Segment Information

6 Months Ended

Jun. 30, 2011

Notes to Financial Statements [Abstract]

Segment Information

(7)  Segment Information

We operate predominantly in the long-term care segment of the healthcare industry. We are a provider of long-term, sub-acute and related ancillary care services to nursing home patients.  Our reportable segments are strategic business units that provide different products and services. They are managed separately because each business has different marketing strategies due to differences in types of customers, distribution channels and capital resource needs.  More complete descriptions and accounting policies of the segments are described in Note 13 - "Segment Information" and  Note 2 - "Summary of Significant Accounting Policies" of our 2010 Form 10-K.  The following tables summarize, for the periods indicated, operating results and other financial information, by business segment (in thousands):

As of and for the
Three Months Ended
June 30, 2011
				Rehabilitation		Medical
	Inpatient			Therapy		Staffing					Intersegment
	Services			Services		Services		Corporate			Eliminations			Consolidated
Revenues from external customers	$	435,683		$	29,979	$	21,998	$	14		$	-		$	487,674
Intersegment revenues		-			33,225		699		-			(33,924	)		-
Total net revenues		435,683			63,204		22,697		14			(33,924	)		487,674
Operating salaries and benefits		202,288			53,494		17,141		-			-			272,923
Self-insurance for workers'
compensation and general and
professional liability insurance		14,206			642		352		67			-			15,267
Other operating costs		127,671			2,540		2,699		-			(33,924	)		98,986
General and administrative expenses(1)		10,435			2,431		609		14,953			-			28,428
Provision for losses on
accounts receivable		4,316			316		77		-			-			4,709
Segment operating income (loss)	$	76,767		$	3,781	$	1,819	$	(15,006	)	$	-		$	67,361
Center rent expense		36,717			127		170		-			-			37,014
Depreciation and amortization		6,487			227		187		861			-			7,762
Interest, net		(30	)		-		-		4,885			-			4,855
Net segment income (loss)	$	33,593		$	3,427	$	1,462	$	(20,752	)	$	-		$	17,730
Identifiable segment assets	$	712,120		$	16,490	$	19,571	$	343,511		$	20,864		$	1,112,556
Goodwill	$	343,648		$	75	$	4,533	$	-		$	-		$	348,256
Segment capital expenditures	$	7,869		$	224	$	19	$	1,207		$	-		$	9,319

______________________________________

(1) General and administrative expenses include operating administrative expenses.

The term "segment operating income (loss)" is defined as earnings before center rent expense, depreciation and amortization, interest, integration costs, income tax expense and discontinued operations.

The term "net segment income (loss)" is defined as earnings before integration costs, income tax expense and discontinued operations.

As of and for the
Three Months Ended
June 30, 2010
			Rehabilitation		Medical
	Inpatient		Therapy		Staffing						Intersegment
	Services		Services		Services			Corporate			Eliminations			Consolidated
Revenues from external customers	$	419,010	$	30,017	$	22,875		$	6		$	-		$	471,908
Intersegment revenues		-		21,034		496			-			(21,530	)		-
Total net revenues		419,010		51,051		23,371			6			(21,530	)		471,908
Operating salaries and benefits		206,890		42,109		17,016			-			-			266,015
Self-insurance for workers'
compensation and general and
professional liability insurance		13,642		435		323			61			-			14,461
Other operating costs		111,266		2,177		3,181			-			(21,530	)		95,094
General and administrative expenses(1)		10,652		1,966		682			15,158			-			28,458
Provision for losses on
accounts receivable		4,768		166		(18	)		-			-			4,916
Segment operating income (loss)	$	71,792	$	4,198	$	2,187		$	(15,213	)	$	-		$	62,964
Center rent expense		18,484		118		203			-			-			18,805
Depreciation and amortization		11,319		159		182			802			-			12,462
Interest, net		2,619		-		-			9,070			-			11,689
Net segment income (loss)	$	39,370	$	3,921	$	1,802		$	(25,085	)	$	-		$	20,008
Identifiable segment assets	$	1,177,034	$	14,746	$	20,546		$	308,972		$	20,895		$	1,542,192
Goodwill	$	332,140	$	75	$	4,533		$	1,616		$	-		$	338,364
Segment capital expenditures	$	10,329	$	129	$	35		$	163		$	-		$	10,656

______________________________________

(1) General and administrative expenses include operating administrative expenses.

The term "segment operating income (loss)" is defined as earnings before center rent expense, depreciation and amortization, interest, transaction costs, income tax expense and discontinued operations.

The term "net segment income (loss)" is defined as earnings before transaction costs, income tax expense and discontinued operations.

As of and for the
Six Months Ended
June 30, 2011
				Rehabilitation		Medical
	Inpatient			Therapy		Staffing						Intersegment
	Services			Services		Services			Corporate			Eliminations			Consolidated
Revenues from external customers	$	867,160		$	60,076	$	44,314		$	21		$	-		$	971,571
Intersegment revenues		-			65,920		1,321			-			(67,241	)		-
Total net revenues		867,160			125,996		45,635			21			(67,241	)		971,571
Operating salaries and benefits		402,839			107,628		34,558			-			-			545,025
Self-insurance for workers'
compensation and general and
professional liability insurance		28,410			1,285		699			135			-			30,529
Other operating costs		254,551			4,708		5,559			-			(67,241	)		197,577
General and administrative expenses(1)		20,661			4,829		1,264			30,333			-			57,087
Provision for losses on
accounts receivable		9,428			640		(24	)		-			-			10,044
Segment operating income (loss)	$	151,271		$	6,906	$	3,579		$	(30,447	)	$	-		$	131,309
Center rent expense		73,329			254		343			-			-			73,926
Depreciation and amortization		12,824			453		374			1,690			-			15,341
Interest, net		(36	)		-		1			9,889			-			9,854
Net segment income (loss)	$	65,154		$	6,199	$	2,861		$	(42,026	)	$	-		$	32,188
Identifiable segment assets	$	712,120		$	16,490	$	19,571		$	343,511		$	20,864		$	1,112,556
Goodwill	$	343,648		$	75	$	4,533		$	-		$	-		$	348,256
Segment capital expenditures	$	14,376		$	953	$	72		$	2,755		$	-		$	18,156

______________________________________

(1) General and administrative expenses include operating administrative expenses.

The term "segment operating income (loss)" is defined as earnings before center rent expense, depreciation and amortization, interest, integration costs, income tax expense and discontinued operations.

The term "net segment income (loss)" is defined as earnings before integration costs, income tax expense and discontinued operations.

As of and for the
Six Months Ended
June 30, 2010
			Rehabilitation		Medical
	Inpatient		Therapy		Staffing						Intersegment
	Services		Services		Services			Corporate			Eliminations			Consolidated
Revenues from external customers	$	836,697	$	59,381	$	46,231		$	14		$	-		$	942,323
Intersegment revenues		-		42,187		640			-			(42,827	)		-
Total net revenues		836,697		101,568		46,871			14			(42,827	)		942,323
Operating salaries and benefits		413,114		83,810		34,180			-			-			531,104
Self-insurance for workers'
compensation and general and
professional liability insurance		27,285		864		630			122			-			28,901
Other operating costs		223,929		3,995		6,649			-			(42,827	)		191,746
General and administrative expenses(1)		20,131		4,126		1,332			30,424			-			56,013
Provision for losses on
accounts receivable		10,264		425		23			-			-			10,712
Segment operating income (loss)	$	141,974	$	8,348	$	4,057		$	(30,532	)	$	-		$	123,847
Center rent expense		36,699		240		413			-			-			37,352
Depreciation and amortization		22,501		311		362			1,636			-			24,810
Interest, net		5,343		-		(1	)		18,236			-			23,578
Net segment income (loss)	$	77,431	$	7,797	$	3,283		$	(50,404	)	$	-		$	38,107
Identifiable segment assets	$	1,177,034	$	14,746	$	20,546		$	308,972		$	20,895		$	1,542,192
Goodwill	$	332,140	$	75	$	4,533		$	1,616		$	-		$	338,364
Segment capital expenditures	$	25,871	$	330	$	149		$	1,364		$	-		$	27,714

______________________________________

(1) General and administrative expenses include operating administrative expenses.

The term "segment operating income (loss)" is defined as earnings before center rent expense, depreciation and amortization, interest, transaction costs, income tax expense and discontinued operations.

The term "net segment income (loss)" is defined as earnings before transaction costs, income tax expense and discontinued operations.

Measurement of Segment Income

We evaluate financial performance and allocate resources primarily based on income or loss from operations before income taxes, excluding any unusual items. The following table reconciles net segment income to consolidated income before income taxes and discontinued operations (in thousands):

	For the Three Months Ended
	June 30,
	2011		2010
Net segment income	$	17,730	$	20,008
Transaction costs		-		2,248
Integration costs		167		-
Consolidated income before income taxes and
discontinued operations	$	17,563	$	17,760

	For the Six Months Ended
	June 30,
	2011		2010
Net segment income	$	32,188	$	38,107
Transaction costs		-		2,248
Integration costs		303		-
Consolidated income before income taxes and
discontinued operations	$	31,885	$	35,859