AMN 2017 Annual Report

25 Depreciation and Amortization Expenses. Amortization expense increased 55% to $18.3 million for 2016 from $11.8 million for 2015, primarily attributable to additional amortization expense related to the intangible assets acquired in the TFS, Millican, BES, HSG and Peak acquisitions. Depreciation expense increased 23% to $11.3 million for 2016 from $9.2 million for 2015, primarily attributable to fixed assets acquired as part of the TFS, Millican, BES, HSG and Peak acquisitions and an increase in purchased and developed hardware and software for our ongoing front and back office information technology initiatives. Interest Expense, Net, and Other . Interest expense, net, and other was $15.5 million for 2016, as compared to $7.8 million for 2015. The increase is primarily due to a higher average debt outstanding balance for the year ended December 31, 2016, which resulted from (1) borrowings under our credit facilities that we used primarily to finance the BES and Peak acquisitions and (2) the consummation of the issuance and sale of our Notes (as defined below in this Item 7) in October 2016. Income Tax Expense . Income tax expense was $70.3 million for 2016, as compared to $39.2 million for 2015, reflecting effective income tax rates of 39.9% and 32.4% for these periods, respectively. During 2015, we recorded a discrete federal income tax benefit of $12.2 million resulting from the IRS federal audit settlement. See additional information in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (7), Income Taxes.” Liquidity and Capital Resources In summary, our cash flows were: Year Ended December 31, 2017 2016 2015 (in thousands) Net cash provided by operating activities $ 115,262 $ 131,851 $ 56,313 Net cash used in investing activities (33,446) (257,362) (116,085) Net cash provided by (used in) financing activities (77,193) 126,290 56,200 Historically, our primary liquidity requirements have been for acquisitions, working capital requirements, and debt service under our credit facilities and the Notes. We have funded these requirements through internally generated cash flow and funds borrowed under our credit facilities. During the third quarter of 2017, we paid off the remaining balance of our term debt. At December 31, 2017, zero was drawn with $256.0 million of available credit under our Revolver (as defined below), and the aggregate principal amount of our 5.125% Senior Notes due 2024 (the “Notes”) outstanding equaled $325.0 million. We describe in further detail our Credit Agreement (as defined below) under which our Revolver and Second Term Loan (and any other loans that may be made thereunder) are governed in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (8), Notes Payable and Credit Agreement.” On February 9, 2018, we replaced our Credit Agreement with a New Credit Agreement (as defined below). In April 2015, we entered into an interest rate swap agreement to minimize our exposure to interest rate fluctuations on $100 million of our outstanding variable rate debt under one of our Term Loans (as defined below in this Item 7) for which we pay a fixed rate of 0.983% per annum and receive a variable rate equal to floating one-month LIBOR. This agreement was set to expire on March 30, 2018, and no initial investment was made to enter into this agreement. In connection with our issuance and sale of $325.0 million aggregate principal amount of the Notes and the use of a portion of the proceeds thereof to repay $138.4 million of our Term Loans on October 3, 2016, we reduced the interest rate swap notional amount to $40.0 million. On May 3, 2017, we terminated the remaining interest rate swap. See additional information in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (3), Derivative Instruments.” We believe that cash generated from operations and available borrowings under our Revolver 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 Revolver or other borrowing under our 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.