Acquisitions

American Personnel

On December 1, 2018, the Company completed the acquisition of American Personnel, Inc. (AP Staffing) for a total purchase price of $2.0 million, subject to a net working capital adjustment. The Company assigned a total of $0.4 million to definite life intangible assets with a weighted average estimated useful life of 10 years. The remaining excess purchase price over the fair value of net assets acquired of $0.7 million was recorded as goodwill, which is not deductible for tax purposes since this was a stock acquisition. Associated acquisition-related costs incurred were $0.2 million and have been included in acquisition and integration costs in the consolidated statements of operations for the year ended December 31, 2018.

The acquisition was deemed immaterial and has been accounted for in accordance with the Business Combinations Topic of the FASB ASC, using the acquisition method of accounting. AP Staffing's results of operations are included in the consolidated statements of operations since its date of acquisition.

Advantage

Effective July 1, 2017, the Company acquired all of the assets of Advantage RN, LLC and its subsidiaries (collectively, Advantage) for cash consideration of $86.6 million, net of cash acquired of $2.8 million. The total purchase price of $88.0 million was subject to a net working capital reduction of $0.6 million at the closing and an additional $0.8 million was received during the third quarter of 2017 as the final adjustment for net working capital. Additionally, $0.6 million of the purchase price was deferred as of the closing and was due to the seller within 20 months, less any COBRA and healthcare payments incurred by the Company on behalf of the seller. The Company incurred approximately $0.5 million in COBRA expenses since the Advantage acquisition and, in February 2019, released to the seller the remaining liability of $0.1 million.

Included in the amount paid at closing were two escrow accounts, the first was $14.5 million which related to tax liabilities and the second was $7.5 million which was to cover any post-close liabilities. On July 28, 2017, $7.3 million related to the tax liabilities was released from escrow, leaving a balance of $7.2 million. On April 3, 2019, $4.3 million related to the tax liabilities was disbursed to pay taxes and the remaining $2.9 million was released from escrow to the seller. In the first quarter of 2019, $7.0 million related to the post-close liabilities was released from escrow, leaving a balance of $0.5 million to cover pending post-close liabilities.

The Company financed the purchase using $19.9 million in available cash and $66.9 million in borrowing under its Credit Facility, including a $40.0 million incremental term loan, which was subsequently refinanced on August 1, 2017. See Note 8 - Debt. The transaction was treated as a purchase of assets for income tax purposes.

The acquisition has been accounted for in accordance with the Business Combinations Topic of the FASB ASC, using the acquisition method of accounting. As such, the amounts of revenue and contribution income included in the consolidated statements of operations from the acquisition date to the period ended December 31, 2017 were $47.0 million and $3.8 million, respectively. The acquisition results have been substantially aggregated with the Company's Nurse and Allied Staffing business segment. See Note 18 - Segment Data.

The purchase price was allocated to the assets acquired and the liabilities assumed based on the estimated fair value at the date of acquisition. The Company used a third-party appraiser to assist with the determination of the fair value and estimated useful lives of certain acquired assets and liabilities.

The following table is an estimate of the fair value of the assets acquired and liabilities assumed on July 1, 2017.



	(amounts in thousands)
Cash and cash equivalents	$	2,833
Accounts receivable	14,396
Other current assets	392
Property and equipment	333
Goodwill	43,596
Other intangible assets	29,900
Total assets acquired	91,450
Accounts payable and accrued expenses	368
Accrued employee compensation and benefits	1,685
Other current liabilities	2
Total liabilities assumed	2,055
Net assets acquired	$	89,395

The Company assigned the following values to other identifiable intangible assets: (i) $4.5 million to trade names with a weighted average estimated useful life of 10 years; (ii) $13.8 million to customer relationships with a weighted average estimated useful life of 10 years; (iii) $11.3 million to a database, consisting of healthcare professionals, with a weighted average estimated useful life of 10 years; and (iv) $0.3 million to non-compete agreements with a weighted average estimated useful life of 5 years, for a total of $29.9 million in definite life intangible assets with a weighted average estimated useful life of 10 years.

The remaining excess purchase price over the fair value of net assets acquired of $43.6 million was recorded as goodwill, which is deductible for tax purposes. Associated acquisition-related costs incurred were $2.0 million and have been included in acquisition and integration costs in the consolidated statements of operations for the year ended December 31, 2017.

Pro Forma Financial Information

The following unaudited pro forma financial information approximates the consolidated results of operations of the Company

as if the Advantage acquisition had occurred as of January 1, 2017, after giving effect to certain adjustments, including

additional interest expense on the amount the Company borrowed on the date of the transaction, the amortization of acquired

intangible assets, and the elimination of certain expenses that will not be recurring in post-acquisition periods, net of an

estimated income tax impact. These adjustments include removing transaction-related expenses of approximately $2.0 million

for the year ended December 31, 2017. These results are not necessarily indicative of future results as they do not include

incremental investments in support functions, elimination of costs for integration or operating synergies, or an estimate of any

impact on interest expense resulting from the operating cash flow of the acquired businesses, among other adjustments that

could be made in the future but are not factually supportable on the date of the transaction.



	Year Ended December 31, 2017
(unaudited, amounts in thousands except per share data)
Revenue from services	$	916,149

Net income attributable to common shareholders	$	40,255

Net income per common share attributable to common shareholders - basic	$	1.16

Net income per common share attributable to common shareholders - diluted	$	1.09

US Resources Healthcare

On December 1, 2016, the Company completed the acquisition of US Resources Healthcare, LLC (USR). The agreement specified that the sellers were eligible to receive additional purchase price consideration based on attainment of specific performance criteria achieved in the years 2017 through 2019. The earnout for 2017 was not achieved and, as a result, in the fourth quarter of 2017, the Company recognized a decrease in the fair value of the related liability of $1.3 million included as acquisition-related contingent consideration in the consolidated statements of operations. The adjustment was driven by the decrease in the projected USR 2018 and 2019 revenue and EBITDA amounts. In the third quarter of 2018, the Company determined that the contingent consideration earnout related to the USR acquisition would not be achieved for 2018 and 2019 and, as a result, the remaining liability of $0.2 million was reversed.

Mediscan

On October 30, 2015, the Company completed the acquisition of all of the membership interests of New Mediscan II, LLC, Mediscan Diagnostic Services, LLC, and Mediscan Nursing Staffing, LLC (collectively Mediscan). An amount of $5.0 million of the purchase price that was held in escrow to cover any post-closing liabilities, was released to the sellers on May 3, 2017.

The agreement also specified that the sellers were eligible to receive additional purchase price consideration of $7.0 million, with $3.5 million per year based on attainment of specific performance criteria in 2016 and 2017. As of December 31, 2016, the Company determined that the first year earnout was not achieved for 2016 and, as of September 30, 2017, the Company

determined that the second year earnout would not be achieved for 2017.

In connection with the Mediscan acquisition, the Company also assumed contingent purchase price liabilities for a previously acquired business that are payable annually based on specific performance criteria for the years 2016 through 2018, and in three equal payments for the 2019 year. Payments related to the years 2016 through 2018 were limited to $0.3 million annually and the 2019 year is uncapped. During the years ended December 31, 2019 and 2018, the Company paid $0.3 million related to the years 2018 and 2017. The payments related to the 2019 year are to be made as follows: (i) an amount equal to one-third of the earnout is to be paid immediately upon finalization of the amount, which is expected to be the first quarter of 2020; and (ii) an amount of one-half of the remaining principal balance is to be paid on January 31, 2021 and the remaining principal balance, together with all accrued and unpaid interest, is to be paid on January 31, 2022. As of December 31, 2019, the fair value of the remaining obligations was estimated at $7.3 million and is included in other current liabilities and contingent consideration in the consolidated balance sheets. See Note 11 - Fair Value Measurements.