Segment Information

3 Months Ended

Mar. 31, 2012

Notes to Financial Statements [Abstract]

Segment Information

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 composed of operating segments, which are aggregated, comprising 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 2011 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
March 31, 2012
	Inpatient Services			Rehabilitation Therapy Services		Medical Staffing Services			Corporate			Intersegment Eliminations			Consolidated
Revenues from external customers	$	405,788		$	30,629	$	22,069		$	7		$	—		$	458,493
Intersegment revenues	—			33,464		831			—			(34,295		)	—
Total net revenues	405,788			64,093		22,900			7			(34,295		)	458,493
Operating salaries and benefits	189,707			53,896		17,487			—			—			261,090
Self-insurance for workers’ compensation and
general and professional liability insurance	14,289			609		355			64			—			15,317
Other operating costs	125,669			2,497		2,695			—			(34,295		)	96,566
General and administrative expenses(1)	9,260			2,530		615			16,042			—			28,447
Provision for losses on
accounts receivable	4,430			414		(36		)	—			—			4,808
Segment operating income (loss)	$	62,433		$	4,147	$	1,784		$	(16,099	)	$	—		$	52,265
Center rent expense	36,075			134		168			—			—			36,377
Depreciation and amortization	7,028			251		185			966			—			8,430
Interest, net	(19		)	—		—			4,430			—			4,411
Net segment income (loss)	$	19,349		$	3,762	$	1,431		$	(21,495	)	$	—		$	3,047
Identifiable segment assets	$	385,342		$	18,701	$	20,287		$	287,188		$	20,829		$	732,347
Goodwill	$	30,297		$	75	$	4,533		$	—		$	—		$	34,905
Segment capital expenditures	$	8,676		$	399	$	51		$	835		$	—		$	9,961

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(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, restructuring costs, income tax expense and discontinued operations.

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

As of and for the
Three Months Ended
March 31, 2011
	Inpatient Services			Rehabilitation Therapy Services		Medical Staffing Services			Corporate			Intersegment Eliminations			Consolidated
Revenues from external customers	$	413,888		$	30,096	$	22,316		$	7		$	—		$	466,307
Intersegment revenues	—			32,694		623			—			(33,317		)	—
Total net revenues	413,888			62,790		22,939			7			(33,317		)	466,307
Operating salaries and benefits	190,931			54,132		17,417			—			—			262,480
Self-insurance for workers’ compensation and
general and professional liability insurance	13,501			642		347			67			—			14,557
Other operating costs	119,422			2,169		2,861			—			(33,317		)	91,135
General and administrative expenses(1)	10,014			2,398		655			15,379			—			28,446
Provision for losses on
accounts receivable	4,953			324		(101		)	—			—			5,176
Segment operating income (loss)	$	75,067		$	3,125	$	1,760		$	(15,439	)	$	—		$	64,513
Center rent expense	35,392			127		173			—			—			35,692
Depreciation and amortization	6,206			226		187			830			—			7,449
Interest, net	(6		)	—		1			5,004			—			4,999
Net segment income (loss)	$	33,475		$	2,772	$	1,399		$	(21,273	)	$	—		$	16,373
Identifiable segment assets	$	691,111		$	15,890	$	20,541		$	346,930		$	20,867		$	1,095,339
Goodwill	$	345,064		$	75	$	4,533		$	—		$	—		$	349,672
Segment capital expenditures	$	6,507		$	729	$	53		$	1,548		$	—		$	8,837

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(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, restructuring costs, income tax expense and discontinued operations.

The term “net segment income (loss)” is defined as earnings before restructuring 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 March 31,
	2012		2011
Net segment income	$	3,047	$	16,373
Restructuring costs	—		136
Consolidated income before income taxes
and discontinued operations	$	3,047	$	16,237