Market Overview

NHC Reports Second Quarter 2018 Earnings

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National
HealthCare Corporation
(NYSE American: NHC),
the nation's oldest publicly traded senior health care company,
announced today net operating revenues for the quarter ended June 30,
2018 totaled $242,142,000 compared to $238,695,000 for the quarter ended
June 30, 2017, an increase of 1.4%.

For the quarter ended June 30, 2018, reported GAAP net income
attributable to NHC was $22,461,000 compared to $10,655,000 for the
second quarter of 2017. The increase in GAAP net income was primarily
due to the new accounting standard of recording the quarterly market
value change of our marketable equity securities through the income
statement. Excluding the $12.4 million unrealized gains in our
marketable equity securities portfolio and other non-GAAP adjustments,
adjusted net income for the quarter ended June 30, 2018 was $14,155,000
compared to $11,882,000 for the second quarter of 2017, an increase of
19.1%(1). For the quarter ended June 30, 2018, the reported
GAAP diluted earnings per share was $1.47 and the adjusted diluted
earnings per share was $0.93(1).

(1) See the tables below that provide a reconciliation of GAAP to
non-GAAP items.

About NHC

NHC affiliates operate for themselves and third parties 76 skilled
nursing facilities with 9,629 beds. NHC affiliates also operate 24
assisted living communities, five independent living communities, and 36
homecare programs. NHC's other services include Alzheimer's and memory
care units, hospice services, pharmacy services, a rehabilitation
services company, and providing management and accounting services to
third party post-acute operators. Other information about the company
can be found on our web site at www.nhccare.com.

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.

Forward-Looking Statements

Statements in this press release that are not historical facts are
forward-looking statements. NHC cautions investors that any
forward-looking statements made involve risks and uncertainties and are
not guarantees of future performance. The risks and uncertainties are
detailed from time to time in reports filed by NHC with the S.E.C.,
including Forms 8-K, 10-Q and 10-K, and include, among others, the
following: liabilities and other claims asserted against us and patient
care liabilities, as well as the resolution of current litigation;
availability of insurance and assets for indemnification; 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; and other factors referenced or incorporated by
reference in the S.E.C. filings. The risks included here are not
exhaustive. All forward-looking statements represent NHC's best judgment
as of the date of this release.

       
Consolidated Statements of Income
(in thousands, except share and per share amounts)
 
    Three Months Ended Six Months Ended
June 30 June 30
2018 2017 2018 2017
(unaudited) (unaudited)
Revenues:
Net patient revenues $ 230,654 $ 227,085 $ 462,346 $ 454,339
Other revenues   11,488     11,610     22,757     22,894  
Net operating revenues 242,142 238,695 485,103 477,233
 
Costs and expenses:
Salaries, wages and benefits 145,466 142,684 285,561 280,739
Other operating 62,589 62,094 127,761 125,272
Facility rent 10,272 10,079 20,501 20,167
Depreciation and amortization 10,397 10,481 20,739 20,776
Interest   1,253     1,219     2,493     2,277  
Total costs and expenses   229,977     226,557     457,055     449,231  
 
Income from operations 12,165 12,138 28,048 28,002
 
Non-operating income 5,654 5,189 2,589 9,957
Unrealized gains (losses) on marketable equity securities   12,448     -     (3,069 )   -  
 
Income before income taxes 30,267 17,327 27,568 37,959
Income tax provision   (7,892 )   (6,758 )   (8,092 )   (14,757 )
Net income 22,375 10,569 19,476 23,202
 
Net loss attributable to noncontrolling interest   86     86     194     181  
 
Net income attributable to National HealthCare Corporation $ 22,461   $ 10,655   $ 19,670   $ 23,383  
 
Net income per common share
Basic $ 1.48 $ 0.70 $ 1.29 $ 1.54
Diluted $ 1.47 $ 0.70 $ 1.29 $ 1.54
 
Weighted average common shares outstanding
Basic 15,221,262 15,189,818 15,218,962 15,181,700
Diluted 15,228,305 15,220,448 15,224,958 15,216,336
 
Dividends declared per common share $ 0.50 $ 0.48 $ 0.98 $ 0.93
 
Balance Sheet Data
(in thousands) June 30 Dec. 31
2018 2017
(unaudited)
 
Cash, cash equivalents and marketable securities $ 195,338 $ 198,203
Restricted cash, cash equivalents and marketable securities 174,498 174,698
Current assets 317,494 329,311
Property and equipment, net 544,035 549,319
Total assets 1,070,749 1,096,526
Current liabilities 142,993 155,065
Long-term debt 85,000 100,000
NHC stockholders' equity 706,270 702,738
       
Selected Operating Statistics
 
Three Months Ended Six Months Ended
June 30 June 30
2018 2017 2018 2017
(unaudited) (unaudited)
Skilled Nursing Per Diems:
Medicare $ 461.99 $ 462.08 $ 461.50 $ 462.24
Managed Care 398.70 407.16 400.23 409.42
Medicaid 188.41 185.05 188.91 185.25
Private Pay and Other   237.08     232.91     237.92     232.29  
 
Average Skilled Nursing Per Diem $ 267.88   $ 266.46   $ 270.28   $ 267.37  
 
Skilled Nursing Patient Days:
Medicare 119,510 118,755 246,733 242,651
Managed Care 59,460 62,542 119,747 122,160
Medicaid 320,729 318,605 630,429 633,893
Private Pay and Other   178,219     181,613     353,679     358,488  
 
Total Skilled Nursing Patient Days   677,918     681,515     1,350,588     1,357,192  
 
 
 
The tables below provide reconciliations of GAAP to non-GAAP items (in
thousands, except per share amounts)
:
 
Three Months Ended Six Months Ended
June 30 June 30
2018 2017 2018 2017
(unaudited) (unaudited)
 
Net income attributable to National Healthcare Corporation $ 22,461 $ 10,655 $ 19,670 $ 23,383
Non-GAAP adjustments
Unrealized (gains)/losses on marketable equity securities (12,448 ) - 3,069 -
Legal costs and charges related to Caris' legal investigation 136 359 8,364 482
Operating results for newly opened facilities not at full capacity
(*)
339 912 531 1,750
Stock-based compensation expense 749 740 1,177 832
Provision of income taxes on non-GAAP adjustments   2,918     (784 )   (2,563 )   (1,195 )
Non-GAAP Net income $ 14,155   $ 11,882   $ 30,248   $ 25,252  
 
 
GAAP diluted earnings per share $ 1.47 $ 0.70 $ 1.29 $ 1.54
Non-GAAP adjustments
Unrealized (gains)/losses on marketable equity securities (0.60 ) - 0.15 -
Legal costs and charges related to Caris' legal investigation 0.01 0.01 0.46 0.02
Operating results for newly opened facilities not at full capacity
(*)
0.01 0.04 0.03 0.07
Stock-based compensation expense   0.04     0.03     0.06     0.03  
Non-GAAP diluted earnings per share $ 0.93   $ 0.78   $ 1.99   $ 1.66  
 
(*) The newly opened facilities consist of one skilled nursing
facility and two assisted living facilities that opened during 2017.

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