Business Combinations

As set forth below, the Company completed seven acquisitions from January 1, 2014 through December 31, 2016. The Company accounted for each acquisition using the acquisition method of accounting. Accordingly, it recorded the tangible and intangible assets acquired and liabilities assumed at their estimated fair values as of the applicable date of acquisition. For each acquisition, the Company did not incur any material acquisition-related costs.

Peak Provider Solutions Acquisition

On June 3, 2016, the Company completed its acquisition of Peak Provider Solutions (“Peak”), which provides remote medical coding and consulting solutions to hospitals and physician medical groups nationwide. The addition of Peak has expanded the Company’s workforce solutions and enables the Company to offer services in coding diagnosis and procedure codes, which is critical to clinical quality reporting and the financial health of healthcare organizations. The initial purchase price of $52,125 included (1) $51,645 cash consideration paid upon acquisition, funded through cash-on-hand, net of cash received, and borrowings under the Company’s Revolver, and (2) a contingent earn-out payment of up to $3,000 with an estimated fair value of $480 as of the acquisition date. The contingent earn-out payment is based on the operating results of Peak for the year ended December 31, 2016. As the acquisition’s operations are not considered material, pro forma information is not provided. The results of Peak have been included in the Company’s other workforce solutions segment since the date of acquisition. During the third quarter of 2016, an additional $275 of cash consideration was paid to the selling shareholders for the final working capital settlement.

The preliminary allocation of the $52,400 purchase price, which included the additional cash consideration paid for the final working capital settlement, consisted of (1) $5,658 of fair value of tangible assets acquired, (2) $9,305 of liabilities assumed, (3) $19,220 of identified intangible assets, and (4) $36,827 of goodwill, none of which is deductible for tax purposes. The fair value of intangible assets primarily includes $7,600 of trademarks and $11,500 of customer relationships with a weighted average useful life of approximately thirteen years.

HealthSource Global Staffing Acquisition

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

The 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) $4,897 of liabilities assumed, (3) $3,944 of identified intangible assets, and (4) $8,147 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 is more fully described in Note (8), “Notes Payable and Credit Agreement.” The results of BES have been included in the Company’s other workforce solutions segment since the date of acquisition. During the second quarter of 2016, $524 was returned to the Company for the final working capital settlement.

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



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

Approximately $108,459 of revenue and $16,491 of income before income taxes of BES were included in the consolidated statement of comprehensive income for the year ended December 31, 2016. The following summary presents unaudited pro forma consolidated results of operations of the Company for the year ended December 31, 2015 as if the BES acquisition had occurred on January 1, 2015, which gives effect to certain adjustments, including the reduction of compensation expense related to non-recurring executive salary expense and the addition of acquisition-related costs and amortization of intangible assets. The pro forma financial information is not necessarily indicative of the operating results that would have occurred had the acquisition been consummated as of the date indicated, nor is it necessarily indicative of the Company’s future operating results.



	Year Ended December 31,
(Unaudited)	2015
Revenue	$	1,556,729
Income from operations	$	132,023
Net income	$	80,114
Net income per common share:
Basic	$	1.69
Diluted	$	1.64

MillicanSolutions Acquisition

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

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

The First String Healthcare Acquisition

On September 15, 2015, the Company completed its acquisition of The First String Healthcare (“TFS”), a leading provider of interim staffing and permanent placement of nurse leaders and executives. The total purchase price of $7,653 included (1) $4,453 cash consideration paid upon acquisition, funded by cash-on-hand, net of cash received, (2) $500 to be paid on the first anniversary of the acquisition date, which was paid in September 2016, and (3) a contingent earn-out with a fair value of $2,700 as of the acquisition date. Also, the purchase agreement included an additional $1,000 payment to be paid on the second anniversary of the acquisition date conditioned upon, subject to certain exceptions, continued employment of the selling shareholders, which is being recorded as compensation expense for post-combination services. The acquisition enhances the Company’s capabilities to provide interim and permanent nursing leadership. As the acquisition is not considered material, pro forma information is not provided. The results of operations of TFS are included in the other workforce solutions segment since the date of acquisition.

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

Onward Healthcare Acquisition

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

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



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

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

Avantas Acquisition

On December 22, 2014, the Company acquired Avantas, LLC (“Avantas”), a provider of clinical workforce management services, including its proprietary SaaS-based scheduling technology. The initial purchase price of $17,520 included (1) $14,470 cash consideration paid at acquisition, funded through cash-on-hand and borrowings under the Company’s Revolver, (2) $1,650 cash holdback for potential indemnification claims and (3) a tiered contingent earn-out of up to $8,500 based on the operating performance of Avantas during the 12-month period ended June 30, 2016, with an estimated fair value at acquisition of $1,400. During the year ended December 31, 2015, the Company paid an additional $165 to the selling shareholders for a working capital adjustment. The acquisition expanded the Company’s ability to provide workforce optimization services. The results of operations of Avantas are included in the Company’s other workforce solutions segment since the date of acquisition.

The allocation of the total $17,685 purchase price (which gives effect to the $165 working capital adjustment on the initial purchase price) consisted of (1) $1,631 of fair value of tangible assets acquired, (2) $3,821 of liabilities and deferred revenue assumed, (3) $9,960 of identified intangible assets, including tradenames and trademarks, customer relationships and acquired technologies with a weighted average useful life of approximately fourteen years and (4) $9,915 of goodwill, a portion of which is deductible for tax purposes.