BUSINESS COMBINATIONS | BUSINESS COMBINATIONS The First String Healthcare Acquisition On September 15, 2015, the Company completed its acquisition of The First String Healthcare (“TFS”), a leading provider of interim staffing and permanent placement of nurse leaders and executives. The total purchase price of $7,653 included (1) $4,453 cash consideration paid upon acquisition, funded by cash-on-hand, net of cash received, (2) $500 to be paid on the first anniversary of the acquisition date, and (3) a contingent earn-out with a fair value of $2,700 as of the acquisition date. Also, the purchase agreement included an additional $1,000 payment to be paid on the second anniversary of the acquisition date conditioned upon, subject to certain exceptions, continued employment of the selling shareholders, which will be recorded as compensation expense for post-combination services. The acquisition is intended to enhance the Company’s capabilities to provide interim and permanent nursing leadership. As the acquisition is not considered significant, pro forma information is not provided. The Company did not incur any material acquisition-related costs. The Company accounted for the acquisition using the acquisition method of accounting and, accordingly, it recorded the tangible and intangible assets acquired and liabilities assumed at their estimated fair values as of the date of the acquisition. The acquisition agreement provides for a tiered contingent earn-out payment of up to $4,000 , of which (1) up to $1,000 may be paid to the sellers in 2016 based on the operating results of TFS for the 12-month period ending December 31, 2015 and (2) up to $3,000 may be paid in 2017 based on the operating results of TFS for the 12-month period ending December 31, 2016. As of the filing date of this Form 10-Q, the Company is still finalizing the allocation of the purchase price, primarily related to tax matters. The preliminary allocation of the purchase price consisted of $920 of fair value of tangible assets acquired, $867 of liabilities assumed, $3,373 of identified intangible assets and $4,228 of goodwill, which goodwill is deductible for tax purposes. The intangible assets include the fair value of tradenames and trademarks, customer relationships staffing database and covenant not to compete. The weighted average useful life of the acquired intangible assets subject to amortization is approximately seven years . The results of operations of TFS are included in the nurse and allied healthcare staffing segment in the Company’s consolidated financial statements since the date of acquisition. Onward Healthcare Acquisition On January 7, 2015, the Company completed its acquisition of Onward Healthcare, including its two wholly-owned subsidiaries, Locum Leaders and Medefis (collectively, “OH”), for approximately $76,643 in cash, funded by cash-on-hand and borrowings under the Company’s revolving credit facility. Onward Healthcare is a national nurse and allied healthcare staffing firm, Locum Leaders is a national locum tenens provider, and Medefis is a provider of a software as a service, or “SaaS,” based vendor management system for healthcare facilities. The acquisition helps the Company to expand its service lines and its supply and placement capabilities of healthcare professionals to its clients. The Company accounted for the acquisition using the acquisition method of accounting and, accordingly, it recorded the tangible and intangible assets acquired and liabilities assumed at their estimated fair values as of the date of the acquisition. As of the filing date of this Form 10-Q, the Company is still finalizing the allocation of the purchase price, primarily related to tax matters. The preliminary allocation of the $76,643 purchase price consisted of $25,420 of fair value of tangible assets acquired (including $20,269 of accounts receivable), $21,659 of liabilities assumed (including $10,534 of accounts payable and accrued expenses), $30,219 of identified intangible assets, and $42,663 of goodwill, a portion of which is deductible for tax purposes. The intangible assets include the fair value of tradenames and trademarks, customer relationships, staffing database, acquired technologies and non-compete agreements. The weighted average useful life of the acquired intangible assets is approximately 11 years. The following table summarizes the fair value and useful life of each intangible asset acquired: Fair Value Useful Life (in years) Identifiable intangible assets Tradenames and Trademarks $ 8,100 3 - 15 Customer Relationships 17,600 10 - 15 Staffing Database 2,600 5 Acquired Technologies 1,700 8 Non-compete agreements 219 2 $ 30,219 Of the $42,663 allocated to goodwill, $37,422 and $5,241 were allocated to the Company’s nurse and allied healthcare staffing segment and locum tenens staffing segment, respectively. The results of Onward Healthcare and Medefis are included in the Company’s nurse and allied healthcare staffing segment and the results of Locum Leaders are included in the Company’s locum tenens staffing segment since the date of acquisition. For the three months ended September 30, 2015 , approximately $39,145 of revenue and $4,774 of income before income taxes of the OH entities were included in the unaudited condensed consolidated statement of operations. For the nine months ended September 30, 2015 , approximately $106,492 of revenue and $11,416 of income before income taxes of the OH entities were included in the unaudited condensed consolidated statement of operations. The following summary presents unaudited pro forma consolidated results of operations of the Company for the three and nine months ended September 30, 2015 and 2014 as if the OH acquisition described above had occurred on January 1, 2014. The following unaudited pro forma financial information gives effect to certain adjustments, including the reduction in compensation expense related to non-recurring executive salary expense, acquisition-related costs and the amortization of acquired intangible assets. The pro forma financial information is not necessarily indicative of the operating results that would have occurred had the acquisition been consummated as of the date indicated, nor are they necessarily indicative of future operating results. Three Months Ended September 30, Nine Months Ended September 30, 2015 2014 2015 2014 Revenue $ 382,859 $ 293,072 $ 1,062,798 $ 838,109 Net income $ 34,350 $ 9,091 $ 63,513 $ 24,088 Net income per common share: Basic $ 0.72 $ 0.20 $ 1.34 $ 0.52 Diluted $ 0.70 $ 0.19 $ 1.30 $ 0.50 Avantas Acquisition On December 22, 2014, the Company completed its acquisition of Avantas, a leading provider of clinical labor management services, including workforce consulting, data analytics, predictive modeling and SaaS-based scheduling technology, for $17,520 , which the Company funded through cash-on-hand and borrowings under its revolving credit facility. The total purchase price of $17,520 included $14,470 cash consideration paid, $1,650 cash holdback for potential working capital claims, and contingent earn-out payments with a fair value of $1,400 as of the acquisition date. As of September 30, 2015, the fair value of the contingent consideration liability was remeasured at $1,100 , which resulted in a decrease in operating expenses of $300 during the three and nine months ended September 30, 2015. During the nine months ended September 30, 2015 , the Company paid an additional $165 to the selling equityholders for a working capital adjustment. The acquisition is intended to help enable the Company to provide a level of workforce predictability to clients that can be integrated with its workforce and staffing solutions. As the acquisition is not significant, pro forma information is not provided. The Company did not incur any material acquisition-related costs. The Company accounted for the acquisition using the acquisition method of accounting and, accordingly, it recorded the tangible and intangible assets acquired and liabilities assumed at their estimated fair values as of the date of the acquisition. The acquisition agreement provides for a tiered contingent earn-out payment of up to $8,500 to be paid in 2016 based on the operating results of Avantas for the 12-month period ending June 30, 2016. As of the filing date of this Form 10-Q, the Company is still finalizing the allocation of the purchase price, primarily related to tax matters. The preliminary allocation of the purchase price consisted of $1,631 of fair value of tangible assets acquired, $3,821 of liabilities and deferred revenue assumed, $9,960 of identified intangible assets and $9,916 of goodwill, which goodwill is deductible for tax purposes. The intangible assets include the fair value of tradenames and trademarks, customer relationships and acquired technologies. The weighted average useful life of the acquired intangible assets subject to amortization is approximately 14 years . The results of operations of Avantas are included in the nurse and allied healthcare staffing segment in the Company’s consolidated financial statements. |