National HealthCare Corporation

1. National HealthCare Corporation December 2, 2014 Ricky Fang, Fan Fei, Jacob Stoiber

2. Agenda 1.Introduction 2.Macroeconomic Review 3.Relevant Stock Market Prospects 4.Company Review 5.Financial Analysis 6.Financial Projection 7.Application of Valuation Methodologies 8.Recommendation

3. Company Overview National HealthCare Corporation (“NHC”) Founded in 1971 An innovator in the delivery of quality long-term care Operates 73 skilled nursing centers with 9,410 beds, 37 homecare programs, 5 residential living centers and 18 assisted living communities Source: NHC Website

4. Position May 14, 2014 Purchased 100 shares @ $55.25/share Cost Basis: $5,525 December 2, 2014 Hold100 shares @ $59.82/share Market Value: $5,982 Annualized return: 8.27% Source: Yahoo Finance

5. Relevant Stock Market Source: NHC 2013 10-K page 32

6. Macroeconomic Factors Aging Population Source: U.S. Bureau of the Census

7. Macroeconomic Factors Government Funding Source: ibis world

8. Industry Outlook Nursing Homes & Long-Term Care Facilities Industry  Government support (reimbursement for Medicare and Medicaid) accounts for 75% of industry revenue Preferences starts to shift from nursing homes to at-home managed care and community care services Numerous Mergers and Acquisitions in the industry to broaden the scope of services they offer and providing supplementary services to reduce costs. Expected to continue to grow with revenue expected increase at an average annual rate of 5.7% to $167.7 billion in the five years to 2019. Source: ibis world

9. Portor’s Five Force

10. Business Overview Net Patient Revenues • Skilled Nursing Facilities (SNF), Rehabilitative Services, Assisted Living Centers, etc. • 93.3 % of net operating revenues Other Revenues • Accounting and Financial Services, Insurance Services, and Rental Income • 6.7% of net operating revenues Source: NHC 2013 10K pg. 3-6

11. Business Overview • Revenue Sources • 73 Long-Term Care centers with a total of 9,410 licensed beds • 10 states: MA, NH, TN, KY, GA, SC, MO, FL, VA, and AL Source: NHC 2013 10K pg. 8, NHC 2013 10K pg. 23-28, NHC 2013 Q3 10Q pg. 9

12. SWOT Analysis S: Integrated Business Segments, Lease Renewals W: Decreasing Occupancy Rates O: Age increase, Affordable Care Act T: Reimbursement rates, competitive market for healthcare professionals, and regulation.

13. Management Focus Expansion by opening new facilities and broadening service and boosting revenue Occupnancy rate within skilled nursing facilities Accrued professional liability reserves, workers’ compensation reserves and health insurance reserves Source: NHC 2013 10-K page 34-35

14. Recent Financial Results Renewal $ 75 million line of credit on October.27 Net income available to common shareholders decreased in first nine months in 2014 compared to 2013 because of the negatively impact by a decrease in non-operating income. Announced $0.34 cents per common shares dividend (company pay dividend every quarter) in November 6 Announced $25 million stock repurchase program that will expire in August 2015 Source: Yahoo Finance NHC Press Release

15. Ratios

16. Ratios

17. Ratios

18. Technical Analysis Source: Yahoo Finance

19. Financial Projection

20. Discount Rate

21. DCF Analysis

22. Discount Rate —With Lease

23. DCF Analysis—With Lease

24. Implied Price Without Lease With Lease

25. Comparables

26. Recommendation Our Valuation: $55.77 Market Price: $59.82