–

Summary of Significant Accounting Policies.

The Company’s CODM evaluates performance and allocates capital resources to each segment based on an operating model that is designed to improve the quality of patient care and profitability of the Company while enhancing long-term shareholder value. The CODM does

not

review assets by segment in his resource allocation and therefore, assets by segment are

not

disclosed below.

The following table sets forth the Company’s unaudited interim condensed consolidated statements of operations by business segment

(in thousands

):

	Three Months Ended March 31, 2019
	Inpatient Services		Homecare		All Other			Total
Revenues:
Net patient revenues	$	221,635	$	14,476	$	-		$	236,111
Other revenues		231		-		11,943			12,174
Net operating revenues		221,866		14,476		11,943			248,285
Costs and expenses:
Salaries, wages and benefits		126,101		8,026		7,261			141,388
Other operating		62,629		4,252		2,551			69,432
Rent		8,291		462		1,485			10,238
Depreciation and amortization		9,653		61		803			10,517
Interest		348		-		578			926
Total costs and expenses		207,022		12,801		12,678			232,501
Income (loss) from operations		14,844		1,675		(735	)		15,784
Non-operating income		-		-		6,001			6,001
Unrealized gains on marketable equity securities		-		-		6,838			6,838
Income before income taxes	$	14,844	$	1,675	$	12,104		$	28,623

	Three Months Ended March 31, 2018
	Inpatient Services		Homecare		All Other			Total
Revenues:
Net patient revenues	$	216,351	$	15,341	$	-		$	231,692
Other revenues		271		-		10,998			11,269
Net operating revenues		216,622		15,341		10,998			242,961
Costs and expenses:
Salaries, wages and benefits		123,380		8,030		8,685			140,095
Other operating		57,835		5,279		2,058			65,172
Rent		8,258		487		1,484			10,229
Depreciation and amortization		9,461		38		843			10,342
Interest		396		-		844			1,240
Total costs and expenses		199,330		13,834		13,914			227,078
Income (loss) from operations		17,292		1,507		(2,916	)		15,883
Non-operating loss		-		-		(3,065	)		(3,065	)
Unrealized losses on marketable equity securities		-		-		(15,517	)		(15,517	)
Income (loss) before income taxes	$	17,292	$	1,507	$	(21,498	)	$	(2,699	)

XML

Note 7 - Long-term Leases

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Leases of Lessee Disclosure [Text Block]

Note

7

– Long-Term Leases

The Company’s lease portfolio primarily consists of finance and operating real estate leases for certain skilled nursing facilities, assisted and independent living facilities, homecare offices, and pharmacy warehouses. The original terms of the leases typically range from

two

to

fifteen

years. Several of the real estate leases include renewal options which vary in length and

may

not

include specific rent renewal amounts. We determine if an arrangement is a lease at inception of a contract. We determine the lease term by assuming exercise of renewal options that are reasonably certain.

On

January 1, 2019,

the Company recorded right-of-use assets and liabilities on the condensed consolidated balance sheets for non-cancelable real estate operating leases with original or remaining lease terms in excess of

one

year. Leases with a lease term of

12

months or less at inception are

not

recorded on our condensed consolidated balance sheets and are expensed on a straight-line basis over the lease term in our condensed consolidated statement of operations. Finance leases remain on the condensed consolidated balance sheets as required by previous accounting guidance.

Operating lease right-of-use assets and liabilities are recorded at the present value of the lease payments over the lease term. The present value of the lease payments are discounted using the incremental borrowing rate associated with each lease. As most of our leases do

not

provide implicit rates, we have used incremental borrowing rates that were calculated based on information available at the later of the lease commencement date or the adoption date,

January 1, 2019.

The variable components of the lease payment that fluctuate with the operations of a health facility are

not

included in determining the right-of-use assets and lease liabilities. Rather, these variable components are expensed as incurred.

Accounting Policy Elections

The Company has elected the package of practical expedients offered in the transition guidance which allows management

not

to reassess lease identification, lease classification, and initial direct costs. The Company has elected the accounting policy practical expedient to exclude recording short-term leases, for all asset classes, as right-of-use assets and lease liabilities on the condensed consolidated balance sheets. Finally, the Company has elected the accounting policy practical expedient to recognize lease components and non-lease components together and

not

as separate parts of a lease for real estate leases.

Operating Leases with NHI

At

March 31, 2019,

we leased from NHI the real property of

35

skilled nursing facilities,

seven

assisted living centers and

three

independent living centers under

two

separate lease agreements. As part of the

first

lease agreement, we sublease

four

Florida skilled nursing facilities to a

third

-party operator.

On

January 1, 2007,

a

15–year

lease extension began which included

three

additional five–year renewal options. In

December 2012,

NHC extended the lease agreement through the

first

of the

three

additional

five

–year renewal options, which extended the lease date through

2026.

The

two

additional

five

–year renewal options on the lease still remain. Under the terms of the lease, base rent totals

$30,750,000

with rent thereafter escalating by

4%

of the increase in facility revenue over a

2007

base year.

In

September 2013

and under the

second

lease agreement, NHC began operating

seven

skilled nursing facilities in New Hampshire and Massachusetts. The

15

-year lease term consists of base rent of

$3,450,000

annually with rent escalating by

4%

of the increase in facility revenue over a

2014

base year. Additionally, NHC has the option to purchase the

seven

facilities from NHI in the

13th

year of the lease for a purchase price of

$49,000,000.

Base rent expense under both NHI lease agreements totals

$34,200,000.

Percentage rent under the leases is based on a quarterly calculation of revenue increases and is payable on a quarterly basis. Percentage rent expense under both leases for the periods ending

March 31, 2019

and

2018

was

$965,000

and

$928,000,

respectively.

We have a right of

first

refusal with NHI to purchase any of the properties should NHI receive an offer from an unrelated party during the term of the lease or up to

180

days after termination of the related lease.

Finance

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.

Lease

Classification

At

March 31, 2019,

the Company recorded the following on the condensed consolidated balance sheets (

in thousands

):

Right-of-Use Assets	Balance Sheet Classification	March 31, 2019
Finance lease assets	Net property and equipment	$	21,881
Operating lease right-of-use assets	Operating lease right-of-use assets		220,134
Total		$	242,015

Lease Liabilities	Balance Sheet Classification	March 31, 2019
Current:
Finance lease liabilities	Finance lease obligations, current portion	$	6,780
Operating lease liabilities	Operating lease liabilities, current portion		23,353
Noncurrent:
Finance lease liabilities	Finance lease obligations, less current portion		18,110
Operating lease liabilities	Operating lease liabilities, less current portion		196,781
Total		$	245,024

Weighted-average remaining lease terms and discount rates at

March 31, 2019

were as follows:

Weighted-average remaining lease terms (in years)
Finance	4.9
Operating	7.9
Weighted-average discount rate
Finance	6.0	%
Operating	6.0	%

Lease Costs

For the

three

months ended

March 31, 2019,

the lease costs recorded in the condensed consolidated statement of operations are as follows

(in thousands):

Finance lease costs:
Depreciation of leased assets	$	981
Interest of lease liabilities		348
Total finance lease costs		1,329
Operating lease costs:
Operating lease costs		9,086
Variable lease costs		965
Short-term lease costs		187
Total operating lease costs		10,238
Total lease costs	$	11,567

Minimum Lease Payments

The following table summarizes the maturity of our finance and operating lease liabilities as of

March 31, 2019 (

in thousands

):

	Finance Leases			Operating Leases
2020	$	7,998		$	35,733
2021		5,200			35,443
2022		5,200			35,112
2023		5,200			34,688
2024		4,767			34,403
Thereafter		--			99,877
Total minimum lease payments		28,365			275,256
Less: amounts representing interest		(3,475	)		(55,122	)
Present value of future minimum lease payments		24,890			220,134
Less: current portion		(6,780	)		(23,353	)
Noncurrent lease liabilities	$	18,110		$	196,781

Other

Supplemental cash flow data for the

three

months ended

March 31, 2019

was as follows

(

in thousands)

:

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	9,086
Operating cash flows for finance leases		348
Financing cash flows for finance leases		959

XML

Note 8- Earnings Per Share

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Earnings Per Share [Text Block]

Note

8

–

Earnings per Share

Basic net income (loss) per share is computed based on the weighted average number of common shares outstanding for each period presented. Diluted net income (loss) per share reflects the potential dilution that would have occurred if securities to issue common stock were exercised, converted, or resulted in the issuance of common stock that would have then shared in our earnings.

The following table summarizes the earnings (losses) and the weighted average number of common shares used in the calculation of basic and diluted earnings (loss) per share

(in thousands, except for share and per share amounts)

:

	Three Months Ended March 31
	2019		2018
Basic:
Weighted average common shares outstanding		15,256,189		15,216,635
Net income (loss) attributable to National HealthCare Corporation	$	21,269	$	(2,791	)
Earnings (loss) per common share, basic	$	1.39	$	(0.18	)
Diluted:
Weighted average common shares outstanding		15,256,189		15,216,635
Effects of dilutive instruments		67,936		-
Weighted average common shares outstanding		15,324,125		15,216,635
Net income (loss) attributable to National HealthCare Corporation	$	21,269	$	(2,791	)
Earnings (loss) per common share, diluted	$	1.39	$	(0.18	)

In the above table, options to purchase

8,475

shares of our common stock have been excluded for the quarter ended

March 31, 2019,

due to their anti–dilutive impact.  The impact of potentially dilutive securities (

1,238,855

) for the

three

months ended

March 31, 2018,

were

not

considered because the effect would be anti-dilutive in that period.

XML

Note 9 - Investments in Marketable Securities

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

Note

9

–

Inve

stments in Marketable Securities

Our investments in marketable equity securities are carried at fair value with the changes in unrealized gains and losses recognized in our results of operations at each measurement date. Our investments in marketable debt securities are classified as available for sale securities and carried at fair value with the unrealized gains and losses recognized through accumulated other comprehensive income at each measurement date. Realized gains and losses from securities sales are recognized in results of operations upon disposition of the securities using the specific identification method on a trade date basis. Refer to Note

10

for a description of the Company's methodology for determining the fair value of marketable securities.

Marketable securities and restricted marketable securities consist of the following

(in thousands)

:

	March 31, 2019				December 31, 2018
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Investments available for sale:
Marketable equity securities	$	30,176	$	147,061	$	30,176	$	140,223
Restricted investments available for sale:
Corporate debt securities		66,649		66,819		69,439		67,632
Asset-based securities		64,601		64,504		62,772		62,068
U.S. Treasury securities		20,091		19,748		22,038		21,457
State and municipal securities		21,715		21,736		21,818		21,436
	$	203,232	$	319,868	$	206,243	$	312,816

Included in the marketable equity securities are the following

(in thousands, except share amounts)

:

	March 31, 2019						December 31, 2018
	Shares		Cost		Fair Value		Shares		Cost		Fair Value
NHI Common Stock		1,630,642	$	24,734	$	128,087		1,630,642	$	24,734	$	123,179

The amortized cost and estimated fair value of debt securities classified as available for sale, by contractual maturity, are as follows

(in thousands)

:

	March 31, 2019				December 31, 2018
	Cost		Fair Value		Cost		Fair Value
Maturities:
Within 1 year	$	11,081	$	11,054	$	11,448	$	11,401
1 to 5 years		95,001		95,229		98,487		97,430
6 to 10 years		66,974		66,524		64,932		62,527
Over 10 years		--		--		1,200		1,235
	$	173,056	$	172,807	$	176,067	$	172,593

Gross unrealized gains related to marketable equity securities are

$116,906,000

and

$110,081,000

as of

March 31, 2019

and

December 31, 2018,

respectively. Gross unrealized losses related to marketable equity securities are

$21,000

and

$34,000

as of

March 31, 2019

and

December 31, 2018,

respectively. For the

three

months ended

March 31, 2019

and

2018,

the Company recognized net unrealized gains of

$6,838,000

and net unrealized losses of

$15,517,000

,

respectively, for the changes in fair market value of the marketable equity securities in the interim condensed consolidated statement of operations.

Gross unrealized gains related to available for sale debt securities are

$1,089,000

and

$335,000

as of

March 31, 2019

and

December 31, 2018,

respectively. Gross unrealized losses related to available for sale debt securities are

$1,338,000

and

$3,809,000

as of

March 31, 2019

and

December 31, 2018,

respectively.

For the marketable securities in gross unrealized loss positions, (a) it is more likely than

not

that the Company will

not

be required to sell the investment securities before recovery of the unrealized losses, and (b) the Company expects that the contractual principal and interest will be received on the investment securities. As a result, the Company recognized

no

other-than-temporary impairment during the

three

months ended

March 31, 2019

or for the year ended

December 31, 2018.

Proceeds from the sale of available for sale debt securities during the

three

months ended

March 31, 2019

and

2018

were

$6,576,000

and

$3,535,000,

respectively. Investment gains of

$0

and

$11,000

were realized on these sales during the

three

months ended

March 31, 2019

and

2018,

respectively.

No

sales were reported for marketable equity securities for the

three

months ended

March 31, 2019

and

2018,

respectively.

XML

Note 10 - Fair Value Measurements

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Fair Value Disclosures [Text Block]

Note

10

–

Fair Value Measurements

The accounting standard for fair value measurements provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. Fair value is defined as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. This accounting standard establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs, where available. The following summarizes the

three

levels of inputs that

may

be used to measure fair value:

Level 

1

 

– The valuation is based on quoted prices in active markets for identical instruments.

Level 

2

 

– The valuation is based on observable inputs such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are

not

active, and model–based valuation techniques for which all significant assumptions are observable in the market.

Level 

3

 

– The valuation is based on unobservable inputs that are supported by minimal or

no

market activity and that are significant to the fair value of the instrument. Level

3

valuations are typically performed using pricing models, discounted cash flow methodologies, or similar techniques that incorporate management’s own estimates of assumptions that market participants would use in pricing the instrument, or valuations that require significant management judgment or estimation.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The following table summarizes fair value measurements by level at

March 31, 2019

and

December 31, 2018

for assets and liabilities measured at fair value on a recurring basis

(in thousands)

:

	Fair Value Measurements Using
March 31, 2019	Fair Value		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents	$	38,194	$	38,194	$	–	$	–
Restricted cash and cash equivalents		16,505		16,505		–		–
Marketable equity securities		147,061		147,061		–		–
Corporate debt securities		66,819		49,600		17,219		–
Mortgage–backed securities		64,504		–		64,504		–
U.S. Treasury securities		19,748		19,748		–		–
State and municipal securities		21,736		–		21,736		–
Total financial assets	$	374,567	$	271,108	$	103,459	$	–

	Fair Value Measurements Using
December 31, 2018	Fair Value		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents	$	43,247	$	43,247	$	–	$	–
Restricted cash and cash equivalents		11,673		11,673		–		–
Marketable equity securities		140,223		140,223		–		–
Corporate debt securities		67,632		47,921		19,711		–
Asset - backed securities		62,068		–		62,068		–
U.S. Treasury securities		21,457		21,457		–		–
State and municipal securities		21,436		–		21,436		–
Total financial assets	$	367,736	$	264,521	$	103,215	$	–

XML

Note 11 - Long-term Debt

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Debt Disclosure [Text Block]

Note

1

1

–

Long

–

Term Debt

Long–term debt consists of the following:

	Weighted Average Interest Rate		Maturity		March 31, 2019		December 31, 2018
	Variable				(dollars in thousands)
Credit facility, interest payable monthly		3.9%		2020	$	55,000	$	55,000
Less current portion						–		–
Total long-term debt					$	55,000	$	55,000

The available borrowing capacity of the credit facility is

$110,000,000.

The credit facility has a maturity date of

October 2020.

Loans bear interest at either (i) LIBOR plus

1.40%

or (ii) the base rate plus

0.40%.

XML

Note 12 - Stock Repurchase Program

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Treasury Stock [Text Block]

Note

1

2

- Stock Repurchase Program

In

August 2018,

the Board of Directors authorized a common stock purchase program. The program will allow for repurchases of up to

$25

million of its common stock. During the quarter ended

March 31, 2019,

the Company repurchased

10,396

shares of its common stock for a total cost of

$872,000.

The shares were funded from cash on hand and were cancelled and returned to the status of authorized but unissued.

XML

Note 13 - Stock-based Compensation

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

Note

1

3

–

S

tock

–

Based Compensation

NHC recognizes stock–based compensation expense for all stock options granted over the requisite service period using the fair value at the date of grant using the Black–Scholes pricing model. Stock–based compensation totaled

$424,000

and

$428,000

for the

three

months ended

March 31, 2019

and

2018,

respectively. Stock–based compensation is included in “Salaries, wages and benefits” in the interim condensed consolidated statements of operations.

At

March 31, 2019,

the Company had

$5,343,000

of unrecognized compensation cost related to unvested stock–based compensation awards. This unrecognized compensation cost will be amortized over an approximate

three

-year period.

Stock Options

The following table summarizes the significant assumptions used to value the options granted for the

three

months ended

March 31, 2019

and for the year ended

December 31, 2018.

	March 31, 2019		December 31, 2018
Risk–free interest rate		2.60%		2.46%
Expected volatility		18.1%		16.1%
Expected life, in years		1.0		3.0
Expected dividend yield		2.65%		3.29%

The following table summarizes our outstanding stock options for the

three

months ended

March 31, 2019

and for the year ended

December 31, 2018.

	Number of Shares			Weighted Average Exercise Price		Aggregate Intrinsic Value
Options outstanding at January 1, 2018		1,239,407		$	71.19	$	–
Options granted		110,265			61.39		–
Options exercised		(68,291	)		54.31		–
Options cancelled		(118,000	)		72.11		–
Options outstanding at December 31, 2018		1,163,381			71.16		–
Options granted		8,475			77.72		–
Options exercised		(318,152	)		72.36		–
Options outstanding at March 31, 2019		853,704		$	70.77	$	4,374,000
Options exercisable at March 31, 2019		178,729		$	64.42	$	2,048,000

Options Outstanding March 31, 2019	Exercise Prices			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years
159,668	$52.93	-	$62.78		61.11		2.6
694,036	$72.94	-	$77.72		73.00		2.9
853,704					70.77		2.8

XML

Note 14 - Income Taxes

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note

1

4

– Income Taxes

The income tax provision for the

three

months ended

March 31, 2019

is

$7,392,000

(an effective income tax rate of

25.8%

). The income tax provision and effective tax rate for the

three

months ended

March 31, 2019

were unfavorably impacted by adjustments to unrecognized tax benefits of

$200,000

but was favorably impacted by a tax benefit of

$228,000

relating to the exercise of stock options. The income tax provision for the

three

months ended

March 31, 2019

was favorably impacted by the higher pre-tax book income resulting from the unrealized gain of

$6,838,000

for the market value increase in our marketable equity securities portfolio.  The income tax provision for the

three

months ended

March 31, 2018

was

$200,000

(an effective income tax rate of -

7.4%

). The income tax provision and effective tax rate for the

three

months ended

March 31, 2018

were unfavorably impacted by nondeductible expenses of

$855,000

(primarily the non-deductible portion of the estimated potential settlement of the Caris HealthCare, L.P. Qui Tam legal matter) or -

31.7%

of income before taxes. The income tax provision for the

three

months ended

March 31, 2018

was also unfavorably impacted by the lower pre-tax book income resulting from the unrealized loss of

$15,517,000

for the market value decrease in our marketable equity securities portfolio. Prior to

2018,

such market value changes ran through the balance sheet and did

not

impact our income statement.

Interest and penalties expense related to U.S. federal and state income tax returns are included within income tax expense.

The Company is

no

longer subject to U.S. federal and state examinations by tax authorities for years before

2015

(with certain state exceptions).

XML

Note 15 - Contingencies and Commitments

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note

1

5

– Contingencies

and Commitments

Accrued Risk Reserves

We are self–insured for risks related to health insurance and have wholly–owned limited purpose insurance companies that insure risks related to workers’ compensation and general and professional liability insurance claims both for our owned and leased entities and certain of the entities to which we provide management or accounting services. The liability we have recognized for reported claims and estimates for incurred but unreported claims totals

$98,542,000

and

$96,024,000

at

March 31, 2019

and

December 31, 2018,

respectively. The liability is included in accrued risk reserves in the interim condensed consolidated balance sheets and is subject to adjustment for actual claims incurred. It is possible that these claims plus unasserted claims could exceed our insurance coverages and our reserves, which could have a material adverse effect on our consolidated financial position, results of operations and cash flows.

As a result of the terms of our insurance policies and our use of wholly–owned limited purpose insurance companies, we have retained significant insurance risk with respect to workers’ compensation and general and professional liability. We consider the professional services of independent actuaries to assist us in estimating our exposures for claims obligations (for both asserted and unasserted claims) related to deductibles and exposures in excess of coverage limits, and we maintain reserves for these obligations. Such estimates are based on many variables including historical and statistical information and other factors.

Workers

’

Compensation

For workers’ compensation, we utilize a wholly–owned Tennessee domiciled property/casualty insurance company to write coverage for NHC affiliates and for third–party customers. Policies are written for a duration of

twelve

months and cover only risks related to workers’ compensation losses. All customers are companies which operate in the senior care industry. Business is written on a direct basis. Direct business coverage is written for statutory limits and the insurance company’s losses in excess of

$1,000,000

per claim are covered by reinsurance.

General and Professional Liability Lawsuits and Insurance

The senior care industry has experienced increases in both the number of personal injury/wrongful death claims and in the severity of awards based upon alleged negligence by nursing facilities and their employees in providing care to residents. As of

March 31, 2019,

we and/or our managed centers are currently defendants in

63

such claims.

Insurance coverage for both periods includes both primary policies and excess policies. The primary coverage is in the amount of

$1.0

million per incident,

$3.0

million per location with an annual primary policy aggregate limit that is adjusted on an annual basis. For

2018

and

2019,

the excess coverage is

$9.0

million per occurrence. Additional insurance is purchased through

third

party providers that serve to supplement the coverage provided through our wholly–owned captive insurance company.

Financing Commitments

In conjunction with our management contract with National, we have entered into a line of credit arrangement whereby we

may

have amounts due from National from time to time. The maximum loan commitment under the line of credit is

$2,000,000.

At

March 31, 2019,

National did

not

have an outstanding balance on the line of credit.

Nutritional Support Services, L.P., Qui Tam Litigation

On

June 19, 2018,

a First Amended Complaint was filed naming Nutritional Support Services, L.P. (“NSS”), a wholly-owned subsidiary of the Company, as a defendant in the action captained U.S. ex rel. McClain v. Nutritional Support Services, L.P.,

No.

6:17

-cv-

2608

-AMQ (D.S.C.), which was filed in the United States District Court for the District of South Carolina. The action alleges that NSS violated the False Claims Act by reporting a National Drug Code (“NDC”) number that did

not

correspond to the NDC for dispensed prescriptions. On

April 16, 2018,

the United States filed a Notice of Election to Decline Intervention with respect to the allegations asserted in this action. NSS intends to vigorously defend itself with respect to this action.

Governmental Regulations

Laws and regulations governing the 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.

XML

Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2019

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

The unaudited interim condensed consolidated financial statements to which these notes are attached include all normal, recurring adjustments which are necessary to fairly present the financial position, results of operations and cash flows of NHC. All significant intercompany transactions and balances have been eliminated in consolidation. The consolidated financial statements include the accounts of all entities controlled by NHC. The Company presents noncontrolling interest within the equity section of its consolidated balance sheets. The Company presents the amount of consolidated net income that is attributable to NHC and the noncontrolling interest in its consolidated statements of operations.

We assume that users of these interim financial statements have read or have access to the audited

December 31, 2018

consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations and that the adequacy of additional disclosure needed for a fair presentation, except in regard to material contingencies,

may

be determined in that context. Accordingly, footnotes and other disclosures which would substantially duplicate the disclosure contained in our most recent annual report to stockholders have been omitted. This interim financial information is

not

necessarily indicative of the results that

may

be expected for a full year for a variety of reasons.

Use of Estimates, Policy [Policy Text Block]

Estimates and Assumptions

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and could cause our reported net income to vary significantly from period to period.

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Adopted Accounting Guidance

In

February 2016,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

No.

2016

-

02,

"Leases (Topic

842

)." The objective of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU is effective for fiscal years beginning after

December 15, 2018,

including interim periods within those annual periods and is to be applied either retrospectively to each prior reporting period presented in the financial statements or retrospectively at the beginning of the period of adoption.

The Company adopted the standard as of

January 1, 2019,

electing the transition method that allows it to apply the standard as of the adoption date and record a cumulative adjustment in retained earnings, if applicable. We did

not

have a cumulative adjustment to retained earnings. The interim condensed consolidated financial statements for the period ending

March 31, 2019,

are presented under the new standard, while comparative years presented are

not

adjusted and continue to be reported in accordance with our historical accounting policy.

On

June 20, 2018,

the FASB issued ASU

No.

2018

-

07,

“Compensation – Stock Compensation (Topic

718

): Improvements to Nonemployee Share-based Payment Accounting.” ASU

No.

2018

-

07

simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most of the guidance on such payments to nonemployees is aligned with the requirements for share-based payments granted to employees. On

January 1, 2019,

the Company early adopted the provisions of ASU

No.

2018

-

07

and this standard did

not

have an impact on our consolidated financial statements.

On

August 28, 2018,

the FASB issued ASU

No.

2018

-

13,

“Fair Value Measurement (Topic

820

): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.” ASU

No.

2018

-

13

changes the fair value measurement disclosure requirements of Accounting Standards Codification (“ASC”)

820.

Entities are

no

longer required to disclose the amount of and reasons for transfers between Level

1

and Level

2

of the fair value hierarchy, but they will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level

3

fair value measurements. On

January 1, 2019,

the Company early adopted the provisions of ASU

No.

2018

-

13

and this standard did

not

have a material impact on our consolidated financial statements.

Recent Accounting Guidance

Not

Yet Adopted

 

In

June 2016,

the FASB issued ASU

No.

2016

-

13,

“Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments.” ASU

No.

2016

-

13

adds to U.S. GAAP an impairment model that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses. The ASU is also intended to reduce the complexity of U.S. GAAP by decreasing the number of credit impairment models that entities use to account for debt instruments. This ASU is effective for fiscal years beginning after

December 15, 2019,

including interim periods within those annual periods, with early adoption permitted for fiscal years beginning after

December 15, 2018.

We are currently evaluating the impact this standard will have on our policies and procedures and internal control framework.

Revenue [Policy Text Block]

Net Patient Revenues and Accounts Receivable

Net patient revenues are derived from services rendered to patients for skilled and intermediate nursing, rehabilitation therapy, assisted living and independent living, and home health care services. Net patient revenue is reported at the amount that reflects the consideration to which the Company expects to be entitled in exchange for providing patient services. These amounts are due from patients, governmental programs, and other

third

-party payors, and include variable consideration for retroactive revenue adjustments due to settlement of audits, reviews, and investigations.

The Company recognizes revenue as its performance obligations are completed. Routine services are treated as a single performance obligation satisfied over time as services are rendered. These routine services represent a bundle of services that are

not

capable of being distinct. The performance obligations are satisfied over time as the patient simultaneously receives and consumes the benefits of the healthcare services provided. Additionally, there

may

be ancillary services which are

not

included in the daily rates for routine services, but instead are treated as separate performance obligations satisfied at a point in time when those services are rendered.

The Company determines the transaction price based on established billing rates reduced by contractual adjustments provided to

third

party payors. Contractual adjustments are based on contractual agreements and historical experience. The Company considers the patient's ability and intent to pay the amount of consideration upon admission. Subsequent changes resulting from a patient’s ability to pay are recorded as bad debt expense, which is included as a component of other operating expenses in the interim condensed consolidated statements of operations. Bad debt expense was

$1,047,000

and

$959,000

for the

three

months ended

March 31, 2019

and

2018,

respectively. As of

March 31, 2019,

and

December 31, 2018,

the Company has recorded allowance for doubtful accounts of

$5,169,000

and

$4,610,000,

respectively, as our best estimate of probable losses inherent in the accounts receivable balance.

Revenue Recognition for Alternative Revenue Programs, Policy [Policy Text Block]

Other Revenues

Other revenues include revenues from the provision of insurance services, management and accounting services to other long–term care providers, and rental income. Our insurance revenues consist of premiums that are generally paid in advance and then amortized into income over the policy period. We charge for management services based on a percentage of net revenues. We charge for accounting services based on a monthly fee or a fixed fee per bed of the healthcare center under contract. We record other revenues as the performance obligations are satisfied based on the terms of our contractual arrangements.

Segment Reporting, Policy [Policy Text Block]

Segment Reporting

In accordance with the provisions of ASC

280,

“Segment Reporting”, the Company is required to report financial and descriptive information about its reportable operating segments. The Company has

two

reportable operating segments: (

1

) inpatient services, which includes the operation of skilled nursing facilities, assisted and independent living facilities, and

one

behavioral health hospital, and (

2

) homecare services. The Company also reports an “all other” category that includes revenues from rental income, management and accounting services fees, insurance services, and costs of the corporate office. See Note

6

for further disclosure of the Company’s operating segments.

Other Operating Expenses Policy [Policy Text Block]

Other Operating Expenses

Other operating expenses include the costs of care and services that we provide to the residents of our facilities and the costs of maintaining our facilities. Our primary patient care costs include drugs, medical supplies, purchased professional services, food, and professional liability insurance and licensing fees. The primary facility costs include utilities and property insurance.

Selling, General and Administrative Expenses, Policy [Policy Text Block]

General and Administrative Costs

With the Company being a healthcare provider, the majority of our expenses are "cost of revenue" items. Costs that could be classified as "general and administrative" by the Company would include its corporate office costs, excluding stock-based compensation, which were

$5,144,000

and

$6,678,000

for the

three

months ended

March 31, 2019

and

2018,

respectively.

Property, Plant and Equipment, Policy [Policy Text Block]

Property and Equipment

Property and equipment are recorded at cost. Depreciation is provided by the straight-line method over the expected useful lives of the assets estimated as follows: buildings and improvements,

20

-

40

years and equipment and furniture,

3

-

15

years. Leasehold improvements are amortized over periods that do

not

exceed the non-cancelable respective lease terms using the straight-line method.

Finance leases are recorded at cost. Finance leases are amortized in accordance with the provision codified within ASC

842,

Leases

. Amortization of finance lease assets is included in depreciation and amortization expense.

Liability Reserve Estimate, Policy [Policy Text Block]

Accrued Risk Reserves

  

We are self–insured for risks related to health insurance and have wholly–owned limited purpose insurance companies that insure risks related to workers’ compensation and general and professional liability insurance claims. The accrued risk reserves include a liability for reported claims and estimates for incurred but unreported claims. Our policy is to engage an external, independent actuary to assist in estimating our exposure for claims obligations (for both asserted and unasserted claims). We reassess our accrued risk reserves on a quarterly basis.

Professional liability remains an area of particular concern to us. The long-term care industry has seen an increase in personal injury/wrongful death claims based on alleged negligence by skilled nursing facilities and their employees in providing care to residents. As of

March 31, 2019,

we and/or our managed centers are defendants in

63

such claims. It remains possible that those pending matters plus potential unasserted claims could exceed our reserves, which could have a material adverse effect on our consolidated financial position, results of operations and cash flows. It is also possible that future events could cause us to make significant adjustments or revisions to these reserve estimates and cause our reported net income to vary significantly from period to period.

We are principally self-insured for incidents occurring in all centers owned or leased by us. The coverages include both primary policies and excess policies. In all years, settlements, if any, in excess of available insurance policy limits and our own reserves would be expensed by us.

Continuing Care Contracts and Refundable Entrance Fee, Policy [Policy Text Block]

Continuing Care Contracts and Refundable Entrance Fee

We have

one

continuing care retirement center (“CCRC”) within our operations. Residents at this retirement center

may

enter into continuing care contracts with us. The contracts provide that

10%

of the resident entry fee becomes non-refundable upon occupancy, and the remaining refundable portion of the entry fee is calculated using the lessor of the price at which the apartment is re-assigned or

90%

of the original entry fee, plus

40%

of any appreciation if the apartment exceeds the original resident’s entry fee.

Non-refundable fees are included as a component of the transaction price and are amortized into revenue over the actuarily determined remaining life of the resident, which is the expected period of occupancy by the resident. We pay the refundable portion of our entry fees to residents when they relocate from our community and the apartment is re-occupied. Refundable entrance fees are

not

included as part of the transaction price and are classified as non-current liabilities in our consolidated balance sheets. As of

March 31, 2019,

and

December 31, 2018,

we have recorded a refundable entrance fee in the amount of

$8,078,000.

Obligation to Provide Future Services

We annually estimate the present value of the cost of future services and the use of facilities to be provided to the current CCRC residents and compare that amount with the balance of non-refundable deferred revenue from entrance fees received. If the present value of the cost of future services exceeds the related anticipated revenues, a liability is recorded (obligation to provide future services) with a corresponding charge to income. As of

March 31, 2019,

and

December 31, 2018,

we have recorded a future service obligation in the amount of

$2,172,000.

Other Noncurrent Liabilities [Policy Text Block]

Other Noncurrent Liabilities

Other noncurrent liabilities include reserves primarily related to various uncertain income tax positions.

Revenue from Contract with Customer [Policy Text Block]

D

eferred Revenue

Deferred revenue includes the deferred gain on the sale of assets to National Health Corporation (“National”), the non-refundable portion (

10%

) of CCRC entrance fees being amortized over the remaining life expectancies of the residents, and premiums received within our workers’ compensation and professional liability companies in which the performance obligations have

not

been satisfied.

Noncontrolling Interest, Policy [Policy Text Block]

Noncontrolling Interest

The noncontrolling interest in a subsidiary is presented within total equity in the Company's interim condensed consolidated balance sheets. The Company presents the noncontrolling interest and the amount of consolidated net income attributable to NHC in its interim condensed 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.

Consolidation, Variable Interest Entity, Policy [Policy Text Block]

Variable Interest Entities

We have equity interests in unconsolidated limited liability companies that operate various post-acute and senior healthcare businesses. We analyze our investments in these limited liability companies to determine if the company is considered a variable interest entity (“VIE”) and would require consolidation. To the extent that we own interests in a VIE and we (i) are the sole entity that has the power to direct the activities of the VIE and (ii) have the obligation or rights to absorb the VIE's losses or receive its benefits, then we would be determined to be the primary beneficiary and would consolidate the VIE. To the extent we own interests in a VIE, then at each reporting period, we re-assess our conclusions as to which, if any, party within the VIE is considered the primary beneficiary.

The Company's maximum exposure to losses in its investments in unconsolidated VIEs cannot be quantified and

may

or

may

not

be limited to its investment in the unconsolidated VIE. The investments in unconsolidated VIEs are classified as “investments in limited liability companies” in the consolidated balance sheets.

XML

Note 3 - Net Patient Revenues (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Disaggregation of Revenue [Table Text Block]

	Three Months Ended March 31
	2019		2018
Net patient revenues:
Inpatient services	$	221,635	$	216,351
Homecare		14,476		15,341
Total net patient revenue	$	236,111	$	231,692

	Three Months Ended March 31
Source	2019			2018
Medicare		36	%		36	%
Managed Care		12	%		13	%
Medicaid		26	%		25	%
Private Pay and Other		26	%		26	%
Total		100	%		100	%

XML

Note 4 - Other Revenues (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Schedule of Other Revenues [Table Text Block]

	Three Months Ended March 31
(in thousands)	2019		2018
Insurance services	$	1,524	$	1,692
Management and accounting services fees		4,751		3,708
Rental income		5,608		5,532
Other		291		337
Total other revenues	$	12,174	$	11,269

Lessor, Operating Lease, Payments to be Received, Maturity [Table Text Block]

2020	$	21,891
2021		22,192
2022		22,927
2023		22,868
2024		22,730
Thereafter		40,614
Total future minimum lease payments	$	153,222

XML

Note 5 - Non-operating Income (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Schedule of Other Nonoperating Income, by Component [Table Text Block]

	Three Months Ended March 31
(in thousands)	2019		2018
Equity in earnings of unconsolidated investments	$	2,321	$	(6,586	)
Dividends and net realized gains and losses on sales of securities		1,931		1,803
Interest income		1,749		1,718
Total non-operating income	$	6,001	$	(3,065	)

XML

Note 6 - Business Segments (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Three Months Ended March 31, 2019
	Inpatient Services		Homecare		All Other			Total
Revenues:
Net patient revenues	$	221,635	$	14,476	$	-		$	236,111
Other revenues		231		-		11,943			12,174
Net operating revenues		221,866		14,476		11,943			248,285
Costs and expenses:
Salaries, wages and benefits		126,101		8,026		7,261			141,388
Other operating		62,629		4,252		2,551			69,432
Rent		8,291		462		1,485			10,238
Depreciation and amortization		9,653		61		803			10,517
Interest		348		-		578			926
Total costs and expenses		207,022		12,801		12,678			232,501
Income (loss) from operations		14,844		1,675		(735	)		15,784
Non-operating income		-		-		6,001			6,001
Unrealized gains on marketable equity securities		-		-		6,838			6,838
Income before income taxes	$	14,844	$	1,675	$	12,104		$	28,623

	Three Months Ended March 31, 2018
	Inpatient Services		Homecare		All Other			Total
Revenues:
Net patient revenues	$	216,351	$	15,341	$	-		$	231,692
Other revenues		271		-		10,998			11,269
Net operating revenues		216,622		15,341		10,998			242,961
Costs and expenses:
Salaries, wages and benefits		123,380		8,030		8,685			140,095
Other operating		57,835		5,279		2,058			65,172
Rent		8,258		487		1,484			10,229
Depreciation and amortization		9,461		38		843			10,342
Interest		396		-		844			1,240
Total costs and expenses		199,330		13,834		13,914			227,078
Income (loss) from operations		17,292		1,507		(2,916	)		15,883
Non-operating loss		-		-		(3,065	)		(3,065	)
Unrealized losses on marketable equity securities		-		-		(15,517	)		(15,517	)
Income (loss) before income taxes	$	17,292	$	1,507	$	(21,498	)	$	(2,699	)

XML

Note 7 - Long-term Leases (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Lease, Balance Sheet Classification [Table Text Block]

Right-of-Use Assets	Balance Sheet Classification	March 31, 2019
Finance lease assets	Net property and equipment	$	21,881
Operating lease right-of-use assets	Operating lease right-of-use assets		220,134
Total		$	242,015

Lease Liabilities	Balance Sheet Classification	March 31, 2019
Current:
Finance lease liabilities	Finance lease obligations, current portion	$	6,780
Operating lease liabilities	Operating lease liabilities, current portion		23,353
Noncurrent:
Finance lease liabilities	Finance lease obligations, less current portion		18,110
Operating lease liabilities	Operating lease liabilities, less current portion		196,781
Total		$	245,024

Lease, Cost [Table Text Block]

Weighted-average remaining lease terms (in years)
Finance	4.9
Operating	7.9
Weighted-average discount rate
Finance	6.0	%
Operating	6.0	%

Finance lease costs:
Depreciation of leased assets	$	981
Interest of lease liabilities		348
Total finance lease costs		1,329
Operating lease costs:
Operating lease costs		9,086
Variable lease costs		965
Short-term lease costs		187
Total operating lease costs		10,238
Total lease costs	$	11,567

Lessee, Lease, Liability, Maturity [Table Text Block]

	Finance Leases			Operating Leases
2020	$	7,998		$	35,733
2021		5,200			35,443
2022		5,200			35,112
2023		5,200			34,688
2024		4,767			34,403
Thereafter		--			99,877
Total minimum lease payments		28,365			275,256
Less: amounts representing interest		(3,475	)		(55,122	)
Present value of future minimum lease payments		24,890			220,134
Less: current portion		(6,780	)		(23,353	)
Noncurrent lease liabilities	$	18,110		$	196,781

Lease, Cash Flow Information [Table Text Block]

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	9,086
Operating cash flows for finance leases		348
Financing cash flows for finance leases		959

XML

Note 8- Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended March 31
	2019		2018
Basic:
Weighted average common shares outstanding		15,256,189		15,216,635
Net income (loss) attributable to National HealthCare Corporation	$	21,269	$	(2,791	)
Earnings (loss) per common share, basic	$	1.39	$	(0.18	)
Diluted:
Weighted average common shares outstanding		15,256,189		15,216,635
Effects of dilutive instruments		67,936		-
Weighted average common shares outstanding		15,324,125		15,216,635
Net income (loss) attributable to National HealthCare Corporation	$	21,269	$	(2,791	)
Earnings (loss) per common share, diluted	$	1.39	$	(0.18	)

XML

Note 9 - Investments in Marketable Securities (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Available-for-sale Securities [Table Text Block]

	March 31, 2019				December 31, 2018
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Investments available for sale:
Marketable equity securities	$	30,176	$	147,061	$	30,176	$	140,223
Restricted investments available for sale:
Corporate debt securities		66,649		66,819		69,439		67,632
Asset-based securities		64,601		64,504		62,772		62,068
U.S. Treasury securities		20,091		19,748		22,038		21,457
State and municipal securities		21,715		21,736		21,818		21,436
	$	203,232	$	319,868	$	206,243	$	312,816

Schedule of Available-for-sale Securities Reconciliation [Table Text Block]

	March 31, 2019						December 31, 2018
	Shares		Cost		Fair Value		Shares		Cost		Fair Value
NHI Common Stock		1,630,642	$	24,734	$	128,087		1,630,642	$	24,734	$	123,179

Investments Classified by Contractual Maturity Date [Table Text Block]

	March 31, 2019				December 31, 2018
	Cost		Fair Value		Cost		Fair Value
Maturities:
Within 1 year	$	11,081	$	11,054	$	11,448	$	11,401
1 to 5 years		95,001		95,229		98,487		97,430
6 to 10 years		66,974		66,524		64,932		62,527
Over 10 years		--		--		1,200		1,235
	$	173,056	$	172,807	$	176,067	$	172,593

XML

Note 10 - Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

	Fair Value Measurements Using
March 31, 2019	Fair Value		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents	$	38,194	$	38,194	$	–	$	–
Restricted cash and cash equivalents		16,505		16,505		–		–
Marketable equity securities		147,061		147,061		–		–
Corporate debt securities		66,819		49,600		17,219		–
Mortgage–backed securities		64,504		–		64,504		–
U.S. Treasury securities		19,748		19,748		–		–
State and municipal securities		21,736		–		21,736		–
Total financial assets	$	374,567	$	271,108	$	103,459	$	–

	Fair Value Measurements Using
December 31, 2018	Fair Value		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents	$	43,247	$	43,247	$	–	$	–
Restricted cash and cash equivalents		11,673		11,673		–		–
Marketable equity securities		140,223		140,223		–		–
Corporate debt securities		67,632		47,921		19,711		–
Asset - backed securities		62,068		–		62,068		–
U.S. Treasury securities		21,457		21,457		–		–
State and municipal securities		21,436		–		21,436		–
Total financial assets	$	367,736	$	264,521	$	103,215	$	–

XML

Note 11 - Long-term Debt (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Schedule of Debt [Table Text Block]

	Weighted Average Interest Rate		Maturity		March 31, 2019		December 31, 2018
	Variable				(dollars in thousands)
Credit facility, interest payable monthly		3.9%		2020	$	55,000	$	55,000
Less current portion						–		–
Total long-term debt					$	55,000	$	55,000

XML

Note 13 - Stock-based Compensation (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	March 31, 2019		December 31, 2018
Risk–free interest rate		2.60%		2.46%
Expected volatility		18.1%		16.1%
Expected life, in years		1.0		3.0
Expected dividend yield		2.65%		3.29%

Share-based Payment Arrangement, Option, Activity [Table Text Block]

	Number of Shares			Weighted Average Exercise Price		Aggregate Intrinsic Value
Options outstanding at January 1, 2018		1,239,407		$	71.19	$	–
Options granted		110,265			61.39		–
Options exercised		(68,291	)		54.31		–
Options cancelled		(118,000	)		72.11		–
Options outstanding at December 31, 2018		1,163,381			71.16		–
Options granted		8,475			77.72		–
Options exercised		(318,152	)		72.36		–
Options outstanding at March 31, 2019		853,704		$	70.77	$	4,374,000
Options exercisable at March 31, 2019		178,729		$	64.42	$	2,048,000

Share-based Payment Arrangement, Option, Exercise Price Range [Table Text Block]

Options Outstanding March 31, 2019	Exercise Prices			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years
159,668	$52.93	-	$62.78		61.11		2.6
694,036	$72.94	-	$77.72		73.00		2.9
853,704					70.77		2.8

XML

Note 1 - Description of Business (Details Textual)	Mar. 31, 2019
Number of Skilled Nursing Centers	75
Number of Beds	9,510
Number of Assisted Living Facilities	25
Number of Independent Living Facilities	5
Number of Geriatric Psychiatric Hospitals	1
Number of Homecare Programs	35
Number of States in which Entity Operates	10

XML

Note 2 - Summary of Significant Accounting Policies (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Accounts Receivable, Credit Loss Expense (Reversal)	$ 1,047,000	$ 959,000
Accounts Receivable, Allowance for Credit Loss, Ending Balance	$ 5,169,000		$ 4,610,000
Number of Reportable Segments	2
Contract with Customer, Refund Liability, Total	$ 8,078,000		8,078,000
Continuing Care Retirement Communities, Refund Obligation	$ 2,172,000		$ 2,172,000
Refundable Advance Fees [Member]
Nonrefundable Resident Entry Fee Percentage	10.00%
Original Entry Fee [Member]
Refundable Resident Entry Fee Percentage	90.00%
Appreciation [Member]
Appreciation of Apartment Over Original Residents Entry Fee Percentage	40.00%
Building and Building Improvements [Member] | Minimum [Member]
Property, Plant and Equipment, Useful Life	20 years
Building and Building Improvements [Member] | Maximum [Member]
Property, Plant and Equipment, Useful Life	40 years
Equipment and Furniture [Member] | Minimum [Member]
Property, Plant and Equipment, Useful Life	3 years
Equipment and Furniture [Member] | Maximum [Member]
Property, Plant and Equipment, Useful Life	15 years
Corporate Office Costs [Member]
General and Administrative Expense, Total	$ 5,144,000	$ 6,678,000

XML

Note 3 - Net Patient Revenues (Details Textual) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Accounts Receivable, Allowance for Credit Loss, Ending Balance	$ 5,169,000	$ 4,610,000
Medicare and Medicaid [Member]
Accounts Receivable, Allowance for Credit Loss, Ending Balance	$ 16,293,000	$ 16,108,000

XML

Note 3 - Net Patient Revenues - Revenue Disaggregation (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Net patient revenues	$ 236,111	$ 231,692
Revenue, concentration percentage	100.00%	100.00%
Medicare [Member]
Revenue, concentration percentage	36.00%	36.00%
Inpatient Services [Member]
Net patient revenues	$ 221,635	$ 216,351
Managed Care [Member]
Revenue, concentration percentage	12.00%	13.00%
Homecare [Member]
Net patient revenues	$ 14,476	$ 15,341
Medicaid [Member]
Revenue, concentration percentage	26.00%	25.00%
Private Pay and Other [Member]
Revenue, concentration percentage	26.00%	26.00%

XML

Note 4 - Other Revenues (Details Textual)	3 Months Ended
	Mar. 31, 2019 USD ($)	Mar. 31, 2018 USD ($)
Insurance Services Revenue, Total	$ 1,524,000	$ 1,692,000
Number of Skilled Nursing Centers	75
Number of Assisted Living Facilities	25
FLORIDA
Number of Assisted Living Facilities	4
National [Member]
Number of Skilled Nursing Centers	5
Property Management Fee Revenue	$ 1,854,000	1,014,000
Workers Compensation Revenue [Member]
Insurance Services Revenue, Total	847,000	1,019,000
Professional Liability Insurance [Member]
Insurance Services Revenue, Total	$ 677,000	$ 673,000

XML

Note 4 - Other Revenues - Summary of Other Revenues (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Insurance services	$ 1,524	$ 1,692
Management and accounting services fees	4,751	3,708
Rental income	5,608	5,532
Other	291	337
Total other revenues	$ 12,174	$ 11,269

XML

Note 4 - Other Revenues - Minimum Lease Payments Receivable (Details) $ in Thousands	Mar. 31, 2019 USD ($)
2020	$ 21,891
2021	22,192
2022	22,927
2023	22,868
2024	22,730
Thereafter	40,614
Total future minimum lease payments	$ 153,222

XML

Note 5 - Non-operating Income (Details Textual) - Caris [Member] - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2019
Equity Method Investment, Ownership Percentage		75.10%
Loss Contingency, Damages Paid, Value	$ 8,228,000

XML

Note 5 - Non-operating Income - Summary of Non-operating Income (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Equity in earnings of unconsolidated investments	$ 2,321	$ (6,586)
Dividends and net realized gains and losses on sales of securities	1,931	1,803
Interest income	1,749	1,718
Total non-operating income	$ 6,001	$ (3,065)

XML

Note 6 - Business Segments (Details Textual)	3 Months Ended
	Mar. 31, 2019
Number of Operating Segments	2

XML

Note 6 - Business Segments - Summary of Financial Information by Reporting Segment (Details) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Revenues:
Net patient revenues	$ 236,111,000	$ 231,692,000
Other revenues	12,174,000	11,269,000
Net operating revenues	248,285,000	242,961,000
Cost and expenses:
Salaries, wages and benefits	141,388,000	140,095,000
Other operating	69,432,000	65,172,000
Rent	10,238,000	10,229,000
Depreciation and amortization	10,517,000	10,342,000
Interest	926,000	1,240,000
Total costs and expenses	232,501,000	227,078,000
Income (loss) from operations	15,784,000	15,883,000
Non-operating income	6,001,000	(3,065,000)
Unrealized gains (losses) on marketable equity securities	6,838,000	(15,517,000)
Income before income taxes	28,623,000	(2,699,000)
Inpatient Services Segment [Member]
Revenues:
Net patient revenues	221,635,000	216,351,000
Other revenues	231,000	271,000
Net operating revenues	221,866,000	216,622,000
Cost and expenses:
Salaries, wages and benefits	126,101,000	123,380,000
Other operating	62,629,000	57,835,000
Rent	8,291,000	8,258,000
Depreciation and amortization	9,653,000	9,461,000
Interest	348,000	396,000
Total costs and expenses	207,022,000	199,330,000
Income (loss) from operations	14,844,000	17,292,000
Non-operating income
Unrealized gains (losses) on marketable equity securities
Income before income taxes	14,844,000	17,292,000
Homecare Services Segment [Member]
Revenues:
Net patient revenues	14,476,000	15,341,000
Other revenues
Net operating revenues	14,476,000	15,341,000
Cost and expenses:
Salaries, wages and benefits	8,026,000	8,030,000
Other operating	4,252,000	5,279,000
Rent	462,000	487,000
Depreciation and amortization	61,000	38,000
Interest
Total costs and expenses	12,801,000	13,834,000
Income (loss) from operations	1,675,000	1,507,000
Non-operating income
Unrealized gains (losses) on marketable equity securities
Income before income taxes	1,675,000	1,507,000
Other Segments [Member]
Revenues:
Net patient revenues
Other revenues	11,943,000	10,998,000
Net operating revenues	11,943,000	10,998,000
Cost and expenses:
Salaries, wages and benefits	7,261,000	8,685,000
Other operating	2,551,000	2,058,000
Rent	1,485,000	1,484,000
Depreciation and amortization	803,000	843,000
Interest	578,000	844,000
Total costs and expenses	12,678,000	13,914,000
Income (loss) from operations	(735,000)	(2,916,000)
Non-operating income	6,001,000	(3,065,000)
Unrealized gains (losses) on marketable equity securities	6,838,000	(15,517,000)
Income before income taxes	$ 12,104,000	$ (21,498,000)

XML

Note 7 - Long-term Leases (Details Textual)			1 Months Ended	3 Months Ended
	Mar. 01, 2014 USD ($)	Jan. 01, 2007 USD ($)	Sep. 30, 2013 USD ($)	Mar. 31, 2019 USD ($)	Mar. 31, 2018 USD ($)
Number of Skilled Nursing Centers				75
Number of Facilities Under Capitalized Lease	3
Number of Capitalized Lease Agreements	3
Capital Leases, Future Minimum Payments, Net Minimum Payments, Total	$ 5,200,000
Two Leases with NHI [Member]
Number of Skilled Nursing Centers Leased from NHI				35
Number of Assisted Living Centers Leased from NHI				7
Number of Independent Living Centers Leased from NHI				3
Number of Lease Agreements with NHI				2
Lease One With NHI [Member]
Lessee, Operating Lease, Term of Contract		15 years
Number of Skilled Nursing Facilities Subleased				4
Number of Additional Lease Options		3
Operating Leases, Rent Expense, Minimum Rentals		$ 30,750,000
Operating Lease Additional Percentage Rent Percentage		4.00%
Term of Additional Lease Option		5 years
Lease Two with NHI [Member]
Lessee, Operating Lease, Term of Contract			15 years
Operating Leases, Rent Expense, Minimum Rentals			$ 3,450,000	$ 34,200,000
Operating Lease Additional Percentage Rent Percentage			4.00%
Number of Skilled Nursing Centers			7
Facility Purchase Price			$ 49,000,000
Both NHI Lease Agreements [Member]
Operating Leases Percentage Rent Expense				$ 965,000	$ 928,000
Capital Lease [Member]
Number of Additional Lease Options	2
Initial Lease Term	10 years
Capital Lease Additional Percentage Rent Percentage	4.00%
Term of Additional Lease Option	5 years
Minimum [Member]
Lessee, Operating Lease, Term of Contract				2 years
Maximum [Member]
Lessee, Operating Lease, Term of Contract				15 years

XML

Note 7 - Long-term Leases - Balance Sheet Classification (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Finance lease assets	$ 21,881
Operating lease right-of-use assets	220,134
Total	242,015
Finance lease liabilities	6,780	3,924
Operating lease liabilities	23,353
Noncurrent lease liabilities, finance leases	18,110	19,128
Noncurrent lease liabilities, operating leases	196,781
Total	$ 245,024

XML

Note 7 - Long-term Leases - Lease Information and Expense (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($)
Finance (Year)	4 years 328 days
Operating (Year)	7 years 328 days
Finance	6.00%
Operating	6.00%
Depreciation of leased assets	$ 981
Interest of lease liabilities	348
Total finance lease costs	1,329
Operating lease costs	9,086
Variable lease costs	965
Short-term lease costs	187
Total operating lease costs	10,238
Total lease costs	$ 11,567

XML

Note 7 - Long-term Leases - Maturity of Lease Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
2020, finance leases	$ 7,998
2020, operating leases	35,733
2021, finance leases	5,200
2021, operating leases	35,443
2022, finance leases	5,200
2022, operating leases	35,112
2023, finance leases	5,200
2023, operating leases	34,688
2024, finance leases	4,767
2024, operating leases	34,403
Thereafter, finance leases
Thereafter, operating leases	99,877
Total minimum lease payments, finance leases	28,365
Total minimum lease payments, operating leases	275,256
Less: amounts representing interest, finance leases	(3,475)
Less: amounts representing interest, operating leases	(55,122)
Present value of future minimum lease payments, finance leases	24,890
Present value of future minimum lease payments, operating leases	220,134
Less: current portion, finance leases	(6,780)	$ (3,924)
Less: current portion, operating leases	(23,353)
Noncurrent lease liabilities, finance leases	18,110	19,128
Noncurrent lease liabilities, operating leases	$ 196,781

XML

Note 7 - Long-term Leases - Cash Flow Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Operating cash flows for operating leases	$ 9,086
Operating cash flows for finance leases	348
Financing cash flows for finance leases	$ 959	$ 903

XML

Note 8- Earnings Per Share (Details Textual) - shares	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Share-based Payment Arrangement, Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	8,475	1,238,855

XML

Note 8 - Earnings Per Share - Summary of Earnings and Weighted Average Number of Common Shares Used in Calculation of Basic and Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Basic:
Weighted average common shares outstanding (in shares)	15,256,189	15,216,635
Net income (loss) attributable to National HealthCare Corporation	$ 21,269	$ (2,791)
Earnings (loss) per common share, basic (in dollars per share)	$ 1.39	$ (0.18)
Diluted:
Weighted average common shares outstanding (in shares)	15,256,189	15,216,635
Effects of dilutive instruments (in shares)	67,936
Weighted average common shares outstanding (in shares)	15,324,125	15,216,635
Net income (loss) attributable to National HealthCare Corporation	$ 21,269	$ (2,791)
Earnings (loss) per common share, diluted (in dollars per share)	$ 1.39	$ (0.18)

XML

Note 9 - Investments in Marketable Securities (Details Textual) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Equity Securities Fv Ni Gross Unrealized Gain	$ 116,906,000		$ 110,081,000
Equity Securities Fv Ni Gross Unrealized Loss	21,000		34,000
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax	1,089,000		335,000
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	1,338,000		3,809,000
Other than Temporary Impairment Losses, Investments, Available-for-sale Securities, Total	0		$ 0
Proceeds from Sale of Debt Securities, Available-for-sale	6,576,000	$ 3,535,000
Realized Investment Gains (Losses), Total	0	11,000
Proceeds from Sale and Maturity of Marketable Securities, Total	0	0
Equity Securities, FV-NI, Unrealized Gain (Loss), Total	$ 6,838,000	$ (15,517,000)

XML

Note 9 - Investments in Marketable Securities - Marketable Securities and Restricted Marketable Securities (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Restricted investments available for sale, amortized cost	$ 173,056	$ 176,067
Restricted investments available for sale, fair value	172,807	172,593
Investments available for sale, amortized cost	203,232	206,243
Investments available for sale, fair value	319,868	312,816
Equity Securities [Member]
Unrestricted investments available for sale, amortized cost	30,176	30,176
Unrestricted investments available for sale, fair value	147,061	140,223
Corporate Debt Securities [Member]
Restricted investments available for sale, amortized cost	66,649	69,439
Restricted investments available for sale, fair value	66,819	67,632
Collateralized Mortgage Backed Securities [Member]
Restricted investments available for sale, amortized cost	64,601	62,772
Restricted investments available for sale, fair value	64,504	62,068
US Government Corporations and Agencies Securities [Member]
Restricted investments available for sale, amortized cost	20,091	22,038
Restricted investments available for sale, fair value	19,748	21,457
US States and Political Subdivisions Debt Securities [Member]
Restricted investments available for sale, amortized cost	21,715	21,818
Restricted investments available for sale, fair value	$ 21,736	$ 21,436

XML

Note 9 - Investments in Marketable Securities - Available for Sale Marketable Equity Securities (Details) - NHI Common Stock [Member] - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
NHI Common Stock, Shares (in shares)	1,630,642	1,630,642
NHI Common Stock, Cost	$ 24,734	$ 24,734
NHI Common Stock, Fair Value	$ 128,087	$ 123,179

XML

Note 9 - Investments in Marketable Securities - Amortized Cost and Estimated Fair Value of Debt Securities as Available for Sale (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Within 1 year, cost	$ 11,081	$ 11,448
Within 1 year, fair value	11,054	11,401
1 to 5 years, cost	95,001	98,487
1 to 5 years, fair value	95,229	97,430
6 to 10 years, cost	66,974	64,932
6 to 10 years, fair value	66,524	62,527
Over 10 years, cost		1,200
Over 10 years, fair value		1,235
Cost	173,056	176,067
Fair Value	$ 172,807	$ 172,593

XML

Note 10 - Fair Value Measurements - Summary of Fair Value Measurements by Level (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018
Restricted cash and cash equivalents	$ 16,505,000		$ 11,778,000
Available-for-sale securities	172,807,000	$ 172,593,000
Corporate Debt Securities [Member]
Available-for-sale securities	66,819,000	67,632,000
Collateralized Mortgage Backed Securities [Member]
Available-for-sale securities	64,504,000	62,068,000
US States and Political Subdivisions Debt Securities [Member]
Available-for-sale securities	21,736,000	21,436,000
Fair Value, Recurring [Member]
Cash and cash equivalents	38,194,000	43,247,000
Restricted cash and cash equivalents	16,505,000	11,673,000
Total financial assets	374,567,000	367,736,000
Fair Value, Recurring [Member] | Equity Securities [Member]
Available-for-sale securities	147,061,000	140,223,000
Fair Value, Recurring [Member] | Corporate Debt Securities [Member]
Available-for-sale securities	66,819,000	67,632,000
Fair Value, Recurring [Member] | Collateralized Mortgage Backed Securities [Member]
Available-for-sale securities	64,504
Fair Value, Recurring [Member] | Asset-backed Securities [Member]
Available-for-sale securities		62,068,000
Fair Value, Recurring [Member] | US Treasury Securities [Member]
Available-for-sale securities	19,748,000	21,457,000
Fair Value, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member]
Available-for-sale securities	21,736,000	21,436,000
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Cash and cash equivalents	38,194,000	43,247,000
Restricted cash and cash equivalents	16,505,000	11,673,000
Total financial assets	271,108,000	264,521,000
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Equity Securities [Member]
Available-for-sale securities	147,061,000	140,223,000
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Corporate Debt Securities [Member]
Available-for-sale securities	49,600,000	47,921,000
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Collateralized Mortgage Backed Securities [Member]
Available-for-sale securities
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Asset-backed Securities [Member]
Available-for-sale securities
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | US Treasury Securities [Member]
Available-for-sale securities	19,748,000	21,457,000
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | US States and Political Subdivisions Debt Securities [Member]
Available-for-sale securities
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Cash and cash equivalents
Restricted cash and cash equivalents
Total financial assets	103,459,000	103,215,000
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Equity Securities [Member]
Available-for-sale securities
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Corporate Debt Securities [Member]
Available-for-sale securities	17,219,000	19,711,000
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Collateralized Mortgage Backed Securities [Member]
Available-for-sale securities	64,504
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Asset-backed Securities [Member]
Available-for-sale securities		62,068,000
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | US Treasury Securities [Member]
Available-for-sale securities
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | US States and Political Subdivisions Debt Securities [Member]
Available-for-sale securities	$ 21,736,000	$ 21,436,000

XML

Note 11 - Long-term Debt (Details Textual) - Bank of America [Member] - USD ($)	1 Months Ended
	Oct. 31, 2015	Mar. 31, 2019
Line of Credit Facility, Maximum Borrowing Capacity		$ 110,000,000
London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument, Basis Spread on Variable Rate	1.40%
Base Rate [Member]
Debt Instrument, Basis Spread on Variable Rate	0.40%

XML

Note 11 - Long-term Debt - Summary of Long-term Debt (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Dec. 31, 2018
Long-term debt	$ 55,000	$ 55,000
Less current portion
Total long-term debt	$ 55,000
Line of Credit [Member]
Long-term debt, weighted average interest rate	3.90%
Long-term debt, maturities	2020
Long-term debt	$ 55,000

XML

Note 12 - Stock Repurchase Program (Details Textual) - Common Stock [Member] - USD ($)	3 Months Ended
	Mar. 31, 2019	Aug. 31, 2018
Stock Repurchase Program, Authorized Amount		$ 25,000,000
Stock Repurchased and Retired During Period, Shares	10,396
Stock Repurchased and Retired During Period, Value	$ 872,000

XML

Note 13 - Stock-based Compensation (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Share-based Payment Arrangement, Expense	$ 424,000	$ 428,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total	$ 5,343,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition	3 years

XML

Note 13 - Stock-based Compensation - Summary of Assumptions Used to Value Options Granted (Details)	3 Months Ended	12 Months Ended
	Mar. 31, 2019	Dec. 31, 2018
Risk–free interest rate	2.60%	2.46%
Expected volatility	18.10%	16.10%
Expected life (Year)	1 year	3 years
Expected dividend yield	2.65%	3.29%

XML

Note 13 - Stock-based Compensation - Summary of Options Outstanding (Details) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2019	Dec. 31, 2018
Options outstanding, shares (in shares)	1,163,381	1,239,407
Options outstanding, weighted average exercise price (in dollars per share)	$ 71.16	$ 71.19
Options granted, shares (in shares)	8,475	110,265
Options granted, weighted average exercise price (in dollars per share)	$ 77.72	$ 61.39
Options exercised, shares (in shares)	(318,152)	(68,291)
Options exercised, weighted average exercise price (in dollars per share)	$ 72.36	$ 54.31
Options cancelled, shares (in shares)		(118,000)
Options cancelled, weighted average exercise price (in dollars per share)		$ 72.11
Options outstanding, shares (in shares)	853,704	1,163,381
Options outstanding, weighted average exercise price (in dollars per share)	$ 70.77	$ 71.16
Options outstanding, aggregate intrinsic value	$ 4,374,000
Options exercisable, shares (in shares)	178,729
Options exercisable, weighted average exercise price (in dollars per share)	$ 64.42
Options exercisable, aggregate intrinsic value	$ 2,048,000

XML

Note 13 - Stock-based Compensation - Options Outstanding by Exercise Price Range (Details)	3 Months Ended
	Mar. 31, 2019 $ / shares shares
Options outstanding (in shares) | shares	853,704
Weighted average exercise price (in dollars per share)	$ 70.77
Weighted average remaining contractual life (Year)	2 years 292 days
Exercise Price Range 1 [Member]
Options outstanding (in shares) | shares	159,668
Exercise price, lower range (in dollars per share)	$ 52.93
Exercise price, upper range (in dollars per share)	62.78
Weighted average exercise price (in dollars per share)	$ 61.11
Weighted average remaining contractual life (Year)	2 years 219 days
Exercise Price Range 2 [Member]
Options outstanding (in shares) | shares	694,036
Exercise price, lower range (in dollars per share)	$ 72.94
Exercise price, upper range (in dollars per share)	77.72
Weighted average exercise price (in dollars per share)	$ 73
Weighted average remaining contractual life (Year)	2 years 328 days

XML

Note 14 - Income Taxes (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Income Tax Expense (Benefit), Total	$ 7,392,000	$ 200,000
Effective Income Tax Rate Reconciliation, Percent, Total	25.80%	7.40%
Effective Income Tax Rate Reconciliation, Tax Contingency, Amount, Total	$ 200,000
Effective Income Tax Rate Reconciliation, Tax Expense (Benefit), Share-based Payment Arrangement, Amount	(228,000)
Equity Securities, FV-NI, Unrealized Gain (Loss), Total	$ 6,838,000	$ (15,517,000)
Effective Income Tax Rate Reconciliation, Nondeductible Expense, Amount, Total		$ 855,000
Effective Income Tax Rate Reconciliation, Nondeductible Expense, Percent, Total		31.70%
Open Tax Year	2015 2016 2017 2018

XML

Note 15 - Contingencies and Commitments (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2019	Dec. 31, 2018
Self Insurance Reserve	$ 98,542,000	$ 96,024,000
Direct Business Coverage Statutory Limits	1,000,000
Primary Insurance Coverage, Amount Per Incident	1,000,000
Primary Insurance Coverage, Amount Per Location	3,000,000
Annual Excess Coverage	9,000,000
National [Member]
Line of Credit Facility, Maximum Borrowing Capacity	2,000,000
Long-term Line of Credit, Total	$ 0