knd-10q_20160630.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

x    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016

OR

¨    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     .

Commission file number: 001-14057

 

KINDRED HEALTHCARE, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

61-1323993

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

680 South Fourth Street Louisville, KY

 

 

40202

(Address of principal executive offices)

 

(Zip Code)

(502) 596-7300

(Registrant’s telephone number, including area code)

 

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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

x

  

Accelerated filer

 

¨

Non-accelerated filer

 

¨

  

Smaller reporting company

 

¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No   x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class of Common Stock

  

Outstanding at July 31, 2016

Common stock, $0.25 par value

  

     85,253,198 shares

 

 

 

1 of 83


 

KINDRED HEALTHCARE, INC.

FORM 10-Q

INDEX

 

 

 

Page

PART I. FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited):

 

 

Condensed Consolidated Statement of Operations – for the three months ended June 30, 2016 and 2015 and for the six months ended June 30, 2016 and 2015

3

 

Condensed Consolidated Statement of Comprehensive Income (Loss) – for the three months ended June 30, 2016 and 2015 and for the six months ended June 30, 2016 and 2015

4

 

Condensed Consolidated Balance Sheet –June 30, 2016 and December 31, 2015

5

 

Condensed Consolidated Statement of Cash Flows – for the three months ended June 30, 2016 and 2015 and for the six months ended June 30, 2016 and 2015

6

 

Notes to Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

46

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

79

Item 4.

Controls and Procedures

80

 

PART II. OTHER INFORMATION

 

Item 1.

Legal Proceedings

81

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

81

Item 6.

Exhibits

82

 

 

 

2


 

KINDRED HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

(In thousands, except per share amounts)

 

 

Three months ended

 

 

Six months ended

 

 

June 30,

 

 

June 30,

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Revenues

$

1,842,070

 

 

$

1,833,475

 

 

$

3,680,041

 

 

$

3,509,442

 

Salaries, wages and benefits

 

928,954

 

 

 

935,687

 

 

 

1,855,168

 

 

 

1,782,780

 

Supplies

 

99,410

 

 

 

98,237

 

 

 

198,826

 

 

 

191,508

 

Rent

 

100,555

 

 

 

96,402

 

 

 

198,323

 

 

 

188,542

 

Other operating expenses

 

217,850

 

 

 

212,117

 

 

 

432,551

 

 

 

409,844

 

General and administrative expenses (exclusive of depreciation and

     amortization expense included below)

 

338,672

 

 

 

334,805

 

 

 

694,199

 

 

 

740,907

 

Other income

 

(511

)

 

 

(569

)

 

 

(1,463

)

 

 

(1,049

)

Litigation contingency expense

 

930

 

 

 

3,925

 

 

 

2,840

 

 

 

98,925

 

Impairment charges

 

6,131

 

 

 

-

 

 

 

13,919

 

 

 

6,726

 

Depreciation and amortization

 

40,257

 

 

 

38,625

 

 

 

80,938

 

 

 

77,560

 

Interest expense

 

58,056

 

 

 

57,170

 

 

 

115,555

 

 

 

119,688

 

Investment income

 

(497

)

 

 

(1,030

)

 

 

(751

)

 

 

(1,771

)

 

 

1,789,807

 

 

 

1,775,369

 

 

 

3,590,105

 

 

 

3,613,660

 

Income (loss) from continuing operations before income taxes

 

52,263

 

 

 

58,106

 

 

 

89,936

 

 

 

(104,218

)

Provision (benefit) for income taxes

 

17,882

 

 

 

24,396

 

 

 

29,718

 

 

 

(3,340

)

Income (loss) from continuing operations

 

34,381

 

 

 

33,710

 

 

 

60,218

 

 

 

(100,878

)

Discontinued operations, net of income taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

3,016

 

 

 

(589

)

 

 

2,434

 

 

 

(4,013

)

Gain (loss) on divestiture of operations

 

(83

)

 

 

983

 

 

 

179

 

 

 

983

 

Income (loss) from discontinued operations

 

2,933

 

 

 

394

 

 

 

2,613

 

 

 

(3,030

)

Net income (loss)

 

37,314

 

 

 

34,104

 

 

 

62,831

 

 

 

(103,908

)

(Earnings) loss attributable to noncontrolling interests:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

(13,522

)

 

 

(11,735

)

 

 

(26,036

)

 

 

(20,582

)

Discontinued operations

 

(3

)

 

 

2

 

 

 

(5

)

 

 

31

 

 

 

(13,525

)

 

 

(11,733

)

 

 

(26,041

)

 

 

(20,551

)

Income (loss) attributable to Kindred

$

23,789

 

 

$

22,371

 

 

$

36,790

 

 

$

(124,459

)

Amounts attributable to Kindred stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

$

20,859

 

 

$

21,975

 

 

$

34,182

 

 

$

(121,460

)

Income (loss) from discontinued operations

 

2,930

 

 

 

396

 

 

 

2,608

 

 

 

(2,999

)

Net income (loss)

$

23,789

 

 

$

22,371

 

 

$

36,790

 

 

$

(124,459

)

Earnings (loss) per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

$

0.24

 

 

$

0.25

 

 

$

0.39

 

 

$

(1.47

)

Discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

0.03

 

 

 

(0.01

)

 

 

0.03

 

 

 

(0.05

)

Gain (loss) on divestiture of operations

 

-

 

 

 

0.01

 

 

 

-

 

 

 

0.01

 

Income (loss) from discontinued operations

 

0.03

 

 

 

-

 

 

 

0.03

 

 

 

(0.04

)

Net income (loss)

$

0.27

 

 

$

0.25

 

 

$

0.42

 

 

$

(1.51

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

$

0.23

 

 

$

0.25

 

 

$

0.38

 

 

$

(1.47

)

Discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

0.03

 

 

 

(0.01

)

 

 

0.03

 

 

 

(0.05

)

Gain (loss) on divestiture of operations

 

-

 

 

 

0.01

 

 

 

-

 

 

 

0.01

 

Income (loss) from discontinued operations

 

0.03

 

 

 

-

 

 

 

0.03

 

 

 

(0.04

)

Net income (loss)

$

0.26

 

 

$

0.25

 

 

$

0.41

 

 

$

(1.51

)

Shares used in computing earnings (loss) per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

86,836

 

 

 

86,045

 

 

 

86,713

 

 

 

82,828

 

Diluted

 

87,500

 

 

 

86,402

 

 

 

87,374

 

 

 

82,828

 

Cash dividends declared and paid per common share

$

0.12

 

 

$

0.12

 

 

$

0.24

 

 

$

0.24

 

 

See accompanying notes.

3


 

KINDRED HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands)

 

 

Three months ended

 

 

Six months ended

 

 

June 30,

 

 

June 30,

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Net income (loss)

$

37,314

 

 

$

34,104

 

 

$

62,831

 

 

$

(103,908

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities (Note 9):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized investment gains (losses)

 

573

 

 

 

(144

)

 

 

1,183

 

 

 

137

 

Reclassification of (gains) losses realized in net income (loss)

 

(4

)

 

 

5

 

 

 

131

 

 

 

-

 

Net change

 

569

 

 

 

(139

)

 

 

1,314

 

 

 

137

 

Interest rate swaps (Note 1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized gains (losses)

 

313

 

 

 

728

 

 

 

(5,783

)

 

 

(1,264

)

Reclassification of ineffectiveness realized in net income (loss)

 

-

 

 

 

32

 

 

 

-

 

 

 

29

 

Reclassification of (gains) losses realized in net income (loss),

     net of payments

 

2

 

 

 

12

 

 

 

393

 

 

 

(12

)

Net change

 

315

 

 

 

772

 

 

 

(5,390

)

 

 

(1,247

)

Income tax expense (benefit) related to items of other

    comprehensive income (loss)

 

(322

)

 

 

(237

)

 

 

1,816

 

 

 

450

 

Other comprehensive income (loss)

 

562

 

 

 

396

 

 

 

(2,260

)

 

 

(660

)

Comprehensive income (loss)

 

37,876

 

 

 

34,500

 

 

 

60,571

 

 

 

(104,568

)

Earnings attributable to noncontrolling interests

 

(13,525

)

 

 

(11,733

)

 

 

(26,041

)

 

 

(20,551

)

Comprehensive income (loss) attributable to Kindred

$

24,351

 

 

$

22,767

 

 

$

34,530

 

 

$

(125,119

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

4


 

KINDRED HEALTHCARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)

(In thousands, except per share amounts)

 

June 30,

 

 

December 31,

 

 

2016

 

 

2015

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

100,056

 

 

$

98,758

 

Insurance subsidiary investments

 

96,330

 

 

 

106,638

 

Accounts receivable less allowance for loss of $64,851 June 30, 2016 and $62,896 December 31, 2015

 

1,264,540

 

 

 

1,194,868

 

Inventories

 

28,178

 

 

 

27,791

 

Income taxes

 

11,223

 

 

 

11,790

 

Other

 

70,384

 

 

 

61,054

 

 

 

1,570,711

 

 

 

1,500,899

 

 

 

 

 

 

 

 

 

Property and equipment

 

2,165,547

 

 

 

2,162,398

 

Accumulated depreciation

 

(1,226,072

)

 

 

(1,190,402

)

 

 

939,475

 

 

 

971,996

 

 

 

 

 

 

 

 

 

Goodwill

 

2,690,202

 

 

 

2,669,810

 

Intangible assets less accumulated amortization of $107,784 June 30, 2016 and $94,221 December 31, 2015

 

781,203

 

 

 

755,655

 

Assets held for sale

 

4,459

 

 

 

613

 

Insurance subsidiary investments

 

199,075

 

 

 

204,498

 

Deferred tax assets

 

81,324

 

 

 

104,130

 

Acquisition deposit

 

-

 

 

 

18,489

 

Other

 

281,073

 

 

 

242,169

 

Total assets (a)

$

6,547,522

 

 

$

6,468,259

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

196,952

 

 

$

187,061

 

Salaries, wages and other compensation

 

419,251

 

 

 

404,925

 

Due to third party payors

 

33,136

 

 

 

36,251

 

Professional liability risks

 

60,367

 

 

 

64,099

 

Other accrued liabilities

 

271,972

 

 

 

394,246

 

Long-term debt due within one year

 

27,793

 

 

 

24,630

 

 

 

1,009,471

 

 

 

1,111,212

 

 

 

 

 

 

 

 

 

Long-term debt

 

3,218,679

 

 

 

3,086,348

 

Professional liability risks

 

277,844

 

 

 

263,273

 

Deferred credits and other liabilities

 

312,001

 

 

 

301,379

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

Stockholder's equity:

 

 

 

 

 

 

 

Common stock, $0.25 par value; authorized 175,000 shares; issued 85,266 shares June 30, 2016 and

83,792 shares December 31, 2015

 

21,317

 

 

 

20,948

 

Capital in excess of par value

 

1,724,018

 

 

 

1,737,747

 

Accumulated other comprehensive loss

 

(4,892

)

 

 

(2,632

)

Accumulated deficit

 

(219,514

)

 

 

(256,209

)

 

 

1,520,929

 

 

 

1,499,854

 

Noncontrolling interests

 

208,598

 

 

 

206,193

 

Total equity

 

1,729,527

 

 

 

1,706,047

 

Total liabilities (a) and equity

$

6,547,522

 

 

$

6,468,259

 

 

(a)

The Company’s consolidated assets as of June 30, 2016 and December 31, 2015 include total assets of variable interest entities of $401.1 million and $389.0 million, respectively, which can only be used to settle the obligations of the variable interest entities. The Company’s consolidated liabilities as of June 30, 2016 and December 31, 2015 include total liabilities of variable interest entities of $46.5 million and $39.7 million, respectively. See note 1 of the notes to unaudited condensed consolidated financial statements.

 

 

See accompanying notes.

5


 

KINDRED HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

(In thousands)

 

 

Three months ended

 

 

Six months ended

 

 

June 30,

 

 

June 30,

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

37,314

 

 

$

34,104

 

 

$

62,831

 

 

$

(103,908

)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation expense

 

34,435

 

 

 

31,313

 

 

 

68,392

 

 

 

63,458

 

Amortization of intangible assets

 

5,957

 

 

 

7,536

 

 

 

12,783

 

 

 

14,468

 

Amortization of stock-based compensation costs

 

5,639

 

 

 

6,746

 

 

 

10,043

 

 

 

12,570

 

Amortization of deferred financing costs

 

3,708

 

 

 

3,539

 

 

 

7,275

 

 

 

6,601

 

Payment of capitalized lender fees related to debt issuance

 

(7,333

)

 

 

-

 

 

 

(7,333

)

 

 

(28,012

)

Provision for doubtful accounts

 

9,221

 

 

 

10,511

 

 

 

20,946

 

 

 

18,803

 

Deferred income taxes

 

17,802

 

 

 

21,130

 

 

 

29,298

 

 

 

(4,450

)

Impairment charges

 

6,131

 

 

 

-

 

 

 

13,919

 

 

 

6,726

 

(Gain) loss on divestiture of discontinued operations

 

83

 

 

 

(983

)

 

 

(179

)

 

 

(983

)

Other

 

656

 

 

 

4,975

 

 

 

959

 

 

 

6,972

 

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

(13,229

)

 

 

(7,733

)

 

 

(101,121

)

 

 

(39,389

)

Inventories and other assets

 

(10,161

)

 

 

(17,608

)

 

 

(15,393

)

 

 

35,414

 

Accounts payable

 

23,077

 

 

 

(12,900

)

 

 

12,456

 

 

 

(12,435

)

Income taxes

 

707

 

 

 

1,923

 

 

 

780

 

 

 

(3,845

)

Due to third party payors

 

351

 

 

 

(3,554

)

 

 

(4,492

)

 

 

(18,973

)

Other accrued liabilities

 

20,670

 

 

 

21,380

 

 

 

(109,198

)

 

 

7,760

 

Net cash provided by (used in) operating activities

 

135,028

 

 

 

100,379

 

 

 

1,966

 

 

 

(39,223

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Routine capital expenditures

 

(28,724

)

 

 

(24,500

)

 

 

(46,830

)

 

 

(45,269

)

Development capital expenditures

 

(8,707

)

 

 

(518

)

 

 

(18,726

)

 

 

(6,306

)

Acquisitions, net of cash acquired

 

(1,372

)

 

 

(2,684

)

 

 

(27,711

)

 

 

(661,755

)

Acquisition deposits

 

-

 

 

 

-

 

 

 

18,489

 

 

 

195,000

 

Sale of assets

 

142

 

 

 

2,229

 

 

 

1,223

 

 

 

3,177

 

Proceeds from senior unsecured notes offering held in escrow

 

-

 

 

 

-

 

 

 

-

 

 

 

1,350,000

 

Interest in escrow for senior unsecured notes

 

-

 

 

 

-

 

 

 

-

 

 

 

23,438

 

Purchase of insurance subsidiary investments

 

(20,154

)

 

 

(16,911

)

 

 

(52,995

)

 

 

(42,829

)

Sale of insurance subsidiary investments

 

15,713

 

 

 

12,764

 

 

 

46,603

 

 

 

34,793

 

Net change in insurance subsidiary cash and cash equivalents

 

13,201

 

 

 

(5,205

)

 

 

23,159

 

 

 

(5,763

)

Net change in other investments

 

583

 

 

 

175

 

 

 

(33,398

)

 

 

199

 

Other

 

792

 

 

 

(798

)

 

 

(1,127

)

 

 

(793

)

Net cash provided by (used in) investing activities

 

(28,526

)

 

 

(35,448

)

 

 

(91,313

)

 

 

843,892

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from borrowings under revolving credit

 

244,300

 

 

 

347,700

 

 

 

778,000

 

 

 

1,155,150

 

Repayment of borrowings under revolving credit

 

(524,600

)

 

 

(360,100

)

 

 

(827,700

)

 

 

(970,150

)

Proceeds from issuance of term loan, net of discount

 

198,100

 

 

 

-

 

 

 

198,100

 

 

 

199,000

 

Proceeds from other long-term debt

 

-

 

 

 

-

 

 

 

750

 

 

 

-

 

Repayment of Gentiva debt

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,177,363

)

Repayment of term loan

 

(3,508

)

 

 

(6,005

)

 

 

(6,511

)

 

 

(6,005

)

Repayment of other long-term debt

 

(270

)

 

 

(459

)

 

 

(550

)

 

 

(900

)

Payment of deferred financing costs

 

(141

)

 

 

(445

)

 

 

(292

)

 

 

(2,983

)

Issuance of common stock in connection with employee benefit plans

 

-

 

 

 

139

 

 

 

-

 

 

 

205

 

Payment of costs associated with issuance of common stock and tangible equity units

 

-

 

 

 

-

 

 

 

-

 

 

 

(915

)

Payment of dividend for mandatory redeemable preferred stock

 

(2,853

)

 

 

(2,654

)

 

 

(5,654

)

 

 

(5,432

)

Dividends paid

 

(10,225

)

 

 

(10,027

)

 

 

(20,293

)

 

 

(20,002

)

Contributions made by noncontrolling interests

 

1,900

 

 

 

-

 

 

 

6,268

 

 

 

-

 

Distributions to noncontrolling interests

 

(14,231

)

 

 

(10,119

)

 

 

(30,546

)

 

 

(21,138

)

Purchase of noncontrolling interests

 

-

 

 

 

-

 

 

 

(1,000

)

 

 

-

 

Other

 

-

 

 

 

50

 

 

 

73

 

 

 

1,212

 

Net cash provided by (used in) financing activities

 

(111,528

)

 

 

(41,920

)

 

 

90,645

 

 

 

(849,321

)

Change in cash and cash equivalents

 

(5,026

)

 

 

23,011

 

 

 

1,298

 

 

 

(44,652

)

Cash and cash equivalents at beginning of period

 

105,082

 

 

 

96,525

 

 

 

98,758

 

 

 

164,188

 

Cash and cash equivalents at end of period

$

100,056

 

 

$

119,536

 

 

$

100,056

 

 

$

119,536

 

Supplemental information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest payments

$

33,796

 

 

$

31,640

 

 

$

107,472

 

 

$

66,450

 

Income tax payments

 

1,297

 

 

 

909

 

 

 

1,109

 

 

 

1,139

 

Issuance of common stock in Gentiva Merger (see Note 2)

 

-

 

 

 

2,353

 

 

 

-

 

 

 

177,441

 

Non-cash contribution made by noncontrolling interest

 

-

 

 

 

-

 

 

 

2,800

 

 

 

-

 

 

See accompanying notes.

 

6


KINDRED HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1 – BASIS OF PRESENTATION

Business

Kindred Healthcare, Inc. is a healthcare services company that through its subsidiaries operates transitional care (“TC”) hospitals, a home health, hospice and community care business, inpatient rehabilitation hospitals (“IRFs”), a contract rehabilitation services business, nursing centers, and assisted living facilities across the United States (collectively, the “Company” or “Kindred”). At June 30, 2016, the Company’s hospital division operated 97 TC hospitals (certified as long-term acute care (“LTAC”) hospitals under the Medicare program) in 22 states. The Company’s Kindred at Home division primarily provided home health, hospice, and community care services from 617 sites of service in 40 states. The Company’s Kindred Rehabilitation Services division operated 19 IRFs and 105 hospital-based acute rehabilitation units (“ARUs”) (certified as IRFs), and provided rehabilitation services primarily in hospitals and long-term care settings in 46 states. The Company’s nursing center division operated 92 nursing centers and seven assisted living facilities in 19 states.

Gentiva merger

On October 9, 2014, the Company entered into an Agreement and Plan of Merger (the “Gentiva Merger Agreement”) with Gentiva Health Services, Inc. (“Gentiva”), providing for the Company’s acquisition of Gentiva (the “Gentiva Merger”). On February 2, 2015, the Company consummated the Gentiva Merger, with Gentiva continuing as the surviving company and the Company’s wholly owned subsidiary.

Discontinued operations

The Company has completed s