SEGMENT REPORTING | SEGMENT REPORTINGWe operate in two reportable business segments, Managed IL Properties and Other Properties. Our Managed IL Properties segment includes 102 IL properties throughout the United States managed by Holiday, Merrill Gardens and Grace under Property Management Agreements. Our Other Properties segment includes one CCRC, which is currently leased to Watermark under a triple net lease agreement that obligates the tenant to pay all property-related expenses, including maintenance, utilities, taxes, insurance, repairs, capital improvements and the payroll expense of property-level employees. It also includes the operations of two managed AL/MC properties we previously owned and sold during the nine months ended September 30, 2019. We evaluate performance of the combined properties in each reportable business segment based on segment NOI. We define NOI as total revenues less property-level operating expenses, which include property management fees and travel cost reimbursements. We believe that net income, as defined by GAAP, is the most appropriate earnings measurement. However, we believe that segment NOI serves as a useful supplement to net income because it allows investors, analysts and management to measure unlevered property-level operating results and to compare our operating results between periods and to the operating results of other real estate companies on a consistent basis. Segment NOI should not be considered as an alternative to net income as determined in accordance with GAAP. Depreciation and amortization, interest expense, acquisition, transaction and integration expense, termination fee, management fees and incentive compensation to affiliate, general and administrative expense, loss on extinguishment of debt, impairment of real estate, other expense (income), gain (loss) on sale of real estate, gain on lease termination, litigation proceeds, net, income tax expense (benefit) and discontinued operations, net are not allocated to individual segments for purposes of assessing segment performance. There are no intersegment sales. Three Months Ended September 30, 2020 Three Months Ended September 30, 2019 Managed IL Properties Other Properties Consolidated Managed IL Properties Other Properties Consolidated Revenues Resident fees and services $ 81,582 $ — $ 81,582 $ 84,475 $ (102) $ 84,373 Rental revenue — 1,583 1,583 — 1,583 1,583 Less: Property operating expense 49,957 — 49,957 50,678 (102) 50,576 Segment NOI $ 31,625 $ 1,583 33,208 $ 33,797 $ 1,583 35,380 Interest expense 14,540 18,962 Depreciation and amortization 16,204 17,323 General and administrative expense 5,905 5,410 Acquisition, transaction and integration expense 43 503 Other expense 192 16 Total expenses 36,884 42,214 Litigation proceeds, net — 38,226 Income (Loss) before income taxes (3,676) 31,392 Income tax expense 74 37 Income (Loss) from continuing operations (3,750) 31,355 Loss from discontinued operations — (2,506) Net income (loss) $ (3,750) $ 28,849 Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019 Managed IL Properties Other Properties Consolidated Managed IL Properties Other Properties Consolidated Revenues Resident fees and services $ 249,540 $ — $ 249,540 $ 251,736 $ 3,207 $ 254,943 Rental revenue — 4,748 4,748 — 4,748 4,748 Less: Property operating expense 149,782 — 149,782 150,450 3,758 154,208 Segment NOI $ 99,758 $ 4,748 104,506 $ 101,286 $ 4,197 105,483 Interest expense 47,040 58,382 Depreciation and amortization 50,522 51,304 General and administrative expense 17,645 15,747 Acquisition, transaction and integration expense 195 1,169 Loss on extinguishment of debt 5,884 335 Other expense 520 1,393 Total expenses 121,806 128,330 Loss on sale of real estate — (122) Litigation proceeds, net — 38,226 Income (Loss) before income taxes (17,300) 15,257 Income tax expense 156 110 Income (Loss) from continuing operations (17,456) 15,147 Discontinued Operations: Gain on sale of real estate 19,992 — Loss from discontinued operations (3,107) (7,077) Discontinued operations, net 16,885 (7,077) Net income (loss) $ (571) $ 8,070 Assets by reportable business segment are reconciled to total assets as follows: September 30, 2020 December 31, 2019 Amount Percentage Amount Percentage Managed IL Properties $ 1,710,666 94.9 % $ 1,748,787 79.7 % Other Properties 63,208 3.5 % 63,616 2.9 % All other assets (A) 28,811 1.6 % 382,306 17.4 % Total assets $ 1,802,685 100.0 % $ 2,194,709 100.0 % (A) Includes $363.5 million of assets classified as discontinued operations for the year ended December 31, 2019. The remaining balance primarily consists of corporate cash which is not directly attributable to our reportable business segments. The following table presents the percentage of total revenues by geographic location: As of and for the nine months ended As of and for the nine months ended Number of Communities % of Total Revenue Number of Communities % of Total Revenue Florida 9 9.0 % 9 9.2 % California 9 10.2 % 9 10.8 % Texas 9 8.0 % 9 8.0 % North Carolina 8 8.5 % 8 8.5 % Pennsylvania 5 5.7 % 5 5.5 % Oregon 8 7.1 % 8 7.2 % Other 55 51.5 % 55 50.8 % Total 103 100.0 % 103 100.0 % |