Discontinued Operations

9 Months Ended

Sep. 30, 2013

Discontinued Operations and Disposal Groups [Abstract]

DISCONTINUED OPERATIONS

DISCONTINUED OPERATIONS

Arkansas Lease Termination

Effective September 1, 2013, the Company entered into an agreement with Omega Healthcare Investors, Inc. ("Omega") to terminate its lease with respect to eleven nursing centers and 1,181 licensed beds located in Arkansas and concurrently entered into operation transfer agreements to transfer the operations of each of those eleven centers to an operator selected by Omega. Upon the completion of the transaction, the Company no longer operates any skilled nursing centers in the State of Arkansas. In connection with the closing of this transaction, the Company and Omega entered into the Thirteenth Amendment to Consolidated Amended and Restated Master Lease ("Master Lease") most recently amended on January 22, 2013. This amendment effectively modifies the terms of the Master Lease to terminate the terms surrounding the eleven nursing centers in Arkansas, and only as to those eleven centers, and effectively reduces the annual rent payable under the Master Lease by $5,000,000.

As a result of this transaction, the Company has reclassified the operations of these centers as discontinued operations for all periods presented in the accompanying interim consolidated financial statements. These centers contributed revenues of $40,161,000 and $46,140,000 and net loss of $2,432,000 and net income of $836,000 during the nine months ended September 30, 2013 and 2012, respectively.  The net income or loss for the nursing centers included in discontinued operations does not reflect any allocation of corporate general and administrative expense or any allocation of corporate interest expense. The Company considered these additional costs along with the centers' future prospects based upon operating history when determining the contribution of the skilled nursing centers to its operations. In addition to the expenses associated with the discontinued operations, the Company also incurred $944,000 in restructuring expenses that represent corporate expenses and exit costs associated with the Arkansas disposition, but not classified as discontinued operations.

The discontinued assets and liabilities of the disposed skilled nursing centers have been reclassified and are segregated in the interim consolidated balance sheets as assets and liabilities of discontinued operations. The current asset amounts, which are primarily composed of net accounts receivable, of $1,963,000 and $4,485,000, and the current liabilities are primarily composed of trade payable and various accrued expenses such as payroll and real estate taxes of $546,000 and $2,199,000 at September 30, 2013 and December 31, 2012, respectively. The Company expects to collect the balance of the accounts receivable and pay the remaining trade payables and accrued expenses in the ordinary course of business. The Company did not transfer the accounts receivable or liabilities to the new owner. Further, in accordance with Company accounting policy, the reserve for professional liability and workers' compensation will remain in the consolidated liability accounts as future payment of these liabilities will be paid through the Company's future operating cash flows.

Newport Disposition

In addition to the transaction above, the Company sold an owned skilled nursing center in Arkansas to an unrelated party and has reclassified the operations of this center as discontinued operations for all periods presented in the accompanying interim consolidated financial statements effective September 1, 2012. The financial impact of this skilled nursing center continues to be reflected in the current and historical interim consolidated financial statements during this period. This center contributed revenues of $0 and $3,463,000 and net loss of $130,000 and net income of $7,000 during the nine months ended September 30, 2013 and 2012, respectively.  Similar to the transaction above, the net income or loss for the nursing center included in discontinued operations does not reflect any allocation of corporate general and administrative expense or any allocation of corporate interest expense. The Company considered these additional costs along with the center's future prospects when determining the contribution of the skilled nursing center to its operations.