FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 of 15(d)
of the Securities Exchange Act of 1934
For quarter ended March 31, 2000 Commission file number 333-37185
NATIONAL HEALTHCARE CORPORATION
(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 Vine Street
Murfreesboro, TN 37130
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (615) 890-2020
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.
Yes x No
(2) Has been subject to such filing requirements for the past 90 days.
Yes x No
11,429,694 shares were outstanding as of April 30, 1999.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
NATIONAL HEALTHCARE CORPORATION
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended
March 31
2000 1999
(in thousands)
<S> <C> <C>
REVENUES:
Net patient revenues $ 108,783 $ 99,247
Other revenues 6,618 8,682
Net revenues 115,401 107,929
COSTS AND EXPENSES:
Salaries, wages and benefits 64,132 61,561
Other operating 30,470 27,248
Rent 11,889 10,968
Depreciation and amortization 3,328 2,807
Interest 1,692 1,586
Total costs and expenses 111,511 104,170
Income Before Income Taxes 3,890 3,759
Income Tax Provision (1,511) (1,522)
NET INCOME $ 2,379 $ 2,237
EARNINGS PER SHARE:
Basic $ .21 $ .20
Diluted $ .21 $ .20
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 11,552,974 11,412,987
Diluted 11,552,974 11,428,327
</TABLE>
The accompanying notes to interim condensed consolidated financial
statements are an integral part of these statements.
2
<PAGE>
<TABLE>
NATIONAL HEALTHCARE CORPORATION
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
<CAPTION>
March 31 December 31
2000 1999
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,767 $ 4,054
Cash held by trustees 5,671 4,672
Marketable securities 30,418 30,459
Accounts receivable, less allowance for
doubtful accounts of $11,073 and $10,278 53,465 52,337
Notes receivable 602 602
Inventory at lower of cost (first-in,
first-out method) or market 4,839 5,010
Deferred income taxes 9,929 7,932
Prepaid expenses and other assets 6,551 2,430
Total current assets 115,242 107,496
PROPERTY AND EQUIPMENT AND ASSETS UNDER
ARRANGEMENT WITH OTHER PARTIES:
Property and equipment at cost 160,419 157,558
Less accumulated depreciation and
amortization (64,103) (61,107)
Assets under arrangement with other parties 3,322 3,475
Net property, equipment and assets under
arrangement with other parties 99,638 99,926
OTHER ASSETS:
Bond reserve funds, mortgage replacement
reserves and other deposits 775 757
Unamortized financing costs 816 837
Notes receivable 14,584 3,381
Notes receivable from National 12,301 12,198
Deferred income taxes 8,170 7,826
Minority equity investments and other 10,646 7,898
Total other assets 47,292 32,897
$262,172 $240,319
</TABLE>
The accompanying notes to interim condensed consolidated financial
statements are an integral part of these consolidated balance sheets.
3
<PAGE>
<TABLE>
NATIONAL HEALTHCARE CORPORATION
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
LIABILITIES AND SHAREOWNERS' EQUITY
<CAPTION>
March 31 December 31
2000 1999
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ 20,112 $ 4,487
Short-term borrowings 17,000 2,000
Trade accounts payable 18,695 13,285
Accrued payroll 18,842 25,951
Amount due to third-party payors 27,495 26,923
Accrued interest 604 276
Other current liabilities 27,273 19,737
Total current liabilities 130,021 92,659
Long-term debt, less current portion 29,550 45,736
Debt serviced by other parties, less
current portion 14,802 14,911
Other noncurrent liabilities 11,536 11,536
Minority interests in consolidated subsidiaries 709 698
Deferred income 22,091 21,143
Commitments, contingencies And guarantees
SHAREOWNERS' EQUITY:
Preferred stock, $.01 par value;
10,000,000 shares authorized;
none issued or outstanding --- ---
Common stock, $.01 par value;
30,000,000 shares authorized;
11,548,996 and 11,553,496 shares,
respectively, issued and outstanding 115 115
Capital in excess of par value,
less notes receivable 54,258 54,250
Retained earnings 4,363 1,984
Unrealized losses on securities (5,273) (2,713)
Total shareowners' equity 53,463 53,636
$262,172 $ 240,319
</TABLE>
The accompanying notes to interim condensed consolidated financial
statements are an integral part of these consolidated balance sheets.
4
<PAGE>
<TABLE>
NATIONAL HEALTHCARE CORPORATION
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended
March 31
2000 1999
(in thousands)
<S> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net income $ 2,379 $ 2,237
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 3,140 2,605
Provision for doubtful accounts receivable 795 569
Amortization of intangibles and deferred charges 211 220
Amortization of deferred income (68) (134)
Equity in earnings of unconsolidated investments (61) (59)
Distributions from unconsolidated investments 136 8
Deferred income taxes (613) (176)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (1,923) 3,478
(Increase) decrease in inventory 171 (134)
Increase in prepaid expenses and other assets (4,121) (2,113)
Increase (decrease) in trade accounts payable 5,410 (8,585)
Decrease in accrued payroll (7,109) (7,644)
Increase in amounts due to third party payors 572 6,587
Increase (decrease) in accrued interest 328 (6)
Increase in other current liabilities 4,536 2,405
Increase in entrance fee deposits 1,016 779
Net cash provided by operating activities 4,799 37
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Additions to and acquisitions of property and
equipment, net (2,852) (4,712)
Investment in notes receivable (13,188) (764)
Collection of notes receivable 1,882 4,355
Increase in minority equity investments and other --- (127)
(Purchase) sale of marketable securities (4,247) 1,293
Net cash provided by (used) in investing activities (18,405) 45
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from debt issuance 15,000 ---
Increase in cash held by trustee (999) (958)
Increase (decrease) in minority interests in subsidiaries 11 (35)
Increase in bond reserve funds, mortgage
replacement reserves and other deposits (18) (71)
Issuance of common shares 5 72
Collection of receivables 81 ---
Purchase of common shares (78) ---
Payments on debt (669) (471)
Increase in financing costs (14) ---
Net cash provided by (used in) financing activities 13,319 (1,463)
NET DECREASE IN CASH AND CASH EQUIVALENTS (287) (1,381)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,054 12,630
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,767 $ 11,249
Supplemental Information:
Cash payments for interest expense $ 1,364 $ 1,592
</TABLE>
The accompanying notes to interim condensed consolidated financial
statements are an integral part of these consolidated statements.
5
<PAGE>
<TABLE>
NATIONAL HEALTHCARE CORPORATION
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended
March 31
2000 1999
(in thousands)
<S> <C> <C>
During the three months ended March 31, 1999,
$710,000, of convertible subordinated
debentures were converted into 46,690
shares of common stock:
Convertible subordinated debentures $ --- $ (710)
Financing costs --- 47
Accrued interest --- (8)
Common stock --- ---
Capital in excess of par value --- 671
During the three months ended March 31, 2000, NHC
acquired $3,000,000 of National Health Investors,
Inc. preferred stock in exchange for a $3,000,000
payable to National Health Investors, Inc.
Minority equity investments and other $ 3,000 $ ---
Other current liabilities 3,000 ---
</TABLE>
The accompanying notes to interim condensed consolidated financial
statements are an integral part of these consolidated statements.
6
<PAGE>
<TABLE>
NATIONAL HEALTHCARE CORPORATION
Interim Condensed Consolidated Statements of Shareowners' Equity
(in thousands, except share and unit amounts)
<CAPTION>
Unrealized Total
Receivables Gains Share-
Common Stock from Sale Paid in Retained (Losses) on Owners'
Shares Amount of Shares Capital Earnings Securities Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999 11,553,496 $ 115 $(16,799) $71,049 $ 1,984 $(2,713) $ 53,636
Net income --- --- --- --- 2,379 --- 2,379
Unrealized losses on
securities --- --- --- --- --- (2,560) (2,560)
Total Comprehensive Income (181)
Shares sold 1,000 --- --- 5 --- --- 5
Collection of receivables --- --- 81 --- --- --- 81
Shares repurchased (5,500) --- --- (78) --- --- (78)
Balance at March 31, 2000 11,548,996 $ 115 $(16,718) $70,976 $ 4,363 $(5,273) $ 53,463
Balance at December 31, 1998 11,378,558 $ 114 $(16,807) $69,645 $ (6,399) $ 3,762 $ 50,315
Net income --- --- --- --- 2,237 --- 2,237
Unrealized losses on
securities --- --- --- --- --- (1,901) (1,901)
Total Comprehensive Income 336
Shares sold 4,446 --- (12) 84 --- --- 72
Shares issued in conversion of
convertible debentures to
common shares 46,690 --- --- 671 --- --- 671
Balance at March 31, 1999 11,429,694 $ 114 $(16,819) $70,400 $ (4,162) $ 1,861 $ 51,394
</TABLE>
The accompanying notes to interim condensed consolidated financial
statements are an integral part of these consolidated statements.
7
<PAGE>
NATIONAL HEALTHCARE CORPORATION
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(Unaudited)
Note 1 - CONSOLIDATED FINANCIAL STATEMENTS:
The financial statements of National HealthCare Corporation ("NHC") for
the three months ended March 31, 2000 and 1999, which have not been examined
by independent public accountants, reflect, in the opinion of management, all
adjustments necessary to present fairly the data for such periods. The
results of the operations for the three months ended March 31, 2000 are not
necessarily indicative of the results that may be expected for the entire
fiscal year ended December 31, 2000. The interim condensed balance sheet at
December 31, 1999 is taken from the audited financial statements at that date.
The interim condensed financial statements should be read in conjunction with
the consolidated financial statements, including the notes thereto, and
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in NHC's Form 10-K for the year ended December 31, 1999.
Note 2 - OTHER REVENUES:
Three Months Ended
March 31
2000 1999
(in thousands)
Revenue from managed centers $ 3,067 $ 5,922
Guarantee fees 121 132
Advisory fee from NHI 720 703
Advisory fee from NHR 119 118
Earnings on securities 1,108 398
Equity in earnings of
unconsolidated investments 61 59
Interest income 674 757
Other 748 593
$ 6,618 $ 8,682
Revenues from managed centers include management fees and interest
income on notes receivable from the managed centers. "Other" revenues include
non-health care related earnings.
Note 3 - INVESTMENTS IN MARKETABLE SECURITIES AND PREFERRED STOCK:
NHC considers its investments in marketable securities as available for
sale securities and unrealized gains and losses are recorded in shareowners'
equity in accordance with Statement of Financial Accountant Standards No. 115.
On March 31, 2000, NHC acquired $3,000,000 of National Health Investors,
Inc. ("NHI") Preferred Stock, convertible at $12.00 per share into NHI common
stock after December 31, 2000. The shares pay dividends at the rate of 8%
through June 30, 2000, at the rate of 10% from July 1, 2000 through September
30, 2000, and at the rate of 12% thereafter. The Preferred Stock, which is
not listed on a stock exchange, is considered a non-marketable security and is
recorded at cost.
Realized gains and losses from securities sales are determined on the
specific identification of the securities.
Note 4 - GUARANTEES AND CONTINGENCIES:
Guarantees and Related Events
In order to obtain management agreements and to facilitate the
construction or acquisition of certain health care centers which NHC manages
for others, NHC has guaranteed some or all of the debt (principal and
interest) on those centers. For this service, NHC charges an annual guarantee
fee of 1% to 2% of the outstanding principal balance guaranteed, which fee is
in addition to NHC's management fee. The principal amounts outstanding under
the guarantees is approximately $67,763,094 (net of available debt service
reserves) at variable and fixed interest rates with a weighted average rate of
6.8% at March 31, 2000.
As a result of the health care industry's generally weak financial
position, the bankruptcy of Integrated Health Services Corporation (the lessee
for fourteen facilities formerly managed by NHC) in 1999 and the uncertainty
engendered by the pendency of the Whistleblower lawsuits discussed above, NHC
has experienced and is experiencing the potential for significant defaults in
financial obligations which it has undertaken. A summary of the potential
defaults are as follows:
FCC Guarantees: Although NHC transferred to National Health Realty,
Inc. ("NHR") approximately $60 million of first and second mortgage
notes made by FCC on fourteen facilities managed by NHC, NHC remained
as a guarantor on two Letters of Credit securing in the aggregate
approximately $23 million of first mortgage tax-exempt debt on
eight of the fourteen centers. Toronto Dominion Bank had
approximately $14 million in a Letter of Credit securing tax-exempt
notes on six FCC notes. On April 25, 2000, FCC replaced the Toronto
Dominion Bank Letter of Credit with one issued by Norwest Bank
Minnesota N.A. As a result, NHC was released from this guarantee in
April, 2000, except for $3,350,000 which is a secured lien on NHC's
owned 180 bed nursing home in Pensacola, Florida.
The Bank of Tokyo/Mitsubishi ("BOTM") had an approximate $9 million
Letter of Credit on two FCC centers, which are also guaranteed by
NHC. On April 25, 2000, FCC replaced the BOTM Letter of Credit with
one issued by Norwest Bank Minnesota N.A. NHC was released from its
guarantee on this indebtedness.
York Hannover Bankruptcy: NHC had originally guaranteed $5 million of
that certain first mortgage debt made by York Hannover Nursing
Centers, Inc. ("York Hannover") to NHI in December 1993. York
Hannover sought bankruptcy protection in June 1999 and on December
30, 1999, the six Florida nursing facilities, which secured the NHI
note, were acquired by a subsidiary of the first mortgage lender.
NHC has remained as a limited ($3 million) guarantor of the out-
standing debt plus the guarantor on a $2,000,000 working capital
note, all collateralized by the pledge of certain marketable
securities in the approximate amount of $5 million. NHC is no
longer managing these facilities. The failure of these facilities
to make their payments on the first mortgage notes could result
in the acceleration of that indebtedness and an attempt by
the first mortgage holder and/or working capital lender to collect
their total of $5 million in guarantees from NHC or the collateral
now held by the first mortgage lender.
Customer Bankruptcies
On November 5, 1999, NHC was informed that a substantial debtor of its
rehabilitation division had filed for Chapter 11 protection in the United
States Bankruptcy/District Court in Wilmington, Delaware. The debtor is an
affiliate of Lenox Healthcare, Inc. of Pittsfield, Massachusetts. The debt is
collateralized by second mortgages on certain licensed nursing facilities, a
first lien on certain accounts receivables, and the assignment of a number of
limited partnership and corporate shareholder interests.
NHC also manages nine other nursing homes owned in part by Mr. Tom
Clarke, the owner of Lenox Healthcare, Inc. Six of these properties (the
York-Hannover centers) were sold by the bankruptcy court to the first mortgage
lender on December 30, 1999. NHC's management contract on these six centers
was terminated on January 1, 2000, but the new owner has contracted with NHC
for off site financial and accounting services. Two of the nine facilities
are not in bankruptcy and are in compliance with all the terms and conditions
of the Management Agreement. The third managed facility is located in
Carthage, Tennessee and may be impacted by the bankruptcy.
Professional Liability Claims
Due to liberal statutory provisions in the State of Florida as well as
an active and specialized plaintiff's bar, the entire long-term care industry
has seen a drastic increase in liability claims, reserves, settlements, and
judgments over the last several years. As a result, the Company's
professional liability insurance premium for its owned and managed centers (22
of which are in Florida currently) has increased from $1,995,000 in 1998 to
$3,200,000 in 1999 and $6,700,000 in 2000. Prior to 1999, coverage was
secured on a first dollar basis (no deductible). Additionally, for policy
years 1999 and 2000, all owned centers have a significant per claim deductible
which is capped in the aggregate at $1,225,000 for policy year 1999 and
$2,000,000 for policy year 2000. These deductible aggregates must be added to
the premium totals for 1999 and 2000. Given the current legal environment,
significant additional premiums and retentions going forward may be expected.
Given the current legal environment in the State of Florida, plus the
unapproved and bad faith settlement entered into by the Company's carrier in
the previously discussed York Hannover case, the Company believes there is a
potential of uninsured liability in excess of insurance coverage for the years
1995 and 1996, which amount is not quantifiable at the present time. Any
judgments or settlements above the Company's specific center and umbrella
coverage may have a material adverse impact on NHC's financial position, cash
flow and results of operations.
Note 5 - NEW ACCOUNTING PRONOUNCEMENT:
In April 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-5 ("SOP 98-5") effective for fiscal
years beginning after December 15, 1998. SOP 98-5 requires that all
nongovernmental entities expense the costs of start-up activities as those
costs are incurred. The statement also requires nongovernmental entities to
write off any unamortized start-up costs that remain on the balance sheet at
the date of adoption. NHC has adopted the provisions of SOP 98-5 effective
January 1, 1999. The adoption did not have a material impact on NHC's
financial position or cash flows.
Note 6 - LEGAL PROCEEDINGS:
Braeuning vs. NHC
NHC is also a defendant in a lawsuit styled Braeuning, et al vs.
National HealthCare L.P., et al filed "under seal" in the U.S. District Court
of the Northern District of Florida on April 9, 1996. The court removed the
seal from the complaint - but not the file itself - on March 20, 1997, and
service of process occurred on July 8, 1997, with the government participating
as an intervening plaintiff. By agreement, and with court approval, the suit
has been moved from the Pensacola District Court to the Tampa, Florida,
District Court. NHC has filed its answer denying the allegations. The suit
alleges that NHC submitted cost reports and routine cost limit exception
requests containing "fraudulent allocation of routine nursing services to
ancillary service cost centers" and also alleges that NHC improperly allocated
skilled nursing service hours in four managed centers, all in the state of
Florida. The suit was filed under the Qui Tam provisions of the Federal False
Claims Act, commonly referred to as the "Whistleblower Act". NHC has denied
all allegations and believes the facts will vindicate its position. The
individual plaintiff Braeuning has amended the suit to allege that he was
"retaliatory discharged" from his position in retaliation for the filing of
the suit. In a March 13, 1998 order denying Braeuning's Motion for Summary
Judgment on this issue, the court stated, "That the defendants have submitted
a legitimate non-retaliatory reason for firing Mr. Braeuning casts significant
doubt on Mr. Braeuning's likelihood of success on the merits."
In regard to the allegations contained in the Braeuning lawsuit, NHC
believes that the cost report information of the centers has been either
appropriately filed or, upon amendment, will reflect adjustments for, among
other items, i) the correction of unintentional misallocations; ii) instances
in which the self audit process has had to use different source documents due
to loss or misplacement of the original source documents and iii)
recalculation of Director of Nursing/Assistant Director of Nursing time based
upon indirect allocation percentages rather than time studies, as were
originally used. Prior to the filing of the suit, NHC had commenced an
in-depth review of the nursing time allocation process at its owned, leased and
managed centers. A number of amended cost reports have been filed and NHC has
finalized the self-audit process for years 1995 and 1996. NHC's self audit
process has been approved by the plaintiffs and NHC has retained a nationally
recognized accounting firm to review the self audit process. The cost report
periods reviewed include 1991 through 1996. The Company has reached a
tentative agreement with the Department of Justice and the Health Care
Financing Administration on the use of certain audit ratios to be used to
calculate the amount of Medicare overpayment or underpayment for years 1991
thru 1994; thus avoiding a confirmation of the costly self audit process.
Adjustments to the reimbursable costs claimed will be the responsibility
of the center where costs were incurred, whether owned, leased or managed by
the Company; however, under the terms of NHC's 1998 settlement of litigation
with Florida Convalescent Centers, Inc. ("FCC"), NHC has agreed to be
responsible for any adjustments to previously filed Medicare and routine cost
limit exceptions related to the 16 FCC centers. In return, any receivables
owed to FCC thru 1998 are the property of NHC. Adjustments made to the six
centers owned by York Hannover may also be borne by NHC. Negative adjustments
to managed centers would reduce NHC's management fee (6% of net revenue)and
could result in claims against NHC as manager by the owners including damages
and termination of the management relationships. Adjustments to owned or
leased centers would directly impact NHC's financial statements. NHC intends
to continue its revenue policy of not reflecting routine cost limit exception
requests as income until the process, including cost report audits, is
completed. NHC and the government are aggressively pursuing an amicable
settlement. Although no written agreement has been reached, the Company
believes the self-audit numbers and ratios plus projected receivables from the
government will enable NHC to finalize the litigation without a current
adverse income statement effect. Of course, until a written settlement is
reached and approved by the Court, an adverse determination in the lawsuit or
an agreed upon settlement could include repayments, fines and/or penalties
which would have a material negative impact on the financial position, cash
flow and results of operations of NHC.
General Liability Lawsuits
The entire long term care industry has seen a dramatic increase in
personal injury/wrongful death claims based on alleged negligence by nursing
homes and their employees in providing care to residents. This is especially
prevalent in Florida. As of March 31, 2000, the Company and/or its managed
centers are defendants in 77 such lawsuits in Florida, compared to 33 in all
other states combined.
On March 31, 1999, after the close of business, the insurance carrier
covering both NHC and the Florida based six facility nursing home chain
managed by NHC (York Hannover) contacted NHC's Florida counsel to advise them
that the jury had returned a verdict in excess of policy limits in
compensatory damages, and the jury indicated that punitive damages would be
assessed against NHC. Prior to the verdict, the plaintiff's attorney had
indicated a willingness to settle this claim within NHC's available policy
limits, but the insurance carrier refused to settle. On the evening of March
31, 1999, the insurance carrier asked what, if any, contribution NHC would be
willing to make to a settlement to avoid the jury's determination as to the
amount of punitive damages to be assessed. NHC's Florida counsel, unable to
reach NHC management after the close of business, advised the insurance
carrier's vice president that the insurance carrier should do whatever it
deemed appropriate to protect the interests of its insured, who had already
been substantially damaged by the carrier's failure to settle the case within
policy limits. The insurance carrier then entered into a settlement of the
compensatory and punitive claim against NHC in an amount materially greater
than policy limits and the initial jury verdict. The settlement was far in
excess of what the insurance carrier could have settled the claim prior to or
during the trial.
Unsure as to whether the carrier will seek to assert a claim against NHC
and/or the owner or, alternatively, that the carrier might seek to claim that
the coverage be divided between the umbrella policy issued for separate
calendar years, NHC has filed for declaratory judgment in the Chancery Court
of Rutherford County, Tennessee asking the court to find that the settlement
was made in bad faith and that the insurance carrier should be responsible for
the entire amount of the judgment. The insurance carrier has moved the case
into the federal district court in Nashville, Tennessee. The York Hannover
bankruptcy Trustee has filed in identical suit in Tampa, Florida against the
carrier. If the insurance carrier asserts a claim against NHC and is
successful in requiring NHC to pay any excess over the covered amount, then
such payment will have a material impact on NHC's financial position, cash
flow and results of operations.
Customer Bankruptcies
On November 5, 1999, NHC was informed that a substantial debtor of its
rehabilitation division had filed for Chapter 11 protection in the United
States Bankruptcy/District Court in Wilmington, Delaware. The debtor is an
affiliate of Lenox Healthcare, Inc. of Pittsfield, Massachusetts. The debt is
collateralized by second mortgages on certain licensed nursing facilities, a
first lien on certain accounts receivables, and the assignment of a number of
limited partnership and corporate shareholder interests.
NHC also manages nine other nursing homes owned in part by Mr. Tom
Clarke, the owner of Lenox Healthcare, Inc. Six of these properties (the
York-Hannover centers) were sold by the bankruptcy court to the first mortgage
lender on December 30, 1999. NHC's management contract on these six centers
was terminated on January 1, 2000, but the new owner has contracted with NHC
for off site financial and accounting services. Two of the nine facilities
are not in bankruptcy and are in compliance with all the terms and conditions
of the Management Agreement. The third managed facility is located in
Carthage, Tennessee and may be impacted by the bankruptcy.
Note 7. LONG-TERM DEBT:
As of March 31, 2000, NHC and NHI were in violation of certain financial
covenants included in a debt instrument originally financed through the
National Health Corporation Leveraged Employee Ownership Plan and Trust.
In addition, NHI no longer meets a requirement that its senior unsecured debt
be rated investment grade by Standard & Poor's and Moody's Investment
Services. As of March 31, 2000, the total debt balance on the loan was
$25,892,000, of which $6,119,000 is the primary obligation of NHC. NHC is
not obligated on nor has NHC guaranteed the remaining balance of the loan.
As a result of NHI's investment grade down rating violation, NHI has been
delivered a tender notice from the note holders to purchase,
between June 10, 2000 and June 15, 2000, all of the $25,892,000 outstanding
notes. If NHI does not resolve the investment grade issue, the
note holders could accelerate the payment of NHC's $6,119,000 obligation.
As a result of the above violations, other debt owed by NHC totaling
$29,266,000 would be cross-defaulted and accelerated and other debt for
which NHC is guarantor totaling $28,473,000 could be cross-defaulted and
therefore accelerated. These events could have a material adverse impact
on the financial position and cash flows of NHC. NHC, NHR and NHI are
seeking to refinance the related obligation and are currently in negotiations
with the note holders to resolve the financial covenant violations and
investment grade rating issues. However, at the current time,
NHC is unable to determine the outcome of those discussions. Accordingly,
all debt that could potentialy be accelerated as a result of the above
violations has been classified as current in the interim condensed con-
solidated financial statements as of March 31, 2000. Regardless of whether
the notes are purchased by NHI or refinanced, the note holders may assert
that NHI is obligated to pay a "make-whole" payment to the note holders to
compensate them for lost interest income on this investment. Neither the
legal existence of this duty in these circumstances nor the amount of the
"make-whole" payment has been determined by the note holders; however, such a
payment, if made, could have a material adverse impact on the financial
position, results of operations and cash flows of NHC.
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations
Overview
National HealthCare Corporation ("NHC", or the "Company") operates or
manages 106 long-term health care centers with 13,977 beds in 12 states. NHC
provides nursing care as well as ancillary therapy services to patients in a
variety of settings including long-term care nursing centers, managed care
specialty units, subacute care units, Alzheimer's care units, homecare
programs, assisted living centers and independent living centers.
Results of Operations
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31,
1999.
Results for the three month period ended March 31, 2000 include a 9.6%
increase compared to the same period in 1999 in net revenues and a 6.3%
increase in net income.
The increase in revenues reflect improved PPS rates, improved census
mix, and increases in the number of beds operated in long-term nursing care
operations.
Compared to the quarter a year ago, NHC has increased the number of
owned or leased long-term care beds by 417 beds from 7,559 beds to 7,976 beds.
Also contributing to increased revenues are improved occupancy rates at
assisted living centers and at independent living centers.
Revenues from managed centers, which are included in the Statements of
Income in Other Revenues, decreased $2.8 million or 48.2% in 2000 from $5.9
million in 1999 to $3.1 million in 2000. The decline is due primarily to the
loss of management contracts for 14 centers, owned by Florida Convalescent
Centers, Inc. ("FCC"). The FCC management agreements were terminated
effective July 31, 1999 pursuant to the 1998 settlement of previously
disclosed litigation.
Total costs and expenses for the 2000 first quarter increased $7.3
million or 7.0% to $111.5 million from $104.2 million. Salaries, wages and
benefits, the largest operating costs of this service company, increased $2.6
million or 4.2% to $64.1 million from $61.6 million. Other operating expenses
increased $3.2 million or 11.8% to $30.5 million for the 2000 period compared
to $27.2 million in the 1999 period. Rent increased $.9 million or 8.4% to
$11.9 million from $11.0 million. Depreciation and amortization increased
18.6% to $3.3 million. Interest costs increased $0.1 million to $1.7 million.
Increases in salaries, wages and benefits are due to long-term care bed
additions and the increased occupancy in assisted living and independent
living services. Also, bonus and benefit programs have been increased
compared to the quarter a year ago. These decreases in costs were offset in
part by the increase in staffing levels due to long-term care bed additions
and assisted living occupancy improvements and expansions. Further
contributing to higher costs of labor are inflationary increases for salaries
and the associated benefits.
Increases in operating costs are due primarily to the increased number
of beds in operation and the higher occupancies in assisted living and
independent living services. Rent increases are due primarily to additions at
existing rental properties.
The total census at owned and leased centers for the quarter averaged
94.0% compared to an average of 93.5% for the same quarter a year ago.
Liquidity and Capital Resources
NHC generated net cash from operating activities during the first three
months of 2000 totaling $4.8 million compared to $0.0 million in the prior
year period. The increase in cash generated from operating activities is due
to increases in trade accounts payable and current liabilities as compared to
the prior period charges for the same items.
Cash flows used in investing activities during the first three months of
2000 totaled $18.4 million compared to $0.0 million provided in the same
period in 1999. Cash used for investments in property, notes receivable, and
marketable securities totaled $20.3 million in 2000 compared to $48.1 million
in 1999. Collections of notes receivable generated $1.9 million in 2000
compared to $4.4 million in 1999.
Cash provided by financing activities totaled $13.3 million in the first
three months of 2000 compared to cash used of $1.5 million for the same period
in 1999. Payments on debt of $0.7 million and increases in cash held by
trustees of $1.0 million in 2000 were offset by proceeds from new debt
issuance of $15.0 million. In the prior year, cash flows used included $0.5
million for payments on debt and $1.0 million for increases in cash held by
trustees.
At March 31, 2000, the Company's ratio of long-term obligations and
deferred income to convertible debt and capital is 1.3 to 1.
NHC has also guaranteed approximately $67.8 million of the debt of
certain health care centers which NHC manages for others. See Note 4 for
discussion of the possibility of additional liabilities as a result of its
debt guarantees.
As of March 31, 2000, NHC and NHI were in violation of certain financial
covenants included in a debt instrument originally financed through the
National Health Corporation Leveraged Employee Ownership Plan and Trust. In
addition, NHI no longer meets a requirement that its senior unsecured debt be
rated investment grade by Standard & Poor's and Moody's Investment Services.
As of March 31, 2000, the total debt balance on the loan was $25,892,000,
of which $6,119,000 is the primary obligation of NHC. NHC is not obligated
on nor has NHC guaranteed the remaining balance of the loan. As a result
of NHI's investment grade down rating violation, NHI has been delivered a
tender notice from the note holders to purchase, between June 10, 2000 and
June 15, 2000, all of the $25,892,000 outstanding notes. If NHI does not
resolve the investment grade issue, the note holders could accelerate the
payment of NHC's $6,119,000 obligation. As a result of the above violations,
other debt owed by NHC totaling $29,266,000 would be cross-defaulted and
accelerated and other debt for which NHC is guarantor totaling $28,473,000
could be cross-defaulted and therefore accelerated. These events could
have a material adverse impact on the financial position and cash flows
of NHC. NHC, NHR and NHI are seeking to refinance the related obligation
and are currently in negotiations with the note holders to resolve the
financial covenant violations and investment grade rating issues. However,
at the current time, NHC is unable to determine the outcome of those
discussions. Accordingly, all debt that could potentially be accelerated
as a result of the above violations have been classified as current in the
interim condensed consolidated financial statements as of March 31, 2000.
Regardless of whether the notes are purchased by NHI or refinanced,
the note holders may assert that NHI is obligated to pay a "make-whole"
payment to the note holders to compensate them for lost interest income
on this investment. Neither the legal existence of this duty in these
circumstances nor the amount of the "make-whole" payment has been
determined by the note holders; however, such a payment, if made, could
have a material adverse impact on the financial position, results of
operations and cash flows of NHC.
Cash Dividends
NHC may pay dividends at the discretion of the Board of Directors. NHC
does not anticipate paying dividends.
Impact of Inflation
Reimbursement rates under the Medicare and Medicaid programs generally
reflect the underlying increases in costs and expenses resulting from
inflation. For this reason, the impact of inflation on profitability has not
been significant.
Health Care Legislation
During 1997, the Federal government enacted the Balanced Budget Act of
1997 ("BBA"), which requires that skilled nursing facilities transition to a
Prospective Payment System ("PPS") under the Medicare program commencing with
the first cost reporting period beginning on or after July 1, 1998. Although
PPS went into effect for a small portion of NHC's long-term health care
centers during 1998, PPS was implemented for the vast majority of NHC's
centers beginning January 1, 1999. PPS has significantly changed the manner
in which NHC's centers are paid for inpatient services provided to Medicare
beneficiaries. Under PPS, Medicare pays NHC's centers a fixed fee per
Medicare patient per day, based on the acuity level of the patient, to cover
all post-hospital extended care routine service costs, ancillary costs and
capital related costs. PPS is being phased in over a three-year period.
During the phase-in, payments are based on a blend of each center's specific
historical costs and federally-established per diem rates that are based on
the average costs of all U.S. skilled nursing facilities. In response to the
Medicare PPS legislative changes, NHC has implemented strategies that have
included a significant reduction in the number of therapy staff positions and
renegotiation at lower rates of supplier contracts for inhalation therapy,
pharmacy, x-ray and medical supplies. In addition, during November, 1999,
Congress passed the Medicare Refinement Act of 1999 ("MRA-99"). The MRA-99
allows providers to elect to skip the three year phase-in period. Where
advantageous, NHC has so elected commencing January 1, 2000.
Litigation
Braeuning vs. NHC
NHC is also a defendant in a lawsuit styled Braeuning, et al vs.
National HealthCare L.P., et al filed "under seal" in the U.S. District Court
of the Northern District of Florida on April 9, 1996. The court removed the
seal from the complaint - but not the file itself - on March 20, 1997, and
service of process occurred on July 8, 1997, with the government participating
as an intervening plaintiff. By agreement, and with court approval, the
suit has been moved from the Pensacola District Court to the Tampa, Florida,
District Court. NHC has filed its answer denying the allegations. The
suit alleges that NHC submitted cost reports and routine cost limit excep-
tion requests containing "fraudulent allocation of routine nursing services
to ancillary service cost centers" and also alleges that NHC improperly
allocated skilled nursing service hours in four managed centers, all in the
state of Florida. The suit was filed under the Qui Tam provisions of the
Federal False Claims Act, commonly referred to as the "Whistleblower Act".
NHC has denied all allegations and believes the facts will vindicate its
position. The individual plaintiff Braeuning has amended the suit to allege
that he was "retaliatory discharged" from his position in retaliation for
the filing of the suit. In a March 13, 1998 order denying Braeuning's
Motion for Summary Judgment on this issue, the court stated, "That the
defendants have submitted a legitimate non-retaliatory reason for firing
Mr. Braeuning casts significant doubt on Mr. Braeuning's likelihood of
success on the merits."
In regard to the allegations contained in the Braeuning lawsuit, NHC
believes that the cost report information of the centers has been either
appropriately filed or, upon amendment, will reflect adjustments for, among
other items, i) the correction of unintentional misallocations; ii) instances
in which the self audit process has had to use different source documents due
to loss or misplacement of the original source documents and iii)
recalculation of Director of Nursing/Assistant Director of Nursing time based
upon indirect allocation percentages rather than time studies, as were
originally used. Prior to the filing of the suit, NHC had commenced an
in-depth review of the nursing time allocation process at its owned, leased and
managed centers. A number of amended cost reports have been filed and NHC has
finalized the self-audit process for years 1995 and 1996. NHC's self audit
process has been approved by the plaintiffs and NHC has retained a nationally
recognized accounting firm to review the self audit process. The cost report
periods reviewed include 1991 through 1996. The Company has reached a
tentative agreement with the Department of Justice and the Health Care
Financing Administration on the use of certain audit ratios to be used to
calculate the amount of Medicare overpayment or underpayment for years 1991
through 1994; thus avoiding a confirmation of the costly self audit process.
Adjustments to the reimbursable costs claimed will be the responsibility
of the center where costs were incurred, whether owned, leased or managed by
the Company; however, under the terms of NHC's 1998 settlement of litigation
with FCC, NHC has agreed to be responsible for any adjustments to previously
filed Medicare and routine cost limit exceptions related to the 16 FCC
centers. In return, any receivables owed to FCC thru 1998 are the property of
NHC. Adjustments made to the six centers owned by York Hannover Nursing
Centers, Inc. ("York Hannover") may also be borne by NHC. Negative
adjustments to managed centers would reduce NHC's management fee (6% of net
revenue)and could result in claims against NHC as manager by the owners
including damages and termination of the management relationships. Adjustments
to owned or leased centers would directly impact the Company's financial
statements. NHC intends to continue its revenue policy of not reflecting
routine cost limit exception requests as income until the process, including
cost report audits, is completed. NHC and the government are aggressively
pursuing an amicable settlement. Although no written agreement has been
reached, the Company believes the self-audit numbers and ratios plus projected
unrecorded receivables from the government will enable it to finalize the
litigation without a profit or loss effect. Of course, until a written
settlement is reached and approved by the Court, an adverse determination in
the lawsuit or an agreed upon settlement could include repayments, fines
and/or penalties which will have a material negative impact on the financial
position, cash flow and results of operations of NHC.
General Liability Lawsuits
The entire long term care industry has seen a dramatic increase in
personal injury/wrongful death claims based on alleged negligence by nursing
homes and their employees in providing care to residents. This is especially
prevalent in Florida. As of March 31, 2000, the Company and/or its managed
centers are defendants in 77 such lawsuits in Florida, compared to 33 in all
other states combined.
On March 31, 1999, after the close of business, the insurance carrier
covering both NHC and the Florida based six facility nursing home chain
managed by NHC (York Hannover) contacted NHC's Florida counsel to advise them
that the jury had returned a verdict in excess of policy limits in
compensatory damages, and the jury indicated that punitive damages would be
assessed against NHC. Prior to the verdict, the plaintiff's attorney had
indicated a willingness to settle this claim within NHC's available policy
limits, but the insurance carrier refused to settle. On the evening of March
31, 1999, the insurance carrier asked what, if any, contribution NHC would be
willing to make to a settlement to avoid the jury's determination as to the
amount of punitive damages to be assessed. NHC's Florida counsel, unable to
reach NHC management after the close of business, advised the insurance
carrier's vice president that the insurance carrier should do whatever it
deemed appropriate to protect the interests of its insured, who had already
been substantially damaged by the carrier's failure to settle the case within
policy limits. The insurance carrier then entered into a settlement of the
compensatory and punitive claim against NHC in an amount materially greater
than policy limits and the initial jury verdict. The settlement was far in
excess of what the insurance carrier could have settled the claim prior to or
during the trial.
Unsure as to whether the carrier will seek to assert a claim against NHC
and/or the owner or, alternatively, that the carrier might seek to claim that
the coverage be divided between the umbrella policy issued for separate
calendar years, NHC has filed for declaratory judgment in the Chancery Court
of Rutherford County, Tennessee asking the court to find that the settlement
was made in bad faith and that the insurance carrier should be responsible for
the entire amount of the judgment. The insurance carrier has moved the case
into the federal district court in Nashville, Tennessee. The York Hannover
bankruptcy Trustee has filed in identical suit in Tampa, Florida against the
carrier. If the insurance carrier asserts a claim against NHC and is
successful in requiring NHC to pay any excess over the covered amount, then
such payment will have a material impact on NHC's earnings and cash flow.
Due to liberal statutory provisions in the State of Florida as well as
an active and specialized plaintiff's bar, the entire long-term care industry
has seen a drastic increase in liability claims, reserves, settlements, and
judgments over the last several years. As a result, the Company's
professional liability insurance premium for its owned and managed centers (22
of which are in Florida currently) has increased from $1,995,000 in 1998 to
$3,200,000 in 1999 and $6,700,000 in 2000. Prior to 1999, coverage was
secured on a first dollar basis (no deductible). Additionally, for policy
years 1999 and 2000, all owned centers have a significant per claim deductible
which is capped in the aggregate at $1,225,000 for policy year 1999 and
$2,000,000 for policy year 2000. These deductible aggregates must be added to
the premium totals for 1999 and 2000. Given the current legal environment,
significant additional premiums and retentions going forward may be expected.
Given the current legal environment in the State of Florida, plus the
unapproved and bad faith settlement entered into by the Company's carrier in
the previously discussed York Hannover case, the Company believes there is a
potential of uninsured liability in excess of insurance coverage for the years
1995 and 1996, which amount is not quantifiable at the present time. Any
judgments or settlements above the Company's specific center and umbrella
coverage may have a material adverse impact on NHC's financial position, cash
flow and results of operations.
Customer Bankruptcies
On November 5, 1999, NHC was informed that a substantial debtor of its
rehabilitation division had filed for Chapter 11 protection in the United
States Bankruptcy/District Court in Wilmington, Delaware. The debtor is an
affiliate of Lenox Healthcare, Inc. of Pittsfield, Massachusetts. The debt is
collateralized by second mortgages on certain licensed nursing facilities, a
first lien on certain accounts receivables, and the assignment of a number of
limited partnership and corporate shareholder interests.
NHC also manages nine other nursing homes owned in part by Mr. Tom
Clarke, the owner of Lenox Healthcare, Inc. Six of these properties (the
York-Hannover centers) were sold by the bankruptcy court to the first mortgage
lender on December 30, 1999. NHC's management contract on these six centers
was terminated on January 1, 2000, but the new owner has contracted with NHC
for off site financial and accounting services. Two of the nine facilities
are not in bankruptcy and are in compliance with all the terms and conditions
of the Management Agreement. The third managed facility is located in
Carthage, Tennessee and may be impacted by the bankruptcy.
NHC is currently a secured and unsecured creditor in the above
bankruptcies, which involve approximately $20,000,000 in account receivables
and notes owed to NHC by the bankrupt estates. NHC is evaluating the
probability of recovering and collecting from these entities, but believes
that a substantial portion will not be collectable. The Company has
historically provided full reserves for these amounts based on its assessments
of the loss exposure to the Company. The Company is not required to fund
additional amounts to these parties. The Company expects no additional
charges or expenses.
Guarantees and Related Events
As a result of the health care industry's generally weak financial
position, the bankruptcy in 1999 of Integrated Health Services Corporation
(the lessee for fourteen facilities owned by FCC) and the uncertainty
engendered by the pendency of the Whistleblower lawsuits discussed above, NHC
has experienced and is experiencing the potential for significant defaults in
financial obligations which it has undertaken. A summary of the potential
defaults are as follows:
FCC Guarantees: Although NHC transferred to National Health Realty,
Inc. ("NHR") approximately $60 million of first and second mortgage
notes made by FCC on fourteen facilities managed by NHC, NHC remained
as a guarantor on two Letters of Credit securing in the aggregate
approximately $23 million of first mortgage tax-exempt debt on
eight of the fourteen centers. Toronto Dominion Bank had approxi-
mately $14 million in a Letter of Credit securing tax-exempt notes
on six FCC notes. On April 25, 2000, FCC replaced the Toronto
Dominion Bank Letter of Credit with a letter of credit issued by
Norwest Bank Minnesota N.A. As a result, NHC was released from
this guarantee, except for $3,350,000 which is a secured lien on
NHC's owned 180 bed nursing home in Pensacola, Florida.
The Bank of Tokyo/Mitsubishi ("BOTM") has an approximate $9 million
Letter of Credit on two FCC centers, which are also guaranteed by NHC.
On April 25, 2000, FCC replaced the BOTM Letter of Credit with a
letter of credit issued by Norwest Bank Minnesota N.A. As a result,
NHC was released from its guarantee on this indebtedness.
York Hannover Bankruptcy: NHC had originally guaranteed $5 million of
that certain first mortgage debt made by York Hannover to NHI in
December 1993. York Hannover sought bankruptcy protection in June
1999 and on December 30, 1999, the six Florida nursing facilities,
which secured the NHI note, were acquired by a subsidiary of the
first mortgage lender. NHC has remained as a limited ($3 million)
guarantor of the outstanding debt plus the guarantor on a $2,000,000
working capital note, all collateralized by the pledge of certain
marketable securities in the approximate amount of $5 million. NHC
is no longer managing these facilities. The failure of these
facilities to make their payments on the first mortgage notes could
result in the acceleration of that indebtedness and an attempt by
the first mortgage holder and/or working capital lender to collect
their total of $5 million in guarantees from NHC or the collateral
now held by the first mortgage lender.
General
There is certain additional litigation incidental to NHC's business,
none of which, in management's opinion, would be material to the financial
position or results of operations of NHC.
Item 3. Quantitative and Qualitative Information About Market Risk
Interest Rate Risk--
The Company's cash and cash equivalents consist of highly liquid
investments with a maturity of less than three months. As a result of the
short-term nature of the Company's cash instruments, a hypothetical 10% change
in interest rates would have no impact on the Company's future earnings and
cash flows related to these instruments. A hypothetical 10% change in
interest rates would also have an immaterial impact on the fair values of
these instruments. Approximately $10.3 million of the Company's notes
receivable bear interest at fixed interest rates. As the interest rates on
these notes receivable are fixed, a hypothetical 10% change in interest rates
would have no impact on the Company's future earnings and cash flows related
to these instruments. A hypothetical 10% change in interest rates would also
have an immaterial impact on the fair values of these instruments.
Approximately $17.2 million of the Company's notes receivable bear interest at
variable rates (generally at prime plus 2%). Because the interest rates of
these instruments are variable, a hypothetical 10% change in interest rates
would result in a related increase or decrease in interest income of
approximately $192,000. However, a hypothetical 10% change in interest rates
would have an immaterial impact on the fair values of these instruments. As
of March 31, 2000, $41.2 million of the Company's long-term debt and debt
serviced by other parties bear interest at fixed interest rates. Because the
interest rates of these instruments are fixed, a hypothetical 10% change in
interest rates would have no impact on the Company's future earnings and cash
flows related to these instruments. A hypothetical 10% change in interest
rates would have an immaterial impact on the fair values of these instruments.
The remaining $40.3 million of the Company's long-term debt and debt serviced
by other parties bear interest at variable rates. Because the interest rates
of these instruments are variable, a hypothetical 10% change in interest rates
would result in a related increase or decrease in interest expense of
approximately $250,000. However, a hypothetical 10% change in interest rates
would have an immaterial impact on the fair value of these instruments. The
Company does not currently use any derivative instruments to hedge its
interest rate exposure. The Company has not used derivative instruments for
trading purposes and the use of such instruments in the future would be
subject to strict approvals by the Company's senior officers. Therefore, the
Company's exposure related to such derivative instruments is not material to
the Company's financial position, results of operations or cash flows.
Equity Price Risk--
The Company considers its investments in marketable securities as
available for sale securities and unrealized gains and losses are recorded in
stockholders' equity in accordance with Statement of Financial Accounting
Standards No. 115. The investments in marketable 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 price. Hypothetically, a 10% change in quoted
market prices would result in a related 10% change in the fair value of the
Company's investments in marketable securities.
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 6, page 10, of this
Form 10-Q.
Item 2. Changes in Securities. Not applicable
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission of Matters to Vote of Security Holders. None
Item 5. Other Information. None
Item 6. Exhibits and Reports on Form 8-K.
(a) List of exhibits - Exhibit 27 - Financial Data Schedule (for
SEC purposes only)
(b) Reports on Form 8-K. None
SIGNATURES
Pursuant to the requirements of the Security 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 15, 2000 /s/ Richard F. LaRoche, Jr.
Richard F. LaRoche, Jr.
Secretary
Date May 15, 2000 /s/ Donald K. Daniel
Donald K. Daniel
Vice President and Controller
Principal Accounting Officer
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