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Note 3 - Acquisition of White Oak Senior Living | 9 Months Ended
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Sep. 30, 2024
Notes to Financial Statements |
Business Combination Disclosure [Text Block] | Note 3 – Acquisition of White Oak Senior Living On August 1, 2024, the Company purchased certain assets and assumed certain liabilities of the White Oak Senior Living (“White Oak”) portfolio for a purchase price of $221,400,000. The White Oak portfolio consists of 22 healthcare operations, which includes 15 skilled nursing facilities, two assisted living facilities, four independent living facilities, and a long-term care pharmacy. The operations have 1,928 licensed skilled nursing beds, 48 assisted living units, and 302 independent living units in the states of South Carolina and North Carolina (2,278 total beds/units). The acquisition represents both an expansion of NHC’s operations into a new state (North Carolina) 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 White Oak’s assets acquired and liabilities assumed. The final valuation of the assets acquired and liabilities assumed was not complete as of September 30, 2024, 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 |
Cash and cash equivalents |  | $ | 9 |
Inventories |  |  | 1,054 |
Prepaid expenses and other assets |  |  | 137 |
Property and equipment |  |  | 203,695 |
Deferred tax asset |  |  | 2,499 |
Operating lease right-of-use assets |  |  | 11,380 |
Intangible assets |  |  | 12,765 |
Total assets acquired |  |  | 231,539 |
Operating lease liabilities, current portion |  |  | 424 |
Accrued payroll |  |  | 3,559 |
Other current liabilities |  |  | 1,085 |
Operating lease liabilities, less current portion |  |  | 10,956 |
Other noncurrent liabilities |  |  | 1,005 |
Total liabilities assumed |  |  | 17,029 |
Net identifiable assets acquired |  |  | 214,510 |
Goodwill |  |  | 1,395 |
Total estimated fair value of the acquisition |  | $ | 215,905 |
The indefinite-lived intangible assets acquired include the trade name of White Oak and the skilled nursing certificates of need and licenses. The goodwill is recorded in the inpatient services segment and is attributed to the workforce acquired and reputation of the business as part of the transaction. We expect the goodwill to be deductible for income tax purposes. For the three and nine months ended September 30, 2024, White Oak contributed net operating revenues of $37,305,000 and income before income taxes of $1,557,000 that are included in the Company’s interim condensed consolidated statements of operations. The Company recognized $637,000 and $2,831,000 in acquisition-related expenses for the three and nine months ended September 30, 2024, respectively, in connection with the White Oak acquisition. These costs related to legal and other professional fees, which were included as a component of other operating expenses in the interim condensed consolidated statements of operations. The following table contains unaudited pro forma interim condensed consolidated statements of operations information for the three months and nine months ended September 30, 2024 and 2023, assuming that the White Oak acquisition closed on January 1, 2023. The pro forma financial information includes various assumptions, including those related to the preliminary purchase price allocation of assets acquired and liabilities assumed. The pro forma financial information may vary in future quarters based on the final valuations and analysis of the fair value of the assets acquired and liabilities assumed (in thousands).
|  | Three Months Ended September 30 |  |  | Nine Months Ended September 30 |
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
Net operating revenues and grant income |  | $ | 358,334 |  |  | $ | 337,817 |  |  | $ | 1,065,418 |  |  | $ | 987,186 |
Income before income taxes |  |  | 58,881 |  |  |  | 14,087 |  |  |  | 134,777 |  |  |  | 49,113 |
Net income attributable to NHC |  | $ | 43,413 |  |  | $ | 10,431 |  |  | $ | 99,121 |  |  | $ | 34,064 |

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