knd-10q_20170930.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

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

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

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      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      No  

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

Large accelerated filer

 

  

Accelerated filer

 

 

Emerging growth company

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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

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 October 31, 2017

Common stock, $0.25 par value

  

     86,932,592 shares

 

 

 

1 of 84


 

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 September 30, 2017 and 2016 and for the nine months ended September 30, 2017 and 2016

3

 

Condensed Consolidated Statement of Comprehensive Loss – for the three months ended September 30, 2017 and 2016 and for the nine months ended September 30, 2017 and 2016

4

 

Condensed Consolidated Balance Sheet – September 30, 2017 and December 31, 2016

5

 

Condensed Consolidated Statement of Cash Flows – for the three months ended September 30, 2017 and 2016 and for the nine months ended September 30, 2017 and 2016

6

 

Notes to Condensed Consolidated Financial Statements

7

Item 2.

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

48

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

80

Item 4.

Controls and Procedures

81

 

PART II. OTHER INFORMATION

 

Item 1.

Legal Proceedings

82

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

82

Item 6.

Exhibits

83

 

 

 

2


 

KINDRED HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

(In thousands, except per share amounts)

 

 

Three months ended

 

 

Nine months ended

 

 

September 30,

 

 

September 30,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Revenues

$

1,477,141

 

 

$

1,563,276

 

 

$

4,550,841

 

 

$

4,774,813

 

Salaries, wages and benefits

 

830,558

 

 

 

867,611

 

 

 

2,504,074

 

 

 

2,546,031

 

Supplies

 

73,344

 

 

 

85,469

 

 

 

231,229

 

 

 

263,679

 

Building rent

 

64,422

 

 

 

66,946

 

 

 

193,939

 

 

 

199,956

 

Equipment rent

 

8,537

 

 

 

9,911

 

 

 

26,285

 

 

 

31,280

 

Other operating expenses

 

155,949

 

 

 

167,453

 

 

 

496,934

 

 

 

500,787

 

General and administrative expenses (exclusive of depreciation and

     amortization expense included below)

 

258,834

 

 

 

262,051

 

 

 

800,493

 

 

 

848,945

 

Other income

 

(638

)

 

 

(341

)

 

 

(2,895

)

 

 

(2,679

)

Litigation contingency expense

 

4,000

 

 

 

-

 

 

 

4,000

 

 

 

2,840

 

Impairment charges

 

-

 

 

 

297,276

 

 

 

136,303

 

 

 

311,195

 

Restructuring charges

 

16,500

 

 

 

81,463

 

 

 

31,556

 

 

 

84,213

 

Depreciation and amortization

 

24,808

 

 

 

32,995

 

 

 

80,279

 

 

 

99,747

 

Interest expense

 

61,146

 

 

 

59,856

 

 

 

181,275

 

 

 

175,398

 

Investment income

 

(705

)

 

 

(1,797

)

 

 

(3,442

)

 

 

(2,519

)

 

 

1,496,755

 

 

 

1,928,893

 

 

 

4,680,030

 

 

 

5,058,873

 

Loss from continuing operations before income taxes

 

(19,614

)

 

 

(365,617

)

 

 

(129,189

)

 

 

(284,060

)

Provision (benefit) for income taxes

 

(1,225

)

 

 

283,630

 

 

 

(15,107

)

 

 

314,106

 

Loss from continuing operations

 

(18,389

)

 

 

(649,247

)

 

 

(114,082

)

 

 

(598,166

)

Discontinued operations, net of income taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

(13,612

)

 

 

(22,060

)

 

 

(1,871

)

 

 

(10,489

)

Gain (loss) on divestiture of operations

 

(49,663

)

 

 

-

 

 

 

(349,868

)

 

 

179

 

Loss from discontinued operations

 

(63,275

)

 

 

(22,060

)

 

 

(351,739

)

 

 

(10,310

)

Net loss

 

(81,664

)

 

 

(671,307

)

 

 

(465,821

)

 

 

(608,476

)

Earnings attributable to noncontrolling interests:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

(10,960

)

 

 

(9,574

)

 

 

(32,234

)

 

 

(26,272

)

Discontinued operations

 

(3,162

)

 

 

(4,732

)

 

 

(12,597

)

 

 

(14,075

)

 

 

(14,122

)

 

 

(14,306

)

 

 

(44,831

)

 

 

(40,347

)

Loss attributable to Kindred

$

(95,786

)

 

$

(685,613

)

 

$

(510,652

)

 

$

(648,823

)

Amounts attributable to Kindred stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations

$

(29,349

)

 

$

(658,821

)

 

$

(146,316

)

 

$

(624,438

)

Loss from discontinued operations

 

(66,437

)

 

 

(26,792

)

 

 

(364,336

)

 

 

(24,385

)

Net loss

$

(95,786

)

 

$

(685,613

)

 

$

(510,652

)

 

$

(648,823

)

Loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations

$

(0.33

)

 

$

(7.58

)

 

$

(1.67

)

 

$

(7.20

)

Discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

(0.19

)

 

 

(0.31

)

 

 

(0.17

)

 

 

(0.28

)

Gain (loss) on divestiture of operations

 

(0.57

)

 

 

-

 

 

 

(4.00

)

 

 

-

 

Loss from discontinued operations

 

(0.76

)

 

 

(0.31

)

 

 

(4.17

)

 

 

(0.28

)

Net loss

$

(1.09

)

 

$

(7.89

)

 

$

(5.84

)

 

$

(7.48

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations

$

(0.33

)

 

$

(7.58

)

 

$

(1.67

)

 

$

(7.20

)

Discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

(0.19

)

 

 

(0.31

)

 

 

(0.17

)

 

 

(0.28

)

Gain (loss) on divestiture of operations

 

(0.57

)

 

 

-

 

 

 

(4.00

)

 

 

-

 

Loss from discontinued operations

 

(0.76

)

 

 

(0.31

)

 

 

(4.17

)

 

 

(0.28

)

Net loss

$

(1.09

)

 

$

(7.89

)

 

$

(5.84

)

 

$

(7.48

)

Shares used in computing loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

87,597

 

 

 

86,869

 

 

 

87,398

 

 

 

86,766

 

Diluted

 

87,597

 

 

 

86,869

 

 

 

87,398

 

 

 

86,766

 

Cash dividends declared and paid per common share

$

-

 

 

$

0.12

 

 

$

0.12

 

 

$

0.36

 

See accompanying notes.

3


 

KINDRED HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS

(Unaudited)

(In thousands)

 

 

Three months ended

 

 

Nine months ended

 

 

September 30,

 

 

September 30,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Net loss

$

(81,664

)

 

$

(671,307

)

 

$

(465,821

)

 

$

(608,476

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities (Note 12):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized investment gains

 

44

 

 

 

278

 

 

 

1,453

 

 

 

1,461

 

Reclassification of gains realized in net loss

 

(45

)

 

 

(1,333

)

 

 

(1,700

)

 

 

(1,202

)

Net change

 

(1

)

 

 

(1,055

)

 

 

(247

)

 

 

259

 

Interest rate swaps (Note 1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized gains (losses)

 

1,276

 

 

 

2,022

 

 

 

2,108

 

 

 

(3,761

)

Reclassification of (gains) losses realized in net loss,

   net of payments

 

(182

)

 

 

18

 

 

 

(505

)

 

 

411

 

Net change

 

1,094

 

 

 

2,040

 

 

 

1,603

 

 

 

(3,350

)

Income tax (expense) benefit related to items of other

    comprehensive income (loss)

 

-

 

 

 

(427

)

 

 

-

 

 

 

1,389

 

Other comprehensive income (loss)

 

1,093

 

 

 

558

 

 

 

1,356

 

 

 

(1,702

)

Comprehensive loss

 

(80,571

)

 

 

(670,749

)

 

 

(464,465

)

 

 

(610,178

)

Earnings attributable to noncontrolling interests

 

(14,122

)

 

 

(14,306

)

 

 

(44,831

)

 

 

(40,347

)

Comprehensive loss attributable to Kindred

$

(94,693

)

 

$

(685,055

)

 

$

(509,296

)

 

$

(650,525

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

4


 

KINDRED HEALTHCARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)

(In thousands, except per share amounts)

 

 

September 30,

 

 

December 31,

 

 

2017

 

 

2016

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

130,364

 

 

$

137,061

 

Insurance subsidiary investments

 

98,079

 

 

 

108,966

 

Accounts receivable less allowance for loss of $103,997 ─ September 30, 2017 and $71,070 ─ December 31, 2016

 

1,218,200

 

 

 

1,172,078

 

Inventories

 

21,491

 

 

 

22,438

 

Income taxes

 

4,983

 

 

 

10,067

 

Assets held for sale

 

79,051

 

 

 

289,450

 

Other

 

66,463

 

 

 

63,693

 

 

 

1,618,631

 

 

 

1,803,753

 

 

 

 

 

 

 

 

 

Property and equipment

 

1,686,504

 

 

 

1,531,598

 

Accumulated depreciation

 

(956,644

)

 

 

(912,978

)

 

 

729,860

 

 

 

618,620

 

 

 

 

 

 

 

 

 

Goodwill

 

2,424,831

 

 

 

2,427,074

 

Intangible assets less accumulated amortization of $79,276 ─  September 30, 2017 and $101,612 ─ December 31, 2016

 

612,277

 

 

 

770,108

 

Insurance subsidiary investments

 

184,417

 

 

 

204,929

 

Other

 

301,735

 

 

 

288,240

 

Total assets (a)

$

5,871,751

 

 

$

6,112,724

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

176,353

 

 

$

203,925

 

Salaries, wages and other compensation

 

370,213

 

 

 

397,486

 

Due to third party payors

 

48,791

 

 

 

41,320

 

Professional liability risks

 

55,668

 

 

 

65,284

 

Accrued lease termination fees

 

109,113

 

 

 

5,224

 

Other accrued liabilities

 

264,957

 

 

 

264,512

 

Long-term debt due within one year

 

18,247

 

 

 

27,977

 

 

 

1,043,342

 

 

 

1,005,728

 

 

 

 

 

 

 

 

 

Long-term debt

 

3,302,936

 

 

 

3,215,062

 

Professional liability risks

 

315,322

 

 

 

295,311

 

Deferred tax liabilities

 

182,065

 

 

 

201,808

 

Deferred credits and other liabilities

 

497,436

 

 

 

353,294

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 14)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

Common stock, $0.25 par value; authorized 175,000 shares; issued 86,980 shares ─ September 30, 2017 and

   85,166 shares December 31, 2016

 

21,745

 

 

 

21,291

 

Capital in excess of par value

 

1,710,480

 

 

 

1,710,231

 

Accumulated other comprehensive income

 

2,929

 

 

 

1,573

 

Accumulated deficit

 

(1,431,196

)

 

 

(920,544

)

 

 

303,958

 

 

 

812,551

 

Noncontrolling interests

 

226,692

 

 

 

228,970

 

Total equity

 

530,650

 

 

 

1,041,521

 

Total liabilities (a) and equity

$

5,871,751

 

 

$

6,112,724

 

 

 

(a)

The Company’s consolidated assets as of September 30, 2017 and December 31, 2016 include total assets of variable interest entities of $404.2 million and $394.1 million, respectively, which can only be used to settle the obligations of the variable interest entities. The Company’s consolidated liabilities as of September 30, 2017 and December 31, 2016 include total liabilities of variable interest entities of $41.8 million and $38.9 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

 

 

Nine months ended

 

 

September 30,

 

 

September 30,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(81,664

)

 

$

(671,307

)

 

$

(465,821

)

 

$

(608,476

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation expense

 

22,696

 

 

 

34,914

 

 

 

79,001

 

 

 

103,306

 

Amortization of intangible assets

 

2,889

 

 

 

5,468

 

 

 

11,909

 

 

 

18,251

 

Amortization of stock-based compensation costs

 

5,329

 

 

 

3,015

 

 

 

13,316

 

 

 

13,058

 

Amortization of deferred financing costs

 

4,363

 

 

 

3,987

 

 

 

12,847

 

 

 

11,262

 

Payment of capitalized lender fees related to debt amendment

 

-

 

 

 

(42

)

 

 

(5,403

)

 

 

(7,375

)

Provision for doubtful accounts

 

10,327

 

 

 

10,009

 

 

 

57,511

 

 

 

30,955

 

Deferred income taxes

 

(3,788

)

 

 

279,172

 

 

 

(19,608

)

 

 

308,470

 

Impairment charges

 

-

 

 

 

324,289

 

 

 

137,572

 

 

 

338,208

 

(Gain) loss on divestiture of discontinued operations

 

49,663

 

 

 

-

 

 

 

349,868

 

 

 

(179

)

Other

 

9,299

 

 

 

6,303

 

 

 

16,111

 

 

 

7,262

 

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

(3,976

)

 

 

(42,832

)

 

 

(103,199

)

 

 

(143,953

)

Inventories and other assets

 

(6,999

)

 

 

11,871

 

 

 

(9,517

)

 

 

(3,522

)

Accounts payable

 

(3,903

)

 

 

11,995

 

 

 

(26,213

)

 

 

24,451

 

Income taxes

 

2,369

 

 

 

1,615

 

 

 

6,718

 

 

 

2,468

 

Due to third party payors

 

20,614

 

 

 

24,809

 

 

 

7,471

 

 

 

20,317

 

Other accrued liabilities

 

(18,738

)

 

 

33,101

 

 

 

(54,051

)

 

 

(73,268

)

Net cash provided by operating activities

 

8,481

 

 

 

36,367

 

 

 

8,512

 

 

 

41,235

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Routine capital expenditures

 

(16,463

)

 

 

(21,873

)

 

 

(45,800

)

 

 

(68,703

)

Development capital expenditures

 

(6,415

)

 

 

(8,386

)

 

 

(17,711

)

 

 

(27,112

)

Acquisitions, net of cash acquired

 

-

 

 

 

(49,329

)

 

 

(6,650

)

 

 

(77,040

)

Acquisition deposits

 

-

 

 

 

-

 

 

 

-

 

 

 

18,489

 

Sale of assets

 

5,494

 

 

 

3,739

 

 

 

5,494

 

 

 

4,962

 

Purchase of insurance subsidiary investments

 

(18,047

)

 

 

(22,427

)

 

 

(108,655

)

 

 

(75,422

)

Sale of insurance subsidiary investments

 

50,087

 

 

 

31,875

 

 

 

117,863

 

 

 

78,478

 

Net change in insurance subsidiary cash and cash equivalents

 

(10,053

)

 

 

(14,680

)

 

 

23,472

 

 

 

8,479

 

Net change in other investments

 

5,088

 

 

 

51

 

 

 

4,844

 

 

 

(33,347

)

Other

 

(81

)

 

 

(150

)

 

 

(35

)

 

 

(1,277

)

Net cash provided by (used in) investing activities

 

9,610

 

 

 

(81,180

)

 

 

(27,178

)

 

 

(172,493

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from borrowings under revolving credit

 

426,700

 

 

 

489,200

 

 

 

1,214,300

 

 

 

1,267,200

 

Repayment of borrowings under revolving credit

 

(427,300

)

 

 

(388,100

)

 

 

(1,120,600

)

 

 

(1,215,800

)

Proceeds from issuance of term loan, net of discount

 

-

 

 

 

-

 

 

 

-

 

 

 

198,100

 

Proceeds from other long-term debt

 

-

 

 

 

-

 

 

 

-

 

 

 

750

 

Repayment of term loan

 

(3,508

)

 

 

(3,508

)

 

 

(10,525

)

 

 

(10,019

)

Repayment of other long-term debt

 

(217

)

 

 

(276

)

 

 

(840

)

 

 

(826

)

Payment of deferred financing costs

 

(170

)

 

 

(50

)

 

 

(299

)

 

 

(342

)

Issuance of common stock in connection with employee benefit plans

 

-

 

 

 

-

 

 

 

32

 

 

 

-

 

Payment of dividend for mandatory redeemable preferred stock

 

(3,120

)

 

 

(2,904

)

 

 

(9,195

)

 

 

(8,558

)

Dividends paid

 

-

 

 

 

(10,224

)

 

 

(10,228

)

 

 

(30,517

)

Contributions made by noncontrolling interests

 

-

 

 

 

4,993

 

 

 

113

 

 

 

11,261

 

Distributions to noncontrolling interests

 

(10,071

)

 

 

(4,694

)

 

 

(48,372

)

 

 

(35,240

)

Purchase of noncontrolling interests

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,000

)

Payroll tax payments for equity awards issuance

 

(88

)

 

 

(250

)

 

 

(2,417

)

 

 

(3,079

)

Net cash provided by (used in) financing activities

 

(17,774

)

 

 

84,187

 

 

 

11,969

 

 

 

171,930

 

Change in cash and cash equivalents

 

317

 

 

 

39,374

 

 

 

(6,697

)

 

 

40,672

 

Cash and cash equivalents at beginning of period

 

130,047

 

 

 

100,056

 

 

 

137,061

 

 

 

98,758

 

Cash and cash equivalents at end of period

$

130,364

 

 

$

139,430

 

 

$

130,364

 

 

$

139,430

 

Supplemental information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest payments

$

76,085

 

 

$

73,755

 

 

$

186,075

 

 

$

181,227

 

Income tax payments (refunds)

 

263

 

 

 

1,075

 

 

 

(2,054

)

 

 

2,184

 

Non-cash contributions made by noncontrolling interests

 

-

 

 

 

-

 

 

 

1,150

 

 

 

2,800

 

Non-cash investing activities (see Note 4):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sale proceeds from the SNF Divestiture (as defined) placed in third party escrow

 

500,572

 

 

 

-

 

 

 

500,572

 

 

 

-

 

Payments from third party escrow funds to landlords related to the SNF Divestiture

 

(500,572

)

 

 

-

 

 

 

(500,572

)

 

 

-

 

 

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 a home health, hospice and community care business, transitional care (“TC”) hospitals, inpatient rehabilitation hospitals (“IRFs”), and a contract rehabilitation services business across the United States (collectively, the “Company” or “Kindred”). At September 30, 2017, the Company’s Kindred at Home division primarily provided home health, hospice, and community care services from 609 sites of service in 40 states. The Company’s hospital division operated 77 TC hospitals (certified as long-term acute care (“LTAC”) hospitals under the Medicare program) in 18 states. The Company’s Kindred Rehabilitation Services division operated 19 IRFs and 101 hospital-based acute rehabilitation units (“ARUs”) (certified as IRFs), and provided rehabilitation services primarily in hospitals and long-term care settings in 45 states.

Discontinued operations

The Company has completed several transactions related to the divestiture of unprofitable hospitals and nursing centers to improve its future operating results. The Com