AMN HEALTHCARE SERVICES INC (Form: 10-Q, Received: 11/04/2019 17:05:38)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-Q

____________________



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019



OR
☐	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

____________________

Securities registered pursuant to Section 12(b) of the Act:



Title of Each Class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.01 par value	AMN	New York Stock Exchange

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 every Interactive Data File required to be submitted 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 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 growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐
Smaller reporting company	☐	Emerging growth company	☐

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 ☐ No x

As of October 30, 2019, there were 46,711,155 shares of common stock, $0.01 par value, outstanding.

TABLE OF CONTENTS



Item		Page

	PART I - FINANCIAL INFORMATION

1.	Condensed Consolidated Financial Statements (unaudited):	1
	Condensed Consolidated Balance Sheets, As of September 30, 2019 and December 31, 2018	1
	Condensed Consolidated Statements of Comprehensive Income, For the Three and Nine Months Ended September 30, 2019 and 2018	2
	Condensed Consolidated Statements of Stockholders’ Equity, For the Nine Months Ended September 30, 2019 and 2018	3
	Condensed Consolidated Statements of Cash Flows, For the Nine Months Ended September 30, 2019 and 2018	5
	Notes to Unaudited Condensed Consolidated Financial Statements	7
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
3.	Quantitative and Qualitative Disclosures about Market Risk	31
4.	Controls and Procedures	31

	PART II - OTHER INFORMATION


1.	Legal Proceedings	32
1A.	Risk Factors	32
2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
3.	Defaults Upon Senior Securities	32
4.	Mine Safety Disclosures	32
5.	Other Information	32
6.	Exhibits	33
	Signatures	34

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, 2019			December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	40,748		$	13,856
Accounts receivable, net of allowances of $11,324 and $10,560 at September 30, 2019 and December 31, 2018, respectively	354,742			365,871
Accounts receivable, subcontractor	62,752			50,143
Prepaid expenses	11,325			12,409
Other current assets	37,365			39,887
Total current assets	506,932			482,166
Restricted cash, cash equivalents and investments	59,165			59,331
Fixed assets, net of accumulated depreciation of $127,005 and $114,413 at September 30, 2019 and December 31, 2018, respectively	100,199			90,419
Operating lease right-of-use assets	92,257			—
Other assets	115,482			96,152
Goodwill	586,611			438,506
Intangible assets, net of accumulated amortization of $140,342 and $114,924 at September 30, 2019 and December 31, 2018, respectively	400,428			326,147
Total assets	$	1,861,074		$	1,492,721
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	139,505		$	149,603
Accrued compensation and benefits	157,950			135,059
Current portion of notes payable	3,750			—
Current portion of operating lease liabilities	13,387			—
Deferred revenue	11,227			12,365
Other current liabilities	18,090			10,243
Total current liabilities	343,909			307,270
Revolving credit facility	146,000			120,000
Notes payable, less unamortized fees	465,899			320,607
Deferred income taxes, net	46,356			27,326
Operating lease liabilities	94,150			—
Other long-term liabilities	59,656			78,528
Total liabilities	1,155,970			853,731
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value; 10,000 shares authorized; none issued and outstanding at September 30, 2019 and December 31, 2018	—			—
Common stock, $0.01 par value; 200,000 shares authorized; 49,271 issued and 46,710 outstanding at September 30, 2019 and 48,809 issued and 46,643 outstanding at December 31, 2018	493			488
Additional paid-in capital	451,096			452,730
Treasury stock, at cost (2,561 and 2,166 shares at September 30, 2019 and December 31, 2018, respectively)	(119,143		)	(100,438		)
Retained earnings	372,565			286,059
Accumulated other comprehensive income	93			151
Total stockholders’ equity	705,104			638,990
Total liabilities and stockholders’ equity	$	1,861,074		$	1,492,721

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,
	2019		2018		2019			2018
Revenue	$	567,597	$	526,842	$	1,635,215		$	1,607,439
Cost of revenue	377,566		351,695		1,088,883			1,083,512
Gross profit	190,031		175,147		546,332			523,927
Operating expenses:
Selling, general and administrative	133,207		121,216		374,872			341,488
Depreciation and amortization	17,085		11,296		41,513			29,788
Total operating expenses	150,292		132,512		416,385			371,276
Income from operations	39,739		42,635		129,947			152,651
Interest expense, net, and other	7,830		4,649		19,568			16,360
Income before income taxes	31,909		37,986		110,379			136,291
Income tax expense	8,394		10,068		23,873			30,163
Net income	$	23,515	$	27,918	$	86,506		$	106,128

Other comprehensive income (loss):
Foreign currency translation and other	132		133		(58		)	205
Other comprehensive income (loss)	132		133		(58		)	205

Comprehensive income	$	23,647	$	28,051	$	86,448		$	106,333

Net income per common share:
Basic	$	0.50	$	0.59	$	1.85		$	2.23
Diluted	$	0.49	$	0.58	$	1.82		$	2.17
Weighted average common shares outstanding:
Basic	46,677		47,286		46,701			47,556
Diluted	47,607		48,529		47,600			48,859

See accompanying notes to unaudited condensed consolidated financial statements.

AMN HEALTHCARE SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited and in thousands)



	Common Stock			Additional Paid-in Capital			Treasury Stock					Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total
	Shares	Amount		Additional Paid-in Capital			Shares		Amount			Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total
Balance, December 31, 2017	48,411	$	484	$	453,351		(930	)	$	(33,425	)	$	142,229	$	(112	)	$	562,527
Equity awards vested and exercised, net of shares withheld for payroll taxes	349	4		(10,930		)	—		—			—		—			(10,926		)
Cumulative-effect adjustment from adoption of the new revenue recognition standard	—	—		—			—		—			2,089		—			2,089
Share-based compensation	—	—		2,864			—		—			—		—			2,864
Comprehensive income (loss)	—	—		—			—		—			42,681		(19		)	42,662
Balance, March 31, 2018	48,760	$	488	$	445,285		(930	)	$	(33,425	)	$	186,999	$	(131	)	$	599,216
Repurchase of common stock into treasury	—	—		—			(385	)	(20,891		)	—		—			(20,891		)
Equity awards vested and exercised, net of shares withheld for payroll taxes	47	—		(482		)	—		—			—		—			(482		)
Share-based compensation	—	—		3,281			—		—			—		—			3,281
Comprehensive income	—	—		—			—		—			35,529		91			35,620
Balance, June 30, 2018	48,807	$	488	$	448,084		(1,315	)	$	(54,316	)	$	222,528	$	(40	)	$	616,744
Repurchase of common stock into treasury	—	—		—			(580	)	(31,859		)	—		—			(31,859		)
Equity awards vested and exercised, net of shares withheld for payroll taxes	2	—		(25		)	—		—			—		—			(25		)
Share-based compensation	—	—		1,809			—		—			—		—			1,809
Comprehensive income	—	—		—			—		—			27,918		133			28,051
Balance, September 30, 2018	48,809	$	488	$	449,868		(1,895	)	$	(86,175	)	$	250,446	$	93		$	614,720



	Common Stock			Additional Paid-in Capital			Treasury Stock					Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total
	Shares	Amount		Additional Paid-in Capital			Shares		Amount			Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total
Balance, December 31, 2018	48,809	$	488	$	452,730		(2,166	)	$	(100,438	)	$	286,059	$	151		$	638,990
Repurchase of common stock into treasury	—	—		—			(378	)	(17,930		)	—		—			(17,930		)
Equity awards vested and exercised, net of shares withheld for payroll taxes	313	3		(10,284		)	—		—			—		—			(10,281		)
Share-based compensation	—	—		5,186			—		—			—		—			5,186
Comprehensive income (loss)	—	—		—			—		—			34,122		(101		)	34,021
Balance, March 31, 2019	49,122	$	491	$	447,632		(2,544	)	$	(118,368	)	$	320,181	$	50		$	649,986
Repurchase of common stock into treasury	—	—		—			(17	)	(775		)	—		—			(775		)
Equity awards vested and exercised, net of shares withheld for payroll taxes	101	1		(1,254		)	—		—			—		—			(1,253		)
Share-based compensation	—	—		3,702			—		—			—		—			3,702
Comprehensive income (loss)	—	—		—			—		—			28,869		(89		)	28,780
Balance, June 30, 2019	49,223	$	492	$	450,080		(2,561	)	$	(119,143	)	$	349,050	$	(39	)	$	680,440
Equity awards vested and exercised, net of shares withheld for payroll taxes	48	1		(1,809		)	—		—			—		—			(1,808		)
Share-based compensation	—	—		2,825			—		—			—		—			2,825
Comprehensive income	—	—		—			—		—			23,515		132			23,647
Balance, September 30, 2019	49,271	$	493	$	451,096		(2,561	)	$	(119,143	)	$	372,565	$	93		$	705,104

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,
	2019			2018
Cash flows from operating activities:
Net income	$	86,506		$	106,128
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	41,513			29,788
Non-cash interest expense and other	1,816			591
Write-off of fees on the prior credit facilities	—			574
Change in fair value of contingent consideration	2,283			(1,307		)
Increase in allowances for doubtful accounts and sales credits	6,809			6,240
Provision for deferred income taxes	(3,700		)	(2,384		)
Share-based compensation	11,713			7,954
Loss on disposal or sale of fixed assets	449			40
Amortization of discount on investments	(276		)	(78		)
Non-cash lease expense	(1		)	—
Changes in assets and liabilities, net of effects from acquisitions:
Accounts receivable	25,146			743
Accounts receivable, subcontractor	(12,610		)	(3,879		)
Income taxes receivable	(3,401		)	12,997
Prepaid expenses	1,118			2,334
Other current assets	1,332			446
Other assets	(8,790		)	(1,019		)
Accounts payable and accrued expenses	(14,277		)	7,311
Accrued compensation and benefits	19,787			11,014
Other liabilities	(7,273		)	(10,423		)
Deferred revenue	(2,038		)	1,062
Restricted investments balance	99			(86		)
Net cash provided by operating activities	146,205			168,046

Cash flows from investing activities:
Purchase and development of fixed assets	(24,776		)	(23,922		)
Purchase of investments	(16,759		)	(27,185		)
Proceeds from maturity of investments	28,635			10,400
Payments to fund deferred compensation plan	(11,364		)	(7,800		)
Equity investment	—			(4,600		)
Cash paid for acquisitions, net of cash received	(228,222		)	(217,361		)
Cash paid for other intangibles	(1,120		)	(1,180		)
Net cash used in investing activities	(253,606		)	(271,648		)



	Nine Months Ended September 30,
	2019			2018
Cash flows from financing activities:
Payments on term loans	(938		)	—
Proceeds from term loans	150,000			—
Payments on revolving credit facility	(75,000		)	(45,000		)
Proceeds from revolving credit facility	101,000			195,000
Repurchase of common stock	(18,705		)	(52,750		)
Payment of financing costs	(875		)	(2,331		)
Earn-out payments for prior acquisitions	(5,700		)	(1,713		)
Cash paid for shares withheld for taxes	(13,342		)	(11,432		)
Net cash provided by financing activities	136,440			81,774
Effect of exchange rate changes on cash	(58		)	205
Net increase (decrease) in cash, cash equivalents and restricted cash	28,981			(21,623		)
Cash, cash equivalents and restricted cash at beginning of period	84,324			98,894
Cash, cash equivalents and restricted cash at end of period	$	113,305		$	77,271

Supplemental disclosures of cash flow information:
Cash paid for amounts included in the measurement of operating lease liabilities	$	13,294		$	—
Cash paid for interest (net of $363 and $368 capitalized for the nine months ended September 30, 2019 and 2018, respectively)	$	14,988		$	11,521
Cash paid for income taxes	$	32,457		$	21,223
Acquisitions:
Fair value of tangible assets acquired in acquisitions, net of cash and restricted cash received	$	28,542		$	24,027
Goodwill	148,095			97,703
Intangible assets	98,580			122,111
Liabilities assumed	(34,873		)	(16,380		)
Earn-out liabilities	(12,122		)	(10,100		)
Net cash paid for acquisitions	$	228,222		$	217,361
Supplemental disclosures of non-cash investing and financing activities:
Purchase of fixed assets recorded in accounts payable and accrued expenses	$	2,142		$	4,504

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 (“U.S. GAAP”). Please refer to the Company’s audited consolidated financial statements and the related notes for the fiscal year ended December 31, 2018, contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the Securities and Exchange Commission on February 21, 2019 (“2018 Annual Report”).

The preparation of financial statements in conformity with 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 intangible assets purchased in a business combination, 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 February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-02, “Leases.” This standard requires organizations that lease assets to recognize the assets and liabilities created by those leases. The standard also requires disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. A modified retrospective transition approach is required, applying the standard to all leases existing at the date of initial application. In addition, the FASB has also issued several amendments to the standard, which clarify certain aspects of the guidance, including an optional transition method for adoption of 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 retained earnings, and continue to apply the legacy guidance in Accounting Standards Codification (“ASC”) 840, Leases, including its disclosure requirements, in the comparative periods presented. The new standard provides a number of optional practical expedients in transition. The Company elected the ‘package of practical expedients’, which permits organizations not to reassess under the new standard prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect to use the hindsight practical expedient to determine the lease term or evaluate impairment for existing leases.

The Company adopted ASU 2016-02 effective January 1, 2019, using the optional transition method described above. The Company recognized the cumulative effect of adopting this guidance as an adjustment as of the effective date, primarily related to the recognition of lease liabilities of $114,807 and corresponding right-of-use assets of $99,525 for existing operating leases. The Company also derecognized existing deferred rent liabilities of $15,302. These adjustments had no effect on opening retained earnings and prior periods were not retrospectively adjusted and continue to be reported in accordance with ASC 840. The new standard also provides practical expedients for an organization’s ongoing accounting. The Company elected the short-term lease recognition exemption and the practical expedient to not separate lease and non-lease components for all leases that qualify. The Company does not expect the adoption of this standard to impact its results of operations.

There was no other material impact to the Company’s condensed consolidated financial statements as a result of adopting this updated standard.

Cash, cash equivalents and restricted cash

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents include currency on hand, deposits with financial institutions and highly liquid investments. Restricted cash and cash equivalents primarily represent cash and money market funds on deposit with financial institutions and investments represents commercial paper that serves as collateral for the Company’s outstanding letters of credit and captive insurance subsidiary claim payments. See Note (6), “Notes Payable and Credit Agreement” and Note (7), “Fair Value Measurement” for additional information.

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 the amounts presented in the accompanying condensed consolidated statements of cash flows.



	September 30, 2019			December 31, 2018
Cash and cash equivalents	$	40,748		$	13,856
Restricted cash and cash equivalents (included in other current assets)	16,885			26,329
Restricted cash, cash equivalents and investments	59,165			59,331
Total cash, cash equivalents and restricted cash and investments	116,798			99,516
Less restricted investments	(3,493		)	(15,192		)
Total cash, cash equivalents and restricted cash	$	113,305		$	84,324

2. ACQUISITIONS

As set forth below, the Company completed four acquisitions from January 1, 2018 through September 30, 2019. 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. Since the applicable date of acquisition, the Company has revised the allocation of the purchase price to the tangible and intangible assets acquired and liabilities assumed based on analysis of information that has been made available through September 30, 2019. The allocations noted as preliminary will continue to be updated through the measurement period, if necessary. For each acquisition, the Company did not incur any material acquisition-related costs.

Advanced Acquisition

On June 14, 2019, the Company completed its acquisition of Advanced Medical Personnel Services, Inc. (“Advanced”), a national healthcare staffing company that specializes in placing therapists and nurses across multiple settings. The initial purchase price of $211,743 included (1) $201,121 cash consideration paid upon acquisition and (2) a contingent earn-out payment of up to $20,000 with an estimated fair value of $10,622 as of the acquisition date. The contingent earn-out payment is based on the operating results of Advanced for the twelve months ending December 31, 2019. The acquisition was funded primarily through (1) 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, and (2) the First Amendment (as defined in Note (6) below) to the New Credit Agreement, which provided $150,000 of additional available borrowings to the Company. The New Credit Agreement and the First Amendment are more fully described in Note (6), “Notes Payable and Credit Agreement.” The results of Advanced have been included in the Company’s nurse and allied solutions segment since the date of acquisition. During the third quarter of 2019, an additional $73 of cash consideration was paid to the selling shareholders for the final working capital settlement.

The preliminary allocation of the $211,816 purchase price, which included the additional cash consideration paid for the final working capital settlement, consisted of (1) $30,013 of fair value of tangible assets acquired, which included $2,497 cash and restricted cash received, (2) $31,483 of liabilities assumed, (3) $91,700 of identified intangible assets, and (4) $121,586 of goodwill, of which $56,936 is expected to be deductible for tax purposes. The provisional items pending finalization are the valuation of the acquired intangible assets, goodwill, and income tax related matters. The intangible assets acquired have a weighted average useful life of approximately nine 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
	Customer Relationships	$	68,000	10
	Tradenames and Trademarks	10,000		5
	Staffing Database	10,300		10
	Developed Technology	3,400		3
		$	91,700

Silversheet Acquisition

On January 30, 2019, the Company completed its acquisition of Silversheet, Inc. (“Silversheet”), which provides innovative software and services to reduce the complexities and challenges of the credentialing process for clinicians and healthcare organizations. The initial purchase price of $31,676 included (1) $30,176 cash consideration paid upon acquisition, funded primarily through borrowings under the Senior Credit Facility, and (2) a contingent earn-out payment of up to $25,000 with an estimated fair value of $1,500 as of the acquisition date. The contingent earn-out payment is based on (A) up to $6,000 based on the operating results of Silversheet for the twelve months ending December 31, 2019, and (B) up to $19,000 based on the operating results of Silversheet for the twelve months ending December 31, 2020. The results of Silversheet have been included in the Company’s other workforce solutions segment since the date of acquisition.

The preliminary allocation of the $31,676 purchase price consisted of (1) $1,677 of fair value of tangible assets acquired, which included $651 cash received, (2) $3,390 of liabilities assumed, (3) $6,880 of identified intangible assets, and (4) $26,509 of goodwill, none of which is deductible for tax purposes. The provisional items pending finalization are the valuation of the acquired intangible assets, goodwill, and income tax related matters. The fair value of intangible assets primarily includes $5,300 of developed technology and $1,500 of trademarks with a weighted average useful life of approximately eight years.

MedPartners Acquisition

On April 9, 2018, the Company completed its acquisition of MedPartners HIM (“MedPartners”), which provides case management, clinical documentation improvement, medical coding and registry services to hospitals and physician medical groups nationwide. The initial purchase price of $200,933 included (1) $196,533 cash consideration paid upon acquisition, funded primarily through borrowings under the Senior Credit Facility, and (2) a contingent earn-out payment of up to $20,000 with an estimated fair value of $4,400 as of the acquisition date. The contingent earn-out payment is based on (A) up to $10,000 based on the operating results of MedPartners for the twelve months ending December 31, 2018, which resulted in no earn-out payment, and (B) up to $10,000 based on the operating results of MedPartners for the six months ending June 30, 2019. The results of MedPartners have been included in the Company’s other workforce solutions segment since the date of acquisition. During the third quarter of 2018, $222 was returned to the Company for the final working capital settlement.

The allocation of the $200,711 purchase price, which was reduced by the final working capital settlement and finalized during the second quarter of 2019, consisted of (1) $28,508 of fair value of tangible assets acquired, which included $8,403 cash received, (2) $11,933 of liabilities assumed, (3) $103,000 of identified intangible assets, and (4) $81,136 of goodwill, all of which is deductible for tax purposes. The intangible assets acquired have a weighted average useful life of approximately sixteen years. The following table summarizes the fair value and useful life of each intangible asset acquired as of the acquisition date:



		Fair Value		Useful Life
				(in years)
Identifiable intangible assets
	Tradenames and Trademarks	$	46,000	20
	Customer Relationships	57,000		12
		$	103,000

During the third quarter of 2019, the Company shortened the estimated useful life for the tradenames and trademarks intangible asset as a result of its plan to rebrand the revenue cycle solutions business. Based on this change in circumstances since the date of acquisition, the Company determined that the remaining useful life of this asset was five years and began amortizing its remaining value on a straight-line basis over the remaining useful life.

Phillips DiPisa and Leaders For Today Acquisition

On April 6, 2018, the Company completed its acquisition of two related entities, Phillips DiPisa and Leaders For Today (“PDA and LFT”), which offer a range of leadership staffing and permanent placement solutions for the healthcare industry. The initial purchase price of $35,968 included (1) $30,268 cash consideration paid upon acquisition, funded through cash on hand, and (2) a contingent earn-out payment of up to $7,000 with an estimated fair value of $5,700 as of the acquisition date. The contingent earn-out payment is based on the operating results of PDA and LFT for the twelve months ending December 31, 2018, which was settled in full during the second quarter of 2019. The results of PDA and LFT have been included in the Company’s other workforce solutions segment since the date of acquisition. During the third quarter of 2018, $465 was returned to the Company for the final working capital settlement.

The allocation of the $35,503 purchase price, which was reduced by the final working capital settlement and finalized during the second quarter of 2019, consisted of (1) $4,389 of fair value of tangible assets acquired, which included $351 cash received, (2) $4,779 of liabilities assumed, (3) $19,110 of identified intangible assets, and (4) $16,783 of goodwill, all of which is deductible for tax purposes. The fair value of intangible assets includes $5,400 of trademarks, $8,000 of customer relationships and $5,710 of staffing databases with a weighted average useful life of approximately twelve years.

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 clinical and non-clinical healthcare 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 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. Revenue from executive search, physician permanent placement, and recruitment process outsourcing services is recognized as the services are rendered. The Company’s SaaS-based revenue is recognized ratably over the applicable arrangement’s service period.

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, 2019, previously deferred revenue recognized as revenue was $9,498.

The Company has elected to apply the following practical expedients and optional exemptions related to contract costs and revenue recognition:


•	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 Note (5), “Segment Information” for additional 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:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Net income	$	23,515	$	27,918	$	86,506	$	106,128

Net income per common share - basic	$	0.50	$	0.59	$	1.85	$	2.23
Net income per common share - diluted	$	0.49	$	0.58	$	1.82	$	2.17

Weighted average common shares outstanding - basic	46,677		47,286		46,701		47,556
Plus dilutive effect of potential common shares	930		1,243		899		1,303
Weighted average common shares outstanding - diluted	47,607		48,529		47,600		48,859

Share-based awards to purchase 32 and 55 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, 2019, respectively, because the effect of these instruments was anti-dilutive. 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.

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,
	2019		2018		2019		2018
Revenue
Nurse and allied solutions	$	362,533	$	306,292	$	1,031,189	$	977,199
Locum tenens solutions	84,164		101,102		246,728		311,516
Other workforce solutions	120,900		119,448		357,298		318,724
	$	567,597	$	526,842	$	1,635,215	$	1,607,439
Segment operating income
Nurse and allied solutions	$	47,544	$	42,165	$	144,160	$	137,906
Locum tenens solutions	6,156		10,992		18,985		34,321
Other workforce solutions	27,806		29,010		81,121		77,437
	81,506		82,167		244,266		249,664
Unallocated corporate overhead	21,857		26,427		61,093		59,271
Depreciation and amortization	17,085		11,296		41,513		29,788
Share-based compensation	2,825		1,809		11,713		7,954
Interest expense, net, and other	7,830		4,649		19,568		16,360
Income before income taxes	$	31,909	$	37,986	$	110,379	$	136,291

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, 2019 and 2018, revenue under the Company’s managed services program arrangements comprised approximately 60% and 61% for nurse and allied solutions revenue, 23% and 17% for locum tenens solutions revenue and 9% and 5% for other workforce solutions revenue, respectively. For the nine months ended September 30, 2019 and 2018, revenue under the Company’s managed services program arrangements comprised approximately 64% and 60% for nurse and allied solutions revenue, 23% and 16% for locum tenens solutions revenue and 9% 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, 2019	$	103,107	$	19,743	$	315,656		$	438,506
Goodwill adjustment for MedPartners acquisition	—		—		23			23
Goodwill adjustment for PDA and LFT acquisition	—		—		(13		)	(13		)
Goodwill from Silversheet acquisition	—		—		26,509			26,509
Goodwill from Advanced acquisition	121,586		—		—			121,586
Balance, September 30, 2019	$	224,693	$	19,743	$	342,175		$	586,611
Accumulated impairment loss as of December 31, 2018 and September 30, 2019	$	154,444	$	53,940	$	6,555		$	214,939

6. NOTES PAYABLE AND 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. On June 14, 2019, the Company entered into the first amendment to the New Credit Agreement (the “First Amendment”) to provide for, among other things, a $150,000 secured term loan credit facility (the “Term Loan”). The First Amendment (together with the New Credit Agreement, the “Amended Credit Agreement”) also extended the maturity date of the Senior Credit Facility to be coterminous with the Term Loan. The obligations of the Company under the Amended Credit Agreement are secured by substantially all of the assets of the Company. The Company used the proceeds from the Term Loan, together with a drawdown of a portion of the Senior Credit Facility, to complete its acquisition of Advanced, as more fully described in Note (2), “Acquisitions.”

Borrowings under the Senior Credit Facility and the Term Loan (together, the “Credit Facilities”) 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 Term Loan is subject to amortization of principal of 2.50% per year for the first year of the term and 5.00% per year thereafter, payable in equal quarterly installments. The Senior Credit Facility is available for working capital, capital expenditures, permitted acquisitions and general corporate purposes. The maturity date of the Credit Facilities is June 14, 2024.

In connection with the First Amendment, the Company incurred $875 in fees paid to lenders and other third parties, which were capitalized during the three months ended June 30, 2019 and are amortized to interest expense over the term of the Credit Facilities. In addition, $1,702 of unamortized financing fees incurred in connection with obtaining the New Credit Agreement will continue to be amortized to interest expense over the term of the Credit Facilities.

In connection with the Company's issuance of $300,000 aggregate principal amount of 4.625% Senior Notes due 2027 (the “2027 Notes”) on October 1, 2019, the Company used a portion of the proceeds to repay $295,063 of its indebtedness under the Credit Facilities. See additional information in Note (12), “Subsequent Events.”

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 3—Fair Value Measurement” of the 2018 Annual Report. The Company has not changed the valuation techniques or inputs it uses for its fair value measurement during the three and nine months ended September 30, 2019.

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 $59,244 commercial paper issued and outstanding as of September 30, 2019, $3,493 had original maturities greater than three months, which were considered available-for-sale securities. As of December 31, 2018, the Company had $63,243 commercial paper issued and outstanding, of which $15,192 had original maturities greater than three months and were considered available-for-sale securities.

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, 2019
	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	$	2,498		$	2,498	$	—	$	—
Commercial paper	59,244			—		59,244		—
Acquisition contingent consideration liabilities	(15,105		)	—		—		(15,105		)



	Fair Value Measurements as of December 31, 2018
	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	$	2,461		$	2,461	$	—	$	—
Commercial paper	63,243			—		63,243		—
Acquisition contingent consideration liabilities	(7,700		)	—		—		(7,700		)

Level 3 Information

The following 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,
	2019			2018
Balance as of July 1,	$	(10,664	)	$	(10,119	)
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
Change in fair value of contingent consideration liability from Silversheet acquisition	42			—
Change in fair value of contingent consideration liability from Advanced acquisition	(4,483		)	—
Balance as of September 30,	$	(15,105	)	$	(8,793	)



	Nine Months Ended September 30,
	2019			2018
Balance as of January 1,	$	(7,700	)	$	(2,070	)
Settlement of HSG contingent consideration liability for year ended December 31, 2016	—			70
Settlement of HSG contingent consideration liability for year ended December 31, 2017	—			2,000
Settlement of PDA and LFT contingent consideration liability for year ended December 31, 2018	7,000			—
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		)
Contingent consideration liability from Silversheet acquisition on January 30, 2019	(1,500		)	—
Contingent consideration liability from Advanced acquisition on June 14, 2019	(10,622		)	—
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	700			2,520
Change in fair value of contingent consideration liability from Silversheet acquisition	1,500			—
Change in fair value of contingent consideration liability from Advanced acquisition	(4,483		)	—
Balance as of September 30,	$	(15,105	)	$	(8,793	)

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 balance of the equity investment classified as Level 2 in the fair value hierarchy was $15,449 as of both September 30, 2019 and December 31, 2018. There were no changes to the fair value of the equity investment recognized during the three and nine months ended September 30, 2019.

There were no triggering events identified, 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, 2019 and 2018.

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, 2019, the 5.125% Senior Notes due 2024 (the “2024 Notes”) have a carrying amount of $325,000 and an estimated fair value of $337,188. As of December 31, 2018, the 2024 Notes had a carrying amount of $325,000 and an estimated fair value of $310,375. Quoted market prices in active markets for identical liabilities based inputs (Level 1) were used to estimate fair value. The 2024 Notes were issued in October 2016 and have a fixed rate of 5.125%. See additional information in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (7), Notes Payable and Credit Agreement” of our 2018 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.

8. LEASES

The Company leases certain office facilities, data centers, and equipment under various operating leases. Leases with an initial term of 12 months or less (primarily related to housing arrangements for healthcare professionals on assignment) are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Most leases include one or more options to renew, with renewal terms that can extend the lease term up to 10 years. Certain leases also include options to terminate the leases within 3 years.

The components of lease expense were as follows:



	Three Months Ended September 30,		Nine Months Ended September 30,
	2019		2019
Lease Cost
Operating lease cost	$	4,867	$	13,972
Short-term lease cost	4,848		15,846
Variable and other lease cost	783		2,099
Net lease cost	$	10,498	$	31,917

The maturity of lease liabilities as of September 30, 2019 were as follows:



	Operating Leases
Years ending December 31,
2019 (excluding the nine months ended September 30, 2019)	$	4,525
2020	18,343
2021	18,500
2022	18,230
2023	17,898
Thereafter	50,379
Total lease payments	$	127,875
Less imputed interest	(20,338		)
Present value of lease liabilities	$	107,537

Supplemental cash flow information related to leases was as follows:



	Nine Months Ended September 30,
	2019
Cash paid for amounts included in the measurement of operating lease liabilities (operating cash flows)	$	13,294
Operating lease right-of-use assets obtained in exchange for lease obligations	$	—



Weighted average remaining lease term	7 years
Weighted average discount rate	4.8	%

Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) as of December 31, 2018 were as follows:



	Operating Leases
Years ending December 31,
2019	$	18,218
2020	18,149
2021	18,349
2022	18,144
2023	17,990
Thereafter	50,436
Total minimum lease payments	$	141,286

Rent expense under operating leases (with initial lease terms in excess of one year) was $21,402 for the year ended December 31, 2018.

9. 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, 2019, the Company is no longer subject to state, local or foreign examinations by tax authorities for tax years before 2009 and the Company is no longer subject to U.S. federal income or payroll tax examinations for tax years before 2016. The IRS conducted, completed, and settled audits of the Company’s 2011-2012 and 2013 tax years related to income and employment tax issues for the Company’s treatment of certain non-taxable per diem allowances and travel benefits in November 2017 and May 2018, respectively. Prior to the Company's acquisition of Advanced, on June 14, 2019, Advanced was under an IRS audit for the years 2011-2013 for various payroll tax matters related to the treatment of certain non-taxable per diem allowances and travel benefits. This audit was completed and an assessment was issued for $8,300 in July 2018. Advanced filed a protest in August 2018 and had their first IRS Appeals meeting in May 2019. Advanced is no longer subject to state or local examinations by tax authorities for tax years before 2011. Advanced is no longer subject to U.S. federal income or payroll tax examinations for tax years before 2011 and, payroll and income tax examinations for the years 2014 and 2015. The Company is indemnified for the potential contingent liability by Advanced. The Advanced acquisition is more fully described in Note (2), “Acquisitions.”

The Company believes its reserve for unrecognized tax benefits and contingent tax issues is adequate with respect to all open years. Notwithstanding the foregoing, the Company could adjust its provision for income taxes and contingent tax liability based on future developments.

10. 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, compensation, contract, competitor disputes and employee-related matters and include individual and 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 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 that its wage and hour practices conform with law in all material respects, but litigation is always subject to inherent uncertainty.

With regard to loss contingencies accrued as of September 30, 2019, which are included in accounts payable and accrued expenses in the condensed consolidated balance sheets, the Company believes that such matters will not, either individually or

in the aggregate, have a material adverse effect on its business, consolidated financial position, results of operations, or cash flows.

11. BALANCE SHEET DETAILS

The consolidated balance sheets detail is as follows:



	September 30, 2019			December 31, 2018
Other current assets:
Restricted cash and cash equivalents	$	16,885		$	26,329
Income tax receivable	4,200			799
Other	16,280			12,759
Other current assets	$	37,365		$	39,887

Fixed assets:
Furniture and equipment	$	35,214		$	34,211
Software	182,694			162,006
Leasehold improvements	9,296			8,615
	227,204			204,832
Accumulated depreciation	(127,005		)	(114,413		)
Fixed assets, net	$	100,199		$	90,419

Other assets:
Life insurance cash surrender value	$	74,645		$	55,028
Other	40,837			41,124
Other assets	$	115,482		$	96,152

Accounts payable and accrued expenses:
Trade accounts payable	$	25,474		$	31,537
Subcontractor payable	61,958			50,892
Accrued expenses	35,125			30,236
Loss contingencies	6,045			24,549
Professional liability reserve	8,194			8,633
Other	2,709			3,756
Accounts payable and accrued expenses	$	139,505		$	149,603

Accrued compensation and benefits:
Accrued payroll	$	43,727		$	42,571
Accrued bonuses	20,240			18,021
Accrued travel expense	2,529			3,417
Health insurance reserve	4,168			3,559
Workers compensation reserve	8,587			7,817
Deferred compensation	75,739			55,720
Other	2,960			3,954
Accrued compensation and benefits	$	157,950		$	135,059

Other current liabilities:
Acquisition related liabilities	$	15,105		$	7,918
Other	2,985			2,325
Other current liabilities	$	18,090		$	10,243

Other long-term liabilities:
Workers compensation reserve	$	18,228		$	19,454
Professional liability reserve	34,855			38,324
Deferred rent	—			15,012
Unrecognized tax benefits	4,326			4,862
Deferred revenue	383			865
Other	1,864			11
Other long-term liabilities	$	59,656		$	78,528

12. SUBSEQUENT EVENTS

On October 1, 2019, the Company completed the issuance of $300,000 aggregate principal amount of the 2027 Notes, which mature on October 1, 2027. Interest on the 2027 Notes is payable semi-annually in arrears on April 1 and October 1 of each year, commencing April 1, 2020.

With the proceeds from the 2027 Notes and cash generated from operations, the Company (1) repaid $149,063 of existing Term Loan indebtedness, (2) repaid $146,000 under the Senior Credit Facility, and (3) paid approximately $4,300 of fees and expenses related to the offering and issuance of the 2027 Notes.

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, 2018, filed with the Securities and Exchange Commission (“SEC”) on February 21, 2019 (“2018 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,” workforce consulting services, predictive modeling, staff scheduling, revenue cycle solutions and the placement of physicians, nurses, allied healthcare professionals and healthcare 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.

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, 2019, we recorded revenue of $567.6 million, as compared to $526.8 million for the same period last year. For the nine months ended September 30, 2019, we recorded revenue of $1,635.2 million, as compared to $1,607.4 million for the same period last year.

Nurse and allied solutions segment revenue comprised 63% and 61% of total consolidated revenue for the nine months ended September 30, 2019 and 2018, 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 15% and 19% of total consolidated revenue for the nine months ended September 30, 2019 and 2018, 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 advanced practice providers, with clients on a temporary basis as independent contractors. These locum tenens providers are used by our 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 to one year.

Other workforce solutions segment revenue comprised 22% and 20% of total consolidated revenue for the nine months ended September 30, 2019 and 2018, 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 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) revenue cycle solutions and related consulting services, (7)

workforce optimization services that include consulting, data analytics, predictive modeling, and SaaS-based scheduling technology, and (8) credentialing services.

As part of our long-term growth strategy to add value for our clients, healthcare professionals, and shareholders, on June 14, 2019, January 30, 2019, April 9, 2018 and April 6, 2018, we acquired Advanced, Silversheet, MedPartners HIM (“MedPartners”), and Phillips DiPisa and Leaders For Today (“PDA” and “LFT”), respectively. Advanced is a national healthcare staffing company that specializes in placing therapists and nurses across multiple settings, including hospitals, schools, clinics, skilled nursing facilities, and home health. Silversheet provides innovative credentialing software solutions to clinicians and healthcare enterprises. MedPartners provides revenue cycle solutions, including case management, clinical documentation improvement, medical coding and registry services to hospitals and physician medical groups nationwide. PDA and LFT offer a range of leadership staffing and permanent placement solutions for the healthcare industry. 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 reflects near record levels of healthcare job openings and 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. These positive macro economic and labor trends have created a highly competitive labor market for clinicians and our clinician supply, particularly in nursing, has not kept pace with growth in client demand.

The consolidation within the healthcare industry is creating larger, more sophisticated and complex health systems that we believe has elevated the need for strategic workforce solutions capable of partnering to solve their recruiting, staffing and workforce optimization requirements. Given the increasing need for partners capable of offering a comprehensive workforce solution, we continue to see the benefits of our workforce solutions strategy, particularly with our MSPs. As a result of our ongoing focus on these strategic MSP relationships, the percentage of our staffing revenue derived from our MSP clients continues to increase, and we believe these strategic, longer-term relationships will continue to comprise a greater proportion of revenue in our staffing businesses.

In our nurse and allied solutions segment, overall demand is strong and at the highest levels seen since 2016. However, placement activity has been unfavorably impacted by fewer contingent nurse staffing needs from a large client. Additionally, a tight labor market and modest growth in bill rates is also impacting our ability to sufficiently recruit the nurses to meet the increased demand. Our allied staffing business continues to have strong overall demand resulting in steady organic revenue growth. However, we have recently experienced a decline in demand for therapists from our skilled nursing facility clients that is resulting from recently implemented Medicare reimbursement changes. The access to additional supply of nurse and allied healthcare professionals from the Advanced acquisition has helped us better address our client’s staffing demands.

The demand environment for locum tenens is also generally favorable, although demand for hospitalists and emergency room physicians has significantly declined over the past 12 months. Our locum tenens business has stabilized after disruption resulting from process and technology changes made during 2018, and recruiter productivity continues to improve.

In our other workforce solutions segment, better demand and placements in the interim leadership and physician permanent placement divisions and growth in technology workforce solutions are driving improved segment performance and our profitability on a consolidated basis. Since experiencing a decline in our revenue cycle solutions revenue in recent quarters, revenue for this division has seen signs of stabilization due in part to growing opportunities to serve our MSP customers.

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 intangible assets purchased in a business combination, 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 (“ASU”) 2016-02 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 2018 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 PDA, LFT, MedPartners, Silversheet and Advanced acquisitions impact the comparability of the results between the three and nine months ended September 30, 2019 and 2018 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,
	2019		2018		2019		2018
Unaudited Condensed Consolidated Statements of Operations:
Revenue	100.0	%	100.0	%	100.0	%	100.0	%
Cost of revenue	66.5		66.8		66.6		67.4
Gross profit	33.5		33.2		33.4		32.6
Selling, general and administrative	23.5		23.0		22.9		21.2
Depreciation and amortization	3.0		2.1		2.6		1.9
Income from operations	7.0		8.1		7.9		9.5
Interest expense, net, and other	1.4		0.9		1.1		1.0
Income before income taxes	5.6		7.2		6.8		8.5
Income tax expense	1.5		1.9		1.5		1.9
Net income	4.1	%	5.3	%	5.3	%	6.6	%

Comparison of Results for the Three Months Ended September 30, 2019 to the Three Months Ended September 30, 2018

Revenue. Revenue increased 8% to $567.6 million for the three months ended September 30, 2019 from $526.8 million for the same period in 2018, primarily attributable to additional revenue of $37.0 million from our Silversheet and Advanced acquisitions and higher organic revenue in our nurse and allied solutions segment, partially offset by lower revenue in our locum tenens solutions segment. Excluding the additional revenue from acquisitions, revenue increased 1%.

Nurse and allied solutions segment revenue increased 18% to $362.5 million for the three months ended September 30, 2019 from $306.3 million for the same period in 2018. The $56.2 million increase was primarily attributable to $36.6 million of revenue in connection with the Advanced acquisition, a 2% increase in the average number of healthcare professionals on assignment, and a 2% increase in the average bill rate during the during the three months ended September 30, 2019.

Locum tenens solutions segment revenue decreased 17% to $84.2 million for the three months ended September 30, 2019 from $101.1 million for the same period in 2018. The $16.9 million decrease was primarily attributable to a 15% decrease in the number of days filled and a 2% decrease in the revenue per day filled during the three months ended September 30, 2019.

Other workforce solutions segment revenue increased 1% to $120.9 million for the three months ended September 30, 2019 from $119.4 million for the same period in 2018. The $1.5 million increase was primarily attributable to growth in our interim leadership, permanent placement, recruitment process outsourcing, and VMS businesses, partially offset by a decline in our revenue cycle solutions business during the three months ended September 30, 2019.

Gross Profit. Gross profit increased 8% to $190.0 million for the three months ended September 30, 2019 from $175.1 million for the same period in 2018, representing gross margins of 33.5% and 33.2%, respectively. The gross margin for the three months ended September 30, 2019 was positively impacted by a higher gross margin in our nurse and allied solutions segment, driven by a higher labor disruption margin and partially offset by higher traveler housing costs, and higher other workforce solutions gross margin. These positive factors were partially offset by a lower margin in our locum tenens solutions segment and an unfavorable segment mix shift. Gross margin by reportable segment for the three months ended September 30, 2019 and 2018 was 27.9% and 27.4% for nurse and allied solutions, 27.5% and 28.4% for locum tenens solutions, and 54.3% and 52.4% for other workforce solutions, respectively. The year-over-year gross margin decline in the locum tenens solutions segment was driven by lower perm conversion fees.

Selling, General and Administrative Expenses. Selling, general and administrative (“SG&A”) expenses were $133.2 million, representing 23.5% of revenue, for the three months ended September 30, 2019, as compared to $121.2 million, representing 23.0% of revenue, for the same period in 2018. The increase in SG&A expenses was primarily due to $6.8 million of additional SG&A expenses from the Silversheet and Advanced acquisitions, a $10.1 million increase related to acquisition, integration, changes in the fair value of earn-out liabilities from acquisitions, and extraordinary legal expenses, higher employee compensation expenses, and other expenses associated with our revenue growth. The increase was partially offset by a $12.1 million increase in legal accruals during the three months ended September 30, 2018. 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,
	2019		2018
Nurse and allied solutions	$	53,673	$	41,643
Locum tenens solutions	16,998		17,762
Other workforce solutions	37,854		33,575
Unallocated corporate overhead	21,857		26,427
Share-based compensation	2,825		1,809
	$	133,207	$	121,216

Depreciation and Amortization Expenses. Amortization expense increased 70% to $11.4 million for the three months ended September 30, 2019 from $6.7 million for the same period in 2018, primarily attributable to additional amortization expenses related to the intangible assets acquired in the Silversheet and Advanced acquisitions and the shortened useful life of the tradename intangible asset acquired in the MedPartners acquisition. Depreciation expense increased 24% to $5.7 million for the three months ended September 30, 2019 from $4.6 million for the same period in 2018, 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 $7.8 million during the three months ended September 30, 2019 as compared to $4.6 million for the same period in 2018. The increase is primarily due to a higher average debt outstanding balance for the three months ended September 30, 2019, which resulted from borrowings used to finance the Silversheet and Advanced acquisitions, and a $1.4 million gain related to the change in fair value of an equity investment during the three months ended September 30, 2018. The overall increase is partially offset by a higher income from restricted investments related to our captive insurance company for the three months ended September 30, 2019.

Income Tax Expense. Income tax expense was $8.4 million for the three months ended September 30, 2019 as compared to $10.1 million for the same period in 2018, reflecting effective income tax rates of 26% and 27% for the three months ended September 30, 2019 and 2018, respectively. The decrease in the effective income tax rate was primarily attributable to the Company’s discrete tax benefits of $1.5 million and $0.9 million in relation to income before income taxes of $31.9 million and $38.0 million for the three months ended September 30, 2019 and 2018, respectively. We currently estimate our annual effective tax rate to be approximately 24% for 2019. The 26% effective tax rate for the three months ended September 30, 2019 differs from our estimated annual effective tax rate of 24% primarily due to less proportionate discrete tax benefits recorded during the three months ended September 30, 2019, as compared to the nine months ended September 30, 2019, in relation to income before income taxes. The discrete tax benefits are related to equity awards vested and exercised and fair value changes in the cash surrender value of our Company Owned Life Insurance (“COLI”) and reductions to the reserve for unrecognized tax benefits.

Comparison of Results for the Nine Months Ended September 30, 2019 to the Nine Months Ended September 30, 2018

Revenue. Revenue increased 2% to $1,635.2 million for the nine months ended September 30, 2019 from $1,607.4 million for the same period in 2018, primarily attributable to additional revenue of $76.7 million from our PDA, LFT, MedPartners, Silversheet, and Advanced acquisitions and higher organic revenue in our nurse and allied solutions segment, partially offset by an approximately $8.0 million decrease in labor disruption revenue and lower revenue in our locum tenens solutions segment. Excluding the additional revenue from acquisitions, revenue decreased 3%.

Nurse and allied solutions segment revenue increased 6% to $1,031.2 million for the nine months ended September 30, 2019 from $977.2 million for the same period in 2018. The $54.0 million increase was primarily attributable to additional revenue of $41.7 million in connection with the Advanced acquisition and a 1% increase in the average number of healthcare

professionals on assignment during the nine months ended September 30, 2019, partially offset by an approximately $8.0 million decrease in labor disruption revenue.

Locum tenens solutions segment revenue decreased 21% to $246.7 million for the nine months ended September 30, 2019 from $311.5 million for the same period in 2018. The $64.8 million decrease was primarily attributable to a 21% decrease in the number of days filled during the nine months ended September 30, 2019, partially offset by a slight increase in the revenue per day filled.

Other workforce solutions segment revenue increased 12% to $357.3 million for the nine months ended September 30, 2019 from $318.7 million for the same period in 2018. Of the $38.6 million increase, $35.1 million was attributable to additional revenue in connection with the PDA, LFT, MedPartners, and Silversheet acquisitions, with the remainder primarily attributable to growth in our permanent placement, recruitment process outsourcing, VMS, and organic interim leadership businesses, partially offset by a decline in our organic revenue cycle solutions business during the nine months ended September 30, 2019.

Gross Profit. Gross profit increased 4% to $546.3 million for the nine months ended September 30, 2019 from $523.9 million for the same period in 2018, representing gross margins of 33.4% and 32.6%, respectively. The gross margin for the nine months ended September 30, 2019 was positively impacted by a higher gross margins in our nurse and allied solutions segment, driven by higher labor disruption margin, higher other workforce solutions gross margin, a change in our physician permanent placement business model that prompted a $4.3 million classification of certain recruiter compensation expenses to SG&A that was previously in cost of revenue, and a favorable segment mix shift. These positive factors were partially offset by a lower margin in our locum tenens solutions segment. Gross margin by reportable segment for the nine months ended September 30, 2019 and 2018 was 27.8% and 27.2% for nurse and allied solutions, 27.7% and 29.0% for locum tenens solutions, and 53.7% and 52.6% for other workforce solutions, respectively. The year-over-year gross margin decline in the locum tenens solutions segment was driven by lower perm conversion fees and lower bill-to-pay spreads.

Selling, General and Administrative Expenses. SG&A expenses were $374.9 million, representing 22.9% of revenue, for the nine months ended September 30, 2019, as compared to $341.5 million, representing 21.2% of revenue, for the same period in 2018. The increase in SG&A expenses was primarily due to $17.8 million of additional SG&A expenses from the PDA, LFT, MedPartners, Silversheet and Advanced acquisitions, a $17.3 million increase related to acquisition, integration, changes in the fair value of earn-out liabilities from acquisitions, and extraordinary legal expenses, a $3.8 million increase in share-based compensation expense, and higher employee compensation expenses. The increase was partially offset by an additional $3.5 million of favorable actuarial-based decreases in our professional liability reserves as compared to the same period in 2018 and a $12.1 million increase in legal accruals during the nine months ended September 30, 2018. 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,
	2019		2018
Nurse and allied solutions	$	142,196	$	128,107
Locum tenens solutions	49,281		55,930
Other workforce solutions	110,589		90,226
Unallocated corporate overhead	61,093		59,271
Share-based compensation	11,713		7,954
	$	374,872	$	341,488

Depreciation and Amortization Expenses. Amortization expense increased 44% to $25.4 million for the nine months ended September 30, 2019 from $17.6 million for the same period in 2018, with the increase primarily attributable to additional amortization expenses related to the intangible assets acquired in the PDA, LFT, MedPartners, Silversheet and Advanced acquisitions and the shortened useful life of the tradename intangible asset acquired in the MedPartners acquisition. Depreciation expense increased 32% to $16.1 million for the nine months ended September 30, 2019 from $12.2 million for the same period in 2018, 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 $19.6 million during the nine months ended September 30, 2019 as compared to $16.4 million for the same period in 2018. The increase is primarily due to a higher average debt outstanding balance for the nine months ended September 30, 2019, which resulted from borrowings used to finance the Silversheet and Advanced acquisitions, and a $1.4 million gain related to the change in fair value of an equity

investment during the nine months ended September 30, 2018. The overall increase is partially offset by higher income from restricted investments related to our captive insurance company for the nine months ended September 30, 2019.

Income Tax Expense. Income tax expense was $23.9 million for the nine months ended September 30, 2019 as compared to income tax expense of $30.2 million for the same period in 2018, reflecting effective income tax rates of 22% and 22% for these periods, respectively. We currently estimate our annual effective income tax rate to be approximately 24% for 2019. The 22% effective tax rate for the nine months ended September 30, 2019 differs from our estimated annual effective income tax rate of 24% due to lower income before income taxes for the nine months ended September 30, 2019 compared to projected income before income taxes for the twelve months ended December 31, 2019 in proportion to the same amount of discrete tax benefits for both periods.

Liquidity and Capital Resources

In summary, our cash flows were:



	(In Thousands) Nine Months Ended September 30,
	2019			2018

Net cash provided by operating activities	$	146,205		$	168,046
Net cash used in investing activities	(253,606		)	(271,648		)
Net cash provided by financing activities	136,440			81,774

Historically, our primary liquidity requirements have been for acquisitions, working capital requirements, and debt service under our credit facilities and senior notes. We have funded these requirements through internally generated cash flow and funds borrowed under our credit facilities. As of September 30, 2019, (1) the total of our Term Loan (as defined below) outstanding (including both current and long-term portions) was $149.1 million, (2) $146.0 million was drawn with $239.3 million of available credit under the Senior Credit Facility (as defined below), and (3) the aggregate principal amount of our 5.125% Senior Notes due 2024 (the “2024 Notes”) outstanding equaled $325.0 million. We describe in further detail our credit agreement, in effect prior to the amendment thereof, under which our Senior Credit Facility is governed, and the 2024 Notes in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (7), Notes Payable and Credit Agreement” of our 2018 Annual Report on Form 10-K. See additional information on our Amended Credit Agreement (as defined below) in Note (6), “Notes Payable and Credit Agreement” to the accompanying Condensed Consolidated Financial Statements.

We believe that cash generated from operations and available borrowings under our Senior Credit Facility will be sufficient to fund our operations, including expected capital expenditures, for the next 12 months and beyond. We intend to finance potential future acquisitions with cash provided from operations, borrowings under our Senior Credit Facility or other borrowings under our Amended 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, 2019 was $146.2 million, compared to $168.0 million for the same period in 2018. The decrease in net cash provided by operating activities was primarily attributable to a decrease in accounts payable and accrued expenses primarily due to payment of a loss contingency during the second quarter of 2019 and increases in subcontractor receivables, income tax receivable, and other assets. The overall decrease was partially offset by a decrease in accounts receivable and increases in accrued compensation and benefits and other liabilities between periods due to timing of payments. Our Days Sales Outstanding (“DSO”) was 57 days at September 30, 2019, 64 days at December 31, 2018, and 64 days at September 30, 2018.

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2019 was $253.6 million, compared to $271.6 million for the same period in 2018. The decrease was primarily due to net proceeds of restricted investments related to our captive insurance company of $11.9 million during the nine months ended September 30, 2019, as compared to a net purchase of $16.8 million during the nine months ended September 30, 2018. The decrease was partially offset by $228.2 million used for acquisitions during the nine months ended September 30, 2019, as compared to $217.4 million used for acquisitions during the nine months ended September 30, 2018. See additional information in the accompanying Note (2),

“Acquisitions.” Capital expenditures were $24.8 million and $23.9 million for the nine months ended September 30, 2019 and 2018, respectively.

Financing Activities

Net cash provided by financing activities during the nine months ended September 30, 2019 was $136.4 million, primarily due to borrowings of $101.0 million under the Senior Credit Facility (as defined below) and $150.0 million of borrowings under the Term Loan (as defined below) used to fund our Advanced acquisition, partially offset by (1) the repayment of $75.0 million under the Senior Credit Facility, (2) $18.7 million paid in connection with the repurchase of our common stock, (3) $5.7 million for acquisition contingent consideration earn-out payments, and (4) $13.3 million in cash paid for shares withheld for payroll taxes resulting from the vesting of employee equity awards. Net cash provided by financing activities during the nine months ended September 30, 2018 was $81.8 million, primarily due to borrowings of $195.0 million under the Senior Credit Facility, 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 common stock, (3) $2.3 million payment of financing costs in connection with the new credit agreement, (4) $1.7 million for 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.

Amended Credit Agreement

On February 9, 2018, we entered into a credit agreement (the “New Credit Agreement”) with several lenders to provide for a $400.0 million secured revolving credit facility (the “Senior Credit Facility”) to replace our then-existing credit agreement. The Senior Credit Facility includes a $50.0 million sublimit for the issuance of letters of credit and a $50.0 million sublimit for swingline loans. On June 14, 2019, we entered into the first amendment to the New Credit Agreement (the “First Amendment”) to provide for, among other things, a $150.0 million secured term loan credit facility (the “Term Loan” and, together with the Senior Credit Facility, the “Credit Facilities”). The First Amendment (together with the New Credit Agreement, the “Amended Credit Agreement”) also extended the maturity date of the Senior Credit Facility to be coterminous with the Term Loan. Our obligations under the Amended Credit Agreement are secured by substantially all of our assets. For more detail regarding the terms of the Amended Credit Agreement, including maturity dates, payment and interest terms, please see Note (6) to the accompanying Condensed Consolidated Financial Statements, “Notes Payable and Credit Agreement.”

Letters of Credit

At September 30, 2019, we maintained outstanding standby letters of credit totaling $17.1 million as collateral in relation to our workers’ compensation insurance agreements and a corporate office lease agreement. Of the $17.1 million of outstanding letters of credit, we have collateralized $2.3 million in cash and cash equivalents and the remaining $14.8 million is collateralized by the Senior Credit Facility. Outstanding standby letters of credit at December 31, 2018 totaled $17.6 million.

4.625% Senior Notes Due 2027

On October 1, 2019, AMN Healthcare, Inc. (the “Issuer”), a wholly owned subsidiary of AMN Healthcare Services, Inc. (the “Parent”), completed the issuance of $300.0 million aggregate principal amount of 4.625% Senior Notes due 2027 (the “2027 Notes”). The 2027 Notes will mature on October 1, 2027. Interest on the 2027 Notes is payable semi-annually in arrears on April 1 and October 1 of each year, commencing April 1, 2020.

The 2027 Notes were issued pursuant to an Indenture (the “Indenture”), dated as of October 1, 2019, by and among the Issuer, the Parent, the subsidiary guarantors party thereto (collectively, together with the Parent, the “Guarantors”) and U.S. Bank National Association, as trustee, and are senior unsecured obligations of the Issuer. The Guarantors have guaranteed (the “Guarantees”) the Issuer’s obligations under the 2027 Notes and the Indenture on a senior unsecured basis. The Guarantors include the Parent and the subsidiaries of the Issuer that guarantee the Issuer’s Credit Facilities.

The 2027 Notes will rank pari passu in right of payment with all of the Issuer’s existing and future senior indebtedness, senior to all of the Issuer’s existing and future subordinated indebtedness and effectively subordinated to all of the Issuer’s existing and future secured indebtedness, to the extent of the value of the collateral securing such indebtedness.

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

The 2027 Notes and the Guarantees will be structurally subordinated to all existing and future indebtedness and other liabilities and preferred stock of any of the Issuer’s subsidiaries that do not guarantee the 2027 Notes.

At any time and from time to time on and after October 1, 2022, the Issuer will be entitled at its option to redeem all or a portion of the 2027 Notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed in percentages of principal amount on the redemption date) set forth below, plus accrued and unpaid interest, if any, to (but excluding) the redemption date (subject to the right of holders of record of the 2027 Notes on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the twelve month period commencing on October 1 of the years set forth below:



Period	Redemption Price
2022		102.313	%
2023		101.156	%
2024 and thereafter		100.000	%

At any time and from time to time prior to October 1, 2022, the Issuer may also redeem 2027 Notes with the net cash proceeds of certain equity offerings in an aggregate principal amount not to exceed 40% of the aggregate principal amount of the 2027 Notes issued, at a redemption price (expressed as a percentage of principal amount) of 104.625% of the principal amount thereof plus accrued and unpaid interest, if any, to (but excluding) the applicable redemption date.

In addition, the Issuer may redeem some or all of the 2027 Notes at any time and from time to time prior to October 1, 2022 at a redemption price equal to 100% of the principal amount of the 2027 Notes redeemed, plus accrued and unpaid interest thereon, if any, to (but excluding) the applicable redemption date, plus a “make-whole” premium based on the applicable treasury rate plus 50 basis points.

Upon the occurrence of specified change of control events as defined in the Indenture, the Issuer must offer to repurchase the 2027 Notes at 101% of the principal amount, plus accrued and unpaid interest, if any, to (but excluding) the purchase date.

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

•sell assets,

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

•make certain investments,

•incur or guarantee additional indebtedness or issue preferred stock,

•create certain liens,

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

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

•enter into transactions with affiliates, and

•create unrestricted subsidiaries.

These covenants are subject to a number of important exceptions and qualifications. The Indenture contains affirmative covenants and events of default that are customary for Indentures governing high yield securities. The 2027 Notes and the Guarantees are not subject to any registration rights agreement.

We used the proceeds from the issuance of the 2027 Notes to (1) repay $149.1 million of our existing Term Loan indebtedness, (2) repay $146.0 million under the Senior Credit Facility, and (3) pay fees and expenses related to the offering and sale of the 2027 Notes.

Off-Balance Sheet Arrangements

At September 30, 2019, we did not have any off-balance sheet arrangements that have or are 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, 2019, other than the borrowings under the New Credit Agreement and Amended Credit Agreement described in the accompanying Note (2), “Acquisitions” and Note (6), “Notes Payable and Credit Agreement,” 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 2018 Annual Report.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” The standard introduces new accounting models for determining and recognizing credit losses on certain financial instruments based on an estimate of current expected credit losses and is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. We are in the process of analyzing the requirements of this standard and evaluating the impact on our consolidated financial statements. This includes reviewing current accounting policies and practices to identify potential differences that would result from applying the requirements under the new standard. We completed our preliminary assessment and 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 2019. We will adopt this standard in the first quarter of 2020 and do not expect the adoption to have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, “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. We will adopt this standard in the first quarter of 2020 and do not expect the adoption 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 will adopt this standard in the first quarter of 2020 and are currently evaluating the effect that adopting it will have on our disclosures.

In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” The standard aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The new guidance requires the capitalized implementation costs to be recorded as an other asset, rather than a fixed asset, and the related amortization of those costs to be recorded in selling, general and administrative expenses. This standard is effective on a prospective or retrospective basis for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. We will adopt this standard prospectively in the first quarter of 2020 and do not expect the adoption to have a material impact on our consolidated financial statements.

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

Special Note Regarding Forward-Looking Statements

This Quarterly Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We base these forward-looking statements on our expectations, estimates, forecasts, and projections about future events and about the industry in which we operate. Forward-looking statements are identified by words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “will,” “should,” “would,” “project,” “may,” variations of such words, and other similar expressions. In addition, any statements that refer to projections of financial items, anticipated growth, future growth and revenues, future economic conditions and performance, plans, objectives and strategies for future operations, expectations, or other characterizations of future events or circumstances are forward-looking statements. All forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those discussed in, or implied by, these forward-looking statements. Factors that could cause actual results to differ materially from those implied by the forward-looking statements in this Quarterly Report are set forth in our 2018 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;


•	the ability of our clients to increase the efficiency and effectiveness of their 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 repeal or significant erosion of the Patient Protection and Affordable Care Act 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;


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


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


•	any technology disruptions or our inability to implement new infrastructure and technology systems effectively may adversely affect our operating results and ability to manage our business effectively;


•	any failure to further develop and evolve our current workforce solutions technology offerings and capabilities, which may harm our business;


•	disruption to or failures of our SaaS-based technology 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;


•	security breaches and cybersecurity incidents that could compromise our information and systems, which could adversely affect our business operations and reputation and could subject us to substantial liabilities;


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


•	any inability on our part to continue to attract, develop and retain our sales and operations team members, which may deteriorate our operations;


•	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 incorporate acquisitions into our business operations, which may adversely affect our long-term growth and our results of operations;


•	businesses we acquire may have liabilities or adverse operating issues, which could harm our operating results;


•	any increase to our business and operating risks as we develop new services and clients, enter new lines of business, and focus more of our business on providing a full range of client solutions;


•	any inability on our part to maintain our positive brand awareness and identity, which may adversely affect our results of operation;


•	the expansion of social media platforms presents new risks and challenges, which could cause damage to our brand reputation;


•	any recognition of an impairment to the substantial amount of goodwill or indefinite-lived intangibles on our balance sheet;


•	our indebtedness, which could adversely affect our ability to raise additional capital to fund operations, limit our ability to react to changes in the economy or our industry, and expose us to interest rate risk to the extent of any variable rate debt;


•	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 to our insurance-related accruals on our balance sheet, which could decrease our earnings or increase our losses and negatively impact our cash flows.

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, 2019, our primary exposure to market risk was interest rate risk associated with our variable interest debt instruments. 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, 2019. On October 1, 2019, we completed the issuance of $300.0 million aggregate principal amount of the 2027 Notes. With the proceeds from the issuance of the 2027 Notes, we repaid the full existing balance under the Senior Credit Facility and the full outstanding balance under the term loan indebtedness. During the three and nine months ended September 30, 2019, 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, 2019 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, 2019 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 2018 Annual Report.

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

From time to time, we may repurchase our common stock in the open market pursuant to programs approved by our Board. We may repurchase our common stock for a variety of reasons, such as acquiring shares to offset dilution related to equity-based incentives and optimizing our capital structure. On November 1, 2016, our Board authorized us to repurchase up to $150.0 million of our outstanding common stock in the open market. Under the repurchase program announced on November 1, 2016 (the “Company Repurchase Program”), share purchases may be made from time to time beginning in the fourth quarter of 2016, depending on prevailing market conditions and other considerations. The Company Repurchase Program has no expiration date and may be discontinued or suspended at any time.

During the nine months ended September 30, 2019, we purchased 395,212 shares of common stock at an average price of $47.30 per share, resulting in an aggregate purchase price of $18.7 million. The following table presents the detail of shares repurchased during the nine months ended September 30, 2019. All share repurchases reflected in the table below were made under the Company Repurchase Program, which is the sole repurchase program of the Company currently in effect.




Period	Total Number of Shares (or Units) Purchased	Average Price Paid per Share (or Unit)	Total Number of Shares (or Units) Purchased as Part of Publicly Announced Program	Maximum Dollar Value of Shares (or Units) that May Yet Be Purchased Under the Program
February 1 - 28, 2019	22,900	$50.50	22,900	$48,405,129
March 1 - 31, 2019	355,417	$47.16	355,417	$31,631,647
April 1 - 30, 2019	16,895	$45.80	16,895	$30,857,280

Total	395,212	$47.30	395,212	$30,857,280

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits



Exhibit Number		Description

4.1		Indenture, dated as of October 1, 2019, by and among AMN Healthcare, Inc., the guarantors party thereto, and U.S. Bank National Association.*

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 4, 2019



AMN HEALTHCARE SERVICES, INC.

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

Date: November 4, 2019

/S/ BRIAN M. SCOTT

Brian M. Scott

Chief Accounting Officer,

Chief Financial Officer and Treasurer

(Principal Accounting and Financial Officer)



Term	Section
Affiliate Transaction	4.07(a)
Agent Members	Appendix A
Change of Control Offer	4.08(b)
covenant defeasance	8.01(b)
Covenant Suspension Event	4.14
Definitive Note	Appendix A
Depository	Appendix A
Event of Default	6.01
Excess Proceeds	4.06(a)
Excess Proceeds Offer	4.06(b)
Global Notes	Appendix A
Global Notes Legend	Appendix A
Guaranteed Obligations	10.01(a)
Increased Amount	4.09(c)
IAI	Appendix A
Initial Lien	4.09(a)
Initial Notes	Preamble
Issuer	Preamble
LCA Election	1.05
LCA Test Date	1.05
legal defeasance	8.01(b)
Notes	Preamble
Notes Custodian	Appendix A
Paying Agent	2.04(a)
protected purchaser	2.08
QIB	Appendix A
Registrar	2.04(a)
Regulation S	Appendix A
Regulation S Global Notes	Appendix A
Regulation S Notes	Appendix A
Reporting Entity	4.02(b)
Restricted Notes Legend	Appendix A
Restricted Period	Appendix A
Reversion Date	4.14
Rule 144A Global Notes	Appendix A
Rule 144A Notes	Appendix A
Rule 501	Appendix A
Successor Company	5.01(a)(1)
Successor Guarantor	5.01(b)(1)
Suspended Covenants	4.14
Suspension Date	4.14
Suspension Period	4.14
Transfer Restricted Definitive Notes	Appendix A
Transfer Restricted Global Notes	Appendix A



Term	Section
Transfer Restricted Notes	Appendix A
Unrestricted Definitive Notes	Appendix A
Unrestricted Global Notes	Appendix A



Term:	Defined in Section:
Agent Members	2.1(b)
Clearstream	2.1(b)
Euroclear	2.1(b)
Global Notes	2.1(b)
Regulation S Global Notes	2.1(b)
Regulation S Permanent Global Note	2.1(b)
Regulation S Temporary Global Note	2.1(b)
Rule 144A Global Notes	2.1(b)



No. ____	144A CUSIP No. 00175P AB9
	144A ISIN No. US00175PAB94
	REG S CUSIP No. U0317P AB5
	REG S ISIN No. USU0317PAB59
	$___________



(1)	£	to Parent, the Issuer or any Subsidiary thereof; or
(2)	£	to the Registrar for registration in the name of the Holder, without transfer; or
(3)	£	pursuant to an effective registration statement under the Securities Act of 1933; or
(4)	£	inside the United States to a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act of 1933) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or
(5)	£	outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act of 1933 and such Note shall be held immediately after the transfer through Euroclear or Clearstream until the expiration of the Restricted Period (as defined in the Indenture); or
(6)	£	to an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933) that has furnished to the Trustee a signed letter containing certain representations and agreements; or
(7)	£	pursuant to another available exemption from registration provided by Rule 144 under the Securities Act of 1933.


SECTION 1.04.	No Incorporation by Reference of Trust Indenture Act 31


SECTION 4.05.	Limitation on Restrictions on Distributions from Restricted Subsidiaries 48


SECTION 4.06.	Limitation on Sales of Assets and Subsidiary Stock. 50


SECTION 6.07.	Contractual Rights of the Holders to Receive Payment 62


SECTION 7.11.	Preferential Collection of Claims Against the Issuer 68


SECTION 8.01.	Discharge of Liability on Notes; Defeasance. 69


SECTION 9.03.	Revocation and Effect of Consents and Waivers. 73


SECTION 9.06.	Additional Voting Terms; Calculation of Principal Amount 74


SECTION 10.07.	Execution of Supplemental Indenture for Future Guarantors 77


SECTION 11.02.	Certificate and Opinion as to Conditions Precedent 79


SECTION 11.03.	Statements Required in Certificate or Opinion 79


SECTION 11.05.	Rules by Trustee, Paying Agent and Registrar 80



Period	Redemption Price
2022	102.313%
2023	101.156%
2024 and thereafter	100.000%



Date:
Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor program reasonably acceptable to the Trustee	Signature of Signature Guarantee


£	has requested the Trustee by written order to deliver in exchange for its beneficial interest in the Global Note held by the Depository a Note or Notes in definitive, registered form of authorized denominations and an aggregate principal amount equal to its beneficial interest in such Global Note (or the portion thereof indicated above);



Date of Exchange	Amount of decrease in Principal amount of this Global Note	Amount of increase in Principal amount of this Global Note	Principal amount of this Global Note following such decrease or increase	Signature of authorized signatory of Trustee or Notes Custodian


Signature Guarantee:	Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor program reasonably acceptable to the Trustee