Note S — 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 our owned and operated patient care clinics. 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, health management organizations (“HMOs”), preferred provider organizations (“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 persons aged 65 or older in financial need; 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 A - “Organization and Summary of Significant Accounting Policies” in our 2018 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, 2018.


	Patient Care				Products & Services
	For the Three Months Ended				For the Three Months Ended
	September 30,				September 30,
(in thousands)	2019		2018		2019		2018
Net revenues
Third party	$	230,931	$	214,080	$	48,707	$	48,866
Intersegments		—		—		53,670		48,945
Total net revenues		230,931		214,080		102,377		97,811
Material costs
Third party suppliers		65,055		58,395		26,979		26,410
Intersegments		6,284		6,300		47,386		42,645
Total material costs		71,339		64,695		74,365		69,055
Personnel expenses		81,274		77,806		13,320		13,047
Other expenses		37,245		34,426		6,858		6,306
Depreciation & amortization		4,943		4,651		2,723		2,564
Segment income from operations	$	36,130	$	32,502	$	5,111	$	6,839


	Patient Care				Products & Services
	For the Nine Months Ended				For the Nine Months Ended
	September 30,				September 30,
(in thousands)	2019		2018		2019		2018
Net revenues
Third party	$	652,700	$	620,745	$	144,455	$	143,162
Intersegments		—		—		150,245		141,302
Total net revenues		652,700		620,745		294,700		284,464
Material costs
Third party suppliers		181,358		170,559		80,452		77,118
Intersegments		18,268		17,944		131,977		123,358
Total material costs		199,626		188,503		212,429		200,476
Personnel expenses		233,402		228,211		39,393		38,304
Other expenses		112,014		104,869		20,883		17,944
Depreciation & amortization		13,997		14,547		7,862		7,569
Segment income from operations	$	93,661	$	84,615	$	14,133	$	20,171

A reconciliation of the total of the reportable segments’ income from operations to consolidated net income (loss) is as follows:


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
(in thousands)	2019		2018		2019		2018
Income from operations
Patient Care	$	36,130	$	32,502	$	93,661	$	84,615
Products & Services		5,111		6,839		14,133		20,171
Corporate & other		(23,838)		(23,417)		(69,267)		(67,910)
Income from operations		17,403		15,924		38,527		36,876
Interest expense, net		8,954		8,939		25,973		28,519
Loss on extinguishment of debt		—		—		—		16,998
Non-service defined benefit plan expense		173		176		519		528
Income (loss) before income taxes		8,276		6,809		12,035		(9,169)
Provision (benefit) for income taxes		2,585		2,440		3,260		(3,848)
Net income (loss)	$	5,691	$	4,369	$	8,775	$	(5,321)

A reconciliation of the reportable segment net revenues to consolidated net revenues is as follows:


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
(in thousands)	2019		2018		2019		2018
Net revenues
Patient Care	$	230,931	$	214,080	$	652,700	$	620,745
Products & Services		102,377		97,811		294,700		284,464
Corporate & other		—		—		—		—
Consolidating adjustments		(53,670)		(48,945)		(150,245)		(141,302)
Consolidated net revenues	$	279,638	$	262,946	$	797,155	$	763,907

A reconciliation of the reportable segment material costs to consolidated material costs is as follows:


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
(in thousands)	2019		2018		2019		2018
Material costs
Patient Care	$	71,339	$	64,695	$	199,626	$	188,503
Products & Services		74,365		69,055		212,429		200,476
Corporate & other		—		—		—		—
Consolidating adjustments		(53,670)		(48,945)		(150,245)		(141,302)
Consolidated material costs	$	92,034	$	84,805	$	261,810	$	247,677