SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended ~~September~~June 30, ~~2016~~2017
	OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to

Commission File No.: 001-16753

~~____________________~~

(State or Other Jurisdiction of

Incorporation or Organization)

12400 High Bluff Drive, Suite 100

San Diego, California

____________________

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer” and~~filer,” “smaller reporting ~~company”~~company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange

As of ~~November~~August 2, ~~2016~~2017, there were ~~48,049,426~~47,946,756 shares of common stock, $0.01 par value, outstanding.

PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

AMN HEALTHCARE SERVICES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited and in thousands, except par value)

AMN HEALTHCARE SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited and in thousands, except per share amounts)

AMN HEALTHCARE SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

See accompanying notes to unaudited condensed consolidated financial statements.

AMN HEALTHCARE SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

1. BASIS OF PRESENTATION

The condensed consolidated balance sheets and related condensed consolidated statements of comprehensive income and cash flows contained in this Quarterly Report on Form 10-Q (this “Quarterly Report”), which are unaudited, include the accounts of AMN Healthcare Services, Inc. and its wholly-owned subsidiaries (collectively, the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, all entries necessary for a fair presentation of such unaudited condensed consolidated financial statements have been included. These entries consisted of all normal recurring items. The results of operations for the interim period are not necessarily indicative of the results to be expected for any other interim period or for the entire fiscal year or for any future period.

The unaudited condensed consolidated financial statements do not include all information and notes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States. Please refer to the Company’s audited consolidated financial statements and the related notes for the fiscal year ended December 31, ~~2015,~~2016, contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2015,~~2016, filed with the Securities and Exchange Commission on February ~~24,~~ 17, 2017 (“2016 ~~(“2015~~ Annual Report”).

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. On an ongoing basis, the Company evaluates its estimates, including those related to asset impairments, accruals for self-insurance, compensation and related benefits, accounts receivable, contingencies and litigation, earn-out liabilities, and income taxes. Actual results could differ from those estimates under different assumptions or conditions.

Recently Adopted Accounting Pronouncements

In ~~April 2015,~~March 2016, the Financial Accounting Standards Board (“FASB”) issued ~~ASU 2015-05, “Intangibles~~Accounting Standards Update (“ASU”) 2016-09, “Stock Compensation - ~~Goodwill~~Improvements to Employee Share-Based Payment Accounting.” The guidance attempts to simplify the accounting for share-based payment transactions in several areas, including the following: income tax consequences, classification of awards as either equity or liabilities, forfeitures, expected term, and Other - Internal-Use Software (Subtopic 350-40), Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.” This standard provides guidance about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the software license elementstatement of the arrangement should be accounted for by the customer consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract.cash flows classification. The Company adopted this pronouncement prospectively beginning January 1, ~~2016,~~2017. Accordingly, the prior period has not been adjusted and the primary effects of the adoption ~~did~~for the current period are as follows:

There were no other material ~~effect on~~impacts to the ~~Company’s~~Company's consolidated financial ~~statements.~~

In September 2015, the FASB issued ASU 2015-16, “Business Combinations - Simplifying the Accounting for Measurement-Period Adjustments.” This standard requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The standard requires that the acquirer record, in the same period’s financial statements ~~the effect on earnings of changes in depreciation, amortization, or other income effects, if any,~~ as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The standard also requires an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The Company adoptedadopting this ~~pronouncement prospectively beginning January 1, 2016, and the adoption did not have a material effect on the Company’s consolidated financial statements.~~

2. BUSINESS COMBINATIONS

As set forth below, the Company completed ~~six~~three acquisitions ~~from January 1, 2015 through September 30,~~during 2016. The Company accounted for each acquisition using the acquisition method of accounting. Accordingly, it recorded the tangible and intangible assets acquired and liabilities assumed at their estimated fair values as of the applicable date of acquisition. For each acquisition, the Company did not incur any material acquisition-related costs.

Peak Provider Solutions Acquisition

On June 3, 2016, the Company completed its acquisition of Peak Provider Solutions (“Peak”), which provides remote medical coding and consulting solutions to hospitals and physician medical groups nationwide. The addition of Peak has expanded the Company’s workforce solutions and enables the Company to offer services in coding diagnosis and procedure codes, which is critical to clinical quality reporting and the financial health of healthcare organizations. The initial purchase price of $52,125 included (1) $51,645 cash consideration paid upon acquisition, funded through cash-on-hand, net of cash received, and borrowings under the Company’s revolving credit facility, and (2) a contingent earn-out payment of up to $3,000 with an estimated fair value of $480 as of the acquisition date. The contingent earn-out payment iswas based on the operating results of Peak for the year ending December 31, ~~2016.~~2016, which resulted in no earn-out payment. As the ~~acquisition’s operations are~~acquisition was not considered ~~material,~~significant, pro forma information is not provided. The results of Peak have been included in the Company’s other workforce solutions segment since the date of acquisition. During the third quarter of 2016, an additional $275 of cash consideration was paid to the selling shareholders for the final working capital settlement.

The ~~preliminary~~ allocation of the $52,400 purchase price, which included the additional cash consideration paid for the final working capital settlement, consisted of (1) ~~$5,601~~$5,658 of fair value of tangible assets acquired, (2) ~~$9,568~~$9,346 of liabilities assumed, (3) $19,220 of identified intangible assets, and (4) ~~$37,147~~$36,868 of goodwill, none of which is deductible for tax purposes. The fair value of intangible assets primarily includes $7,600 of trademarks and $11,500 of customer relationships with a weighted average useful life of approximately thirteen years.

HealthSource Global Staffing Acquisition

On January 11, 2016, the Company completed its acquisition of HealthSource Global Staffing (“HSG”), which provides labor disruption and rapid response staffing. The acquisition helps the Company expand its service lines and provide clients with rapid response staffing services. The initial purchase price of ~~$8,367~~$8,511 included (1) ~~$2,655~~$2,799 cash consideration paid upon acquisition, funded through cash-on-hand, net of cash received, and settlement of the pre-existing relationship between AMN and HSG, (2) $2,122 cash holdback for potential indemnification claims, and (3) a tiered contingent earn-out payment of up to $4,000 with an estimated fair value of $3,590 as of the acquisition date. The contingent earn-out payment is comprised of (A) up to $2,000 based on the operating results of HSG for the year ending December 31, 2016, of which, $1,930 was paid in March 2017, and (B) up to $2,000 based on the operating results of HSG for the year ending December 31, 2017. As the acquisition iswas not considered ~~material,~~significant, pro forma information is not provided. The results of HSG have been included in the Company’s nurse and allied solutions segment since the date of acquisition. During the third quarter of 2016, the final working capital settlement resulted in $292 due from the selling shareholders to the Company, which was settled through a reduction to a cash holdback.

The ~~preliminary~~ allocation of the ~~$8,075~~$8,219 purchase price, which was reduced by the final working capital settlement, consisted of (1) ~~$965~~$1,025 of fair value of tangible assets acquired, (2) ~~$5,614~~$3,698 of liabilities assumed, (3) $3,944 of identified intangible assets, and (4) ~~$8,780~~$6,948 of goodwill, none of which is deductible for tax purposes. The intangible assets include the fair value of trademarks, customer relationships, staffing databases, and covenants not to compete with a weighted average useful life of approximately eight years.

B.E. Smith Acquisition

On January 4, 2016, the Company completed its acquisition of B.E. Smith (“BES”), a full-service healthcare interim leadership placement and executive search firm, for $162,232 in cash, net of cash received, and settlement of the pre-existing relationship between AMN and BES. BES places interim leaders and executives across all healthcare settings, including acute care hospitals, academic medical and children’s hospitals, physician practices, and post-acute care providers. The acquisition provides the Company additional access to healthcare executives and enhances its integrated services to hospitals, health systems, and other healthcare facilities across the nation. To help finance the acquisition, the Company entered into the First Amendment to the Credit Agreement (the “First Amendment”), which provided $125,000 of additional available borrowings to the Company. The First Amendment iswas more fully described in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note ~~(7)~~(8), ~~“Notes~~Notes Payable and Credit ~~Agreement.”~~Agreement” of our 2016 Annual Report. The results of BES have been included in the Company’s other workforce solutions segment since the date of acquisition. During the second quarter of 2016, $524 was returned to the Company for the final working capital settlement.

The ~~preliminary~~ allocation of the $161,708 purchase price, which was reduced by the final working capital settlement, consisted of (1) $11,953 of fair value of tangible assets acquired, (2) ~~$6,739~~$7,272 of liabilities assumed, (3) $65,900 of identified intangible assets, and (4) ~~$90,594~~$91,127 of goodwill, most of which is deductible for tax purposes. The intangible assets acquired have a weighted average useful life of approximately fifteen years. The following table summarizes the fair value and useful life of each intangible asset acquired:



		Fair Value	Useful Life
			(in years)
Identifiable intangible assets
	Tradenames and Trademarks	$26,300	20
	Customer Relationships	25,700	12
	Staffing Database	13,000	10
	Non-Compete Agreements	900	5
		$65,900

Three Months Ended September 30, 2015 Nine Months Ended September 30, 2015
Revenue $ 407,172
$ 1,127,939

Income from operations $ 39,172
$ 96,071

Net income $ 32,947
$ 60,810

Net income per common share:
Basic $ 0.69
$ 1.28

Diluted $ 0.67
$ 1.25

~~MillicanSolutions Acquisition~~

On October 5, 2015, the Company acquired MillicanSolutions (“Millican”), a physician and executive leadership search firm. The total purchase price of $3,985 included (1) $2,985 cash consideration paid upon acquisition, funded by cash-on-hand, (2) $500 to be paid on December 31, 2016, and (3) $500 to be paid on December 31, 2017. The acquisition enhances the Company’s ability to respond to the specialized leadership needs within academic pediatrics and children’s medical centers and expands its expertise in serving academic medical centers and teaching hospitals in physician and leadership search. As the acquisition is not considered material, pro forma information is not provided. The results of operations of Millican have been included in the Company’s other workforce solutions segment since the date of acquisition.

The preliminary allocation of the $3,985 purchase price consisted of (1) $261 of fair value of tangible assets acquired, (2) $287 of liabilities assumed, (3) $645 of identified intangible assets, and (4) $3,366 of goodwill, a portion of which is deductible for tax purposes. The intangible assets include the fair value of tradenames and trademarks, staffing databases, customer relationships, and a covenant not to compete. The weighted average useful life of the acquired intangible assets subject to amortization is approximately five years.

~~The First String Healthcare Acquisition~~

On September 15, 2015, the Company completed its acquisition of The First String Healthcare (“TFS”), a leading provider of interim staffing and permanent placement of nurse leaders and executives. The total purchase price of $7,653 included (1) $4,453 cash consideration paid upon acquisition, funded by cash-on-hand, net of cash received, (2) $500 to be paid

on the first anniversary of the acquisition date, which was paid during the three months ended September 30, 2016, and (3) a contingent earn-out with a fair value of $2,700 as of the acquisition date. Also, the purchase agreement included an additional $1,000 payment to be paid on the second anniversary of the acquisition date conditioned upon, subject to certain exceptions, continued employment of the selling shareholders, which is being recorded as compensation expense for post-combination services. The acquisition enhances the Company’s capabilities to provide interim and permanent nursing leadership. As the acquisition is not considered material, pro forma information is not provided. The results of operations of TFS are included in the other workforce solutions segment since the date of acquisition.

The acquisition agreement provides for a tiered contingent earn-out payment of up to $4,000, of which (1) $1,000 was paid to the sellers in March 2016 based on the operating results of TFS for the twelve months ended December 31, 2015, and (2) up to $3,000 may be paid in 2017 based on the operating results of TFS for the twelve months ending December 31, 2016. The allocation of the $7,653 purchase price consisted of (A) $919 of fair value of tangible assets acquired, (B) $891 of liabilities assumed, (C) $3,373 of identified intangible assets, and (D) $4,252 of goodwill, which is deductible for tax purposes. The intangible assets include the fair value of tradenames and trademarks, customer relationships, a staffing database, and covenants not to compete. The weighted average useful life of the acquired intangible assets subject to amortization is approximately seven years.

~~Onward Healthcare Acquisition~~

On January 7, 2015, the Company completed its acquisition of Onward Healthcare, including its two wholly-owned subsidiaries, Locum Leaders and Medefis (collectively, “OH”), for approximately $76,643 in cash, funded by cash-on-hand and borrowings under the Company’s revolving credit facility. Onward Healthcare is a national nurse and allied healthcare staffing firm, Locum Leaders is a national locum tenens provider, and Medefis is a provider of a software-as-a-service (“SaaS”)-based vendor management system for healthcare facilities. The acquisition helps the Company to expand its service lines and its supply and placement capabilities of healthcare professionals to its clients. The results of Onward Healthcare are included in the Company’s nurse and allied solutions segment, the results of Locum Leaders are included in the Company’s locum tenens solutions segment, and the results of Medefis are included in the Company’s other workforce solutions segment, in each case, since the date of acquisition.

~~The allocation of the $76,643 purchase price consisted of (1) $25,216 of fair value of tangible assets acquired (including $21,313 of accounts receivable), (2) $22,275~~of liabilities assumed (including $11,113 of accounts payable and accrued expenses), (3) $30,219 of identified intangible assets, and (4) $43,483 of goodwill, a portion of which is deductible for tax purposes. The intangible assets include the fair value of tradenames and trademarks, customer relationships, staffing database, acquired technologies, and non-compete agreements. The weighted average useful life of the acquired intangible assets is approximately eleven years. The following table summarizes the fair value and useful life of each intangible asset acquired:

Fair Value Useful Life
(in years)
Identifiable intangible assets
Tradenames and Trademarks $ 8,100
3 - 15
Customer Relationships 17,600
10 - 15
Staffing Database 2,600
5
Acquired Technologies 1,700
8
Non-Compete Agreements 219
2
$ 30,219

Of the $43,483 allocated to goodwill, $23,032, $5,241, and $15,210 were allocated to the Company’s nurse and allied solutions, locum tenens solutions, and other workforce solutions segments, respectively.

3. REVENUE RECOGNITION

Revenue consists of fees earned from the temporary and permanent placement of healthcare professionals and executives as well as from the Company’s SaaS-based technology, including its vendor management systems and its scheduling software. Revenue from temporary staffing services is recognized as the services are rendered by the healthcare professional or executive. Under the Company’s managed services program arrangements, the Company manages all or a part of a customer’s supplemental workforce needs utilizing its own pool of healthcare professionals along with those of third-party subcontractors. When the Company uses subcontractors, revenue is recorded net of the related subcontractor’s expense. Payables to

subcontractors of ~~$45,126~~$37,109 and $~~56,177~~51,973 were included in accounts payable and accrued expenses in the unaudited condensed consolidated balance sheet as of ~~September~~June 30, ~~2016~~2017 and the ~~audited~~ consolidated balance sheet as of December 31, ~~2015~~2016, respectively. Revenue from recruitment and permanent placement services is recognized as the services are provided and upon successful placements. The Company’s SaaS-based revenue is recognized ratably over the applicable arrangement’s service period. Fees billed in advance of being earned are recorded as deferred revenue.

4. NET INCOME PER COMMON SHARE

Basic net income per common share is calculated by dividing net income by the weighted average number of common shares outstanding during the reporting period. The following table sets forth the computation of basic and diluted net income per common share for the three months and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016, respectively:

Share-based awards to purchase ~~eleven~~33 and 16 shares of common stock were not included in the above calculation of diluted net income per common share for the three and six months ended ~~September~~June 30, ~~2016~~2017, respectively, because the effect of these instruments was anti-dilutive. Share-based awards to purchase ~~eighteen and twelve~~22 shares of common stock were not included in the above calculation of diluted net income per common share for the ~~nine~~six months ended ~~September~~June 30, 2016 ~~and 2015, respectively,~~ because the effect of these instruments was anti-dilutive.

5. SEGMENT INFORMATION

The Company’s operating segments are identified in the same manner as they are reported internally and used by the Company’s chief operating decision maker for the purpose of evaluating performance and allocating resources. Effective as of January 1, 2016, the Company modified its reportable segments.

The Company previously utilized three reportable segments, which it identified as follows: (1) nurse and allied healthcare staffing, (2) locum tenens staffing, and (3) physician permanent placement services. In light of the Company’s acquisitions over the past several years as well as its transition to a healthcare workforce solutions company, the Company’s management renamed its three reportable segments and also placed several of its business lines that were in the nurse and allied healthcare staffing segment into a different segment to better reflect how the business is evaluated by the chief operating decision maker. As of January 1, 2016, the Company began to disclose the followinghas three reportable segments: ~~(1)~~ nurse and allied solutions, ~~(2)~~ locum tenens solutions, and ~~(3)~~ other workforce solutions. The nurse and allied solutions segment consists of the Company’s nurse, allied, and local staffing businesses. The locum tenens solutions segment consists of the Company’s locum tenens staffing business. The other workforce solutions segment consists of the Company’s (i) physician permanent placement services business, (ii) healthcare interim leadership staffing and executive search services business, (iii) vendor management systems business, (iv) recruitment process outsourcing business, (v) education business, (vi) medical coding and related consulting business, and (vii) workforce optimization services business.

The Company’s chief operating decision maker relies on internal management reporting processes that provide revenue and operating income by reportable segment for making financial decisions and allocating resources. Segment operating income represents income before income taxes plus depreciation, amortization of intangible assets, share-based compensation, interest expense, net, and other, and unallocated corporate overhead. The Company’s management does not evaluate, manage or measure performance of segments using asset information; accordingly, asset information by segment is not prepared or disclosed.

The following table ~~which includes reclassified prior period data to conform to the new segment reporting structure,~~ provides a reconciliation of revenue and operating income by reportable segment to consolidated results and was derived from each segment’s internal financial information as used for corporate management purposes:

The following table summarizes the activity related to the carrying value of goodwill by reportable segment:

Nurse and Allied Solutions Locum Tenens Solutions Other Workforce Solutions Total
Balance, January 1, 2016 $ 95,309
$ 19,743
$ 89,727
$ 204,779
Goodwill from BES acquisition —
—
90,594
90,594
Goodwill from HSG acquisition 8,780
—
—
8,780
Goodwill from Peak acquisition —
—
37,147
37,147
Goodwill adjustment for OH acquisition 850
—
—
850
Goodwill adjustment for TFS acquisition —
—
24
24
Balance, September 30, 2016 $ 104,939
$ 19,743
$ 217,492
$ 342,174
Accumulated impairment loss as of December 31, 2015 and September 30, 2016 $ 154,444
$ 53,940
$ 6,555
$ 214,939



	Nurse and Allied Solutions			Locum Tenens Solutions		Other Workforce Solutions		Total
Balance, January 1, 2017	$	104,306		$	19,743	$	217,705	$	341,754
Goodwill adjustment for HSG acquisition	(1,199		)	—		—		(1,199		)
Goodwill adjustment for Peak acquisition	—			—		41		41
Balance, June 30, 2017	$	103,107		$	19,743	$	217,746	$	340,596
Accumulated impairment loss as of December 31, 2016 and June 30, 2017	$	154,444		$	53,940	$	6,555	$	214,939

6. ~~DERIVATIVE INSTRUMENTS~~

In April 2015, the Company entered into an interest rate swap agreement to minimize its exposure to interest rate fluctuations on $100,000 of its outstanding variable rate debt under one of its term loans whereby the Company pays a fixed rate of 0.983% per annum and receives a variable rate equal to floating one-month LIBOR. This agreement expires on March 30, 2018, and no initial investment was made to enter into this agreement.

At September 30, 2016, the interest rate swap agreement had a fair value of $(396), which is included in other long-term liabilities in the accompanying unaudited condensed consolidated balance sheet as of September 30, 2016. At December 31, 2015, the interest rate swap agreement had a fair value of $165, which was included in other assets in the audited consolidated balance sheet as of December 31, 2015. The Company has formally documented the hedging relationship and accounts for this arrangement as a cash flow hedge. The Company recognizes all derivatives on the balance sheet at fair value based on quotes from an independent pricing service. Gains or losses resulting from changes in the values of the arrangement are recorded in other comprehensive income (loss), net of tax, until the hedged item is recognized in earnings. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivative instrument that is used in the hedging transaction is highly effective in offsetting changes in fair values or cash flows of the hedged item. When it is determined that a derivative instrument is not highly effective as a hedge or that it has ceased to be a highly effective hedge, the Company discontinues hedge accounting prospectively and recognizes subsequent changes in market value in earnings.

In connection with the Company’s issuance of $325,000 aggregate principal amount of 5.125% Senior Notes due 2024 (the “Notes”) and the use of a portion of the proceeds thereof to repay $138,438 of certain of its term loan indebtedness on October 3, 2016, the Company reduced the interest rate swap notional amount to $40,000. As the reduction of the notional amount occurred subsequent to the end of the third quarter, there has been no impact on the valuation of the hedge as of September 30, 2016. In addition, the impact of the reduction in notional amount is expected to be immaterial for the fourth quarter. See additional information in Note (12), “Subsequent Events.”

~~7. NOTES PAYABLE AND CREDIT AGREEMENT~~

On April 18, 2014, the Company entered into a Credit Agreement (the “Credit Agreement”) with several lenders to provide for two credit facilities to replace its prior credit facilities, including (1) a $225,000 secured revolving credit facility (the “Revolver”) that includes a $40,000 sublimit for the issuance of letters of credit and a $20,000 sublimit for swingline loans and (2) a $150,000 secured term loan credit facility (the “Term Loan”). On January 4, 2016, the Company entered into the First Amendment (together with the Credit Agreement and the Second Amendment (as defined elsewhere in this Note (7)), the “Amended Credit Agreement”) with several lenders to provide for, among other things, (A) a $50,000 increase to the Revolver to $275,000, and (B) an additional $75,000 secured term loan (the “Additional Term Loan”). The Company used the proceeds from the Additional Term Loan and drawdowns of the Revolver to complete its acquisitions of BES and Peak, as more fully described in Note (2), “Business Combinations.” The Additional Term Loan is subject to amortization of principal of 5.00% per year of the original Additional Term Loan amount, payable in equal quarterly installments. The maturity date of the Additional Term Loan is January 4, 2021.

On September 19, 2016, the Company entered into the Second Amendment to the Credit Agreement (the “Second Amendment”), which, among other things, permits the Company to increase the commitments that may be obtained under the Amended Credit Agreement by the amount of certain prepayments made thereunder. Accordingly, the Amended Credit Agreement now provides that the Company may from time to time obtain an increase in the Revolver or obtain additional term loans or both in an aggregate principal amount not to exceed $125,000 plus the amount of certain prepayments of credit facilities thereunder (including $138,438 of prepayments of the Term Loan and the Additional Term Loan made by the Company on October 3, 2016) subject to, among other conditions, the arrangement of additional commitments with financial institutions reasonably acceptable to the Company and the administrative agent.

The obligations of the Company under the Amended Credit Agreement are secured by substantially all of the assets of the Company and the common stock or equity interests of its domestic subsidiaries. The payment obligations under the Amended Credit Agreement may be accelerated upon the occurrence of defined events of default. Additionally, the Amended Credit Agreement no longer requires (as was originally set forth in the original Credit Agreement) the Company to make mandatory prepayments under any of the credit facilities provided thereunder with the proceeds of extraordinary receipts and excess cash flow.

The Amended Credit Agreement contains various customary affirmative and negative covenants, including restrictions on incurrence of additional indebtedness, declaration and payment of dividends, dispositions of assets, consolidation into another entity, and allowable investments. Additionally, there are financial covenants based on the Company’s consolidated leverage ratio and interest coverage ratio as calculated in accordance with the Amended Credit Agreement.

In connection with the First Amendment, the Company incurred $632 in fees paid to lenders and other third parties, of which $448 was capitalized and amortized to interest expense over the remaining term of the Amended Credit Agreement and the remaining amount was recorded as interest expense during the nine months ended September 30, 2016. The Company incurred de minimis costs in connection with the Second Amendment.

The Company described in further detail other aspects of the Amended Credit Agreement in effect prior to the Second Amendment in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (8), Notes Payable and Credit Agreement” of the 2015 Annual Report.

As of September 30, 2016, except for the $3,750 scheduled annual payment under the Additional Term Loan, all outstanding balances under the Revolver, the Term Loan and the Additional Term Loan were classified as long-term payments due to the post-balance sheet date issuance of the Notes on October 3, 2016.

8. FAIR VALUE MEASUREMENT

The Company’s valuation techniques and inputs used to measure fair value and the definition of the three levels (Level 1, Level 2, and Level 3) of the fair value hierarchy are disclosed in Part II, Item 8, “Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 4—Fair Value Measurement” of the ~~2015~~2016 Annual Report. The Company

has not changed the valuation techniques or inputs it uses for its fair value measurement during the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2017.

Assets and Liabilities Measured on a Recurring Basis

The Company’s restricted cash equivalents that serve as collateral for the Company’s outstanding letters of credit

typically consist of money market funds that are measured at fair value based on quoted prices, which are Level 1 inputs.

~~As of September 30, 2016, the~~

The Company’s restricted cash equivalents and investments that serve as collateral for the Company’s captive insurance company primarily consist of commercial paper that is measured at observable market prices for identical securities that are traded in less active markets, which are Level 2 inputs. Of the ~~$20,989~~$27,722 commercial paper issued and outstanding as of ~~September~~June 30, ~~2016, $1,996~~2017, $10,280 had original maturities greater than three months, which were considered ~~available for sale~~available-for-sale securities. ~~The Company did not have commercial paper as~~As of December 31, ~~2015.~~2016, the Company had $25,610 commercial paper issued and outstanding, of which $11,152 had original maturities greater than three months and were considered available-for-sale securities.

The Company’s interest rate swap iswas measured at fair value using a discounted cash flow analysis that includes the contractual terms, including the period to maturity, and Level 2 observable market-based inputs, including interest rate curves. The fair value of the swap iswas determined by netting the discounted future fixed cash receipts payments and the discounted expected variable cash receipts. The variable cash receipts ~~are~~were based on an expectation of future interest rates (forward curves) derived from observable market interest rate yield curves. The valuation also ~~considers~~considered credit risk adjustments that ~~are~~were necessary to reflect the probability of default by the counterparty or the Company, which ~~are~~were considered Level 3 ~~inputs; however, as of September 30, 2016,~~inputs. On May 3, 2017, the ~~credit risk adjustments, including nonperformance risk, were considered insignificant to~~Company terminated the ~~total fair value of the~~remaining interest rate swap.

The Company’s contingent consideration liabilities are measured at fair value using probability-weighted discounted cash flow analysis for the acquired companies, which are Level 3 inputs.

The following tables present information about the above-referenced assets and liabilities and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value:

The following ~~tables set~~table sets forth ~~reconciliations~~a reconciliation of changes in the fair value of contingent consideration liabilities classified as Level 3 in the fair value hierarchy:

Three Months Ended September 30,
2016 2015
Balance as of July 1, $ (7,054 )
$ (1,400 )
Change in fair value of contingent consideration earn-out liability from Avantas acquisition —
300
Contingent consideration earn-out liability from TFS acquisition on September 15, 2015 —
(2,700 )
Change in fair value of contingent consideration earn-out liability from TFS acquisition (94 ) —
Change in fair value of contingent consideration earn-out liability from HSG acquisition (84 ) —
Change in fair value of contingent consideration earn-out liability from Peak acquisition 480
—
Balance as of September 30, $ (6,752 ) $ (3,800 )



	Three Months Ended June 30,
	2017			2016
Balance as of April 1,	$	(1,909	)	$	(6,459	)
Contingent consideration earn-out liability from Peak acquisition on June 3, 2016	—			(480		)
Change in fair value of contingent consideration earn-out liability from TFS acquisition	—			(68		)
Change in fair value of contingent consideration earn-out liability from HSG acquisition	(23		)	(47		)
Balance as of June 30,	$	(1,932	)	$	(7,054	)

Assets Measured on a Non-Recurring Basis

The Company applies fair value techniques on a non-recurring basis associated with valuing potential impairment losses related to its goodwill, indefinite-lived intangible assets, long-lived assets, and equity ~~method investment.~~investments.

The Company evaluates goodwill and indefinite-lived intangible assets annually for impairment and whenever circumstances occur indicating that goodwill might be impaired. The Company determines the fair value of its reporting units based on a combination of inputs, including the market capitalization of the Company, as well as Level 3 inputs such as discounted cash flows, which are not observable from the market, directly or indirectly. The Company determines the fair value of its indefinite-lived intangible assets using the income approach (relief-from-royalty method) based on Level 3 inputs.

There were no triggering events identified and no indication of impairment of the Company’s goodwill, indefinite-lived intangible assets, long-lived assets, or equity ~~method investment~~investments during the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015.~~2016.

Fair Value of Financial Instruments

The carrying amount of the Company’s senior notes ~~payable~~ and ~~revolving credit facility~~term loan approximate their fair ~~value as~~values. As it relates to the ~~instruments’~~term loan, the Company amended its credit facilities in January and September 2016 to increase the capacity of the revolver and to incur an additional term loan, and the variable interest ~~rates are variable~~rate under the revolver and ~~comparable~~the term loans (LIBOR plus a spread of between 1.50% and 2.25% or a base rate plus a spread of between 0.50% and 1.25%, at the Company’s option) has remained unchanged since the amendments. As it relates to the senior notes issued in October 2016, they have a fixed rate of 5.125% and there have been no changes in available rates ~~currently offered~~ for similar debt ~~instruments~~since the date of ~~comparable maturity.~~ issuance. See additional information in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (8), Notes Payable and Credit Agreement” of our 2016 Annual Report.

The fair value of the Company’s long-term self-insurance accruals cannot be estimated as the Company cannot reasonably determine the timing of future payments.

The Company is subject to taxation in the U.S. and various states and foreign jurisdictions. With few exceptions, as of ~~September~~June 30, ~~2016,~~2017, the Company is no longer subject to state, local or foreign examinations by tax authorities for tax years before 2006, and the Company is no longer subject to U.S. federal income or payroll tax examinations for tax years before 2011. The Company’s tax years 2007, 2008, 2009 and 2010 had been under audit by the Internal Revenue Service (“IRS”) for several years and in 2014, the IRS issued the Company its Revenue Agent Report (“RAR”) and an Employment Tax Examination Report (“ETER”). The RAR proposed adjustments to the Company’s taxable income for ~~tax years~~ 2007-2010 and net operating loss carryforwards for 2005 and 2006, resulting from the proposed disallowance of certain per diems paid to the Company’s healthcare professionals, and the ETER proposed assessments for additional payroll tax liabilities and penalties for tax years 2009 and 2010 related to the Company’s treatment of certain non-taxable per diem allowances and travel benefits. The positions in the RAR and ETER were mutually exclusive, and contained multiple tax positions, some of which were contrary to each other. The Company filed a Protest Letter for both the RAR and ETER positions in 2014 and the Company received a final determination from the IRS in July 2015 on both the RAR adjustments and ETER assessments, effectively settling these audits with the IRS for $7,200 (including interest) during the third quarter of 2015. As a result of the settlement, the Company recorded federal income tax benefits of approximately $12,200 during the quarter ended September 30, 2015, state income tax benefits (net of federal tax impact) of $568 ~~during~~for the ~~quarter~~year ended ~~September 30,~~December 31, 2016, and expects to record ~~the remaining~~ state income tax benefits (net of federal tax impact) of approximately $1,200 by fiscal year 2019, when the various state statutes are projected to lapse.

The IRS conducted and completed a separate audit of the Company’s 2011 and 2012 tax years that focused on income and employment tax issues similar to those raised in the 2007 through 2010 examination. The IRS completed its audit during the quarter ended March 31, 2015, and issued its RAR and ETER to the Company with proposed adjustments to the Company’s taxable income for 2011 and 2012 and net operating loss carryforwards from 2010 and assessments for additional payroll tax liabilities and penalties for 2011 and 2012 related to the Company’s treatment of certain non-taxable per diem allowances and travel benefits. The positions in the RAR and ETER for the 2011 and 2012 years are mutually exclusive and contain multiple tax positions, some of which are contrary to each other. The Company filed a Protest Letter for both the RAR and ETER in April 2015 and the matter is currently at IRS Appeals. The Company ~~recently held its first~~has been meeting and working with the IRS Appeals office and ~~will continue to meet with the IRS Appeals office during~~anticipates a resolution within the next twelve months. ~~The Company cannot predict with certainty the timing of a resolution of such matter.~~ The IRS began an audit of the Company’s 2013 tax year during the quarter ended June 30, 2015. The Company believes its reserve for unrecognized tax benefits and contingent tax issues is adequate with respect to all open years. Notwithstanding the foregoing, the Company could adjust its provision for income taxes and contingent tax liability based on future developments.

~~10.~~8. COMMITMENTS AND CONTINGENCIES: LEGAL

From time to time, the Company is involved in various lawsuits, claims, investigations, and proceedings that arise in the ordinary course of business. These matters typically relate to professional liability, tax, payroll, contract, competitor disputes and employee-related matters and include individual and collective lawsuits, as well as inquiries and investigations by governmental agencies regarding the Company’s employment practices. Additionally, some of the Company’s clients may also become subject to claims, governmental inquiries and investigations, and legal actions relating to services provided by the Company’s healthcare professionals. Depending upon the particular facts and circumstances, the Company may also be subject to indemnification obligations under its contracts with such clients relating to these matters. The Company records a liability when management believes an adverse outcome from a loss contingency is both probable and the amount, or a range, can be reasonably estimated. Significant judgment is required to determine both probability of loss and the estimated amount. The Company reviews its loss contingencies at least quarterly and adjusts its accruals and/or disclosures to reflect the impact of

With regards to outstanding loss contingencies as of ~~September~~June 30, ~~2016,~~2017, which are included in accounts payable and accrued expenses in the consolidated balance sheet, the Company believes that such matters will not, either individually or in the aggregate, have a material adverse effect on its business, consolidated financial position, results of operations, or cash flows.

~~11.~~9. BALANCE SHEET DETAILS

The consolidated balance sheets detail is as follows as of ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015:~~2016:

~~12. SUBSEQUENT EVENTS~~

~~5.125% Senior Notes Due 2024~~

On October 3, 2016, the Company completed the issuance of $325,000 aggregate principal amount of the Notes, which mature on October 1, 2024. Interest on the Notes is payable semi-annually in arrears on April 1 and October 1 of each year, commencing April 1, 2017.

With the proceeds from the Notes and cash generated from operations, the Company (1) repaid $131,250 of existing Term Loan indebtedness, (2) repaid $7,188 of existing Additional Term Loan indebtedness, (3) repaid $182,500 under the Revolver, and (4) paid approximately $6,200 of fees and expenses related to the offering and issuance of the Notes.

~~Share Repurchase Program Authorized~~

~~On November 1, 2016, the Company’s Board of Directors approved a share repurchase program under which the Company may repurchase up to $150,000 of its outstanding common stock.~~

The amount and timing of the purchases will depend on a number of factors including the price of the Company’s shares, trading volume, Company performance, Company liquidity, general economic and market conditions and other factors that the Company’s management believes are relevant. The share repurchase program does not require the purchase of any minimum number of shares and may be suspended or discontinued at any time.

The Company intends to make all repurchases and to administer the plan in accordance with applicable laws and regulatory guidelines, including Rule 10b-18 of the Exchange Act, and in compliance with its debt instruments. Repurchases may be made from cash on hand, free cash flow generated from the Company’s business or from the Company’s credit facilities. Repurchases may be made from time to time through open market purchases or privately negotiated transactions. Repurchases may also be made pursuant to one or more plans established pursuant to Rule 10b5-1 under the Exchange Act, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading restrictions.



	June 30, 2017			December 31, 2016
Other current assets:
Restricted cash and cash equivalents	$	16,064		$	20,271
Other	13,721			14,336
Other current assets	$	29,785		$	34,607

Fixed assets:
Furniture and equipment	$	27,333		$	25,582
Software	120,389			112,405
Leasehold improvements	8,810			6,832
	156,532			144,819
Accumulated depreciation	(91,164		)	(84,865		)
Fixed assets, net	$	65,368		$	59,954

Other assets:
Life insurance cash surrender value	$	41,562		$	32,190
Other	30,032			25,344
Other assets	$	71,594		$	57,534

Accounts payable and accrued expenses:
Trade accounts payable	$	27,268		$	33,392
Subcontractor payable	37,109			51,973
Accrued expenses	41,329			37,251
Professional liability reserve	6,559			10,254
Other	6,678			4,642
Accounts payable and accrued expenses	$	118,943		$	137,512

Accrued compensation and benefits:
Accrued payroll	$	31,457		$	30,917
Accrued bonuses	15,315			26,992
Accrued travel expense	3,205			2,972
Accrued health insurance reserve	3,369			3,189
Accrued workers compensation reserve	8,461			8,406
Deferred compensation	42,823			32,690
Other	2,653			2,827
Accrued compensation and benefits	$	107,283		$	107,993

Other current liabilities:
Acquisition related liabilities	$	5,164		$	6,921
Other	7,223			9,690
Other current liabilities	$	12,387		$	16,611

Other long-term liabilities:
Workers’ compensation reserve	$	18,755		$	18,708
Professional liability reserve	38,841			37,338
Deferred rent	14,199			13,274
Unrecognized tax benefits	8,693			8,464
Other	1,813			4,312
Other long-term liabilities	$	82,301		$	82,096

Item 2. Management’s Discussion and Analysis of Financial Condition and Results

The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto and other financial information included elsewhere herein and in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2015,~~2016, filed with the Securities and Exchange Commission (“SEC”) on February ~~24,~~ 17, 2017 (“2016 ~~(“2015~~ Annual Report”). Certain statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are “forward-looking statements.” See “Special Note Regarding Forward-Looking Statements.” We undertake no obligation to update the forward-looking statements in this Quarterly Report. References in this Quarterly Report to “AMN Healthcare,” the “Company,” “we,” “us” and “our” refer to AMN Healthcare Services, Inc. and its wholly owned subsidiaries.

~~Changes to Our Reportable Segments~~

Effective as of January 1, 2016, we modified our reportable segments. We previously utilized three reportable segments, which we identified as follows: (1) nurse and allied healthcare staffing, (2) locum tenens staffing, and (3) physician permanent placement services. In light of our acquisitions over the past several years as well as our transition to a healthcare workforce solutions company, our management renamed our three reportable segments and also placed several of our business lines that were in our nurse and allied healthcare staffing segment into a different segment to better reflect how the business is evaluated by our chief operating decision maker. As of January 1, 2016, we began to disclose the following three reportable segments: (1) nurse and allied solutions, (2) locum tenens solutions, and (3) other workforce solutions. The nurse and allied solutions segment consists of our nurse, allied, and local staffing businesses. The locum tenens solutions segment consists of our locum tenens staffing business. The other workforce solutions segment consists of our (i) physician permanent placement services business, (ii) healthcare interim leadership staffing and executive search services business, (iii) vendor management systems business, (iv) recruitment process outsourcing business, (v) education business, (vi) medical coding and related consulting business, and (vii) workforce optimization services business. Prior period data in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” has been reclassified to conform to the new segment reporting structure.

Overview of Our Business

We provide healthcare workforce solutions and staffing services to healthcare facilities across the nation. As an innovative workforce solutions partner, our managed services programs, or “MSP,” vendor management systems, or “VMS,” recruitment process outsourcing, or “RPO,” workforce optimization services, medical coding and consulting services, and the placement of physicians, nurses, allied healthcare professionals, and healthcare executives into temporary and permanent positions enable our clients to successfully reduce staffing complexity, increase efficiency and lead their organizations within the rapidly evolving healthcare environment. Our clients include acute and sub-acute care hospitals, community health centers and clinics, physician practice groups, retail and urgent care centers, home health facilities, and many other healthcare settings. Our clients utilize our workforce solutions and healthcare staffing services to strategically plan for and meet their workforce needs in an economically beneficial manner. Our managed services program and vendor management systems enable healthcare organizations to increase their efficiency by managing all of their supplemental workforce needs through one company or technology.

We conduct business through three reportable segments: (1) nurse and allied solutions, (2) locum tenens solutions, and (3) other workforce solutions. For the three months ended ~~September~~June 30, ~~2016,~~2017, we recorded revenue of ~~$472.6~~$489.8 million, as compared to ~~$382.9~~$473.7 million for the same period last year. For the three months ended ~~September~~June 30, ~~2016,~~2017, we recorded net income of ~~$27.3~~$31.3 million, as compared to ~~$33.6~~$26.3 million for the same period last year. For the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, we recorded revenue of ~~$1,414.4~~$985.0 million, as compared to ~~$1,060.5~~$941.7 million for the same period last year. For the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, we recorded net income of ~~$79.5~~$63.3 million, as compared to ~~$61.7~~$52.2 million for the same period last year.

Nurse and allied solutions segment revenue comprised 62% and ~~65%~~63% of total consolidated revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively. Through our nurse and allied solutions segment, we provide hospitals and other healthcare facilities with a comprehensive managed services solution in which we manage and staff all of the temporary nursing and allied staffing needs of a client and traditional clinical staffing solutions of variable assignment lengths.

Locum tenens solutions revenue comprised ~~23% and 27%~~22% of total consolidated revenue for both the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015, respectively.~~2016. Through our locum tenens solutions segment, we provide a comprehensive managed services solution in which we manage all of the locum tenens needs of a client and place physicians of all specialties, as well as dentists and other advanced practice providers, with clients on a temporary basis as independent contractors. These locum tenens providers are used by our healthcare facility and physician practice group clients to fill temporary vacancies created by vacation and leave schedules and to bridge the gap while they seek permanent candidates or explore expansion. Our locum tenens clients represent a diverse group of healthcare organizations throughout the United States, including hospitals,

Other workforce solutions segment revenue comprised ~~15%~~16% and 8%15% of total consolidated revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively. Through our other workforce solutions segment, we provide hospitals and other healthcare facilities with a range of workforce solutions, including: (1) identifying and recruiting physicians and healthcare leaders for permanent placement, (2) placing interim leaders and executives across all healthcare settings, (3) a ~~SaaS~~software-as-a-service (“SaaS”) VMS through which our clients can manage all of their temporary staffing needs, (4) RPO services that leverage our expertise and support systems to replace or complement a client’s existing internal recruitment function for permanent placement needs, (5) an education program that provides custom healthcare education, research, professional practice tools, and professional development services, (6) medical coding and related consulting services, and (7) workforce optimization services that include consulting, data analytics, predictive modeling, and SaaS-based scheduling technology.

~~Acquisitions During the Nine Months Ended September 30, 2016~~

During the nine months ended September 30, 2016, we completed three acquisitions. On January 4, 2016, we completed the acquisition of B.E. Smith (“BES”), a full-service healthcare interim leadership placement and executive search firm that places interim leaders and executives across all healthcare settings, including acute care hospitals, academic medical hospitals, children’s hospitals, physician practices, and post-acute care providers. We believe the BES acquisition will provide us additional access to healthcare executives and enhance our integrated services to hospitals, health systems, and other healthcare facilities across the nation. We include the results of BES in our other workforce solutions segment.

On January 11, 2016, we completed the acquisition of HealthSource Global Staffing (“HSG”), which provides labor disruption and rapid response staffing. We include the results of HSG in our nurse and allied solutions segment.

On June 3, 2016, we completed the acquisition of Peak Provider Solutions (“Peak”), which provides remote medical coding and consulting solutions to hospitals and physician medical groups nationwide. We include the results of Peak in our other workforce solutions segment.

For the three months ended September 30, 2016, $36.1 million of revenue relating to BES, HSG, and Peak and $4.3 million of income before income taxes relating to BES, HSG, and Peak were included in the unaudited condensed consolidated statement of operations. For the nine months ended September 30, 2016, $124.0 million of revenue relating to BES, HSG, and Peak and $20.2 million of income before income taxes relating to BES, HSG, and Peak were included in the unaudited condensed consolidated statement of operations.

Demand for our temporary and permanent placement staffing services is driven in part by U.S. economic and labor trends. The Bureau of Labor’s survey data reflects near record levels of healthcare job openings and quits, which are viewed as positive trends for the healthcare staffing ~~market environment, including interest in~~industry. At the same time, the entire healthcare industry faces uncertainty related to the potential repeal of, or significant changes to, the Affordable Care Act, which could impact reimbursement. The uncertainty has impacted the utilization of healthcare services and demand for our services to a certain extent.

We continue to see the benefits of our workforce solutions ~~like MSP, remains strong~~strategy, particularly with ~~demand still at near all-time highs. To address the outpacing of demand compared to supply and to meet the needs~~our managed services programs. As a result of our ~~MSP clients,~~ongoing focus on these strategic relationships, we ~~have prioritized the fulfillment of our MSP orders. MSP revenue continues~~continue to increase ~~faster than~~the percentage of our ~~traditional staffing revenue and represented approximately 50% of the~~ nurse and allied ~~solutions segment~~ revenue for the nine months ended September 30, 2016. As a natural outcome of the expansion of our workforce solution offerings, we are seeing certain larger health systems representing a greater portion of our revenue as these clients purchase several different business solutionsderived from our ~~suite of services.~~ managed services program clients.

The high demand for healthcare professionals has generally allowed us to negotiate increased bill rates. In our travel nursing division, we have passed a portion of these increases on through pay rates in order to attract more nurses into our business that has put some pressure on the gross margins in the nurse and allied solutions segment. In addition, due to the prioritization of our MSP clients, we are filling more of the assignments at these clients with our own nurses and using fewer associate vendors to meet these needs. The impact of this prioritization effort in the nurse and allied solutions segment has a positive impact on revenue and gross profit, but a slightly negative effect on our gross margin percentage in light of the relatively higher gross margin percentage from our associate vendor fees.

In our locum tenens solutions segment, we have seen a decline in demand ~~trends remain strong~~ in ~~most specialties. However, the primary constraint~~certain specialties such as hospitalists that have negatively impacted our volumes and, as a result, revenue in this segment. This decline has been offset to ~~faster growth~~some degree by an increase in ~~the~~other specialties such as emergency medicine and advanced practice. Earlier this year, we made organizational and leadership changes in this business ~~is the ability~~ to ~~recruit, credential, and place an ample number of physicians to match the geographies of~~improve performance.

~~The~~ other workforce solutions segment, ~~with its higher profitability, is positively affecting~~ our ~~consolidated gross~~interim leadership and ~~operating margins.~~vendor management systems businesses are growing. We are experiencing declines in our permanent placement businesses that we believe are primarily related to operational execution.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements in conformity with United States generally accepted accounting principles (“U.S. GAAP”) requires us to make estimates and judgments that affect our reported amounts of assets and liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to asset impairments, accruals for self-insurance, compensation and related benefits, accounts receivable, contingencies and litigation, earn-out liabilities, and income taxes. We base these estimates on the information that is currently available to us and on various other assumptions that we believe are reasonable under the circumstances. Actual results could vary from these estimates under different assumptions or conditions. If these estimates differ significantly from actual results, our consolidated financial statements and future results of operations may be materially impacted. ~~Our~~There have been no material changes in our critical accounting policies and estimates, ~~remain consistent with those reported~~other than the adoption of Accounting Standards Update (“ASU”) 2016-09 described in Item 1. Condensed Consolidated Financial Statements—Note 1, “Basis of Presentation,” as compared to the critical accounting policies and estimates described in our ~~2015~~2016 Annual Report.

Results of Operations

The following table sets forth, for the periods indicated, selected unaudited condensed consolidated statements of operations data as a percentage of revenue. Our results of operations include three reportable segments: (1) nurse and allied solutions, (2) locum tenens solutions, and (3) other workforce solutions. The ~~HSG, BES, MillicanSolutions (“Millican”), First String Healthcare (“TFS”), Onward Healthcare (“OH”), and~~ Peak ~~acquisitions impact~~acquisition impacts the comparability of the results between the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015 depending on the timing of the applicable acquisition.~~2016. Our historical results are not necessarily indicative of our future results of operations.


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015		2017		2016		2017		2016
Unaudited Condensed Consolidated Statements of Operations:
Revenue	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Cost of revenue	67.3		67.1		67.4		68.2		67.1		67.3		67.2		67.4
Gross profit	32.7		32.9		32.6		31.8		32.9		32.7		32.8		32.6
Selling, general and administrative	21.2		21.7		21.0		21.6		19.7		21.0		20.2		21.0
Depreciation and amortization	1.6		1.4		1.5		1.5		1.7		1.6		1.6		1.5
Income from operations	9.9		9.8		10.1		8.7		11.5		10.1		11.0		10.1
Interest expense, net, and other	0.6		0.5		0.6		0.5		1.0		0.6		1.0		0.6
Income before income taxes	9.3		9.3		9.4		8.2		10.5		9.5		10.0		9.5
Income tax expense	3.5		0.5		3.8		2.4		4.1		3.9		3.6		4.0
Net income	5.8	%	8.8	%	5.6	%	5.8	%	6.4	%	5.6	%	6.4	%	5.5	%

Comparison of Results for the Three Months Ended ~~September~~June 30, ~~2016~~2017 to the Three Months Ended ~~September~~June 30, ~~2015~~2016

Revenue. Revenue increased ~~23%~~3% to ~~$472.6~~$489.8 million for the three months ended ~~September~~June 30, ~~2016~~2017 from ~~$382.9~~$473.7 million for the same period in ~~2015,~~2016, due to additional revenue of ~~approximately $43~~$5.0 million resulting from our ~~HSG, BES, Millican, TFS, and~~ Peak ~~acquisitions~~acquisition in June 2016 with the remainder of the increase driven by ~~12%~~2% organic growth.

Nurse and allied solutions segment revenue increased ~~16%~~3% to ~~$286.8~~$300.7 million for the three months ended ~~September~~June 30, ~~2016~~2017 from ~~$246.7~~$292.7 million for the same period in ~~2015. Of the $40.1~~2016. The $8.0 million increase ~~approximately $1.8 million~~ was ~~attributable to the additional revenue in connection with the HSG acquisition with the remainder~~ primarily attributable to a ~~12%~~5% increase in the average number of healthcare professionals on assignment and a 5%3% increase in the average bill rate during the three months ended ~~September~~June 30, ~~2016~~2017. The increase was partially offset by an approximately $18.0 million decrease in labor disruption revenue.

Locum tenens solutions segment revenue ~~increased 7% to $108.6~~was $108.2 million for the three months ended ~~September~~June 30, ~~2016~~2017 ~~from~~, as compared to $~~101.8~~109.1 million for the same period in ~~2015.~~2016. The ~~$6.8~~$0.9 million ~~increase~~decrease was primarily attributable to a ~~1% increase~~4% decrease in the number of days filled ~~and~~during the three months ended June 30, 2017, partially offset by a 6%3% increase in the revenue per day ~~filled during the~~ ~~three months ended September 30, 2016~~.filled.

Other workforce solutions segment revenue increased ~~125%~~12% to ~~$77.3~~$80.9 million for the three months ended ~~September~~June 30, ~~2016~~2017 from $~~34.4~~71.9 million for the same period in ~~2015.~~2016. Of the ~~$42.9~~$9.0 million increase, ~~$42.0~~$5.0 million was attributable to the additional revenue in connection with the ~~BES, Millican, TFS, and~~ Peak ~~acquisitions~~acquisition in June 2016 with the remainder primarily attributable to growth in our VMS, interim leadership, and workforce optimization ~~services revenue~~businesses, partially offset by declines in our permanent placement businesses during the three months ended ~~September~~June 30, ~~2016~~2017.

Gross Profit. Gross profit increased ~~23%~~4% to ~~$154.5~~$161.0 million for the three months ended ~~September~~June 30, ~~2016~~2017 from ~~$126.0~~$154.8 million for the same period in ~~2015,~~2016, representing gross margins of ~~32.7%~~32.9% and ~~32.9%~~32.7%, respectively. The ~~decrease~~increase in consolidated gross margin was primarily due to a higher ~~direct costs~~gross margin in the nurse and allied solutions segment driven primarily by lower direct costs, partially offset by ~~the growth of the higher margin other workforce solutions segment and higher bill-to-pay~~lower bill-pay spreads within certain specialties in the locum tenens solutions segment and an unfavorable change in sales mix in our other workforce solutions segment during the three months ended ~~September~~June 30, ~~2016.~~2017. Gross margin by reportable segment for the three months ended ~~September~~June 30, 2017 and 2016 was 27.8% and ~~2015 was~~ 26.7% ~~and 27.5%~~ for nurse and allied solutions, ~~31.2%~~30.0% and ~~30.7%~~31.3% for locum tenens solutions, and ~~56.7%~~55.7% and ~~78.2%~~58.9% for other workforce solutions, respectively. ~~The other workforce solutions segment decrease was primarily due to the change in sales mix resulting from the additions of BES, TFS, and Peak during the three months ended September 30, 2016.~~

Selling, General and Administrative Expenses. Selling, general and administrative (“SG&A”) expenses were ~~$100.0~~$96.7 million, representing ~~21.2%~~19.7% of revenue, for the three months ended ~~September~~June 30, ~~2016,~~2017, as compared to ~~$83.1~~$99.5 million,

representing ~~21.7%~~21.0% of revenue, for the same period in ~~2015.~~2016. The ~~increase~~decrease in SG&A expenses was primarily due to ~~$9.6~~operating leverage on the higher revenue, an additional $2.0 million of favorable actuarial-based decreases in our professional liability reserves and $1.1 million decrease in acquisition and integration costs as compared to the same period last year. The decrease was partially offset by $0.8 million of additional SG&A expenses from the ~~HSG, BES, Millican, TFS, and~~ Peak acquisitions, as well as increased employee headcount, variable compensation, and other expenses associated with our revenue growth. Share-based compensation expense was higher due to the higher expected share vesting amounts associated with our performance equity awards. SG&A increases as a result of acquisitions in the nurse and allied solutions and other workforce solutions segments were $0.9 million and $8.7 million, respectively.acquisition. The ~~increase~~decrease in unallocated corporate overhead was primarily attributable to ~~higher employee~~lower acquisition and ~~variable expenses to support our growth.~~integration costs. SG&A expenses broken down among the reportable segments, unallocated corporate overhead, and share-based compensation are as follows:



	(In Thousands) Three Months Ended June 30,
	2017		2016
Nurse and allied solutions	$	35,703	$	38,747
Locum tenens solutions	20,073		17,811
Other workforce solutions	22,973		24,517
Unallocated corporate overhead	15,362		15,756
Share-based compensation	2,562		2,710
	$	96,673	$	99,541

(In Thousands)
Three Months Ended September 30,
2016 2015
Nurse and allied solutions $ 39,312
$ 35,570
Locum tenens solutions 19,881
17,889
Other workforce solutions 22,985
13,801
Unallocated corporate overhead 15,113
13,817
Share-based compensation 2,704
2,021
$ 99,995
$ 83,098

Depreciation and Amortization Expenses. Amortization expense increased ~~60%~~2% to ~~$4.8~~$4.6 million for the three months ended ~~September~~June 30, ~~2016~~2017 from ~~$3.0~~$4.5 million for the same period in ~~2015,~~2016, primarily attributable to additional amortization expense related to the intangible assets acquired in the ~~TFS, Millican, BES, HSG, and~~ Peak ~~acquisitions.~~acquisition. Depreciation expense increased ~~30%~~18% to ~~$3.0~~$3.3 million for the three months ended ~~September~~June 30, ~~2016~~2017 from ~~$2.3~~$2.8 million for the same period in ~~2015,~~2016, primarily attributable to fixed assets acquired as part of the ~~TFS, Millican, BES, HSG, and~~ Peak ~~acquisitions~~acquisition and an increase in purchased and developed hardware and software placed in service for our ongoing front and back office information technology initiatives.

Interest Expense, Net, and Other. Interest expense, net, and other, was ~~$3.0~~$4.9 million during the three months ended ~~September~~June 30, ~~2016~~2017 as compared to ~~$2.0~~$2.8 million for the same period in ~~2015.~~2016. The increase is primarily due to a higher ~~average debt outstanding balance~~interest bearing Notes

(as defined below) for the three months ended ~~September~~June 30, ~~2016, which resulted from borrowings used primarily~~2017, as compared to ~~finance~~ the ~~BES~~term loans and ~~Peak acquisitions.~~revolver in the same period last year.

Income Tax Expense. Income tax expense was ~~$16.4~~$20.2 million for the three months ended ~~September~~June 30, ~~2016~~2017 as compared to income tax expense of ~~$1.9~~$18.8 million for the same period in ~~2015,~~2016, reflecting effective income tax rates of ~~37%~~39% and 5%42% for the three months ended ~~September~~June 30, 2017 and 2016, respectively. The difference in the effective income tax rate was primarily attributable to the relationship of pre-tax income to permanent differences related to unrecognized tax benefits and ~~2015, respectively. During~~excess tax benefit from the adoption of ASU 2016-09, “Stock Compensation - Improvements to Employee Share-Based Payment Accounting” in the first quarter of 2017, which resulted in recording a $1.0 million reduction in income tax expense for the three months ended ~~September~~June 30, ~~2015,~~2017. Prior to adoption, this amount would have been recorded as additional paid-in capital. This change could create future volatility in our effective tax rate depending upon the amount of exercise or vesting activity from our share-based awards. See additional information in Item 1. Condensed Consolidated Financial Statements—Note 1 “Basis of Presentation.” Including the impact of the adoption of ASU 2016-09, we ~~recorded a discrete federal income tax benefit of $12.2 million resulting from the IRS federal audit settlement. We~~ currently estimate our annual effective income tax rate to be approximately ~~40%~~38% for ~~2016.~~2017.

Comparison of Results for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2017 to the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2015~~2016

Revenue. Revenue increased ~~33%~~5% to ~~$1,414.4~~$985.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 from ~~$1,060.5~~$941.7 million for the same period in ~~2015,~~2016, due to additional revenue of ~~approximately $148.0~~$12.4 million resulting from our ~~HSG, BES, Millican, TFS, OH, and~~ Peak ~~acquisitions~~acquisition in June 2016 with the remainder of the increase driven by ~~20%~~3% organic growth.

Nurse and allied ~~healthcare~~ solutions segment revenue increased ~~27%~~4% to ~~$877.2~~$614.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 from ~~$690.2~~$590.4 million for the same period in ~~2015. Of the $187.0~~2016. The $23.9 million increase ~~$33.2 million~~ was attributable to the additional revenue in connection with the HSG acquisition and $2.0 million was attributable to the prior year having one less week of revenue from the OH acquisition as it was consummated on January 7, 2015 (the “OH Stub Period”), with the remainder primarily attributable to a ~~15%~~6% increase in the average number of healthcare professionals on assignment and a 7%3% increase in the average bill rate during the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2017. The increase was partially offset by an approximately $29.0 million decrease in labor disruption revenue and the impact of one less calendar day due last year being a leap year.

Locum tenens solutions segment revenue ~~increased 12% to $320.4~~was $211.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016 from $285.8~~2017, as compared to $211.9 million for the same period in ~~2015. Of the $34.6~~2016. The $0.8 million ~~increase, $0.6 million~~decrease was ~~attributable to the additional revenue of Locum Leaders over the OH Stub Period with the remainder~~ primarily attributable to a ~~3% increase~~4% decrease in the number of days filled ~~and~~during the six months ended June 30, 2017, partially offset by a 9%4% increase in the revenue per day ~~filled during the nine months ended September 30, 2016.~~filled.

Other workforce solutions segment revenue increased ~~157%~~14% to ~~$216.8~~$159.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 from ~~$84.4~~$139.5 million for the same period in ~~2015.~~2016. Of the ~~$132.4~~$20.2 million increase, ~~$112.7~~$12.4 million was attributable to the additional revenue in connection with the ~~BES, Millican, TFS, and~~ Peak ~~acquisitions and the additional revenue of Medefis~~

~~over the OH Stub Period,~~acquisition in June 2016 with the remainder primarily attributable to ~~an increase in billable active searches and the average placement value in the physician permanent placement business as well as~~ growth in our VMS, interim leadership, and workforce optimization ~~services revenue~~businesses, partially offset by declines in our permanent placement businesses during the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2017.

Gross Profit.Gross profit increased ~~37%~~5% to ~~$461.1~~$322.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 from ~~$337.6~~$306.7 million for the same period in ~~2015,~~2016, representing gross margins of ~~32.6%~~32.8% and ~~31.8%~~32.6%, respectively. The increase in consolidated gross margin was primarily due to ~~the growth in our~~a higher gross margin ~~other workforce solutions segment and higher bill-to-pay spreads in the locum tenens solutions segment, partially offset by higher direct costs~~ in the nurse and allied solutions segment driven primarily by lower direct costs, partially offset by lower bill-pay spreads within certain specialties in the locum tenens solutions segment and an unfavorable change in sales mix in our other workforce solutions segment during the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2017. Gross margin by reportable segment for the ~~nine~~six months ended ~~September~~June 30, 2017 and 2016 was 27.7% and ~~2015 was~~ 26.7% ~~and 27.1%~~ for nurse and allied solutions, ~~31.2%~~30.3% and ~~29.8%~~31.1% for locum tenens solutions, and ~~58.6%~~55.3% and ~~77.1%~~59.6% for other workforce solutions, respectively. ~~The other workforce solutions segment decrease was primarily due to the change in sales mix resulting from the additions of BES, TFS, and Peak during the nine months ended September 30, 2016.~~

Selling, General and Administrative Expenses.SG&A expenses were ~~$297.4~~$198.7 million, representing 20.2% of revenue, for the six months ended June 30, 2017, as compared to $197.4 million, representing 21.0% of revenue, for the ~~nine months ended September 30, 2016, as compared to $229.4 million, representing 21.6% of revenue, for the~~ same period in ~~2015.~~2016. The increase in SG&A expenses was primarily due to ~~$28.4~~$1.9 million of additional SG&A expenses from the ~~HSG, BES, Millican, TFS, and~~ Peak ~~acquisitions, and OH expenses over the OH Stub Period, as well as increased employee headcount, variable compensation,~~acquisition and other expenses associated with our revenue ~~growth. Share-based compensation expense was higher due~~growth, offset by an additional $2.0 million favorable actuarial-based decrease in our professional liability reserves and $1.5 million decrease in acquisition and integration costs as compared to the higher expected share vesting amounts associated with our performance equity awards. SG&A expense increases as a result of acquisitions in the nurse and allied solutions, locum tenens solutions and other workforce solutions segments were $3.1 million, $0.1 million and $25.2 million, respectively.same period last year. The increase in ~~the~~ unallocated corporate overhead was primarily attributable to higher employee and variable expenses to support our growth. SG&A expenses broken down among the reportable segments, unallocated corporate

overhead, and share-based compensation are as follows:


	(In Thousands) Nine Months Ended September 30,				(In Thousands) Six Months Ended June 30,
	2016		2015		2017		2016
Nurse and allied solutions	$	115,755	$	96,437	$	76,580	$	76,443
Locum tenens solutions	56,247		51,030		39,432		36,366
Other workforce solutions	70,654		36,678		46,457		47,669
Unallocated corporate overhead	45,908		38,681		31,034		30,795
Share-based compensation	8,795		6,551		5,243		6,091
	$	297,359	$	229,377	$	198,746	$	197,364

Depreciation and Amortization Expenses. Amortization expense increased ~~56%~~5% to ~~$13.6~~$9.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 from ~~$8.7~~$8.8 million for the same period in ~~2015,~~2016, primarily attributable to additional amortization expense related to the intangible assets acquired in the ~~TFS, Millican, BES, HSG, and~~ Peak ~~acquisitions.~~acquisition. Depreciation expense increased ~~20%~~21% to ~~$8.3~~$6.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 from ~~$6.9~~$5.3 million for the same period in ~~2015,~~2016, primarily attributable to fixed assets acquired as part of the ~~TFS, Millican, BES, HSG, and~~ Peak ~~acquisitions~~acquisition and an increase in purchased and developed hardware and software placed in service for our ongoing front and back office information technology initiatives.

Interest Expense, Net, and Other. Interest expense, net, and other, was ~~$9.1~~$10.1 million during the ~~nine~~six months ended ~~September~~June 30, ~~2016 and $5.8~~2017 as compared to $6.0 million for the same period in ~~2015.~~2016. The increase is primarily due to a higher ~~average debt outstanding balance~~interest bearing Notes (as defined below) for the ~~nine~~six months ended ~~September~~June 30, ~~2016, which resulted from borrowings used primarily~~2017, as compared to ~~finance~~ the ~~BES~~term loans and ~~Peak acquisitions.~~revolver in the same period last year.

Income Tax Expense. Income tax expense was ~~$53.3~~$35.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 as compared to income tax expense of ~~$25.0~~$36.9 million for the same period in ~~2015,~~2016, reflecting effective income tax rates of ~~40%~~36% and ~~29%~~41% for ~~these periods, respectively. During~~ the ~~nine~~six months ended ~~September~~June 30, ~~2015, we recorded a discrete federal~~2017 and 2016, respectively. The difference in the effective income tax ~~benefit~~rate was primarily attributable to the relationship of ~~$12.2 million resulting~~pre-tax income to permanent differences related to unrecognized tax benefits and excess tax benefit from the ~~IRS federal audit settlement. We~~adoption of ASU 2016-09, “Stock Compensation - Improvements to Employee Share-Based Payment Accounting” in the first quarter of 2017, which resulted in recording a $5.3 million reduction in income tax expense for the six months ended June 30, 2017. Prior to adoption, this amount would have been recorded as additional paid-in capital. Since the majority of our equity awards vest during the first quarter of the year, we do not anticipate the recording of additional excess tax benefits of this magnitude for the remainder of the year. This change could create future volatility in our effective tax rate depending upon the amount of exercise or vesting activity from our share-based awards. See additional information in Item 1. Condensed Consolidated Financial Statements—Note 1 “Basis of Presentation.” Including the impact of the adoption of ASU 2016-09, we currently estimate our annual effective income tax rate to be approximately ~~40%~~38% for ~~2016.~~2017.

Liquidity and Capital Resources

In summary, our cash flows were:


	(In Thousands) Nine Months Ended September 30,						(In Thousands) Six Months Ended June 30,
	2016			2015			2017			2016

Net cash provided by operating activities	$	84,820		$	55,637		$	70,788		$	55,280
Net cash used in investing activities	(241,271		)	(105,634		)	(19,621		)	(233,154		)
Net cash provided by financing activities	162,418			51,290
Net cash provided by (used in) financing activities							(38,873		)	189,235

Historically, our primary liquidity requirements have been for acquisitions, working capital requirements, and debt service under our credit ~~facilities.~~facilities and the Notes. We have funded these requirements through internally generated cash flow and funds borrowed under our credit facilities. ~~We are an obligor under two term loans and we maintain a revolving credit facility (the “Revolver”).~~ As of ~~September~~June 30, ~~2016~~2017, (1) ~~the~~our total ~~of our~~ term ~~loans~~loan outstanding, ~~(including both current and long-term portions),~~ less unamortized fees, was ~~$202.5 million, and~~$18.1 million. The amount was all included in the current portion of the notes payable, less unamortized fees, set forth in our unaudited condensed consolidated balance sheet dated June 30, 2017, as we expect to repay the amount within a year; (2) ~~$182.5 million~~zero was drawn ~~with $81.6~~from $264.2 million of available credit under the ~~Revolver.~~revolving credit facility (the “Revolver”); and (3) the aggregate principal amount of our 5.125% Senior Notes due 2024 (the “Notes”) outstanding equaled $325.0 million. We describe in further detail our amended credit agreement, ~~in effect prior to the second amendment thereof,~~ under which our term ~~loans~~loan and Revolver are governed, and the Notes in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (8), Notes Payable and Credit Agreement” of our ~~2015~~2016 Annual ~~Report. See also Note (7) of the Notes to Unaudited Consolidated Financial Statements set forth in Item 1 of this Quarterly~~ Report.

In April 2015, we entered into an interest rate swap agreement to minimize our exposure to interest rate fluctuations on $100 million of our outstanding variable rate debt under one of our term loans for which we pay a fixed rate of 0.983% per annum and receive a variable rate equal to floating one-month LIBOR. This agreement expires on March 30, 2018, and no initial investment was made to enter into this agreement. On October 3, 2016, we reduced the interest rate swap notional amount to $40 million. ~~See additional information in Item 1, Note (6), “Derivative Instruments.”~~On May 3, 2017, we terminated the remaining interest rate swap.

We believe that cash generated from operations and available borrowings under the Revolver will be sufficient to fund our operations for at least the next ~~12 months and beyond.~~year. We intend to finance potential future acquisitions either with cash provided from operations, borrowings under the Revolver, bank loans, debt or equity offerings, or some combination of the foregoing. The following discussion provides further details of our liquidity and capital resources.

Operating Activities

Net cash provided by operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 was ~~$84.8~~$70.8 million, compared to $~~55.6~~55.3 million for the same period in ~~2015.~~2016. The increase in net cash provided by operating activities was primarily attributable to (1) improved operating results, (2) a decrease in restricted cash, cash equivalents and investments attributable to cash payments made to our captive insurance entity, which are restricted for use by the captive for future claim payments and, to a lesser extent, its working capital needs, and (3) a decrease in accounts receivable and subcontractor receivable between periods due to timing of ~~collections.~~collections, and (3) excess tax benefits on the vesting of employee equity awards resulting from the adoption of a new accounting pronouncement discussed in Item 1. Condensed Consolidated Financial Statements—Note (1), “Basis of Presentation.” The overall increase was partially offset by (1) a decrease in accounts payable and accrued expenses as well as accrued compensation and benefits between periods due to timing of ~~payments.~~payments, and (2) additional cash paid for income taxes during the six months ended June 30, 2017 as compared to the same period last year. Our Days Sales Outstanding (“DSO”) was 62 days at June 30, 2017 and 64 days at each of ~~September 30,~~December 31, 2016 and ~~December 31, 2015, and 60 days at September~~June 30, ~~2015.~~2016.

Investing Activities

Net cash used in investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 was ~~$241.3~~$19.6 million, compared to $~~105.6~~233.2 million for the same period in ~~2015.~~2016. The ~~increase~~decrease was primarily due to ~~$216.6 million used~~no cash paid for acquisitions during the ~~acquisitions of BES and HSG in January 2016 and Peak in~~six months ended June ~~2016~~30, 2017 as compared to ~~$81.1~~$216.4 million used for acquisitions during the ~~nine~~six months ended ~~September~~June 30, ~~2015.~~2016, which was partially offset by a $2.0 million equity investment and a net $0.9 million restricted investment related to our captive insurance entity during the six months ended June 30, 2017. Capital expenditures were ~~$17.7~~$11.7 million and ~~$21.1~~$12.9 million for the ~~nine~~six months ended ~~September~~June 30, 2017 and 2016, ~~and 2015,~~ respectively.

Financing Activities

Net cash ~~provided by~~used in financing activities during the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 was ~~$162.4~~$38.9 million, primarily due to proceeds received of $124.0 million from the Revolver and $75.0 million from a new term loan under our amended credit agreement, which we used to fund our BES and Peak acquisitions, partially offset by (1) the ~~repayments~~repayment of ~~$8.4~~$25.9 million under our term loans, (2) $3.7 million for acquisition contingent consideration earn-out payments, and ~~$24.0~~(3) $9.0 million ~~under the Revolver, and (2) $5.6 million~~in cash paid for shares withheld for payroll taxes resulting from the vesting of employee equity awards. Net cash provided by financing activities during the ~~nine~~six months ended ~~September~~June 30, ~~2015~~2016 was $~~51.3~~189.2 million, primarily due to ~~accessing $84.5~~borrowings of $124.0 million under the Revolver and $75.0 million of borrowings under a new term loan under our amended credit agreement to ~~finance the OH acquisition,~~fund our BES and HSG acquisitions, partially offset by (1) ~~$32.6~~the repayment of $5.6 million ~~for repayments of debt, including both regularly scheduled payments and paying off~~under our ~~prior credit facilities,~~term loans and (2) ~~$11.5~~$5.6 million in cash paid for shares withheld for payroll taxes resulting from the vesting of employee equity awards.

Letters of Credit

At ~~September~~June 30, ~~2016~~2017, we maintained outstanding standby letters of credit totaling ~~$16.6~~$14.9 million as collateral in relation to our professional liability insurance agreements, workers’ compensation insurance agreements, and a corporate office lease agreement. Of the ~~$16.6~~$14.9 million of outstanding letters of credit, we have collateralized ~~$5.6~~$4.1 million in cash and cash equivalents and the remaining amounts are collateralized by the Revolver. Outstanding standby letters of credit at December 31, ~~2015~~2016 totaled ~~$15.8~~$15.4 million.

~~5.125% Senior Notes Due 2024~~

On October 3, 2016, AMN Healthcare, Inc. (the “Issuer”), a wholly owned subsidiary of AMN Healthcare Services, Inc. (the “Parent”), completed the issuance of $325.0 million aggregate principal amount of 5.125% Senior Notes due 2024 (the “Notes”). The Notes will mature on October 1, 2024. Interest on the Notes is payable semi-annually in arrears on April 1 and October 1 of each year, commencing April 1, 2017.

The Notes were issued pursuant to an Indenture (the “Indenture”), dated as of October 3, 2016, by and among the Issuer, the Parent, the subsidiary guarantors party thereto (collectively, together with the Parent, the “Guarantors”) and U.S. Bank National Association, as trustee, and are senior unsecured obligations of the Issuer. The Guarantors have guaranteed (the “Guarantees”) the Issuer’s obligations under the Notes and the Indenture on a senior unsecured basis. The Guarantors include the Parent and the subsidiaries of the Issuer that guarantee the Issuer’s credit facilities under the amended credit agreement.

~~The Notes will rank~~ ~~pari passu~~ in right of payment with all of the Issuer’s existing and future senior indebtedness, senior to all of the Issuer’s existing and future subordinated indebtedness and effectively subordinated to all of the Issuer’s existing and future secured indebtedness, to the extent of the value of the collateral securing such indebtedness.

~~The Guarantees will be each Guarantor’s senior unsecured obligations and will rank~~ ~~pari passu~~ in right of payment with all of such Guarantor’s existing and future senior indebtedness, senior to all of such Guarantor’s existing and future subordinated indebtedness and effectively subordinated to all of such Guarantor’s existing and future secured indebtedness, to the extent of the value of the collateral securing such indebtedness.

The Notes and the Guarantees will be structurally subordinated to all existing and future indebtedness and other liabilities and preferred stock of any of the Issuer’s subsidiaries that do not guarantee the Notes.

At any time and from time to time on and after October 1, 2019, the Issuer will be entitled at its option to redeem all or a portion of the Notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed in percentages of principal amount on the redemption date) set forth below, plus accrued and unpaid interest, if any, to (but excluding) the redemption date (subject to the right of holders of record of the Notes on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the twelve month period commencing on October 1 of the years set forth below:

Period
Redemption
Price
2019 103.844 %
2020 102.563 %
2021 101.281 %
2022 and thereafter 100 %

At any time and from time to time prior to October 1, 2019, the Issuer may also redeem Notes with the net cash proceeds of certain equity offerings in an aggregate principal amount not to exceed 40% of the aggregate principal amount of the Notes issued, at a redemption price (expressed as a percentage of principal amount) of 105.125% of the principal amount thereof plus accrued and unpaid interest to (but excluding) the applicable redemption date.

In addition, the Issuer may redeem some or all of the Notes at any time and from time to time prior to October 1, 2019 at a redemption price equal to 100% of the principal amount of the Notes redeemed, plus accrued and unpaid interest thereon, if any, to (but excluding) the applicable redemption date, plus a “make-whole” premium based on the applicable treasury rate plus 50 basis points.

Upon the occurrence of specified change of control events as defined in the Indenture, the Issuer must offer to repurchase the Notes at 101% of the principal amount, plus accrued and unpaid interest, if any, to (but excluding) the purchase date.

~~The Indenture contains covenants that, among other things, restrict the ability of the Parent, the Issuer and their restricted subsidiaries to:~~

•~~sell assets,~~

•~~pay dividends or make other distributions on capital stock or make payments in respect of subordinated indebtedness,~~

•~~make investments,~~

•~~incur additional indebtedness or issue preferred stock,~~

•~~create certain liens,~~

•~~enter into agreements that restrict dividends or other payments from their restricted subsidiaries to the Issuer, the Parent or their restricted subsidiaries,~~

•~~consolidate, merge or transfer all or substantially all of their assets,~~

•~~engage in transactions with affiliates, and~~

•~~create unrestricted subsidiaries.~~

These covenants are subject to a number of important exceptions and qualifications. The Indenture contains affirmative covenants and events of default that are customary for Indentures governing high yield securities. The Notes and the Guarantees are not subject to any registration rights agreement.

We used the proceeds from the issuance of the Notes to (1) repay $131.3 million of our existing Term Loan indebtedness, (2) repay $7.2 million of our existing Additional Term Loan indebtedness, (3) repay $182.5 million under the Revolver, and (4) pay fees and expenses related to the offering and sale of the Notes.

Off-Balance Sheet Arrangements

At ~~September~~June 30, ~~2016~~2017, we did not have any off-balance sheet arrangement that has or is reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.

Contractual Obligations

There have been no material changes to the table entitled “Contractual Obligations” in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in our ~~2015~~2016 Annual Report that occurred during the ~~nine~~six months ended ~~September~~June 30, ~~2016, other than an increase of $39 million in the amount outstanding under the Revolver.~~2017.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance related to revenue recognition. This new standard will replace all current U.S. GAAP guidance on this topic and eliminate all industry-specific guidance. The new revenue recognition standard provides a unified model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. This guidance provides that the standard will be effective for us beginning January 1, 2017 and can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. In July 2015, the FASB

voted to amend the guidance by approving a one-year delay in the effective date of the new standard to 2018. ~~Under~~In addition, the FASB has also issued several amendments to the standard which clarify certain aspects of the guidance, including principal versus agent consideration and identifying performance obligations. We are in the process of analyzing the impact of this ~~deferred implementation, early adoption~~standard and evaluating the impact on our consolidated financial statements. This includes reviewing current accounting policies and practices to identify potential differences that would result from applying the requirements under the new standard. We expect to complete the evaluation of the impact of the accounting and disclosure requirements on our business processes, controls and systems by the end of the third quarter of 2017. A full assessment is ~~allowed, but not earlier than~~expected to be completed by the ~~original effective date.~~end of 2017. We will adopt this standard in the first quarter of 2018, and apply the modified retrospective approach. We are currently evaluating the ~~timing~~impact of adopting this new ~~standard’s adoption and the effect that adopting it will have~~standard on our consolidated financial ~~statements and related disclosures.~~statements.

In February 2016, the FASB issued ASU 2016-02, “Leases.” This standard requires organizations that lease assets to recognize the assets and liabilities created by those leases. The standard also will require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The ASU becomes effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. We are required to adopt the guidance on a modified retrospective basis and can elect to apply optional practical expedients. We are currently evaluating the ~~timing~~approach we will take and the impact of adopting this new ~~standard’s adoption and the effect that adopting it will have~~standard on our consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers - Principal versus Agent Consideration (Reporting Revenue Gross versus Net).” The standard attempts to clarify the implementation guidance on principal versus agent considerations. When an entity that is a principal satisfies a performance obligation, the entity recognizes revenue in the gross amount of consideration to which it expects to be entitled in exchange for the specified good or service transferred to the customer. When an entity that is an agent satisfies a performance obligation, the entity recognizes revenue in the amount of any fee or commission to which it expects to be entitled in exchange for arranging for the specified good or service to be provided by the other party. The ASU affects the guidance in ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet effective. The effective date and transition requirements for the amendments in this ASU are the same as the effective date and transition requirements of ASU 2014-09. ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers the effective date of ASU 2014-09 by one year to annual periods beginning after December 15, 2017. We are currently evaluating the timing of this new standard’s adoption and the effect that adopting it will have on our financial statements and related disclosures.

In March 2016, the FASB issued ASU 2016-09, “Stock Compensation - Improvements to Employee Share-Based Payment Accounting.” The guidance attempts to simplify the accounting for share-based payment transactions in several areas, including the following: income tax consequences, classification of awards as either equity or liabilities, forfeitures, expected term, and statement of cash flows classification. For public entities, ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, and interim periods within those annual periods. We are currently evaluating the timing of this new standard’s adoption. The income tax benefit impact for the nine months ended September 30, 2016, if the standard had been adopted, would have been $2.8 million.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” The standard provides guidance on how certain cash receipts and payments are presented and classified in the statement of cash flows. For public entities, ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods within those annual periods, and requires a retrospective approach. Early ad

~~option~~adoption is permitted, including adoption in an interim period. We are currently evaluating the timing of this new standard’s adoption and the effect that adopting it will have on our financial statements and related disclosures.

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.” The standard requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The new guidance is effective for interim and annual periods beginning after December 15, 2017 and early adoption is permitted. The amendment should be adopted retrospectively. We are currently evaluating the timing of this new standard’s adoption and the effect that adopting it will have on our financial statements and related disclosures.

In January 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” The standard simplifies the subsequent measurement of goodwill by removing the requirement to perform a hypothetical purchase price allocation to compute the implied fair value of goodwill to measure impairment. Instead, any goodwill impairment will equal the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Further, the guidance eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. This standard is effective for annual or any interim goodwill impairment test in fiscal years beginning after December 15, 2019, with early adoption permitted for impairment tests performed after January 1, 2017. While we continue to assess the potential impact of this standard, we do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

There have been no other new accounting pronouncements issued but not yet adopted that are expected to materially affect our consolidated financial condition or results of operations.

Special Note Regarding Forward-Looking Statements

This Quarterly Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We base these forward-looking statements on our expectations, estimates, forecasts, and projections about future events and about the industry in which we operate. Forward-looking statements are identified by words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “will,” “should,” “would,” “project,” “may,” variations of such words, and other similar expressions. In addition, any statements that refer to projections of financial items, anticipated growth, future growth and revenues, future economic conditions and performance, plans, objectives and strategies for future operations, expectations, or other characterizations of future events or circumstances are forward-looking statements. All forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those discussed in, or implied by, these forward-looking statements. Factors that could cause actual results to differ materially from those implied by the forward-looking statements in this Quarterly Report are set forth in our ~~2015~~2016 Annual Report and include but are not limited to:

the effects of economic downturns or slow recoveries, which could result in less demand for our services and pricing pressures;

the negative effects that intermediary organizations may have on our ability to secure new and profitable contracts with our clients;

the level of consolidation and concentration of buyers of healthcare workforce solutions and staffing services, which could affect the pricing of our services and our ability to mitigate concentration risk;

any inability on our part to anticipate and quickly respond to changing marketplace conditions, such as alternative modes of healthcare delivery, reimbursement, or client needs;

the ability of our clients to retain and increase the productivity of their permanent staff, or their ability to increase the efficiency and effectiveness of their internal recruiting efforts, through online recruiting or otherwise, which may negatively affect our revenue, results of ~~operation,~~operations, and cash ~~flow;~~flows;

the uncertainty regarding a repeal of the Patient Protection and Affordable Care Act without a corresponding replacement, or such a repeal with a corresponding replacement that significantly reduces the number of individuals who maintain health insurance, which may negatively affect the demand for our services;

any inability on our part to grow and operate our business profitably in compliance with federal and state healthcare industry regulation, including conduct of operations, costs and payment for services and payment for referrals as well as laws regarding employment practices and government contracting;

any challenge to the classification of certain of our healthcare professionals as independent contractors, which could adversely affect our profitability;

the effect of investigations, claims, and legal proceedings alleging medical malpractice, violation of employment and wage regulations and other legal theories of liability asserted against us, which could subject us to substantial liabilities;

security breaches and other disruptions that could compromise our information and expose us to liability, which could cause our business and reputation to suffer and could subject us to substantial liabilities;

any inability on our part to implement new infrastructure and technology systems effectively or technology disruptions, either of which may adversely affect our operating results and our ability to manage our business effectively;

disruption to or ~~failure~~failures of our ~~software-as-a-service (SaaS)-based~~SaaS-based technology within certain of our service offerings or our inability to adequately protect our intellectual property rights with respect to such technology, which could reduce client satisfaction, harm our reputation, and negatively affect our business;

our dependence on third parties for the execution of certain critical functions;

cybersecurity risks and cyber incidents, which could adversely affect our business or disrupt our operations;

any inability on our part to recruit and retain sufficient quality healthcare professionals at reasonable costs;

any inability on our part to properly screen and match quality healthcare professionals with suitable placements;

any inability on our part to successfully attract, develop and retain a sufficient number of quality sales and operations personnel;

the loss of our key officers and management personnel, which could adversely affect our business and operating results;

any inability on our part to maintain our positive brand awareness and identity;

any inability on our part to consummate and effectively incorporate acquisitions into our business operations;

any recognition by us of an impairment to goodwill or indefinite-lived intangibles;

the effect of significant adverse adjustments by us to our insurance-related accruals, which could decrease our earnings or increase our losses, as the case may be; ~~and~~

our ~~level of~~significant indebtedness and any inability on our part to generate sufficient cash flow to service our ~~debt.~~debt; and

the terms of our debt instruments that impose restrictions on us that may affect our ability to successfully operate our business.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates, and commodity prices. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, our primary exposure to market risk was interest rate risk associated with our variable interest debt instruments. In April 2015, we entered into an interest rate swap agreement to minimize our exposure to interest rate fluctuations on $100 million of our outstanding variable rate debt under one of our term loans for which we pay a fixed rate of 0.983% per annum and receive a variable rate equal to floating one-month LIBOR. ~~This agreement expires on March 30, 2018,~~In connection with the issuance and ~~no initial investment was made~~sale of the Notes and repayment of a portion of the Term Loans, we reduced the interest rate swap notional amount to ~~enter into it.~~$40 million in the fourth quarter of 2016. On May 3, 2017, we terminated the remaining interest rate swap after further repayment of the Term Loans. A 100 basis point increase in interest rates on our variable rate debt would not have resulted in a material effect on our unaudited condensed consolidated financial statements for the three and ~~nine~~six months ended ~~September~~June 30, 2016. On October 3, 2016, we completed the issuance of $325.0 million aggregate principal amount of the Notes. With the proceeds from the issuance of the Notes, we repaid the full existing balance under the Revolver and a portion of the outstanding balance under the term loan indebtedness.2017. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, we generated all of our revenue in the United States. Accordingly, we believe that our foreign currency risk is immaterial.

Item 4. Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures as of ~~September~~June 30, ~~2016~~2017 were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting that occurred during the quarter ended ~~September~~June 30, ~~2016~~2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

We do not believe that there have been any material changes to the risk factors disclosed in Part I, Item 1A of our ~~2015~~2016 Annual Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits



Exhibit Number		Description

~~4.1~~		Indenture, dated as of October 3, 2016, by and among AMN Healthcare, Inc., the guarantors party thereto, and U.S. Bank National Association.*

~~10.1~~		Second Amendment to Credit Agreement, dated as of September 19, 2016, by and among the Registrant, AMN Healthcare, Inc., the subsidiary guarantors party thereto, and SunTrust Bank, as administrative agent (Incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K dated September 19, 2016, filed with the SEC on September 23, 2016).

31.1		Certification by Susan R. Salka pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.*

31.2		Certification by Brian M. Scott pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.*

32.1		Certification by Susan R. Salka pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

32.2		Certification by Brian M. Scott pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

101.INS		XBRL Instance Document.*

101.SCH		XBRL Taxonomy Extension Schema Document.*

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.*

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.*

101.LAB		XBRL Taxonomy Extension Label Linkbase Document.*

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.*



*		Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: ~~November~~August 4, ~~2016~~2017



AMN HEALTHCARE SERVICES, INC.

/S/ SUSAN R. SALKA
Susan R. Salka President and Chief Executive Officer (Principal Executive Officer)

Date: ~~November~~August 4, ~~2016~~2017

/S/ BRIAN M. SCOTT

Brian M. Scott

Chief Accounting Officer,

Chief Financial Officer and Treasurer

(Principal Accounting and Financial Officer)

3025



Delaware		06-1500476
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

12400 High Bluff Drive, Suite 100 San Diego, California		92130
(Address of Principal Executive Offices)		(Zip Code)


	September 30, 2016			December 31, 2015			June 30, 2017			December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents	$	15,708		$	9,576		$	22,878		$	10,622
Accounts receivable, net of allowances of $7,886 and $7,691 at September 30, 2016 and December 31, 2015, respectively	331,220			277,996
Accounts receivable, net of allowances of $12,634 and $11,376 at June 30, 2017 and December 31, 2016, respectively							334,597			341,977
Accounts receivable, subcontractor	42,094			50,807			36,631			49,233
Prepaid expenses	13,928			13,526			17,153			14,189
Other current assets	30,707			23,723			29,785			34,607
Total current assets	433,657			375,628			441,044			450,628
Restricted cash, cash equivalents and investments	28,222			27,352			33,882			31,287
Fixed assets, net of accumulated depreciation of $84,940 and $76,680 at September 30, 2016 and December 31, 2015, respectively	57,965			50,134
Fixed assets, net of accumulated depreciation of $91,164 and $84,865 at June 30, 2017 and December 31, 2016, respectively							65,368			59,954
Other assets	57,296			47,569			71,594			57,534
Goodwill	342,174			204,779			340,596			341,754
Intangible assets, net of accumulated amortization of $67,326 and $53,747 at September 30, 2016 and December 31, 2015, respectively	250,455			174,970
Intangible assets, net of accumulated amortization of $81,295 and $72,057 at June 30, 2017 and December 31, 2016, respectively							236,486			245,724
Total assets	$	1,169,769		$	880,432		$	1,188,970		$	1,186,881
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	118,289		$	118,822		$	118,943		$	137,512
Accrued compensation and benefits	99,629			83,701			107,283			107,993
Current portion of revolving credit facility	—			30,000
Current portion of notes payable	3,750			7,500
Current portion of notes payable, less unamortized fees							18,071			3,750
Deferred revenue	8,446			5,620			9,644			8,924
Other current liabilities	9,962			5,374			12,387			16,611
Total current liabilities	240,076			251,017			266,328			274,790
Revolving credit facility	182,500			52,500

Notes payable, less unamortized fees	198,793			128,490			319,462			359,192
Deferred income taxes, net	28,278			22,431			12,387			21,420
Other long-term liabilities	86,949			78,134			82,301			82,096
Total liabilities	736,596			532,572			680,478			737,498
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value; 10,000 shares authorized; none issued and outstanding at September 30, 2016 and December 31, 2015	—			—
Common stock, $0.01 par value; 200,000 shares authorized; 48,049 and 47,709 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively	480			477
Preferred stock, $0.01 par value; 10,000 shares authorized; none issued and outstanding at June 30, 2017 and December 31, 2016							—			—
Common stock, $0.01 par value; 200,000 shares authorized; 48,400 issued and 47,947 outstanding, respectively, at June 30, 2017 and 48,055 issued and 47,612 outstanding, respectively, at December 31, 2016							484			481
Additional paid-in capital	449,733			443,733			448,716			452,491
Accumulated deficit	(16,679		)	(96,167		)
Accumulated other comprehensive loss	(361		)	(183		)
Treasury stock, at cost (453 and 443 shares at June 30, 2017 and December 31, 2016, respectively)							(13,590		)	(13,261		)
Retained earnings							72,934			9,671
Accumulated other comprehensive income (loss)							(52		)	1
Total stockholders’ equity	433,173			347,860			508,492			449,383
Total liabilities and stockholders’ equity	$	1,169,769		$	880,432		$	1,188,970		$	1,186,881


	Three Months Ended September 30,					Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2016		2015			2016			2015			2017			2016			2017			2016
Revenue	$	472,636	$	382,859		$	1,414,367		$	1,060,513		$	489,803		$	473,729		$	984,972		$	941,731
Cost of revenue	318,169		256,850			953,249			722,954			328,791			318,976			662,184			635,080
Gross profit	154,467		126,009			461,118			337,559			161,012			154,753			322,788			306,651
Operating expenses:
Selling, general and administrative	99,995		83,098			297,359			229,377			96,673			99,541			198,746			197,364
Depreciation and amortization	7,789		5,304			21,888			15,631			7,959			7,334			15,627			14,099
Total operating expenses	107,784		88,402			319,247			245,008			104,632			106,875			214,373			211,463
Income from operations	46,683		37,607			141,871			92,551			56,380			47,878			108,415			95,188
Interest expense, net, and other	3,016		2,013			9,065			5,797			4,928			2,800			10,058			6,049
Income before income taxes	43,667		35,594			132,806			86,754			51,452			45,078			98,357			89,139
Income tax expense	16,371		1,947			53,319			25,028			20,197			18,756			35,094			36,948
Net income	$	27,296	$	33,647		$	79,487		$	61,726		$	31,255		$	26,322		$	63,263		$	52,191

Other comprehensive income (loss):
Other comprehensive loss:
Foreign currency translation and other	40		54			165			42			(41		)	86			(38		)	125
Unrealized gain (loss) on cash flow hedge, net of income taxes	231		(367		)	(343		)	(331		)
Other comprehensive income (loss)	271		(313		)	(178		)	(289		)
Cash flow hedge, net of income taxes												(58		)	(111		)	(15		)	(574		)
Other comprehensive loss												(99		)	(25		)	(53		)	(449		)

Comprehensive income	$	27,567	$	33,334		$	79,309		$	61,437		$	31,156		$	26,297		$	63,210		$	51,742

Net income per common share:
Basic	$	0.57	$	0.71		$	1.66		$	1.30		$	0.65		$	0.55		$	1.32		$	1.09
Diluted	$	0.55	$	0.69		$	1.61		$	1.27		$	0.63		$	0.53		$	1.28		$	1.06
Weighted average common shares outstanding:
Basic	48,049		47,674			47,993			47,466			47,916			48,034			47,849			47,964
Diluted	49,410		48,978			49,287			48,737			49,475			49,348			49,498			49,225


	Nine Months Ended September 30,						Six Months Ended June 30,
	2016			2015			2017			2016
Cash flows from operating activities:
Net income	$	79,487		$	61,726		$	63,263		$	52,191
Adjustments to reconcile net income to net cash provided by operating activities, net of acquisitions:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	21,888			15,631			15,627			14,099
Non-cash interest expense and other	1,180			1,445			1,121			725
Change in fair value of contingent consideration	(88		)	(300		)	46			214
Increase in allowances for doubtful accounts and sales credits	6,746			5,315			7,740			5,452
Provision for deferred income taxes	(3,209		)	17,683			(9,024		)	(419		)
Share-based compensation	8,795			6,551			5,243			6,091
Excess tax benefits from share-based compensation	(2,764		)	(7,269		)	—			(2,764		)
Loss on disposal or sale of fixed assets	45			3			43			23
Amortization of discount on investments							(42		)	—
Changes in assets and liabilities, net of effects from acquisitions:
Accounts receivable	(42,594		)	(46,732		)	(360		)	(41,434		)
Accounts receivable, subcontractor	8,681			(21,078		)	12,602			4,448
Income taxes receivable	6,160			1,008			(825		)	5,448
Prepaid expenses	(195		)	(2,213		)	(2,964		)	(2,013		)
Other current assets	(10,109		)	(6,111		)	5,562			(7,390		)
Other assets	(4,295		)	(3,454		)	(5,763		)	(4,042		)
Accounts payable and accrued expenses	(791		)	25,808			(18,515		)	12,565
Accrued compensation and benefits	10,761			16,707			(710		)	13,648
Other liabilities	5,736			(4,365		)	525			1,619
Deferred revenue	256			1,140			716			(2,043		)
Restricted cash, cash equivalents and investments balance	(870		)	(5,858		)	(3,497		)	(1,138		)
Net cash provided by operating activities	84,820			55,637			70,788			55,280

Cash flows from investing activities:
Purchase and development of fixed assets	(17,705		)	(21,122		)	(11,741		)	(12,894		)
Equity method investment in Pipeline Health Holdings LLC	—			(1,000		)
Purchase of investments							(7,251		)	—
Proceeds from maturity of investments							8,200			—
Change in restricted cash, cash equivalents and investments balance							(5		)	—
Payments to fund deferred compensation plan	(5,665		)	(2,250		)	(6,824		)	(3,062		)
Equity investment							(2,000		)	—
Cash paid for acquisitions, net of cash received	(216,553		)	(81,097		)	—			(216,350		)
Cash paid for working capital adjustments and holdback liability for prior year acquisitions	(1,348		)	(165		)	—			(848		)
Net cash used in investing activities	(241,271		)	(105,634		)	(19,621		)	(233,154		)

Cash flows from financing activities:
Capital lease repayments	(6		)	(4		)
Payments on term loan	(8,438		)	(5,625		)
Proceeds from term loan	75,000			—
Payments on revolving credit facility	(24,000		)	(27,000		)
Proceeds from revolving credit facility	124,000			84,500
Payment of financing costs	(448		)	—
Earn-out payment for prior acquisition	(900		)	—
Proceeds from exercise of equity awards	—			3,663
Cash paid for shares withheld for taxes	(5,554		)	(11,513		)
Excess tax benefits from share-based compensation	2,764			7,269
Net cash provided by financing activities	162,418			51,290
Effect of exchange rate changes on cash	165			42
Net increase in cash and cash equivalents	6,132			1,335
Cash and cash equivalents at beginning of period	9,576			13,073


	Nine Months Ended September 30,						Six Months Ended June 30,
	2016			2015			2017			2016
Cash flows from financing activities:
Capital lease repayments							—			(2		)
Payments on term loans							(25,938		)	(5,625		)
Proceeds from term loans							—			75,000
Proceeds from revolving credit facility							—			124,000
Repurchase of common stock							(329		)	—
Payment of financing costs							—			(448		)
Earn-out payments for prior acquisitions							(3,677		)	(900		)
Proceeds from termination of derivative contract							85			—
Cash paid for shares withheld for taxes							(9,014		)	(5,554		)
Excess tax benefits from equity awards vested and exercised							—			2,764
Net cash provided by (used in) financing activities							(38,873		)	189,235
Effect of exchange rate changes on cash							(38		)	125
Net increase in cash and cash equivalents							12,256			11,486
Cash and cash equivalents at beginning of period							10,622			9,576
Cash and cash equivalents at end of period	$	15,708		$	14,408		$	22,878		$	21,062

Supplemental disclosures of cash flow information:
Cash paid for interest (net of $158 and $173 capitalized for the nine months ended September 30, 2016 and 2015, respectively)	$	7,106		$	4,334
Cash paid for interest (net of $58 and $154 capitalized for the six months ended June 30, 2017 and 2016, respectively)							$	9,129		$	4,678
Cash paid for income taxes	$	52,684		$	20,655		$	45,164		$	34,110
Acquisitions:
Fair value of tangible assets acquired in acquisitions, net of cash received	$	18,789		$	26,340		$	—		$	18,176
Goodwill	136,521			46,891			—			137,174
Intangible assets	89,064			33,592			—			89,084
Liabilities assumed	(21,921		)	(22,526		)	—			(21,892		)
Holdback provision	(1,830		)	(500		)	—			(2,122		)
Earn-out liabilities	(4,070		)	(2,700		)	—			(4,070		)
Net cash paid for acquisitions	$	216,553		$	81,097		$	—		$	216,350
Supplemental disclosures of non-cash investing and financing activities:
Purchase of fixed assets recorded in accounts payable and accrued expenses	$	1,370		$	2,206		$	2,239		$	1,720
Convertible loan converted to equity method investment in Pipeline Health Holdings LLC	$	—		$	1,000


Item		Page		Page

	PART I - FINANCIAL INFORMATION		PART I - FINANCIAL INFORMATION

1.	Condensed Consolidated Financial Statements (unaudited):	1	Condensed Consolidated Financial Statements (unaudited):	1
	Condensed Consolidated Balance Sheets, As of September 30, 2016 and December 31, 2015	1	Condensed Consolidated Balance Sheets, As of June 30, 2017 and December 31, 2016	1
	Condensed Consolidated Statements of Comprehensive Income, For the Three and Nine Months Ended September 30, 2016 and 2015	2	Condensed Consolidated Statements of Comprehensive Income, For the Three and Six Months Ended June 30, 2017 and 2016	2
	Condensed Consolidated Statements of Cash Flows, For the Nine Months Ended September 30, 2016 and 2015	3	Condensed Consolidated Statements of Cash Flows, For the Six Months Ended June 30, 2017 and 2016	3
	Notes to Unaudited Condensed Consolidated Financial Statements	5	Notes to Unaudited Condensed Consolidated Financial Statements	5
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
3.	Quantitative and Qualitative Disclosures about Market Risk	27	Quantitative and Qualitative Disclosures about Market Risk	22
4.	Controls and Procedures	27	Controls and Procedures	22

	PART II - OTHER INFORMATION		PART II - OTHER INFORMATION


1.	Legal Proceedings	28	Legal Proceedings	23
1A.	Risk Factors	28	Risk Factors	23
2.	Unregistered Sales of Equity Securities and Use of Proceeds	28	Unregistered Sales of Equity Securities and Use of Proceeds	23
3.	Defaults Upon Senior Securities	28	Defaults Upon Senior Securities	23
4.	Mine Safety Disclosures	28	Mine Safety Disclosures	23
5.	Other Information	28	Other Information	23
6.	Exhibits	29	Exhibits	24
	Signatures	30	Signatures	25



	Three Months Ended September 30, 2015		Nine Months Ended September 30, 2015
Revenue	$	407,172	$	1,127,939
Income from operations	$	39,172	$	96,071
Net income	$	32,947	$	60,810
Net income per common share:
Basic	$	0.69	$	1.28
Diluted	$	0.67	$	1.25


	Fair Value Measurements as of September 30, 2016											Fair Value Measurements as of June 30, 2017
	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Money market funds	$	5,627		$	5,627	$	—		$	—		$	4,633		$	4,633	$	—	$	—
Commercial paper	20,989			—		20,989			—			27,722			—		27,722		—
Interest rate swap liability	(396		)	—		(396		)	—
Acquisition contingent consideration earn-out liabilities	(6,752		)	—		—			(6,752		)	(1,932		)	—		—		(1,932		)


	Fair Value Measurements as of December 31, 2015										Fair Value Measurements as of December 31, 2016
	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Money market funds	$	5,627		$	5,627	$	—	$	—		$	4,627		$	4,627	$	—	$	—
Commercial paper											25,610			—		25,610		—
Interest rate swap asset	165			—		165		—			24			—		24		—
Acquisition contingent consideration earn-out liabilities	(3,770		)	—		—		(3,770		)	(6,816		)	—		—		(6,816		)



Period	Redemption Price
2019		103.844	%
2020		102.563	%
2021		101.281	%
2022 and thereafter		100	%

Large accelerated filer x

Accelerated filer o

Non-accelerated filer o

Smaller reporting company o

Emerging growth company o