Assets and Liabilities in and Results of Discontinued Operations

9 Months Ended

Sep. 30, 2011

Assets and Liabilities in and Results of Discontinued Operations [Abstract]

Assets and Liabilities in and Results of Discontinued Operations

7. Assets and Liabilities in and Results of Discontinued Operations

As discussed in Note 1, Basis of Presentation, “Reclassifications,” on May 17, 2011, we entered into an agreement to sell substantially all of the assets of all six of our LTCHs. On July 21, 2011, this agreement was amended to remove the Houston LTCH from the sale transaction. The transaction to sell five of our LTCHs was completed on August 1, 2011. HealthSouth closed the Houston LTCH in August 2011 and expects to sell the associated real estate.

Accordingly, we reclassified our condensed consolidated balance sheet as of December 31, 2010 to present the assets and liabilities of all six of our LTCHs in discontinued operations. We also reclassified our condensed consolidated statements of operations and condensed consolidated statements of cash flows for the 2010 periods presented to include these facilities and their results of operations as discontinued operations.

The operating results of discontinued operations are as follows (in millions):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2011			2010		2011			2010
Net operating revenues	$	9.8		$	30.4	$	96.3		$	93.8
Costs and expenses		13.5			27.5		68.0			85.5
Impairments		4.6			—		5.9			0.6
(Loss) income from discontinued operations		(8.3	)		2.9		22.4			7.7
Loss on disposal of assets of discontinued operations		—			—		—			(1.2	)
Gain on sale of LTCHs		65.8			—		65.8			—
Income tax (expense) benefit		(22.8	)		0.3		(34.4	)		1.3
Income from discontinued operations, net of tax	$	34.7		$	3.2	$	53.8		$	7.8

As discussed in Note 10, Settlements, in April 2011, we entered into a definitive settlement and release agreement with the state of Delaware (the “Delaware Settlement”) relating to a previously disclosed audit of unclaimed property conducted on behalf of Delaware and two other states by Kelmar Associates, LLC. During the nine months ended September 30, 2011, we recorded a $24.8 million gain in connection with this settlement as part of our results of discontinued operations.

As discussed in Note 6, Fair Value Measurements, during the three and nine months ended September 30, 2011, we recorded impairment charges of $4.6 million and $5.9 million, respectively, as part of our results of discontinued operations. During the nine months ended September 30, 2010, we recorded impairment charges of $0.6 million as part of our results of discontinued operations.

Income tax expense recorded as part of our results of discontinued operations during the nine months ended September 30, 2011 related primarily to the Delaware Settlement and the gain from the sale of five of our LTCHs.

See Note 18, Assets Held for Sale and Results of Discontinued Operations, to the consolidated financial statements accompanying the 2010 Form 10-K for additional information.

Assets and liabilities in discontinued operations consist of the following (in millions):

	As of September 30, 2011		As of December 31, 2010
Assets:
Accounts receivable, net	$	7.4	$	18.2
Other current assets		0.4		1.6
Total current assets		7.8		19.8
Property and equipment, net		7.8		46.4
Goodwill		—		11.0
Long-term assets		0.4		0.4
Total long-term assets		8.2		57.8
Total assets	$	16.0	$	77.6
Liabilities:
Accounts payable	$	1.7	$	4.5
Accrued expenses and other current liabilities		3.9		7.0
Total current liabilities		5.6		11.5
Long-term liabilities		0.7		1.2
Total liabilities	$	6.3	$	12.7

As of September 30, 2011, assets and liabilities in discontinued operations primarily relate to working capital not included in the sale of five of our LTCHs on August 1, 2011, the Houston LTCH, and a hospital that was closed in 2008. As of December 31, 2010, assets and liabilities in discontinued operations primarily relate to our six LTCHs, as discussed above, as well as a hospital that was closed in 2008. Current assets and long-term assets in the above table are included in Other current assets and Other long-term assets, respectively, in our condensed consolidated balance sheets. Current liabilities and long-term liabilities in the above table are included in Accrued expenses and other current liabilities and Other long-term liabilities, respectively, in our condensed consolidated balance sheets.

Goodwill in the above table represents an allocation of HealthSouth’s Goodwill due to the disposal of the LTCHs. The allocation was made based on the relative fair value of the LTCHs compared to the fair value of HealthSouth.