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National HealthCare Corporation (NHC)

National HealthCare Corporation (NHC). Marnie Georges Daniel Kleeman Jason Mudrock May 1, 2014. Agenda. Screening process Company overview Recent financial performance Macroeconomic and industry overview Management focus Financial analysis Financial projections Valuation

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National HealthCare Corporation (NHC)

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  1. National HealthCare Corporation (NHC) Marnie Georges Daniel Kleeman Jason Mudrock May 1, 2014

  2. Agenda • Screening process • Company overview • Recent financial performance • Macroeconomic and industry overview • Management focus • Financial analysis • Financial projections • Valuation • Recommendation

  3. Our screening process

  4. Business overview Source: 2013 10-k.

  5. Business capabilities • Manage 69 skilled nursing facilities with a total of 8,943 licensed beds • Manages 7 centers for others • Leases 35 centers from National Health Investors • Originally spun off from NHC 4 4 2 3 13 78 31 2 3 10 Source: 2013 10-k.

  6. Market power analysis Strengths Threats Opportunities Weaknesses • Strong profitability • Ability to renew leased facilities • All managed centers are Medicare certified • Heavy industry regulation • Wrongful death lawsuits • Aging population • Increasing insurance coverage • Dependence on Medicare and Medicaid • Excess capacity Source: 2013 10-k.

  7. Recent financial performance • Solid yearly growth overall • Year-to-year variability from business risks • 2013 benefitted from opening new facilities • Several still under construction • Profitability can vary with risk reserves Sources: 2013 10-k, 2012 10-k, 2011 10-k, 2010 10-k.

  8. Stock market performance Sources: Yahoo! Finance.

  9. Industry drivers Increased Private Insurance Ownership Federal Funding for Medicaid & Medicare Aging Population 5.9% CAGR Sources: 1. “Number of adults aged 65 and older.“ IBISWorld Business Environment Profiles. IBISWorld. Jan. 2014. 2. “Federal funding for Medicare and Medicaid.“ IBISWorld Business Environment Profiles. IBISWorld. Jan. 2014. 3.. “Number of people with private health insurance.“ IBISWorld Business Environment Profiles. IBISWorld. Jan. 2014.

  10. Porter’s Five Forces HIGH MEDIUM LOW HIGH LOW Sources: 1. Diment, Dmitry. “Nursing Care Facilities in the US.” IBISWorld Industry Report. IBISWorld. Feb. 2014. 2. Diment, Dmitry. “Elderly & Disabled Services in the US.” IBISWorld Industry Report. IBISWorld. Feb. 2014. 3. Phillips, Jocelyn. “Specialty Hospitals in the US.” IBISWorld Industry Report. IBISWorld. Feb. 2014.

  11. Health insurance overview Sources: 1. “HMOs.” Illinois Department of Insurance. Jun. 2009. 2. “Preferred Provider Organization (PPO) Plans.” Medicare.gov. 3. About the Law.” HHS.gov/HealthCare. U.S. Department of Health & Human Services.

  12. Management focus Source: 2013 10-k.

  13. Financial analysis

  14. Financial analysis

  15. Discount rate

  16. Projections

  17. Comparable valuation Source: Yahoo! Finance.

  18. Projections

  19. DCF

  20. DCF

  21. Price Weighting

  22. Performance relative to comps Source: Yahoo! Finance.

  23. Recommendation

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