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Note 3 - Acquisitions
 9 Months Ended
Sep. 30, 2026
Notes to Financial Statements  
Business Combination [Text Block]

Note 3 – Acquisitions

 

Five Skilled Nursing Facilities from National Health Corporation

 

On June 1, 2026, the Company purchased the land, buildings, and other specified assets and assumed certain liabilities of five skilled nursing facilities from National Health Corporation (“National”) for a purchase price of $50,500,000. National is considered an affiliate and related party, as well as provides payroll services to NHC. The operations have 639 licensed skilled nursing beds in the states of South Carolina and Tennessee. The acquisition represents both an expansion of NHC’s operations into these states and a strategic advancement of its growth in its existing operational footprint. 

 

The Company utilized widely accepted income-based, market-based, and cost-based valuation approaches to perform the preliminary purchase price allocation.

 

The Company has performed a preliminary valuation analysis of the fair market value of the assets acquired and liabilities assumed from National. The final valuation of the assets acquired and liabilities assumed was not complete as of September 30, 2026, but will be finalized within the allowable measurement period. The following table summarizes the allocation of the preliminary purchase price as of the transaction’s closing date (in thousands):

 

  

Amount

 

Accounts receivable

 $6,262 

Inventory

  338 

Prepaid expenses and other assets

  747 

Property and equipment

  51,091 

Intangible assets

  500 

Total assets acquired

  58,938 
     

Trade accounts payable

  1,729 

Accrued payroll

  3,285 

Other current liabilities

  1,726 

Total liabilities assumed

  6,740 
     

Total estimated fair value of the acquisition

 $52,198 

 

The indefinite-lived intangible assets acquired include the skilled nursing certificates of need and licenses.

 

The operations added during the three and nine months ended September 30, 2026 were not material to the Company. Accordingly, pro-forma financial information is not presented. As of September 30, 2026, these additions have been included in the interim condensed consolidated balance sheet of the Company. The operating results have been included in the interim condensed consolidated statements of operations since the date the Company gained effective control, which was June 1, 2026.

 

For the three and nine months ended September 30, 2026, these five skilled nursing facilities contributed net operating revenues of $19,288,000 and $25,290,000, respectively. For the three and nine months ended September 30, 2026, these five skilled nursing facilities contributed income from operations of $2,658,000 and $3,268,000, respectively.

 

Thirty-Two Skilled Nursing Facilities and Three Independent Living Facilities from National Health Investors

 

On July 1, 2026, the Company purchased the land, facilities, and improvements of thirty-two skilled nursing facilities and three independent living facilities, previously leased by us as tenant, from National Health Investors (“NHI”) for a purchase price of $560,000,000. On the closing date of the transaction, the lease agreement with NHI was terminated. The Company operates all of the facilities, except four Florida skilled nursing facilities. The four Florida skilled nursing facilities are leased to a third-party operator.

 

The facilities are located in Alabama, Florida, Kentucky, Missouri, South Carolina, Tennessee, and Virginia. NHC operates multiple skilled nursing facilities, assisted living and independent living communities, as well as homecare and hospice operations within this geographic footprint. The acquisition complements NHC’s current asset portfolio within these regions.

 

The Company previously controlled the right to use these properties through lease agreements; therefore, the transaction was accounted for as a termination of the existing lease and the acquisition of the underlying real estate assets. At the closing date, the Company derecognized the associated “operating lease right-of-use assets” of $16,197,000 and the “operating lease liabilities” of $15,763,000. The net difference of $434,000 between the pre-existing lease balances was included in the initial cost basis of the acquired assets. Additionally, transactions costs of $3,906,000 were also capitalized and included in the initial cost basis of the acquired assets.

 

The following table summarizes the cost allocation based on the relative fair values of the assets at the acquisition date (in thousands):

 

  

Allocated Cost

Basis

 

Land

 $44,483 

Buildings and improvements

  519,857 

Total assets acquired

 $564,340 

 

The fair value of the land was determined utilizing the sales comparison approach. The fair value of the buildings was determined utilizing the cost approach for each location, including replacement cost methods specific to skilled nursing asset classes. No goodwill or intangible assets were recognized in connection with this transaction.