Note

– Business Segments

The Company has

two

reportable operating segments: (

) inpatient services, which includes the operation of skilled nursing facilities and assisted and independent living facilities, and (

) homecare services. These reportable operating segments are consistent with information used by the Company’s Chief Executive Officer, as CODM, to assess performance and allocate resources.

The Company also reports an “all other” category that includes revenues from rental income, management and accounting services fees, insurance services, and costs of the corporate office. For additional information on these reportable segments see Note

Summary of Significant Accounting Policies.

The Company’s CODM evaluates performance and allocates capital resources to each segment based on an operating model that is designed to improve the quality of patient care and profitability of the Company while enhancing long-term shareholder value. The CODM does

not

review assets by segment in his resource allocation and therefore, assets by segment are

not

disclosed below.

The following table sets forth the Company’s unaudited interim condensed consolidated statements of operations by business segment

(in thousands

	Three Months Ended June 30, 2018
	Inpatient Services		Homecare		All Other			Total
Revenues:
Net patient revenues	$	215,617	$	15,037	$	-		$	230,654
Other revenues		181		-		11,307			11,488
Net operating revenues		215,798		15,037		11,307			242,142

Costs and expenses:
Salaries, wages and benefits		128,115		8,611		8,740			145,466
Other operating		56,069		4,740		1,780			62,589
Rent		8,267		485		1,520			10,272
Depreciation and amortization		9,571		44		782			10,397
Interest		383		-		870			1,253
Total costs and expenses		202,405		13,880		13,692			229,977

Income (loss) from operations		13,393		1,157		(2,385	)		12,165
Non-operating income		-		-		5,654			5,654
Unrealized gains on marketable equity securities		-		-		12,448			12,448

Income before income taxes	$	13,393	$	1,157	$	15,717		$	30,267

	Three Months Ended June 30, 2017
(As adjusted)	Inpatient Services		Homecare		All Other			Total
Revenues:
Net patient revenues	$	211,057	$	16,028	$	-		$	227,085
Other revenues		225		-		11,385			11,610
Net operating revenues		211,282		16,028		11,385			238,695

Costs and expenses:
Salaries, wages and benefits		125,614		8,615		8,455			142,684
Other operating		55,227		5,058		1,809			62,094
Rent		8,257		499		1,323			10,079
Depreciation and amortization		9,396		39		1,046			10,481
Interest		436		-		783			1,219
Total costs and expenses		198,930		14,211		13,416			226,557

Income (loss) from operations		12,352		1,817		(2,031	)		12,138

Non-operating income		-		-		5,189			5,189

Income before income taxes	$	12,352	$	1,817	$	3,158		$	17,327

	Six Months Ended June 30, 2018
	Inpatient Services		Homecare		All Other			Total
Revenues:
Net patient revenues	$	431,968	$	30,378	$	-		$	462,346
Other revenues		451		-		22,306			22,757
Net operating revenues		432,419		30,378		22,306			485,103

Costs and expenses:
Salaries, wages and benefits		251,495		16,642		17,424			285,561
Other operating		113,904		10,019		3,838			127,761
Rent		16,524		973		3,004			20,501
Depreciation and amortization		19,032		82		1,625			20,739
Interest		780		-		1,713			2,493
Total costs and expenses		401,735		27,716		27,604			457,055

Income (loss) from operations		30,684		2,662		(5,298	)		28,048

Non-operating income		-		-		2,589			2,589
Unrealized losses on marketable equity securities		-		-		(3,069	)		(3,069	)

Income (loss) before income taxes	$	30,684	$	2,662	$	(5,778	)	$	27,568

	Six Months Ended June 30, 2017
(As adjusted)	Inpatient Services		Homecare		All Other			Total
Revenues:
Net patient revenues	$	422,497	$	31,842	$	-		$	454,339
Other revenues		451		-		22,443			22,894
Net operating revenues		422,948		31,842		22,443			477,233

Costs and expenses:
Salaries, wages and benefits		245,238		16,442		19,059			280,739
Other operating		111,392		10,193		3,687			125,272
Rent		16,424		987		2,756			20,167
Depreciation and amortization		18,605		80		2,091			20,776
Interest		886		-		1,391			2,277
Total costs and expenses		392,545		27,702		28,984			449,231

Income (loss) from operations		30,403		4,140		(6,541	)		28,002

Non-operating income		-		-		9,957			9,957

Income before income taxes	$	30,403	$	4,140	$	3,416		$	37,959