NOTE P — SEGMENT AND RELATED INFORMATION

We have identified two operating segments and both performance evaluation and resource allocation decisions are determined based on each operating segment’s income from operations. The operating segments are described further below:

Patient Care — This segment consists of (i) our owned and operated patient care clinics, and (ii) our contracting and network management business. The patient care clinics provide services to design and fit O&P devices to patients. These clinics also instruct patients in the use, care and maintenance of the devices. The principal reimbursement sources for our services are:

Commercial private payors and other, which consist of individuals, rehabilitation providers, commercial insurance companies, HMOs, PPOs, hospitals, vocational rehabilitation, workers’ compensation programs and similar sources;

Medicare, a federally funded health insurance program providing health insurance coverage for persons aged 65 or older and certain disabled persons, which provides reimbursement for O&P products and services based on prices set forth in published fee schedules with 10 regional pricing areas for prosthetics and orthotics and by state for durable medical equipment;

Medicaid, a health insurance program jointly funded by federal and state governments providing health insurance coverage for certain persons in financial need, regardless of age, which may supplement Medicare benefits for financially needy persons aged 65 or older; and

U.S. Department of Veterans Affairs.

Our contract and network management business, known as Linkia, is the only network management company dedicated solely to serving the O&P market and is focused on managing the O&P services of national and regional insurance companies. We partner with healthcare insurance companies by securing a national or regional contract either as a preferred provider or to manage their O&P network of providers.

Products & Services - This segment consists of our distribution services business, which distributes and fabricates O&P products and components to sell to both the O&P industry and our own patient care clinics, and our therapeutic solutions business. The therapeutic solutions business provides and sells rehabilitation equipment and ancillary consumable supplies combined with equipment maintenance, education, and training. This segment also develops emerging neuromuscular technologies for the O&P and rehabilitation markets.

Corporate & Other - This consists of corporate overhead and includes unallocated expense such as personnel costs, professional fees and corporate offices expenses.

The accounting policies of the segments are the same as those described in Note B - "Significant Accounting Policies" in our 2017 Form 10-K.

Intersegment revenue primarily relates to sales of O&P components from the Products & Services segment to the Patient Care segment. The sales are priced at the cost of the related materials plus overhead.

Summarized financial information concerning our reporting segments is shown in the following tables.

Total assets for each of the segments has not materially changed from December 31, 2017.


			Products &		Corporate &		Consolidating
(in thousands)	Patient Care		Services		Other		Adjustments		Total
Three Months Ended September 30, 2018
Net revenue
Third party	$	214,080	$	48,866	$	—	$	—	$	262,946
Intersegments		—		48,945		—		(48,945)		—
Total net revenue		214,080		97,811		—		(48,945)		262,946
Material costs
Third party suppliers		58,395		26,410		—		—		84,805
Intersegments		6,300		42,645		—		(48,945)		—
Total material costs		64,695		69,055		—		(48,945)		84,805
Personnel expenses		77,806		13,047		—		—		90,853
Other expenses		34,426		6,306		21,682		—		62,414
Depreciation & amortization		4,651		2,564		1,735		—		8,950
Income (loss) from operations		32,502		6,839		(23,417)		—		15,924
Interest expense, net		7,984		3,233		(2,278)		—		8,939
Non-service defined benefit plan expense		—		—		176		—		176
Income (loss) before income taxes		24,518		3,606		(21,315)		—		6,809
Provision for income taxes		—		—		2,440		—		2,440
Net income (loss)	$	24,518	$	3,606	$	(23,755)	$	—	$	4,369


			Products &		Corporate &		Consolidating
(in thousands)	Patient Care		Services		Other		Adjustments		Total
Three Months Ended September 30, 2017
Net revenue
Third party	$	210,637	$	47,329	$	—	$	—	$	257,966
Intersegments		—		45,114		—		(45,114)		—
Total net revenue		210,637		92,443		—		(45,114)		257,966
Material costs
Third party suppliers		56,748		25,597		—		—		82,345
Intersegments		5,997		39,117		—		(45,114)		—
Total material costs		62,745		64,714		—		(45,114)		82,345
Personnel expenses		78,161		11,904		—		—		90,065
Other expenses		35,861		6,251		24,272		—		66,384
Depreciation & amortization		5,324		2,429		1,879		—		9,632
Income (loss) from operations		28,546		7,145		(26,151)		—		9,540
Interest expense, net		8,123		3,275		3,699		—		15,097
Non-service defined benefit plan expense		—		—		184		—		184
Income (loss) before income taxes		20,423		3,870		(30,034)		—		(5,741)
Benefit for income taxes		—		—		(1,580)		—		(1,580)
Net income (loss)	$	20,423	$	3,870	$	(28,454)	$	—	$	(4,161)


			Products &		Corporate &		Consolidating
(in thousands)	Patient Care		Services		Other		Adjustments		Total
Nine Months Ended September 30, 2018
Net revenue
Third party	$	620,745	$	143,162	$	—	$	—	$	763,907
Intersegments		—		141,302		—		(141,302)		—
Total net revenue		620,745		284,464		—		(141,302)		763,907
Material costs
Third party suppliers		170,559		77,118		—		—		247,677
Intersegments		17,944		123,358		—		(141,302)		—
Total material costs		188,503		200,476		—		(141,302)		247,677
Personnel expenses		228,211		38,304		—		—		266,515
Other expenses		104,869		17,944		62,474		—		185,287
Depreciation & amortization		14,547		7,569		5,436		—		27,552
Income (loss) from operations		84,615		20,171		(67,910)		—		36,876
Interest expense, net		22,429		9,745		(3,655)		—		28,519
Loss on extinguishment of debt		—		—		16,998		—		16,998
Non-service defined benefit plan expense		—		—		528		—		528
Income (loss) before income taxes		62,186		10,426		(81,781)		—		(9,169)
Benefit for income taxes		—		—		(3,848)		—		(3,848)
Net income (loss)	$	62,186	$	10,426	$	(77,933)	$	—	$	(5,321)


			Products &		Corporate &		Consolidating
(in thousands)	Patient Care		Services		Other		Adjustments		Total
Nine Months Ended September 30, 2017
Net revenue
Third party	$	614,495	$	140,538	$	—	$	—	$	755,033
Intersegments		—		131,484		—		(131,484)		—
Total net revenue		614,495		272,022		—		(131,484)		755,033
Material costs
Third party suppliers		165,680		74,727		—		—		240,407
Intersegments		17,743		113,741		—		(131,484)		—
Total material costs		183,423		188,468		—		(131,484)		240,407
Personnel expenses		229,582		36,269		—		—		265,851
Other expenses		107,124		19,205		76,389		—		202,718
Depreciation & amortization		16,123		7,691		5,780		—		29,594
Income (loss) from operations		78,243		20,389		(82,169)		—		16,463
Interest expense, net		24,409		9,909		8,879		—		43,197
Non-service defined benefit plan expense		—		—		552		—		552
Income (loss) from operations		53,834		10,480		(91,600)		—		(27,286)
Benefit for income taxes		—		—		(7,028)		—		(7,028)
Net income (loss)	$	53,834	$	10,480	$	(84,572)	$	—	$	(20,258)