UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________

FORM 10-Q

____________________



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, ~~2017~~2018
	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

AMN HEALTHCARE SERVICES, INC.

(Exact Name of Registrant as Specified in Its Charter)



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)

Registrant’s Telephone Number, Including Area Code: (866) 871-8519

____________________

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



Large accelerated filer x	Accelerated filer o	Non-accelerated filer o
Smaller reporting company o	Emerging growth company o

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

Act). Yes o No x

As of ~~November 1, 2017~~October 31, 2018, there were ~~47,772,333~~46,867,877 shares of common stock, $0.01 par value, outstanding.

TABLE OF CONTENTS


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, 2017 and December 31, 2016	1	Condensed Consolidated Balance Sheets, As of September 30, 2018 and December 31, 2017	1
	Condensed Consolidated Statements of Comprehensive Income, For the Three and Nine Months Ended September 30, 2017 and 2016	2	Condensed Consolidated Statements of Comprehensive Income, For the Three and Nine Months Ended September 30, 2018 and 2017	2
	Condensed Consolidated Statements of Cash Flows, For the Nine Months Ended September 30, 2017 and 2016	3	Condensed Consolidated Statements of Cash Flows, For the Nine Months Ended September 30, 2018 and 2017	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	14	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
3.	Quantitative and Qualitative Disclosures about Market Risk	22	Quantitative and Qualitative Disclosures about Market Risk	23
4.	Controls and Procedures	23	Controls and Procedures	24

	PART II - OTHER INFORMATION		PART II - OTHER INFORMATION


1.	Legal Proceedings	24	Legal Proceedings	25
1A.	Risk Factors	24	Risk Factors	25
2.	Unregistered Sales of Equity Securities and Use of Proceeds	24	Unregistered Sales of Equity Securities and Use of Proceeds	25
3.	Defaults Upon Senior Securities	24	Defaults Upon Senior Securities	25
4.	Mine Safety Disclosures	24	Mine Safety Disclosures	25
5.	Other Information	24	Other Information	25
6.	Exhibits	25	Exhibits	26
	Signatures	26	Signatures	27

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)


	September 30, 2017			December 31, 2016			September 30, 2018			December 31, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	19,625		$	10,622		$	18,614		$	15,147
Accounts receivable, net of allowances of $11,381 and $11,376 at September 30, 2017 and December 31, 2016, respectively	343,596			341,977
Accounts receivable, net of allowances of $9,741 and $9,801 at September 30, 2018 and December 31, 2017, respectively							366,436			350,496
Accounts receivable, subcontractor	37,200			49,233			44,891			41,012
Prepaid expenses	15,832			14,189			14,540			16,505
Other current assets	26,220			34,607			35,358			50,993
Total current assets	442,473			450,628			479,839			474,153
Restricted cash, cash equivalents and investments	34,380			31,287			59,453			64,315
Fixed assets, net of accumulated depreciation of $94,531 and $84,865 at September 30, 2017 and December 31, 2016, respectively	68,188			59,954
Fixed assets, net of accumulated depreciation of $109,846 and $97,889 at September 30, 2018 and December 31, 2017, respectively							86,817			73,431
Other assets	73,962			57,534			93,206			74,366
Goodwill	340,596			341,754			438,299			340,596
Intangible assets, net of accumulated amortization of $85,990 and $72,057 at September 30, 2017 and December 31, 2016, respectively	231,791			245,724
Intangible assets, net of accumulated amortization of $108,283 and $90,685 at September 30, 2018 and December 31, 2017, respectively							332,788			227,096
Total assets	$	1,191,390		$	1,186,881		$	1,490,402		$	1,253,957
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	117,934		$	137,512		$	142,543		$	130,319
Accrued compensation and benefits	111,984			107,993			135,632			121,423
Current portion of notes payable, less unamortized fees	—			3,750
Deferred revenue	9,609			8,924			13,107			8,384
Other current liabilities	5,440			16,611			11,806			5,146
Total current liabilities	244,967			274,790			303,088			265,272

Revolving credit facility							150,000			—
Notes payable, less unamortized fees	319,652			359,192			320,416			319,843
Deferred income taxes, net	11,899			21,420			24,651			27,036
Other long-term liabilities	82,673			82,096			77,527			79,279
Total liabilities	659,191			737,498			875,682			691,430
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value; 10,000 shares authorized; none issued and outstanding at September 30, 2017 and December 31, 2016	—			—
Common stock, $0.01 par value; 200,000 shares authorized; 48,402 issued and 47,772 outstanding, respectively, at September 30, 2017 and 48,055 issued and 47,612 outstanding, respectively, at December 31, 2016	484			481
Preferred stock, $0.01 par value; 10,000 shares authorized; none issued and outstanding at September 30, 2018 and December 31, 2017							—			—
Common stock, $0.01 par value; 200,000 shares authorized; 48,809 issued and 46,914 outstanding at September 30, 2018 and 48,411 issued and 47,481 outstanding at December 31, 2017							488			484
Additional paid-in capital	451,136			452,491			449,868			453,351
Treasury stock, at cost (630 and 443 shares at September 30, 2017 and December 31, 2016, respectively)	(20,358		)	(13,261		)
Treasury stock, at cost (1,895 and 930 shares at September 30, 2018 and December 31, 2017, respectively)							(86,175		)	(33,425		)
Retained earnings	101,062			9,671			250,446			142,229
Accumulated other comprehensive income (loss)	(125		)	1			93			(112		)
Total stockholders’ equity	532,199			449,383			614,720			562,527
Total liabilities and stockholders’ equity	$	1,191,390		$	1,186,881		$	1,490,402		$	1,253,957

See accompanying notes to unaudited condensed consolidated financial statements.

AMN HEALTHCARE SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited and in thousands, except per share amounts)


	Three Months Ended September 30,					Nine Months Ended September 30,						Three Months Ended September 30,					Nine Months Ended September 30,
	2017			2016		2017			2016			2018		2017			2018		2017
Revenue	$	494,406		$	472,636	$	1,479,378		$	1,414,367		$	526,842	$	494,406		$	1,607,439	$	1,479,378
Cost of revenue	334,867			318,169		997,051			953,249			351,695		334,867			1,083,512		997,051
Gross profit	159,539			154,467		482,327			461,118			175,147		159,539			523,927		482,327
Operating expenses:
Selling, general and administrative	100,579			99,995		299,325			297,359			121,216		100,579			341,488		299,325
Depreciation and amortization	8,132			7,789		23,759			21,888			11,296		8,132			29,788		23,759
Total operating expenses	108,711			107,784		323,084			319,247			132,512		108,711			371,276		323,084
Income from operations	50,828			46,683		159,243			141,871			42,635		50,828			152,651		159,243
Interest expense, net, and other	4,837			3,016		14,895			9,065			4,649		4,837			16,360		14,895
Income before income taxes	45,991			43,667		144,348			132,806			37,986		45,991			136,291		144,348
Income tax expense	17,863			16,371		52,957			53,319			10,068		17,863			30,163		52,957
Net income	$	28,128		$	27,296	$	91,391		$	79,487		$	27,918	$	28,128		$	106,128	$	91,391

Other comprehensive income (loss):
Foreign currency translation and other	(73		)	40		(111		)	165			133		(73		)	205		(111		)
Cash flow hedge, net of income taxes	—			231		(15		)	(343		)	—		—			—		(15		)
Other comprehensive income (loss)	(73		)	271		(126		)	(178		)	133		(73		)	205		(126		)

Comprehensive income	$	28,055		$	27,567	$	91,265		$	79,309		$	28,051	$	28,055		$	106,333	$	91,265

Net income per common share:
Basic	$	0.59		$	0.57	$	1.91		$	1.66		$	0.59	$	0.59		$	2.23	$	1.91
Diluted	$	0.57		$	0.55	$	1.85		$	1.61		$	0.58	$	0.57		$	2.17	$	1.85
Weighted average common shares outstanding:
Basic	47,912			48,049		47,870			47,993			47,286		47,912			47,556		47,870
Diluted	49,445			49,410		49,480			49,287			48,529		49,445			48,859		49,480

See accompanying notes to unaudited condensed consolidated financial statements.

AMN HEALTHCARE SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and in thousands)


	Nine Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2018			2017 *As Adjusted
Cash flows from operating activities:
Net income	$	91,391		$	79,487		$	106,128		$	91,391
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	23,759			21,888			29,788			23,759
Non-cash interest expense and other	1,718			1,180			591			1,718
Write-off of fees on the prior credit facilities							574			—
Change in fair value of contingent consideration	66			(88		)	(1,307		)	66
Increase in allowances for doubtful accounts and sales credits	9,012			6,746			6,240			9,012
Provision for deferred income taxes	(9,512		)	(3,209		)	(2,384		)	(9,512		)
Share-based compensation	7,720			8,795			7,954			7,720
Excess tax benefits from share-based compensation	—			(2,764		)
Loss on disposal or sale of fixed assets	130			45			40			130
Amortization of discount on investments	(112		)	—			(78		)	(112		)
Changes in assets and liabilities, net of effects from acquisitions:
Accounts receivable	(10,631		)	(42,594		)	743			(10,631		)
Accounts receivable, subcontractor	12,033			8,681			(3,879		)	12,033
Income taxes receivable	(1,854		)	6,160			12,997			(1,854		)
Prepaid expenses	(1,643		)	(195		)	2,334			(1,643		)
Other current assets	10,155			(10,109		)	446			6,100
Other assets	(5,204		)	(4,295		)	(1,019		)	(5,204		)
Accounts payable and accrued expenses	(20,442		)	(791		)	7,311			(20,442		)
Accrued compensation and benefits	3,991			10,761			11,014			3,991
Other liabilities	(5,112		)	5,736			(10,423		)	(5,112		)
Deferred revenue	678			256			1,062			678
Restricted cash, cash equivalents and investments balance	(9,761		)	(870		)
Restricted investments balance							(86		)	8
Net cash provided by operating activities	96,382			84,820			168,046			102,096

Cash flows from investing activities:
Purchase and development of fixed assets	(17,168		)	(17,705		)	(23,922		)	(17,168		)
Purchase of investments	(11,021		)	—			(27,185		)	(11,021		)
Proceeds from maturity of investments	17,200			—			10,400			17,200
Change in restricted cash, cash equivalents and investments balance	601			—
Payments to fund deferred compensation plan	(10,056		)	(5,665		)	(7,800		)	(10,056		)
Equity investment	(2,000		)	—			(4,600		)	(2,000		)
Cash paid for acquisitions, net of cash received	—			(216,553		)	(217,361		)	—
Cash paid for other intangibles							(1,180		)	—
Cash paid for working capital adjustments and holdback liability for prior year acquisitions	(1,000		)	(1,348		)	—			(1,000		)
Net cash used in investing activities	(23,444		)	(241,271		)	(271,648		)	(24,045		)


	Nine Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2018			2017 *As Adjusted
Cash flows from financing activities:
Capital lease repayments	—			(6		)
Payments on term loans	(44,063		)	(8,438		)	—			(44,063		)
Proceeds from term loans	—			75,000
Payments on revolving credit facility	—			(24,000		)	(45,000		)	—
Proceeds from revolving credit facility	—			124,000			195,000			—
Repurchase of common stock	(7,097		)	—			(52,750		)	(7,097		)
Payment of financing costs	—			(448		)	(2,331		)	—
Earn-out payments for prior acquisitions	(3,677		)	(900		)	(1,713		)	(3,677		)
Proceeds from termination of derivative contract	85			—			—			85
Cash paid for shares withheld for taxes	(9,072		)	(5,554		)	(11,432		)	(9,072		)
Excess tax benefits from equity awards vested and exercised	—			2,764
Net cash provided by (used in) financing activities	(63,824		)	162,418			81,774			(63,824		)
Effect of exchange rate changes on cash	(111		)	165			205			(111		)
Net increase in cash and cash equivalents	9,003			6,132
Cash and cash equivalents at beginning of period	10,622			9,576
Cash and cash equivalents at end of period	$	19,625		$	15,708
Net increase (decrease) in cash, cash equivalents and restricted cash							(21,623		)	14,116
Cash, cash equivalents and restricted cash at beginning of period							98,894			51,028
Cash, cash equivalents and restricted cash at end of period							$	77,271		$	65,144

Supplemental disclosures of cash flow information:
Cash paid for interest (net of $113 and $158 capitalized for the nine months ended September 30, 2017 and 2016, respectively)	$	9,395		$	7,106
Cash paid for interest (net of $368 and $113 capitalized for the nine months ended September 30, 2018 and 2017, respectively)							$	11,521		$	9,395
Cash paid for income taxes	$	65,998		$	52,684		$	21,223		$	65,998
Acquisitions:
Fair value of tangible assets acquired in acquisitions, net of cash received	$	—		$	18,789		$	24,027		$	—
Goodwill	—			136,521			97,703			—
Intangible assets	—			89,064			122,111			—
Liabilities assumed	—			(21,921		)	(16,380		)	—
Holdback provision	—			(1,830		)
Earn-out liabilities	—			(4,070		)	(10,100		)	—
Net cash paid for acquisitions	$	—		$	216,553		$	217,361		$	—
Supplemental disclosures of non-cash investing and financing activities:
Purchase of fixed assets recorded in accounts payable and accrued expenses	$	3,156		$	1,370		$	4,504		$	3,156

* See Note (1) for a summary of adjustments.

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.~~States ("U.S. GAAP"). Please refer to the Company’s audited consolidated financial statements and the related notes for the fiscal year ended December 31, ~~2016,~~2017, contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016,~~2017, filed with the Securities and Exchange Commission on February ~~17,~~ 16, 2018 (“2017 ~~(“2016~~ Annual Report”).

The preparation of financial statements in conformity with ~~accounting principles generally accepted in the United States~~U.S. GAAP 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 ~~March 2016,~~May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting ~~Standards~~Standard Update ~~(“ASU”~~("ASU") ~~2016-09, “Stock Compensation - Improvements to Employee Share-Based Payment Accounting.~~2014-09, Revenue from Contracts with Customers (Topic 606).” The FASB also issued a series of other ASUs, which update ASU 2014-09 (collectively, the “new revenue recognition standard”). This new standard replaces all previous U.S. GAAP guidance ~~attempts~~on this topic and eliminates all industry-specific guidance. The new revenue recognition standard provides a unified model to ~~simplify~~determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the ~~accounting~~transfer of promised goods or services to customers in an amount that reflects the consideration for ~~share-based payment transactions~~which the entity expects to be entitled in ~~several areas, including the following: income tax consequences, classification of awards as either equity~~exchange for those goods or ~~liabilities, forfeitures, expected term, and statement of cash flows classification.~~services. The Company adopted this ~~pronouncement prospectively beginning~~standard effective January 1, ~~2017. Accordingly,~~2018, using the ~~prior~~modified retrospective transition method applied to those contracts which were not completed as of that date. Revenue from substantially all of our contracts with customers continues to be recognized over time as services are rendered. The Company recognized the cumulative effect of adopting this guidance as an adjustment to its opening balance of retained earnings of $2,089, net of tax, primarily related to capitalization of contract costs. Prior period ~~has~~amounts are not ~~been~~retrospectively adjusted and continue to be reported in accordance with the ~~primary effects~~accounting standards in effect for those periods. The impact of the adoption ~~for~~of the ~~current period are as follows:~~

~~The Company recorded $56 and $5,381 of tax benefits within income tax expense~~new standard was not material to the Company’s condensed consolidated financial statements for the three and nine months ended September 30, ~~2017, respectively, related to the excess tax benefit on share-based compensation. Prior to adoption, this amount would have been recorded as additional paid-in capital;~~

2018. The Company ~~continued to estimate~~expects the ~~number of awards expected~~impact to be ~~forfeited~~immaterial on an ongoing basis. See additional information regarding revenue recognition and disaggregated revenue in ~~accordance~~Note (3), “Revenue Recognition” and Note (5), “Segment Information,” respectively.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments—Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities.” The FASB also subsequently issued ASU 2018-03, which provides amendments to ASU 2016-01. These standards require equity investments, except those accounted for using the equity method of accounting, to be measured at fair value with ~~its existing~~changes in fair value recognized through net income. The new guidance also provides a measurement alternative for equity investments that do not have readily determinable fair values, which were previously accounted for under the cost method of accounting, ~~policy, which is~~ to ~~estimate forfeitures when recording share-based compensation expense;~~

be recorded at cost, less impairment, adjusted for observable price changes from orderly transactions for identical or similar investments of the same issuer. For public entities, these standards are effective for fiscal years beginning after December 15, 2017, and interim periods within those annual periods. The Company ~~excluded~~adopted the ~~excess tax benefits from~~standards prospectively effective January 1, 2018 and elected to use the ~~assumed proceeds available to repurchase shares~~measurement alternative. See additional information in Note (7), “Fair Value Measurement.”

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 ~~computation~~statement of ~~its diluted earnings per share~~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. The Company adopted this standard effective January 1, 2018 and the adoption did not have a material effect on the Company’s consolidated financial statements.

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 explains the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents (collectively, “restricted cash”). Therefore, restricted cash 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. The Company adopted this standard retrospectively effective January 1, 2018 and included certain restricted cash amounts for the ~~three and nine months ended September 30, 2017. The effect of this change on its diluted earnings per share was not significant; and~~

~~For the nine months~~period ended September 30, 2017 within the accompanying condensed consolidated statements of cash ~~flows~~flows. These adjustments had no effect on previously reported results of operations or retained earnings. The following table provides a summary of the adjustments from amounts previously reported.



	Nine Months Ended September 30, 2017
	As Previously Reported			Adjustments			As Adjusted
Cash flows from operating activities:
Changes in assets and liabilities:
Other current assets	10,155			(4,055		)	6,100
Restricted cash, cash equivalents and investments balance	(9,761		)	9,769			8
Net cash provided by operating activities	96,382			5,714			102,096

Cash flows from investing activities
Change in restricted cash, cash equivalents and investments balance	601			(601		)	—
Net cash used in investing activities	(23,444		)	(601		)	(24,045		)

Net increase in cash, cash equivalents and restricted cash	$	9,003		$	5,113		$	14,116
Cash, cash equivalents and restricted cash at the beginning of period	10,622			40,406			51,028
Cash, cash equivalents and restricted cash at the end of period	$	19,625		$	45,519		$	65,144

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the accompanying condensed consolidated balance sheets and related notes to ~~excess tax benefits were classified as an operating activity.~~the amounts presented in the accompanying condensed consolidated statements of cash flows.



	September 30, 2018			December 31, 2017
Cash and cash equivalents	$	18,614		$	15,147
Restricted cash and cash equivalents (included in other current assets)	22,227			25,506
Restricted cash, cash equivalents and investments	59,453			64,315
Total cash, cash equivalents and restricted cash and investments	100,294			104,968
Less restricted investments	(23,023		)	(6,074		)
Total cash, cash equivalents and restricted cash	$	77,271		$	98,894

There were no other material impacts to the Company's consolidated financial statements as a result of adopting ~~this~~these updated ~~standard.~~standards.

Reclassification

To conform to the current year presentation, certain reclassifications that are not material have been made to the prior year's balances in Note (10), “Balance Sheet Details."

2. ~~BUSINESS COMBINATIONS~~ACQUISITIONS

As set forth below, the Company completed ~~three~~two acquisitions during ~~2016.~~the nine months ended September 30, 2018. 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~~MedPartners Acquisition

On ~~June 3, 2016,~~April 9, 2018, the Company completed its acquisition of ~~Peak Provider Solutions~~MedPartners HIM (“~~Peak”~~MedPartners”), which provides ~~remote~~case management, clinical documentation improvement, medical coding and ~~consulting solutions~~registry services 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~~$200,711 included (1) ~~$51,645~~$196,533 cash consideration paid upon acquisition, funded through ~~cash-on-hand, net of cash received, and~~ borrowings under the Company’s $400,000 secured revolving credit facility (the “Senior Credit Facility”), provided for under a credit agreement (the “New Credit Agreement”), dated as of February 9, 2018, by and among the Company and several lenders, and (2) a contingent earn-out payment of up to ~~$3,000~~$20,000 with an estimated fair value of ~~$480~~$4,400 as of the acquisition date. The contingent earn-out payment ~~was~~is based on (A) up to $10,000 based on the operating results of ~~Peak~~MedPartners for the ~~year~~twelve months ending December 31, ~~2016, which resulted in no earn-out payment.~~2018, and (B) up to $10,000 based on the operating results of MedPartners for the six months ending June 30, 2019. As the ~~acquisition was~~acquisition’s operations are not considered ~~significant,~~material, pro forma information ~~has~~is not ~~been~~ provided. The results of ~~Peak~~MedPartners 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~~2018, $222 was ~~paid~~returned to the ~~selling shareholders~~Company for the final working capital settlement.

The preliminary allocation of the ~~$52,400~~$200,711 purchase price ~~which included the additional cash consideration paid for the final working capital settlement,~~ consisted of (1) ~~$5,658~~$28,425 of fair value of tangible assets acquired, which included $8,403 cash received, (2) ~~$9,346~~$11,809 of liabilities assumed, (3) ~~$19,220~~$103,000 of identified intangible assets, and (4) ~~$36,868~~$81,095 of goodwill, ~~none~~all of which is deductible for tax purposes. The fair value of intangible assets ~~primarily~~ includes ~~$7,600~~$46,000 of trademarks and ~~$11,500~~$57,000 of customer relationships with a weighted average useful life of approximately ~~thirteen~~sixteen years.

~~HealthSource Global Staffing~~Phillips DiPisa and Leaders For Today Acquisition

On ~~January 11, 2016,~~April 6, 2018, the Company completed its acquisition of ~~HealthSource Global Staffing~~two related entities, Phillips DiPisa and Leaders For Today (“~~HSG”~~PDA and LFT”), which ~~provides labor disruption~~offer a range of leadership staffing and ~~rapid response staffing. The acquisition helps~~permanent placement solutions for the ~~Company expand its service lines and provide clients with rapid response staffing services.~~healthcare industry. The initial purchase price of ~~$8,511~~$35,503 included (1) ~~$2,799~~$30,268 cash consideration paid upon acquisition, funded through ~~cash-on-hand, net of~~ cash ~~received,~~on hand, 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~~$7,000 with an estimated fair value of ~~$3,590~~$5,700 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~~PDA and LFT for the ~~year~~twelve months 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.~~2018. As the ~~acquisition was~~acquisition’s operations are not considered ~~significant,~~material, pro forma information ~~has~~is not ~~been~~ provided. The results of ~~HSG have been included in the Company’s nurse~~PDA 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 allocation of the $8,219 purchase price, which was reduced by the final working capital settlement, consisted of (1) $1,025 of fair value of tangible assets acquired, (2) $3,698 of liabilities assumed, (3) $3,944 of identified intangible assets, and (4) $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 was more fully described 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 results of BESLFT have been included in the Company’s other workforce solutions segment since the date of acquisition. During the ~~second~~third quarter of ~~2016, $524~~2018, $465 was returned to the Company for the final working capital settlement.

The preliminary allocation of the ~~$161,708~~$35,503 purchase price ~~which was reduced by the final working capital settlement,~~ consisted of (1) ~~$11,953~~$4,356 of fair value of tangible assets acquired, which included $351 cash received, (2) ~~$7,272~~$4,571 of liabilities assumed, (3) ~~$65,900~~$19,110 of identified intangible assets, and (4) ~~$91,127~~$16,608 of goodwill, ~~most~~all of which is deductible for tax purposes. The fair value of intangible assets ~~acquired have~~includes $5,400 of trademarks, $8,000 of customer relationships and $5,710 of staffing databases with a weighted average useful life of approximately ~~fifteen~~twelve 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

3. REVENUE RECOGNITION

Revenue primarily 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 is recognized when control of these services is transferred to the customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. Revenue from temporary staffing services is recognized as the services are rendered by ~~the~~clinical and non-clinical healthcare ~~professional or executive.~~professionals. 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~~network of healthcare professionals along with those of third-party subcontractors. Revenue and the related direct costs under MSP arrangements are recorded in accordance with the accounting guidance on reporting revenue gross as a principal versus net as an agent. When the Company uses subcontractors and acts as an agent, revenue is recorded net of the related subcontractor’s expense. ~~Payables to subcontractors of $38,167 and~~ ~~$51,973~~ ~~were included in accounts payable and accrued expenses in the unaudited condensed consolidated balance sheet as of~~ ~~September 30, 2017~~ ~~and the consolidated balance sheet as of~~ ~~December 31, 2016, respectively.~~ Revenue from ~~recruitment and~~executive search, physician permanent placement, and recruitment process outsourcing services is recognized as the services are ~~provided and upon successful placements.~~rendered. The Company’s SaaS-based revenue is recognized ratably over the applicable arrangement’s service period. ~~Fees~~

The Company’s customers are primarily billed as services are rendered. Any fees billed in advance of being earned are recorded as deferred revenue. During the nine months ended September 30, 2018, the amount recognized as revenue that was previously deferred was not material.

Under the new revenue recognition standard, the Company has elected to apply the following practical expedients and optional exemptions:

Recognize incremental costs of obtaining a contract with amortization periods of one year or less as expense when incurred. These costs are recorded within selling, general and administrative expenses.

Recognize revenue in the amount of consideration to which the Company has a right to invoice the customer if that amount corresponds directly with the value to the customer of the Company’s services completed to date.

Exemptions from disclosing the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, (ii) contracts for which revenue is recognized in the amount of consideration to which the Company has a right to invoice for services performed and (iii) contracts for which variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct service that forms part of a single performance obligation.

See additional information regarding adoption of the new revenue standard in Note (1), “Basis of Presentation” and additional disclosures required by the new revenue standard in Note (5), “Segment Information.”

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 months ended September 30, ~~2017~~2018 and ~~2016~~2017, respectively:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016		2018		2017		2018		2017
Net income	$	28,128	$	27,296	$	91,391	$	79,487	$	27,918	$	28,128	$	106,128	$	91,391

Net income per common share - basic	$	0.59	$	0.57	$	1.91	$	1.66	$	0.59	$	0.59	$	2.23	$	1.91
Net income per common share - diluted	$	0.57	$	0.55	$	1.85	$	1.61	$	0.58	$	0.57	$	2.17	$	1.85

Weighted average common shares outstanding - basic	47,912		48,049		47,870		47,993		47,286		47,912		47,556		47,870
Plus dilutive effect of potential common shares	1,533		1,361		1,610		1,294		1,243		1,533		1,303		1,610
Weighted average common shares outstanding - diluted	49,445		49,410		49,480		49,287		48,529		49,445		48,859		49,480

Share-based awards to purchase 36 and 27 shares of common stock were not included in the above calculation of diluted net income per common share for the three and nine months ended September 30, 2018, respectively, because the effect of these instruments was anti-dilutive. Share-based awards to purchase 10 and 14 shares of common stock were not included in the above calculation of diluted net income per common share for the three and nine months ended September 30, 2017, respectively, because the effect of these instruments was anti-dilutive. Share-based awards to purchase 11 and 18 shares of common stock were not included in the above calculation of diluted net income per common share for the three and nine months ended September 30, 2016 because the effect of these instruments was anti-dilutive.

5. SEGMENT INFORMATION

The Company has three reportable segments: nurse and allied solutions, locum tenens solutions, and other workforce solutions.

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 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:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016		2018		2017		2018		2017
Revenue
Nurse and allied solutions	$	302,933	$	286,810	$	917,183	$	877,197	$	306,292	$	302,933	$	977,199	$	917,183
Locum tenens solutions	111,415		108,553		322,473		320,420		101,102		111,415		311,516		322,473
Other workforce solutions	80,058		77,273		239,722		216,750		119,448		80,058		318,724		239,722
	$	494,406	$	472,636	$	1,479,378	$	1,414,367	$	526,842	$	494,406	$	1,607,439	$	1,479,378
Segment operating income
Nurse and allied solutions	$	40,807	$	37,396	$	134,638	$	118,517	$	42,165	$	40,807	$	137,906	$	134,638
Locum tenens solutions	14,438		14,026		39,028		43,634		10,992		14,438		34,321		39,028
Other workforce solutions	19,890		20,867		61,788		56,311		29,010		19,890		77,437		61,788
	75,135		72,289		235,454		218,462		82,167		75,135		249,664		235,454
Unallocated corporate overhead	13,698		15,113		44,732		45,908		26,427		13,698		59,271		44,732
Depreciation and amortization	8,132		7,789		23,759		21,888		11,296		8,132		29,788		23,759
Share-based compensation	2,477		2,704		7,720		8,795		1,809		2,477		7,954		7,720
Interest expense, net, and other	4,837		3,016		14,895		9,065		4,649		4,837		16,360		14,895
Income before income taxes	$	45,991	$	43,667	$	144,348	$	132,806	$	37,986	$	45,991	$	136,291	$	144,348

The Company offers a comprehensive managed services program, in which the Company manages all or a portion of a client's contingent staffing needs. This service includes both the placement of the Company's own healthcare professionals and the utilization of other staffing agencies to fulfill the client's staffing needs. See additional information in Note (3), “Revenue Recognition.” For the three months ended September 30, 2018 and 2017, revenue under the Company’s managed services program arrangements comprised approximately 61% and 59% for nurse and allied solutions revenue, 17% and 13% for locum tenens solutions revenue and 5% and 7% for other workforce solutions revenue, respectively. For the nine months ended September 30, 2018 and 2017, revenue under the Company’s managed services program arrangements comprised approximately 60% and 57% for nurse and allied solutions revenue, 16% and 12% for locum tenens solutions revenue and 7% and 7% for other workforce solutions revenue, respectively.

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, 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, September 30, 2017 $ 103,107
$ 19,743
$ 217,746
$ 340,596
Accumulated impairment loss as of December 31, 2016 and September 30, 2017 $ 154,444
$ 53,940
$ 6,555
$ 214,939



	Nurse and Allied Solutions		Locum Tenens Solutions		Other Workforce Solutions		Total
Balance, January 1, 2018	$	103,107	$	19,743	$	217,746	$	340,596
Goodwill from MedPartners acquisition	—		—		81,095		81,095
Goodwill from PDA and LFT acquisition	—		—		16,608		16,608
Balance, September 30, 2018	$	103,107	$	19,743	$	315,449	$	438,299
Accumulated impairment loss as of December 31, 2017 and September 30, 2018	$	154,444	$	53,940	$	6,555	$	214,939

6. NEW CREDIT AGREEMENT

On February 9, 2018, the Company entered into the New Credit Agreement with several lenders to provide for the $400,000 Senior Credit Facility to replace its then-existing credit facilities. The Senior Credit Facility includes a $50,000 sublimit for the issuance of letters of credit and a $50,000 sublimit for swingline loans. The obligations of the Company under the New Credit Agreement and the Senior Credit Facility are secured by substantially all of the assets of the Company. Borrowings under the Senior Credit Facility bear interest at floating rates, at the Company’s option, based upon either LIBOR plus a spread of 1.00% to 2.00% or a base rate plus a spread of 0.00% to 1.00%. The applicable spread is determined quarterly based upon the Company’s consolidated net leverage ratio. The Senior Credit Facility is available for working capital, capital expenditures, permitted acquisitions and general corporate purposes. The maturity date of the Senior Credit Facility is February 9, 2023.

In connection with obtaining the New Credit Agreement, the Company incurred $2,331 in fees paid to lenders and other third parties, which were capitalized and are amortized to interest expense over the term of the New Credit Facility. In addition,

the Company wrote off $574 of unamortized financing fees during the nine months ended September 30, 2018 relating to the

prior credit facilities.

6.7. 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 ~~2016~~2017 Annual Report. The Company has not changed the valuation techniques or inputs it uses for its fair value measurement, except for its adoption of ASU 2016-01, “Financial Instruments—Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities," during the nine months ended September 30, ~~2017.~~2018. See additional information regarding adoption of the new standard in Note (1), “Basis of Presentation” and additional disclosures below.

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.

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 ~~$28,538~~$61,567 commercial paper issued and outstanding as of September 30, ~~2017, $5,076~~2018, $23,023 had original maturities greater than three months, which were considered available-for-sale securities. As of December 31, ~~2016,~~2017, the Company had ~~$25,610~~$28,708 commercial paper issued and outstanding, of which ~~$11,152~~$6,074 had original maturities greater than three months and were considered available-for-sale securities.

The ~~Company’s interest rate swap was measured at fair value using a discounted cash flow analysis that includes~~increase in commercial paper issued and outstanding is due to additional restricted investments related to 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 was determined by netting the discounted future fixed cash receipts payments and the discounted expected variable cash receipts. The variable cash receipts were based on an expectation of future interest rates (forward curves) derived from observable market interest rate yield curves. The valuation also considered credit risk adjustments that were necessary to reflect the probability of default by the counterparty or the Company, which were considered Level 3 inputs. On May 3, 2017, the Company terminated the remaining interest rate swap.captive insurance company.

The Company’s contingent consideration liabilities are measured at fair value using a probability-weighted discounted cash flow analysis or a simulation-based methodology for the acquired companies, which are Level 3 inputs. The Company recognizes changes to the fair value of its contingent consideration liabilities in selling, general and administrative expenses in the condensed consolidated statements of comprehensive income.

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:


	Fair Value Measurements as of September 30, 2017										Fair Value Measurements as of September 30, 2018
	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	$	4,026		$	4,026	$	—	$	—		$	2,739		$	2,739	$	—	$	—
Commercial paper	28,538			—		28,538		—			61,567			—		61,567		—
Acquisition contingent consideration earn-out liabilities	(1,952		)	—		—		(1,952		)
Acquisition contingent consideration liabilities											(8,793		)	—		—		(8,793		)


	Fair Value Measurements as of December 31, 2016										Fair Value Measurements as of December 31, 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	$	4,627		$	4,627	$	—	$	—		$	2,713		$	2,713	$	—	$	—
Commercial paper	25,610			—		25,610		—			28,708			—		28,708		—
Interest rate swap asset	24			—		24		—
Acquisition contingent consideration earn-out liabilities	(6,816		)	—		—		(6,816		)
Acquisition contingent consideration liabilities											(2,070		)	—		—		(2,070		)

Level 3 Information

The following ~~table sets~~tables set forth 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,
2017 2016
Balance as of July 1, $ (1,932 )
$ (7,054 )
Change in fair value of contingent consideration earn-out liability from Peak acquisition —
480
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 (20 ) (84 )
Balance as of September 30, $ (1,952 ) $ (6,752 )



	Three Months Ended September 30,
	2018			2017
Balance as of July 1,	$	(10,119	)	$	(1,932	)
Change in fair value of contingent consideration liability from HealthSource Global Stafffing (“HSG”) acquisition	—			(20		)
Change in fair value of contingent consideration liability from PDA and LFT acquisition	(1,194		)	—
Change in fair value of contingent consideration liability from MedPartners acquisition	2,520			—
Balance as of September 30,	$	(8,793	)	$	(1,952	)

Nine Months Ended September 30,
2017 2016
Balance as of January 1, $ (6,816 ) $ (3,770 )
Settlement of TFS earn-out for year ended December 31, 2015 —
1,000
Contingent consideration earn-out liability from HSG acquisition on January 11, 2016 —
(3,590 )
Contingent consideration earn-out liability from Peak acquisition on June 3, 2016 —
(480 )
Change in fair value of contingent consideration earn-out liability from Avantas acquisition —
660
Change in fair value of contingent consideration earn-out liability from TFS acquisition —
(859 )
Change in fair value of contingent consideration earn-out liability from HSG acquisition (66 ) (193 )
Change in fair value of contingent consideration earn-out liability from Peak acquisition —
480
Settlement of TFS earn-out for year ended December 31, 2016 3,000
—
Settlement of HSG earn-out for year ended December 31, 2016 1,930
—
Balance as of September 30, $ (1,952 ) $ (6,752 )



	Nine Months Ended September 30,
	2018			2017
Balance as of January 1,	$	(2,070	)	$	(6,816	)
Settlement of The First String Healthcare contingent consideration liability for year ended December 31, 2016	—			3,000
Settlement of HSG contingent consideration liability for year ended December 31, 2016	70			1,930
Settlement of HSG contingent consideration liability for year ended December 31, 2017	2,000			—
Contingent consideration liability from PDA and LFT acquisition on April 6, 2018	(5,700		)	—
Contingent consideration liability from MedPartners acquisition on April 9, 2018	(4,400		)	—
Change in fair value of contingent consideration liability from HSG acquisition	—			(66		)
Change in fair value of contingent consideration liability from PDA and LFT acquisition	(1,213		)	—
Change in fair value of contingent consideration liability from MedPartners acquisition	2,520			—
Balance as of September 30,	$	(8,793	)	$	(1,952	)

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 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.

The Company’s equity investment represents an investment in a non-controlled corporation without a readily determinable market value. The Company has elected to measure the investment at cost minus impairment, if any, plus or minus changes resulting from observable price changes. The fair value is determined by using quoted prices for identical or similar investments of the same issuer, which are Level 2 inputs. The Company recognizes changes to the fair value of its equity investment in interest expense, net, and other in the condensed consolidated statements of comprehensive income.

The following tables set forth a reconciliation of changes in the balance of the equity investment classified as Level 2 in the fair value hierarchy:



	Three Months Ended September 30,
	2018		2017
Balance as of July 1,	$	2,000	$	2,000
Additional investment	4,600		—
Change in fair value	1,359		—
Balance as of September 30,	$	7,959	$	2,000



	Nine Months Ended September 30,
	2018		2017
Balance as of January 1,	$	2,000	$	—
Initial investment	—		2,000
Additional investment	4,600		—
Change in fair value	1,359		—
Balance as of September 30,	$	7,959	$	2,000

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 investments, and no impairment charges recorded during the nine months ended September 30, ~~2017~~2018 and ~~2016.~~

2017.

Fair Value of Financial Instruments

The Company is required to disclose the fair value of financial instruments for which it is practicable to estimate the value, even though these instruments are not recognized at fair value in the consolidated balance sheets. As of September 30, 2018, the Company's senior notes have a carrying amount of $325,000 and an estimated fair value of $314,438. As of December 31, 2017, the ~~Company’s~~ senior notes ~~approximate their~~had a carrying amount of $325,000 and an estimated fair ~~values.~~value of $335,156. Quoted market prices in active markets for identical liabilities based inputs (Level 1) were used to estimate fair value. The senior notes were issued in October 2016 and have a fixed rate of 5.125%. ~~There have been no changes in available rates for similar debt since the date of 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~~2017 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.

7.8. INCOME TAXES

The Company is subject to taxation in the U.S. and various states and foreign jurisdictions. With few exceptions, as of September 30, ~~2017,~~2018, the Company is no longer subject to state, local or foreign examinations by tax authorities for tax years before ~~2006,~~2009, and the Company is no longer subject to U.S. federal income or payroll tax examinations for tax years before ~~2011.~~2015. The IRS conducted, completed, and settled audits of the Company’s 2011-2012 and 2013 tax years ~~2007, 2008, 2009~~related to income and ~~2010 had been under audit by the Internal Revenue Service (“IRS”)~~employment tax issues 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 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~~benefits in ~~the RAR~~November 2017 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 for the year ended December 31, 2016, and expects to record 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.May 2018, respectively.

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 has been meeting and working with the IRS Appeals office and anticipates a resolution within the next twelve months. 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.

Immaterial Tax Correction Related to Prior Periods

During the first quarter of 2018, the Company identified an error related to the income tax treatment of fair value changes in the cash surrender value of its Company Owned Life Insurance (COLI) for prior years. These fair value changes had not previously been included as a net tax benefit in the provision for prior periods. In accordance with ASC 250, Accounting Changes and Error Corrections, management evaluated the materiality of the error from qualitative and quantitative

perspectives, and concluded that the error was not material to the consolidated financial statements of prior years, nor is it believed to be material to 2018’s full year consolidated financial statements. As a result, the Company recorded a net tax benefit of $2,501 in the first quarter of 2018 to adjust for this immaterial error correction.

Tax Cuts and Jobs Act

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, reducing the U.S. federal corporate tax rate from 35% to 21%.

The Tax Act changes that affected the Company in 2017 are primarily tax rate changes on certain deferred tax assets (“DTAs”) and deferred tax liabilities (“DTLs”). The staff of the Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements.

The Tax Act also establishes new tax laws that will affect 2018 and beyond, including, but not limited to, (1) reduction of the U.S. federal corporate tax rate; (2) the repeal of the domestic production activity deduction; (3) limitations on the deductibility of certain executive compensation; and (4) limitations on various entertainment and meals deductions.

The Company's accounting for the Tax Act is incomplete, primarily relating to executive compensation. However, the Company was able to make reasonable estimates of these elements and, therefore, recorded provisional adjustments for these items. Final adjustments will be made in the quarter ended December 31, 2018 and are not expected to be material.

8.9. COMMITMENTS AND CONTINGENCIES: LEGAL PROCEEDINGS

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,~~compensation, contract, competitor disputes and employee-related matters and include individual and ~~collective~~class action lawsuits, as well as inquiries and investigations by governmental agencies regarding the Company’s employment and compensation 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 negotiations, settlements, rulings, advice of legal counsel, or other new information, as deemed necessary. The most significant

matters for which the Company has established loss contingencies are class actions related to wage and hour ~~claims. Management currently~~claims under California and Federal law. Specifically, among other claims in these lawsuits, it is alleged that employees were not afforded required breaks or compensated for all time worked, employees' wage statements are not sufficiently clear, and certain expense reimbursements should be included in the regular rate of pay for purposes of calculating overtime rates. The Company believes ~~the probable loss related to these~~that its wage and hour ~~claims~~practices conform with law in all material respects, but litigation is ~~not material and the amount accrued by~~always subject to inherent uncertainty. As a result, the Company ~~for such~~entered into settlement agreements relating to claims in two wage and hour class actions during September and October 2018. The settlement agreements are subject to court approval, which is ~~not material as of~~considered probable. The Company recorded increases to its accruals established in connection with these matters amounting to $12,140 during the three months ended September 30, ~~2017. However, losses ultimately incurred for such claims could materially differ from amounts already accrued by the Company.~~2018.

With ~~regards~~regard to outstanding loss contingencies as of September 30, ~~2017,~~2018, which are included in accounts payable and accrued expenses in the condensed 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.

9.10. BALANCE SHEET DETAILS

The consolidated balance sheets detail is as follows as of September 30, ~~2017~~2018 and December 31, ~~2016:~~

2017:


	September 30, 2017			December 31, 2016			September 30, 2018			December 31, 2017
Other current assets:
Restricted cash and cash equivalents	$	16,215		$	20,271		$	22,227		$	25,506
Income tax receivable							2,901			15,898
Other	10,005			14,336			10,230			9,589
Other current assets	$	26,220		$	34,607		$	35,358		$	50,993

Fixed assets:
Furniture and equipment	$	28,202		$	25,582		$	32,814		$	29,494
Software	126,492			112,405			155,534			132,770
Leasehold improvements	8,025			6,832			8,315			9,056
	162,719			144,819			196,663			171,320
Accumulated depreciation	(94,531		)	(84,865		)	(109,846		)	(97,889		)
Fixed assets, net	$	68,188		$	59,954		$	86,817		$	73,431

Other assets:
Life insurance cash surrender value	$	45,835		$	32,190		$	58,576		$	48,145
Other	28,127			25,344			34,630			26,221
Other assets	$	73,962		$	57,534		$	93,206		$	74,366

Accounts payable and accrued expenses:
Trade accounts payable	$	24,166		$	33,392		$	21,217		$	31,420
Subcontractor payable	38,167			51,973			46,276			41,786
Accrued expenses	45,690			37,251			37,802			29,238
Loss contingencies							25,042			12,548
Professional liability reserve	7,048			10,254			8,510			7,672
Other	2,863			4,642			3,696			7,655
Accounts payable and accrued expenses	$	117,934		$	137,512		$	142,543		$	130,319

Accrued compensation and benefits:
Accrued payroll	$	31,840		$	30,917		$	39,665		$	33,923
Accrued bonuses	16,755			26,992			18,795			19,489
Accrued travel expense	3,488			2,972			3,618			3,256
Accrued health insurance reserve	3,708			3,189
Accrued workers compensation reserve	8,301			8,406
Health insurance reserve							3,820			3,658
Workers compensation reserve							7,789			8,553
Deferred compensation	45,771			32,690			59,502			49,330
Other	2,121			2,827			2,443			3,214
Accrued compensation and benefits	$	111,984		$	107,993		$	135,632		$	121,423

Other current liabilities:
Acquisition related liabilities	$	2,981		$	6,921
Other	2,459			9,690
Other current liabilities	$	5,440		$	16,611

Other long-term liabilities:
Workers’ compensation reserve	$	18,475		$	18,708
Workers compensation reserve							$	19,387		$	19,074
Professional liability reserve	40,033			37,338			37,847			38,964
Deferred rent	14,602			13,274			15,053			14,744
Unrecognized tax benefits	7,240			8,464			4,221			5,270
Deferred revenue							994			960
Other	2,323			4,312			25			267
Other long-term liabilities	$	82,673		$	82,096		$	77,527		$	79,279

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

of Operations

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, ~~2016,~~2017, filed with the Securities and Exchange Commission (“SEC”) on February ~~17,~~ 16, 2018 (“2017 ~~(“2016~~ 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.

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, predictive modeling, staff scheduling, mid-revenue cycle solutions and the placement of physicians, nurses, allied healthcare professionals and healthcare ~~executives~~leaders 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 30, ~~2017,~~2018, we recorded revenue of ~~$494.4~~$526.8 million, as compared to ~~$472.6~~$494.4 million for the same period last year. For the three months ended September 30, ~~2017,~~2018, we recorded net income of ~~$28.1~~$27.9 million, as compared to ~~$27.3~~$28.1 million for the same period last year. For the nine months ended September 30, ~~2017,~~2018, we recorded revenue of ~~$1,479.4~~$1,607.4 million, as compared to ~~$1,414.4~~$1,479.4 million for the same period last year. For the nine months ended September 30, ~~2017,~~2018, we recorded net income of ~~$91.4~~$106.1 million, as compared to ~~$79.5~~$91.4 million for the same period last year.

Nurse and allied solutions segment revenue comprised 61% and 62% of total consolidated revenue for ~~both~~ the nine months ended September 30, 2018 and 2017, ~~and 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 segment revenue comprised ~~22%~~19% and ~~23%~~22% of total consolidated revenue for the nine months ended September 30, ~~2017~~2018 and ~~2016,~~2017, respectively. 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, health systems, medical groups, occupational medical clinics, psychiatric facilities, government institutions, and insurance entities. The professionals we place are recruited nationwide and are typically placed on contracts with assignment lengths ranging from a few days up to one year.

Other workforce solutions segment revenue comprised ~~16%~~20% and ~~15%~~16% of total consolidated revenue for the nine months ended September 30, ~~2017~~2018 and ~~2016,~~2017, 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 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~~mid-revenue cycle management and related consulting services, and (7) workforce optimization services that include consulting, data analytics, predictive modeling, and SaaS-based scheduling technology.

As part of our long-term growth strategy to add value for our clients, healthcare professionals, and shareholders, on April 6, 2018 and April 9, 2018, we acquired Phillips DiPisa and Leaders For Today (“PDA and LFT” or “PDA/LFT”) and MedPartners HIM (“MedPartners”), respectively. PDA and LFT offer a range of leadership staffing and permanent placement solutions for the healthcare industry. MedPartners provides mid-revenue cycle management solutions, including case

management, clinical documentation improvement, medical coding and registry services to hospitals and physician medical groups nationwide. See additional information in the accompanying Note (2), “Acquisitions.”

Recent Trends

Demand for our temporary and permanent placement staffing services is driven in part by U.S. economic and labor trends.

The U.S. Bureau of Labor Statistics’ survey data ~~reflect~~reflects near record levels of healthcare job openings and ~~quits, which we~~quits. We view this data, along with a nearly 20-year-low unemployment rate and continued economic growth as positive trends for the healthcare staffing industry. AtThe low unemployment rate has led to some wage growth to attract healthcare professionals.

The increasing consolidation within the ~~same time, the entire~~ healthcare industry ~~continues~~is creating larger, more sophisticated and complex health systems that we believe has elevated the need for strategic workforce solutions capable of partnering to ~~face uncertainty related to~~solve their recruiting, staffing and workforce optimization requirements. Given the ~~potential dismantling, or significant change to certain aspects~~increasing need for partners capable of ~~the Affordable Care Act, which could impact the reimbursements upon which our clients depend. The uncertainty has impacted the utilization of healthcare services and demand for our services.~~

Weoffering a comprehensive workforce solution, we continue to see the benefits of our workforce solutions strategy, particularly with our ~~managed services programs.~~MSPs. As a result of our ongoing focus on these strategic MSP relationships, ~~we continue to increase~~ the percentage of our ~~nurse and allied~~staffing revenue derived from our ~~managed services program clients.~~MSP clients continues to increase.

In our nurse and allied solutions segment, although clients have focused this year on hiring more permanent staff and increasing the utilization of their staff, overall demand for our travel nurse staffing business has been improving and our nurse orders are now trending above prior year levels. Although we continue to negotiate bill rate increases, a reduced mix of nursing placements utilizing premium bill rates has lowered the overall average bill rates in this business.

In our locum tenens solutions segment, ~~we have seen a decline~~ in ~~demand~~late 2017 and in ~~certain specialties such as hospitalists that has negatively impacted our volumes and, as a result, revenue in this segment. In addition,~~the first half of 2018 we made ~~organizational~~operating model changes and ~~leadership~~implemented new front and back office technologies. Although these changes ~~in this business and~~ are ~~making operational changes~~expected to ~~improve performance. We are beginning to see the~~have a long-term positive impact ~~of these changes~~on our growth and ~~improving~~profitability, they continue to be disruptive to our current sales productivity and revenue. We believe the overall demand environment for locum tenens is relatively stable and that client interest in ~~most specialties.~~managed service programs is increasing.

In our other workforce solutions segment, our ~~interim leadership~~permanent placement, mid-revenue cycle and workforce consulting businesses are growing, but continue to be offset by lower revenue in our vendor management systems businesses are growing. We are experiencing declines in our permanent placement businesses that we believe are primarily related to operational execution and are making organizational changes designed to improve our performance.business.

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. There have been no material changes in our critical accounting policies and estimates, other than the adoption of the Accounting Standards ~~Update~~Updates (“~~ASU”~~ASUs”) ~~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 ~~2016~~2017 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 ~~Peak acquisition impacts~~MedPartners and PDA/LFT acquisitions impact the comparability of the results between the three and nine months ended September 30, 2018 and 2017 ~~and 2016.~~depending on the timing of the applicable acquisition. 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 September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016		2018		2017		2018		2017
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	67.7		67.3		67.4		67.4		66.8		67.7		67.4		67.4
Gross profit	32.3		32.7		32.6		32.6		33.2		32.3		32.6		32.6
Selling, general and administrative	20.3		21.2		20.2		21.0		23.0		20.3		21.2		20.2
Depreciation and amortization	1.7		1.6		1.6		1.6		2.1		1.7		1.9		1.6
Income from operations	10.3		9.9		10.8		10.0		8.1		10.3		9.5		10.8
Interest expense, net, and other	1.0		0.6		1.0		0.6		0.9		1.0		1.0		1.0
Income before income taxes	9.3		9.3		9.8		9.4		7.2		9.3		8.5		9.8
Income tax expense	3.6		3.5		3.6		3.8		1.9		3.6		1.9		3.6
Net income	5.7	%	5.8	%	6.2	%	5.6	%	5.3	%	5.7	%	6.6	%	6.2	%

Comparison of Results for the Three Months Ended September 30, ~~2017~~2018 to the Three Months Ended September 30, ~~2016~~2017

Revenue. Revenue increased 5%7% to ~~$494.4~~$526.8 million for the three months ended September 30, ~~2017~~2018 from ~~$472.6~~$494.4 million for the same period in ~~2016, all~~2017, primarily attributable to additional revenue of ~~which was organic growth.~~$38.2 million from our PDA/LFT and MedPartners acquisitions. Excluding the additional revenue from acquisitions, revenue decreased 1%.

Nurse and allied solutions segment revenue increased 6%1% to ~~$302.9~~$306.3 million for the three months ended September 30, ~~2017~~2018 from ~~$286.8~~$302.9 million for the same period in ~~2016.~~2017. The ~~$16.1~~$3.4 million increase was primarily attributable to a 4%2% increase in the average number of healthcare professionals on assignment, ~~and~~partially offset by a ~~2% increase in the~~lower average bill rate during the three months ended September 30, ~~2017~~2018.

Locum tenens solutions segment revenue ~~increased 3%~~decreased 9% to ~~$111.4~~$101.1 million for the three months ended September 30, ~~2017~~2018 from $~~108.6~~111.4 million for the same period in ~~2016.~~2017. The ~~$2.8~~$10.3 million ~~increase~~decrease was primarily attributable to a ~~4% increase~~15% decrease in the ~~revenue per day~~number of days filled during the three months ended September 30, ~~2017,~~2018, partially offset by a ~~1% decrease~~7% increase in the ~~number of days~~revenue per day filled.

Other workforce solutions segment revenue increased 4%49% to ~~$80.1~~$119.4 million for the three months ended September 30, ~~2017~~2018 from $~~77.3~~80.1 million for the same period in ~~2016. The $2.8~~2017. Of the $39.3 million increase, $38.2 million was attributable to additional revenue in connection with the PDA/LFT and MedPartners acquisitions, with the remainder primarily attributable to growth in our ~~VMS~~permanent placement, mid-revenue cycle and ~~interim leadership~~workforce consulting businesses, partially offset by ~~declines~~a decline in our ~~permanent placement~~interim leadership and VMS businesses during the three months ended September 30, ~~2017.~~2018.

Gross Profit. Gross profit increased 3%10% to ~~$159.5~~$175.1 million for the three months ended September 30, ~~2017~~2018 from ~~$154.5~~$159.5 million for the same period in ~~2016,~~2017, representing gross margins of ~~32.3%~~33.2% and ~~32.7%~~32.3%, respectively. The ~~decrease in consolidated~~ gross margin was due to an unfavorable change in sales mix, higher insurance costs in our other workforce solutions segment and lower bill-pay spreads in the locum tenens solutions segment, partially offset by a higher gross margin in the nurse and allied solutions segment driven primarily by lower direct costs duringfor the three months ended September 30, ~~2017.~~2018 was positively impacted by higher-than-average gross margins from PDA/LFT and MedPartners and a change in our physician permanent placement business model that prompted a $3.3 million classification of certain recruiter compensation expenses to SG&A (as defined below) that was previously in cost of revenue. Net of these factors, our year-over-year gross margin declined primarily due to a lower margin in our locum tenens solutions segment. Gross margin by reportable segment for the three months ended September 30, 2018 and 2017 was 27.4% and ~~2016 was~~ 27.3% ~~and 26.7%~~ for nurse and allied solutions, ~~30.1%~~28.4% and ~~31.2%~~30.1% for locum tenens solutions, and ~~54.1%~~52.4% and ~~56.7%~~54.1% for other workforce solutions, respectively. The other workforce solutions segment decrease during the three months ended September 30, 2018 was primarily due to the change in sales mix resulting from the additions of PDA/LFT and MedPartners.

Selling, General and Administrative Expenses. Selling, general and administrative (“SG&A”) expenses were ~~$100.6~~$121.2 million, representing ~~20.3%~~23.0% of revenue, for the three months ended September 30, ~~2017,~~2018, as compared to ~~$100.0~~$100.6 million, representing ~~21.2%~~20.3% of revenue, for the same period in ~~2016.~~2017. The increase in SG&A expenses was primarily due to ~~higher bad debt expense partially offset by operating leverage on~~$8.7 million of additional SG&A expenses from the ~~higher revenue~~PDA/LFT and ~~lower acquisition~~MedPartners acquisitions and ~~integration costs as compared~~a $12.1 million increase in accruals related to the ~~same period last year.~~probable settlements of two legal matters. The ~~decrease~~year-over-year increase in SG&A expenses in unallocated corporate overhead was primarily ~~attributable to lower~~

~~acquisition~~driven by the increase in legal accruals during the three months ended September 30, 2018. See additional information in the accompanying Note (9), “Commitments and ~~integration costs and employee compensation expenses.~~Contingencies: Legal Proceedings.” SG&A expenses broken down among the reportable segments, unallocated corporate overhead, and share-based compensation are as follows:



	(In Thousands) Three Months Ended September 30,
	2018		2017
Nurse and allied solutions	$	41,643	$	41,884
Locum tenens solutions	17,762		19,075
Other workforce solutions	33,575		23,445
Unallocated corporate overhead	26,427		13,698
Share-based compensation	1,809		2,477
	$	121,216	$	100,579

(In Thousands)
Three Months Ended September 30,
2017 2016
Nurse and allied solutions $ 41,884
$ 39,312
Locum tenens solutions 19,075
19,881
Other workforce solutions 23,445
22,985
Unallocated corporate overhead 13,698
15,113
Share-based compensation 2,477
2,704
$ 100,579
$ 99,995

Depreciation and Amortization Expenses. Amortization expense ~~decreased slightly~~increased 43% to ~~$4.7~~$6.7 million for the three months ended September 30, ~~2017~~2018 from ~~$4.8~~$4.7 million for the same period in ~~2016.~~2017, with the increase attributable to additional amortization expenses related to the intangible assets acquired in the PDA/LFT and MedPartners acquisitions. Depreciation expense increased ~~13%~~35% to ~~$3.4~~$4.6 million for the three months ended September 30, ~~2017~~2018 from ~~$3.0~~$3.4 million for the same period in ~~2016,~~2017, primarily attributable to 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 ~~$4.8~~$4.6 million during the three months ended September 30, ~~2017~~2018 as compared to ~~$3.0~~$4.8 million for the same period in ~~2016.~~2017. The ~~increase~~decrease is primarily due to a $1.4 million gain related to the change in fair value of an equity investment, partially offset by higher ~~interest bearing Notes (as defined below)~~average debt outstanding balance for the three months ended September 30, ~~2017, as compared~~2018, which resulted from borrowings used to finance the ~~term loans and revolver in the same period last year.~~MedPartners acquisition.

Income Tax Expense. Income tax expense was ~~$17.9~~$10.1 million for the three months ended September 30, ~~2017~~2018 as compared to ~~income tax expense of $16.4~~$17.9 million for the same period in ~~2016,~~2017, reflecting effective income tax rates of ~~39%~~27% and ~~37%~~39% for the three months ended September 30, ~~2017~~2018 and ~~2016,~~2017, respectively. The difference in the effective income tax rate was primarily attributable to the ~~relationship~~impact of ~~pre-tax income~~the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) which reduced the U.S. federal corporate tax rate from 35% to ~~permanent differences related to unrecognized tax benefits.~~21%, effective 2018. The decrease in the rate was partially offset by provisions of the Tax Act which disallowed certain fringe benefits, meals and entertainment deductions and performance based compensation for covered employees (Chief Executive Officer, Chief Financial Officer and the top three highest paid executive officers). We currently estimate our annual effective income tax rate to be approximately ~~38%~~24% for ~~2017.~~2018.

Comparison of Results for the Nine Months Ended September 30, ~~2017~~2018 to the Nine Months Ended September 30, ~~2016~~2017

Revenue. Revenue increased 5%9% to ~~$1,479.4~~$1,607.4 million for the nine months ended September 30, ~~2017~~2018 from ~~$1,414.4~~$1,479.4 million for the same period in ~~2016, due~~2017, primarily attributable to additional revenue of ~~$12.4~~$73.8 million ~~resulting~~ from our ~~Peak acquisition in June 2016~~PDA/LFT and MedPartners acquisitions with the remainder of the increase driven by 4% organic growth.

Nurse and allied solutions segment revenue increased 5%7% to ~~$917.2~~$977.2 million for the nine months ended September 30, ~~2017~~2018 from ~~$877.2~~$917.2 million for the same period in ~~2016.~~2017. The ~~$40.0~~$60.0 million increase was primarily attributable to an approximately $24.0 million increase in labor disruption revenue and a 5%4% increase in the average number of healthcare professionals on assignment, ~~and~~partially offset by a ~~3% increase~~2% decrease in the average bill rate during the nine months ended September 30, ~~2017. The increase was partially offset by an approximately $28.0 million decrease in labor disruption revenue and the impact of one less calendar day due to last year being a leap year.~~2018.

Locum tenens solutions segment revenue ~~was $322.5~~decreased 3% to $311.5 million for the nine months ended September 30, ~~2017, as compared to $320.4~~2018 from $322.5 million for the same period in ~~2016.~~2017. The ~~$2.1~~$11.0 million ~~increase~~decrease was primarily attributable to a ~~4% increase~~9% decrease in the ~~revenue per day~~number of days filled during the nine months ended September 30, ~~2017,~~2018, partially offset by a ~~3% decrease~~6% increase in the ~~number of days~~revenue per day filled.

Other workforce solutions segment revenue increased ~~11%~~33% to ~~$239.7~~$318.7 million for the nine months ended September 30, ~~2017~~2018 from ~~$216.8~~$239.7 million for the same period in ~~2016.~~2017. Of the ~~$22.9~~$79.0 million increase, ~~$12.4~~$73.8 million was attributable to ~~the~~

additional revenue in connection with the ~~Peak acquisition in June 2016~~PDA/LFT and MedPartners acquisitions, with the remainder primarily attributable to growth in our ~~VMS,~~ interim leadership, mid-revenue cycle management and workforce ~~optimization~~consulting businesses, partially offset by declines in our permanent placement and ~~recruitment process outsourcing~~VMS businesses during the nine months ended September 30, ~~2017.~~2018.

Gross Profit. Gross profit increased 5%9% to ~~$482.3~~$523.9 million for the nine months ended September 30, ~~2017~~2018 from ~~$461.1~~$482.3 million for the same period in ~~2016,~~2017, representing gross margins of 32.6% for both periods. ~~Consolidated~~The gross margin was consistent with the prior year primarily due to a higher gross margin in the nurse and allied solutions segment driven primarily by lower direct costs, offset by lower bill-pay spreads in the locum tenens solutions segment and an unfavorable change in sales mix in our other workforce solutions segment duringfor the nine months ended September 30, ~~2017.~~2018 was positively impacted by higher-than-average gross margins from PDA/LFT and MedPartners and a change in our physician permanent placement business model that prompted a $6.5 million classification of certain recruiter compensation expenses to SG&A that was previously in cost of revenue. These positives were partly offset by a below-average labor disruption gross margin. Net of these factors, our year-over-year gross margin declined primarily due to a lower margin in our locum tenens solutions segment. Gross margin by reportable segment for the nine months ended September 30, 2018 and 2017 was 27.2% and ~~2016 was~~ 27.6% ~~and 26.7%~~ for nurse and allied ~~soluti~~

~~ons,~~solutions, 29.0% and 30.2% ~~and 31.2%~~ for locum tenens solutions, and ~~54.9%~~52.6% and ~~58.6%~~54.9% for other workforce solutions, respectively. The other workforce solutions segment decrease during the nine months ended September 30, 2018 was primarily due to the change in sales mix resulting from the additions of PDA/LFT and MedPartners.

Selling, General and Administrative Expenses. SG&A expenses were ~~$299.3~~$341.5 million, representing ~~20.2%~~21.2% of revenue, for the nine months ended September 30, ~~2017,~~2018, as compared to ~~$297.4~~$299.3 million, representing ~~21.0%~~20.2% of revenue, for the same period in ~~2016.~~2017. The increase in SG&A expenses was primarily due to ~~$1.9~~$16.2 million of additional SG&A expenses from the ~~Peak acquisition~~PDA/LFT and MedPartners acquisitions, a $12.1 million increase in accruals related to the probable settlements of two legal matters, $2.1 million lower actuarial-based decrease in our professional liability reserves as compared to the same period in 2017 and other expenses associated with our revenue ~~growth, offset~~growth. The year-over-year increase in SG&A expenses in the nurse and allied solutions segment was primarily driven by an additional ~~$2.0 million favorable actuarial-based decrease~~expenses to support the labor disruption revenue during the nine months ended September 30, 2018 and additional employee and insurance expenses associated with the revenue growth. The year-over-year increase in ~~our professional liability reserves and $2.1 million decrease in acquisition and integration costs as compared to the same period last year. The decrease~~SG&A expenses in unallocated corporate overhead was primarily ~~attributable to lower acquisition~~driven by the increase in legal accruals during the nine months ended September 30, 2018. See additional information in the accompanying Note (9), “Commitments and ~~integration costs.~~Contingencies: Legal Proceedings.” 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,
	2018		2017
Nurse and allied solutions	$	128,107	$	118,464
Locum tenens solutions	55,930		58,507
Other workforce solutions	90,226		69,902
Unallocated corporate overhead	59,271		44,732
Share-based compensation	7,954		7,720
	$	341,488	$	299,325

(In Thousands)
Nine Months Ended September 30,
2017 2016
Nurse and allied solutions $ 118,464
$ 115,755
Locum tenens solutions 58,507
56,247
Other workforce solutions 69,902
70,654
Unallocated corporate overhead 44,732
45,908
Share-based compensation 7,720
8,795
$ 299,325
$ 297,359

Depreciation and Amortization Expenses. Amortization expense increased 2%27% to ~~$13.9~~$17.6 million for the nine months ended September 30, ~~2017~~2018 from ~~$13.6~~$13.9 million for the same period in ~~2016, primarily~~2017, with the increase attributable to additional amortization ~~expense~~expenses related to the intangible assets acquired in the ~~Peak acquisition.~~PDA/LFT and MedPartners acquisitions. Depreciation expense increased ~~18%~~24% to ~~$9.8~~$12.2 million for the nine months ended September 30, ~~2017~~2018 from ~~$8.3~~$9.8 million for the same period in ~~2016,~~2017, primarily attributable to ~~fixed assets acquired as part of the Peak 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 ~~$14.9~~$16.4 million during the nine months ended September 30, ~~2017~~2018 as compared to ~~$9.1~~$14.9 million for the same period in ~~2016.~~2017. The increase is primarily due to the write-off of unamortized deferred financing fees in connection with the refinancing of our prior credit facilities during the first quarter of 2018 and a higher ~~interest bearing Notes (as defined below)~~average debt outstanding balance for the nine months ended September 30, ~~2017, as compared~~2018, which resulted from borrowings used to finance the MedPartners acquisition. See additional information in the accompanying Note (6), “New Credit Agreement.” The overall increase is partially offset by a $1.4 million gain related to the ~~term loans and revolver~~change in fair value of an equity investment during the ~~same period last year.~~nine months ended September 30, 2018.

Income Tax Expense. Income tax expense was ~~$53.0~~$30.2 million for the nine months ended September 30, ~~2017~~2018 as compared to income tax expense of ~~$53.3~~$53.0 million for the same period in ~~2016,~~2017, reflecting effective income tax rates of ~~37%~~22% and ~~40%~~37% for the nine months ended September 30, ~~2017~~2018 and ~~2016,~~2017, respectively. The difference in the effective income tax rate was primarily attributable to the ~~relationship~~impact of ~~pre-tax income~~the Tax Act which reduced the U.S. federal corporate tax rate from 35% to ~~permanent differences~~21%, effective

2018. In addition, the Company recorded a net tax benefit of $3.0 million during the nine months ended September 30, 2018 to adjust for the tax treatment of fair value changes in the cash surrender value of its Company Owned Life Insurance (“COLI”). See accompanying Note (8), "Income Taxes" for discussion of immaterial tax correction related to ~~unrecognized~~prior periods. The decrease in the rate was partially offset by provisions of the Tax Act which disallowed certain fringe benefits, meals and entertainment deductions and performance based compensation for covered employees (Chief Executive Officer, Chief Financial Officer and the top three highest paid executive officers). We currently estimate our annual effective income tax ~~benefits and excess~~rate to be approximately 24% for 2018. The 22% effective tax rate in the nine months ended September 30, 2018 differs from our estimated annual effective income tax rate of 24% primarily due to a discrete tax benefit ~~from~~of $5.1 million in the ~~adoption~~nine months ended September 30, 2018 relating to the application of ASU 2016-09, “Stock Compensation - Improvements to Employee Share-Based Payment Accounting” inand the ~~first quarter of 2017, which resulted~~net tax benefit recorded in ~~recording a $5.4 million reduction in income tax expense for~~ the nine months ended September 30, ~~2017. Prior~~2018 relating to ~~adoption, this amount would~~COLI as discussed above. We 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 volatilitydescribed ASU 2016-09 in ~~our effective tax rate depending upon the amount of exercise or vesting activity from our share-based awards. See additional information~~further detail in ~~Item 1. Condensed~~“Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note ~~1 “Basis~~(1)(r), Recently Adopted Accounting Pronouncements” of ~~Presentation.” Including the impact of the adoption of ASU 2016-09, we currently estimate~~ our ~~annual effective income tax rate to be approximately 38% for 2017.~~2017 Annual Report on Form 10-K.

Liquidity and Capital Resources

In summary, our cash flows were:


	(In Thousands) Nine Months Ended September 30,						(In Thousands) Nine Months Ended September 30,
	2017			2016			2018			2017 *As Adjusted

Net cash provided by operating activities	$	96,382		$	84,820		$	168,046		$	102,096
Net cash used in investing activities	(23,444		)	(241,271		)	(271,648		)	(24,045		)
Net cash provided by (used in) financing activities	(63,824		)	162,418			81,774			(63,824		)

* See Note (1) to the accompanying Condensed Consolidated Financial Statements, “Basis of Presentation” for a summary of adjustments resulting from the adoption of ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.”

Historically, our primary liquidity requirements have been for acquisitions, working capital requirements, and debt service under our credit facilities and the Notes. We have funded these requirements through internally generated cash flow and funds borrowed under our credit facilities. During the third quarter of 2017, we paid off the remaining balance of our term debt. On February 9, 2018, we replaced our then-existing credit agreement with our New Credit Agreement (as defined below). As of September 30, ~~2017~~2018, ~~zero~~$150 million was drawn ~~from $258.8~~with $239.8 million of available credit under the ~~revolving credit facility (the “Revolver”)~~Senior Credit Facility (as defined below) and 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,~~New Credit Agreement, under which our ~~term loan and Revolver are~~Senior Credit Facility is 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 ~~2016~~2017 Annual Report on Form 10-K.

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. On May 3, 2017, we terminated the remaining interest rate swap.

We believe that cash generated from operations and available borrowings under ~~the Revolver~~our Senior Credit Facility will be sufficient to fund our operations, including expected capital expenditures, for ~~at least~~ the next ~~year.~~12 months and beyond. We intend to finance potential future acquisitions ~~either~~ with cash provided from operations, borrowings under ~~the Revolver,~~our Senior Credit Facility or other borrowings under our New Credit Agreement, 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 months ended September 30, ~~2017~~2018 was ~~$96.4~~$168.0 million, compared to $~~84.8~~102.1 million for the same period in ~~2016.~~2017. The increase in net cash provided by operating activities was primarily attributable to (1) improved operating results, (2) a decrease in ~~accounts~~income taxes receivable, and ~~subcontractor receivable~~(3) increases in accounts payable and accrued expenses as well as accrued compensation and benefits between periods due to timing of 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.”payments. The overall increase was partially offset by ~~(1)~~ a decrease in ~~accounts payable~~other liabilities and ~~accrued expenses between periods due to timing of payments, (2) additional cash paid for income taxes during the nine months ended September 30, 2017 as compared to the same period last year, and (3)~~ an increase in the 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.other current assets between periods. Our Days Sales Outstanding (“DSO”) was 64 days at ~~each of~~ September 30, ~~2017,~~2018, 63 days at December 31, ~~2016,~~2017, and 64 days at September 30, ~~2016.~~2017.

Investing Activities

Net cash used in investing activities for the nine months ended September 30, ~~2017~~2018 was ~~$23.4~~$271.6 million, compared to $~~241.3~~24.0 million for the same period in ~~2016.~~2017. The ~~decrease~~increase was primarily due to (1) $217.4 million used for acquisitions during the nine months ended September 30, 2018, as compared to no cash paid for acquisitions during the nine months ended September

30, 2017, ~~as compared~~and (2) a net purchase of restricted investments related to ~~$216.6~~our captive insurance company of $16.8 million ~~used for acquisitions~~ during the nine months ended September 30, ~~2016 and (2)~~2018, as compared to net proceeds of $6.2 million ~~restricted investment proceeds related to our captive insurance entity~~ during the nine months ended September 30, 2017. ~~The overall decrease was partially offset by (1) a $2.0 million equity investment and~~See additional information in the accompanying Note (2) $10.1 million of payments to fund the deferred compensation plan during the nine months ended September 30, 2017 as compared to $5.7 million of payments during the nine months ended September 30, 2016., “Acquisitions.” Capital expenditures were ~~$17.2~~$23.9 million and ~~$17.7~~$17.2 million for the nine months ended September 30, 2018 and 2017, ~~and 2016,~~ respectively.

Financing Activities

Net cash provided by financing activities during the nine months ended September 30, 2018 was $81.8 million, primarily due to borrowings of $195.0 million under the Senior Credit Facility (as defined below), partially offset by (1) the repayment of $45.0 million under the Senior Credit facility, (2) $52.8 million paid in connection with the repurchase of our common stock, (3) $2.3 million payment of financing costs in connection with the new credit agreement, (4) $1.7 million for prior acquisition contingent consideration earn-out payments, and (5) $11.4 million in cash paid for shares withheld for payroll taxes resulting from the vesting of employee equity awards. Net cash used in financing activities during the nine months ended September 30, 2017 was $63.8 million, primarily due to (1) the repayment of $44.1 million under our then-existing term ~~loans,~~loan, (2) $3.7 million for ~~acquisition~~prior acquisitions contingent consideration earn-out payments, (3) $7.1 million paid in connection with the repurchase of our common stock, and (4) $9.1 million in cash paid for shares withheld for payroll taxes resulting from the vesting of employee equity awards. ~~Net cash provided~~

New Credit Agreement

On February 9, 2018, we entered into a credit agreement (the “New Credit Agreement”) with several lenders to provide for a $400 million secured revolving credit facility (the “Senior Credit Facility”) to replace our then-existing Credit Agreement. The Senior Credit Facility includes a $50 million sublimit for the issuance of letters of credit and a $50 million sublimit for swingline loans. Our obligations under the New Credit Agreement and the Senior Credit Facility are secured by substantially all of our assets. Borrowings under the Senior Credit Facility bear interest at floating rates, at our option, based upon either LIBOR plus a spread of 1.00% to 2.00% or a base rate plus a spread of 0.00% to 1.00%. The applicable spread is determined quarterly based upon our consolidated net leverage ratio. The Senior Credit Facility is available for working capital, capital expenditures, permitted acquisitions and general corporate purposes. The maturity date of the Senior Credit Facility is February 9, 2023.

In connection with obtaining the New Credit Agreement, we incurred $2.3 million in fees paid to lenders and other third parties, which were capitalized and are amortized to interest expense over the term of the Senior Credit Facility. In addition, we wrote off $0.6 million of unamortized financing ~~activities~~fees during the nine months ended September 30, ~~2016~~ ~~was~~ ~~$162.4~~2018 related to our prior credit facilities. To help finance the MedPartners acquisition, we borrowed $195.0 million, primarily due to 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 fund our BES and HSG acquisitions, partially offset by (1) the repayment of $8.4 million under our term loans and $24.0 million under the Revolver, and (2) $5.6 million cash paid for shares withheld for payroll taxes resulting from the ~~vesting of employee equity awards.~~Senior Credit Facility in April 2018. We paid down $45 million during the nine months ended September 30, 2018. The acquisition is more fully described in Note (2) to the accompanying Condensed Consolidated Financial Statements, “Acquisitions.”

Letters of Credit

At September 30, ~~2017~~2018, we maintained outstanding standby letters of credit totaling ~~$20.2~~$12.9 million as collateral in relation to our ~~professional liability insurance agreements,~~ workers’ compensation insurance agreements and a corporate office lease agreement. Of the ~~$20.2~~$12.9 million of outstanding letters of credit, we have collateralized ~~$4.0~~$2.7 million in cash and cash equivalents and the remaining amounts are collateralized by the ~~Revolver.~~Senior Credit Facility. Outstanding standby letters of credit at December 31, ~~2016~~2017 totaled ~~$15.4~~$22.0 million.

Off-Balance Sheet Arrangements

At September 30, ~~2017~~2018, 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 during the nine months ended September 30, 2018, other than the New Credit Agreement described in the accompanying Note (6), “New Credit Agreement” and the associated borrowings, 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 ~~2016~~2017 Annual ~~Report that occurred during the nine months ended September 30, 2017.~~Report.

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 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. 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 expect to complete our evaluation of the impact of the accounting and disclosure requirements on our consolidated financial statements, business processes, controls and systems during the fourth quarter of 2017. This includes reviewing current accounting policies and practices to identify potential impact of the accounting and disclosure requirements on our business processes, controls and system. The extent of the impact of the adoption of this new standard is subject to the completion of our assessment by the end of 2017. We will adopt this standard in the first quarter of 2018, and apply the modified retrospective approach.

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~~in the ~~guidance on a modified retrospective basis and can elect to apply optional practical expedients. We are currently evaluating the approach we will take and~~process of analyzing the impact of ~~adopting~~ this ~~new~~ standard and evaluating the impact on our consolidated financial ~~statements~~statements. This includes reviewing current accounting policies and ~~related disclosures.~~

~~In August 2016,~~practices to identify potential differences that would result from applying the requirements under the new standard. We completed our preliminary evaluation of the impact of this standard, including assessing the completeness of the lease population and analyzing the practical expedients. 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 2018. The FASB recently issued ~~ASU 2016-15, “Statement~~guidance that provides an optional transition method for adoption of ~~Cash Flows (Topic 230): Classification~~this standard, which allows organizations to initially apply the new requirements at the effective date, recognize a cumulative effect adjustment to the opening balance of ~~Certain Cash Receipts~~retained earnings, and ~~Cash Payments.” The standard provides~~continue to apply the legacy guidance ~~on how certain cash receipts and payments are presented and classified~~in Accounting Standards Codification 840, Leases, including its disclosure requirements, in the ~~statement~~comparative periods presented. We will adopt this standard in the first quarter of ~~cash flows. For public entities, ASU 2016-15 is effective for fiscal years beginning~~

~~after December 15, 2017,~~2019, and ~~interim periods within those annual periods,~~plan to apply the optional transition method and ~~requires a retrospective approach. Early~~optional practical expedients. The adoption ~~is permitted, including adoption in an interim period. We are currently evaluating the timing~~ of this ~~new standard’s adoption~~standard, which is subject to the completion of our assessment, will result in a significant increase to our consolidated balance sheet for lease liabilities 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 will 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.right-of-use assets.

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~~timing of adopting this standard, we do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.” The standard modifies the current disclosure requirements on fair value measurements and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. We are currently evaluating the timing of this new standard’s adoption and the effect that adopting it will have on our disclosures.

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 ~~2016~~2017 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;

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 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~~staffing management and recruiting efforts, through predictive analytics, online recruiting or otherwise, which may negatively affect our revenue, results of operations, and cash flows;

the ~~uncertainty regarding the dismantling of certain aspects~~repeal or significant erosion of the Patient Protection and Affordable Care Act ~~that may significantly reduce the number of individuals who maintain health insurance or reduce the subsidies and reimbursements to our clients, which, in turn,~~without a corresponding replacement 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 and compensation 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~~technology disruptions or our ~~part~~inability 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 failures of our 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~~effect of ~~certain critical functions;~~

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

any inability on our part to recruit and retain sufficient quality healthcare professionals at reasonable ~~costs;~~costs, which could increase our operating costs and negatively affect our business and profitability;

any inability on our part to properly screen and match quality healthcare professionals with suitable ~~placements;~~placements, which may adversely affect demand for our services;

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

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

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

any inability to consummate and effectively integrate acquisitions into our business operations may adversely affect our long-term growth and our results of operations;

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 the substantial amount of goodwill or indefinite-lived ~~intangibles;~~intangibles on our balance sheet;

our substantial indebtedness and any inability on our part to generate sufficient cash flow to service our debt, which could adversely affect our ability to raise additional capital to fund operations and limit our ability to react to changes in the economy or our industry;

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

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;~~

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

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

be.

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 months ended September 30, ~~2017,~~2018, 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. In connection with the issuance and sale of the Notes and repayment of a portion of the Term Loans, we reduced the interest rate swap notional amount to $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. During the third quarter of 2017, we paid off the remaining balance 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 months ended September 30, ~~2017.~~2018. During the three and nine months ended September 30, ~~2017,~~2018, we generated substantially 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 30, ~~2017~~2018 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 30, ~~2017~~2018 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 ~~2016~~2017 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

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 ~~3, 2017~~2, 2018



AMN HEALTHCARE SERVICES, INC.

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

Date: November ~~3, 2017~~2, 2018

/S/ BRIAN M. SCOTT

Brian M. Scott

Chief Accounting Officer,

Chief Financial Officer and Treasurer

(Principal Accounting and Financial Officer)

2627



		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