Ladies and gentlemen, thank you for standing by, and welcome to Q3's 2012 Earnings Call for AMN Healthcare. [Operator Instructions] And, also as a reminder, today's teleconference is being recorded. At this time, I would turn the conference call over to our host, Vice President of Investor Relation's Ms. Amy Chang. Please go ahead.

Good afternoon, everyone. Welcome to AMN Healthcare's third quarter 2012 earnings call. A replay of this webcast will be available until November 15, 2012 at amnhealthcare.com/investors. Details for the audio replay of the conference call can be found in our earnings press release. Regarding our policy on forward-looking statements, various remarks and characterizations we make during this call about future expectations, projections, plans, prospects, events or circumstances constitute forward-looking statements. 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. It is possible that our actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those identified in our Annual Report on Form 10-K for the year ended December 31, 2011, and our other filings with the SEC which are publicly available. The results reported in this call may not be indicative of results for future quarters. These statements reflect the company's current beliefs and are based upon information currently available to it. Developments subsequent to this call may cause these statements to become outdated. The company does not intend, however, to update the guidance provided today prior to its next earnings release. This call may also contain certain non-GAAP financial information. We make available additional information regarding non-GAAP financial measures in the earnings release and on the company's website. On the call today are, Susan Salka, our President and Chief Executive Officer, as well as Brian Scott, our Chief Financial Officer. Joining us during Q&A will be Ralph Henderson, our President of Healthcare Staffing and Bob Livonius, our President of Strategic Workforce Solutions. I will now turn the call over to Susan.

Thank you, Amy. Good afternoon and welcome to AMN Healthcare's 2012 third quarter earnings conference call. I would like to start by thanking everyone for joining us on the call today, especially given the storm activity that occurred earlier this week. We know that many of you as well as some of our clients, patients, clinicians and team members have been affected both personally and professionally. The New York City hospitals are collaborating to ensure that patient care and proper staffing is their top priorities. We are working with multiple facilities to deploy temporary and permanent nurses to where they are needed most. Our hearts go out to everyone who has been impacted and we wish all a speedy recovery and return to their everyday activities. Despite the challenges occurring earlier this week, we do have some good news to share with you today. As you will hear in our discussion, AMN Healthcare is on track with our strategy to expand our leadership position as the nation's innovator and healthcare workforce solutions and staffing services. The third quarter marked yet another solid financial performance with revenue, growth, profit and adjusted EBITDA all growing sequentially year-over-year and meeting or exceeding the company's guidance. These results reflect the benefit of our leadership position in providing managed services programs. They are also a reflection of the outstanding efforts of our sales and service team. Due to our strong delivery reputation, we believe we are extremely well positioned for the continued momentum we are seeing in the demand for workforce solutions. The benefits of this growth and the profitability of our delivery model, also enable us to continue improving the leverage of our core staffing businesses. At the same time, we firmly believe that greater market demand lies ahead in the next few years,…

Thank you, Susan. Good afternoon, everyone. Third quarter revenue was $243.9 million, up 6.5% from last year and 3.4% from last quarter. Our gross margin for the quarter was 28.5%, up 70 basis points from last year and up 10 basis points from the last quarter. The year over year and sequential increase was due to an improvement in the bill to pay spread and locum tenens segment, and an increased gross margin in the physician permanent placement segment, with the generally stable gross margin in the nurse and allied segment. The fourth quarter gross margin is expected to be down slightly due to both, normal seasonality and an increase in workers' compensation rates impacting the nurse and allied segments. SG&A in the quarter totaled $52.4 million, or 21.5% of revenue, compared to 21.6% in the same quarter last year and 21.3% in the prior quarter. The year-over-year percentage change was due to improved SG&A leverage and lower bad debt expense partly offset by the increased spending on strategic initiatives to grow candidate supply and expand our workforce solutions. We also incurred some severance costs related to ongoing back-office efficiency projects and the leadership change made in our local staffing business. The sequential increase in SG&A spending was driven by these costs along with increased headcount and commission and bonus cost tied to business growth. Our nurse and allied segment revenue increased 12.6% from the prior year and sequentially by 4.9% to 166.3 million. Volume grew 11% year-over-year and 5.2% sequentially to 5,884 average clinicians on assignment. Revenue per day was up 1.4% year-over-year and down 1.4%, sequentially. The sequential decline was primarily the result of slightly lower average hours worked. Nurse and allied gross margin of 26.5% was lower year-over-year by 10 basis points with improved bill pay spreads…

[Operator Instructions] Our first question in queue will come from AJ Rice.

First a point of clarification on the guidance and maybe you mentioned the strategic investment in that sort of areas, but if gross margin is going to be 28 to 28.5 and SG&A is 21.5, I guess that would imply a 6.5 to 7 EBITDA margin, but you are calling it adjusted at 7.5. Is there something else that goes into mix there?

The sort of normal, the SG&A by definition includes the stock compensation expense, so that's always that sort of [indiscernible] but that's about 0.6%.

Okay. Obviously for the priority of paying down debt, the $24 million the quarter and the regulation of the $12 million post the end of the quarter, can you talk about is that going to be a priority to continue to get the debt down, or is there a room for tactical acquisitions. Do you think this the time to be looking at acquisition? I guess there was a report that one of your competitors might be looking to get rid of its medical staffing business, and I wondered if you had any thoughts about consolidation activity in the States.

As you've heard from us in the last couple of quarters, we really believe that we have the right components and the right strategy in our business today and we are making investments to make sure that we can continue to really build that momentum in workforce solutions in particular with MSP and RPO and other kinds of solutions for our clients as well as making sure that we have the supply coming into meet the increased demand really across all of the business segment. So, I would say our priorities are, one, making sure that we are appropriately investing in the future growth of our business, and that means increasing a bit of spending, some OpEx but more even on the CapEx side maybe going forward and Brian has talked about that before. We don't feel that it is necessary or that we would get any meaningful benefit by making an acquisition to just add volume to our business today. We think we can make those investments internally and do that more effectively, so we have nothing near-term in our sights. So, aside from investing in our business, paying down debt is obviously the next place for our cash.

All right. Then just maybe lastly on technical question on the working capital fluctuation, I know you had a big cash flow quarter last quarter and you had a good cash flow this one, but it wasn't quite as much as last quarter and it seems like that's receivables bouncing around. Is that just the normal noise from quarter-to-quarter and seasonality or is there anything else going on in the receivable side worth mentioning?

We saw our DSO come down nicely. Great job by the team on the collection side and really working with our clients, so our DSO came down from 56 in Q1 to 53 in Q2, and that's where we saw the operating cash from the second quarter larger than the normal at this level of profitability, so the third quarter I think is more indicative of the type of operating cash that you see at our current levels, so DSO went up little over half, but nothing else unusual. And just like you said, you're going to have the normal working capital fluctuations, but don't expect anything really abnormal on go-forward basis as well.

Our next question in queue will come from Gary Taylor.

I think, Brian, you might have said this right at the tail end of your comments. I was writing stuff down, but I think I missed it. Did you comment on the tax rate for the fourth quarter?

Yes. I said it would be about 44%, which is consistent with our full year effective tax rate.

And as we think about '13, I know there is essentially these permanent differences, which essentially drives effective tax rate higher and earnings are declining toward the level and as they pick up and then the tax rate starts to look more normal again. Is there an easy way to think about that movement as you head into '13?

I think just generally can say we could expect to see the tax rate come down a little bit more to raise your point here in terms of some of those permanent difference is becoming a smaller impact as our pre-tax income goes up. So, we won't get necessarily down to 39%, 40%, but I think we have the room to go down a little bit more from where it is right now. And, you see that even as we've gone through this year we were relative to the year we were thinking that's going to be more in the mid to upper 40% is our pre-tax has come in nicely and we've also been able to work with our clients contractually to try to mitigate some of those permanent differences well. That is also impacting the rating wise lower as well.

All right. Can you remind us in the Nurse and Allied segments, how seasonality affects that revenue sequentially into the 4Q and 1Q? As I was looking back in my model, I think, maybe one time in the last decade has does revenue pick up sequentially into the fourth quarter, so the guidance you gave of flat is a pretty strong and consistent with your typical seasonality is, but then normally seasonality would sequentially assuming the business environment stays good as it is, typical seasonality would have that revenue up sequentially in 1Q, is that correct?

That is basically correct, Gary, and I would say in our Allied and Locums businesses and even from placement, we are probably feeling the effects of the normal seasonality with a bit of a decline in the fourth quarter, but in the Nursing business travel nursing in particular, they are overcoming what might be some normal seasonal pressure. And as you saw in the fourth quarter, we are actually looking to pick up our momentum year-over-year because of just the strength of the model that we have there, it's certainly an outcrop of our strengthened MSP relationships that we have and our ability to continue to fill more in those and add more of those contracts, but it's also within the traditional non-MSP business that we've seen order growth and our ability to increase our traveler account in the number of clients with open order, so I would just say that the travel nurse all around is probably outperforming certainly the market, but also the normal seasonal trend. Ralph do you have anything to add to that?

I'd probably just that it's our 11th consecutive quarter of growth in nurse and allied. If we could get it up next quarter, again, that would be 12. That would be certainly a record for us, so we are feeling pretty good about the growth and lapping the normal seasonal impact, which as you noted was we used to have pretty regularly, I think we've just been able to stay ahead for the last 3 years.

My last question, Brian. I am not sure I understood or quiet heard all the comment about the workers' comp actuarial benefit that you are referencing.

That was just comparing the nurse and allied gross margin year-over-year. In the third quarter of last year, we had about $700,000 actuarial benefit. In the third quarter of this year, we actually had a small negative adjustment, and so I made a point on a go-forward that we are seeing our rates up a little bit based on the latest actuarial report, so that's direct cost that we'll start to see. We saw a little bit of from the actuarial report, but we'll see little more of that pressure on a go-forward as well. So, we'll have to make sure we are counteracting that with either adjustments to other direct costs or going back to our clients to cover that.

Got it. I didn't see anything in this quarter's numbers that led me to think there was something missing.

It was very small in the quarter. And again, it's pretty small impact over our going forward, but enough to know though on a go-forward basis.

Our next question in queue will come from the line of Jeff Silber.

In terms of your nurse allied business you've been growing it at a fairly sizable rate. Do you think the market is growing at that rate, or do you think you are actually taking share?

It's a good question, Jeff. I think, we've said several times now that we have been taking market share, but we also feel like the demand has increased actually more recently. Even after this quarter, we are seeing about 6 weeks of an increasing trend in our orders, so we are feeling like demand is beginning to pick back up again. We saw a little bit of a pullback in Q1. That was kind of last time saw any declines in the market the market then took back off again grew it throughout the year, so it's a combination of both, but we definitely seen some share increases, which is primarily a result of our MSP strategy at these levels of demand, we can feel very, very high percentages of the overall number of orders that we get.

All right. In terms of end markets, are you seeing any difference either different geographies or different types of buyers?

Did you say EMR?

End markets I am sorry.

That is certainly strong in California, New York, and Texas, there are no real changes substantially. We think probably the one thing that's kind of been interesting is a little more diversification among the other space, but that's really it.

And probably the other trend is in the MSPs, and the workforce solutions themselves and the continued momentum that we see and the appetite for MSPs both, within the nursing market but also in allied and locums, So, may be Bob if you want to comment on that?

We think the momentum in nursing is continuing about the same pace, but the growth really is starting up in the allied side and still a smaller percentage than it is in the nursing, but also beginning to build that pipeline for locums, and starting to see some anticipation of growth in that area as well, so it's a bit of a mix change as well as just a geographic change.

That's great to hear. And just a couple of numbers questions for you Brian, what share counts should we be using for the fourth quarter?

It would be just probably about $47 million, May be it's a tad above that.

Okay. And in terms of capital spending, what should we budgeting for the fourth quarter?

It will be probably a little bit closer to $2 million for the quarter.

Okay. I know it's a little bit earlier to discuss 2013, but do you have a rough estimate of where you think will be spending and capital spending next year?

Yes. As Susan mentioned, we're making some investments in both, our supply acquisition as well some of our core infrastructure. And if you go back historically, we have turned it more closer to 1% of our revenue, so I think that's a more realistic expectation for next year. That part is close to around $10 million or so. I'll make real quick comment too, that's what the share count as well. You might have noticed well as during October, particularly Goldman Sachs who was a shareholder that had come through Medfinders acquisition and you've seen it different times. They've been selling down the position of smaller. They accelerated that during October and as of now they have now exited their position with AMN other than a very small amount still from a holdback related to the original acquisition, so.

Our next question in queue will come from Tobey Sommer.

I just wanted to ask you when you sign on a new MSP client, are you still generally moving your wallet share kind of in spend up to kind of an 80% or 90% level of sales, or has that changed over time?

The fill rates haven't been that high in nursing allied, so I don't think we've ever quoted 80% or 90% in terms of fill rates, but our fill rates depending up on the maturity of the account can get to that level after you get to a point where 6 months, nine months into it and then certainly in that second, third year. But on average, our fill rates are little bit less than that on the nursing allied side. Allied in particular in certain sections like therapy is, slightly even lower because it's just harder to find the demand and then as you move into the locum side, even more so. So, I think the overall fill rates for the company will continue to probably trickle down a little while as we build that more in the nursing and the allied side, but overall the number is growing in a very positive way.

When you talk about our direct, is what obviously our fill rate overall with the clients. Maybe that you'll think 90% plus of the orders that we get, so obviously want to sell as much as we can directly, but to the extent we can't, we then use our subcontractors.

In a locums, example let's take. What would be the differential between what would you may receive in terms of orders to kind of have in market share with a customer prior to an MSP, and then potentially what would you aspire to increase that to once an MSP has been implemented in and is maturing [ph]?

I think to be quite honest, Tobey, it's a little early to tell what that top potential direct fill rate might be with locums, because we've just signed our first locums MSPs in the last few months. And so, our intent would be to potentially double them the way that we can do in the nursing business. But at this point, we're being more conservative in our own estimates when we bring those contracts in as to what we might directly fill ourselves. So, if you're average locum fill rate is normally in the 40% to 50% range, we would hope that we could get that to 70% or 80%, which should be comparable to the nursing business. But, again, it's still a fairly new model and so I think we are going to make sure that we have a strong affiliate vendor network, which we do in the nurse and allied business, because our commitment to the client is to fill more like 90% or 95%. And that is our #1 goal, is serving the client well. So, in the beginning we may initially still fill more like 40% or 50%, and then over time as we get things moving and more efficient at our end then we would like to move that up to 60%, 70%, 80%.

And then how much runway do you think you have in MSP growth and I asked the question from a perspective of without knowing kind of the concentration of your clients by metro market or state, I would presume there is some sort of natural limitation where you can only serve so many clients who are side-by-side almost in the same market and do so effectively. Any kind of color you could give us on how to think about that would be helpful?

I'll start. I would like Ralph can help me out, because I think he's got some real statistics. We may have talked about it before, but we actually find just the opposite. We find that when we are in a market and we can do multiple MSPs, the actually fill rate goes up for all of us. We also find that even our non-MSP clients in the same markets have higher fill rates. That's partly because we are bringing more nurses to the market ourselves, so while there may be some client concern as we go through the sale cycle, we always want to try to go back to the client again and show them examples where that's actually potentially to their benefit. So, the answer to your question, I think more on the longer term potential. We are finding that there the acceptance level and understanding of how MSP can impact them just continues to grow as a result principally of the reference base, so now we have the strong support we get from Novation, and they've certainly got very large pipeline and clients who have yet to implement MSP and they are out there and trying to help us get into those client as well, so our outlook for, certainly for the next year or so is certainly very strong.

This is Ralph. All I'll add in, I mean, we really are nowhere near the penetration cap, if there even was one. So, we way behind. It's a long ways off, I think in other industries as you look at you know 60% penetration of MSP in the marketplace and our industry is half of that probably, maybe even less. Secondly, I'll reiterate Bob's point. In markets where we have multiple MSPs, our fill rates on those MSPs are higher when we have multiple MSPs. And surprisingly also, our traditional business fill rates go up at the same time, we become kind of the source that can move to go around and find a multiple opportunity and so we can serve their kind of the entire career, right? They can work locally for us for a while. In our Nursefinders brand, they can work a long-term traveler assignment, so we can move them around a lot better and find them more opportunities and that's a secret to keeping candidate happy, is just keeping them working and keeping them on good assignments and giving them kind of challenging new opportunities even if they are at different facilities within the same city.

Very helpful. The re-pricing we're able to in physician staffing has that unfolded into the P&L with third quarter results or is that more of a multi-quarter process with more to come?

Let me make sure I understand the question.

It was part of an initiative and a process that began in the fourth quarter of last year, where we really reorganized our groups and constantly put greater accountability on how we were pricing locums business and managing the gross margins, and we started to see the benefit of that in the second quarter when you saw our gross margins increased significantly and that has sustained and even improved a little further into the third quarter. With that said, we still think that we have room to grow. As we look at what competitors are doing with their gross margins, we think that we have another 3 or 4 percentage points that we can improve our gross margins over time. A little bit of it is mix. We are more weighted in the government business for example, which tends to have lower margins, but that's part of what Ralph and our leadership team are addressing within the locums business is to overtime adjust our mix to be more weighted in the higher growth areas and not to be cause any over weighted in any particular specialty that might be susceptible to declines in the future. So, it will be a multi-quarter process and while we might see some nice jumps from quarter-to-quarter, it won't necessarily be a study progress. Certainly, it's our goal to get our gross margins above 30%. It's going to take that in order to get our EBITDA margins where we believe they can and should be.

Just 2 last questions for me. Do you anticipate any impact from either the election or federal government sequestration on the business? Then I was wondering if you could comment about strike activity at your hospital customers and whether you are seeing kind of more of that than you have historically and if you would expect that to continue.

Okay. Maybe I'll take kind of overall question regarding the political environment and movement and I think most would agree it's hard to predict exactly what will happen other than they are going to have to regardless of who wins the election. They are going to have to address some of the issues that exist with reimbursement changes and sequestration and things sitting out there. There is a lot of uncertainty and our clients are feeling it in and it even affects their behavior right now in holding back until they have better clarity. But, whoever moves into office will need to mobilize very quickly to address some of those issues. If they don't, there would be much bigger issues than what AMN has to worry about, and so we are pretty confident that they will address at least the reimbursement related issues. They are not going to be in a position to be denying care to millions of people as of January 1, so I think they are going to have to move pretty quickly to address at least the most critical issues. How they address them? Is uncertain, and so we don't see anything in particular that we think is likely. I mean, there is always the disaster scenarios that people predict out there what if, what if, what if. But again, those are so severe that I have to believe that they will be addressed, and so on the probable fronts, we don't see anything that we would have a material effect on our business and the trajectory of where we think that we are going.

I'll just add in on that sequestration. I think our clients have had a couple of years of visibility into that one, so I would suspect that's already built into current demand level. So, I don't think that's going to be anything that surprises them. I think the things that throw them off are things they come up shorter term, quick changes to rags. But honestly the entire industry has done a very good job of reacting to those changes and kind of bouncing back from them. So they have some lumpiness occasional what people are trying to figure how to deal with the changes, but the industry tends to get out of it within a couple of quarters.

Comment on the strike, what you're seeing Ralph?

On the strike front slowdown in activity there, I think some of the stuff we were seeing on both coast, has really just kind of almost gone away for all intents and purposes although there is a little bit of activity we are seeing kind of in the Midwest, and some possibilities there that are more towards mid-year this year. We don't provide very much strike business we only support our MSP clients when they go into a strike and help them manage that process and keep their expenses low and remain efficient and with high quality during those times. So, I wouldn't anticipate that's going to have much of an impact on our numbers over the next 2, 3 quarters.

Our next question in queue will come from Mark Marcon.

I was wondering if you could talk a little bit about what you are seeing in terms of nurse behavior just the number of nurses that are more willing to act as travelers. It's unclear as to whether or not you are gaining travelers from other potential players, because of your strong supply in terms of high quality client base or are you actually starting to see an improvement in terms of the behavioral trends there?

This is Ralph. I will handle that one too. We are seeing some pretty significant growth in our applicant trends and the numbers that are new to the industry has gone up slightly from what we had seen in the past. A lot of them were returns that dropped out of the industry in 2008-2009, so they are not as much taking somebody who is active on with somebody else away, but as reigniting the passion in travel nursing for somebody who used to do it and used to really like that as part of their career kind of gave it up in 2008-2009 where everything slowed down a lot. I don't know we gave a number, but I guess we are up in the 20% to 40% range when you look at it on our supply trends. So, I could really say is that they are feeling better I think about travel nursing as a career option. And also since they're probably feeling a little bit better about the economy and their jobs as a whole. I did notice in the BLS data that the quits have gone up. It's usually a sign that people are getting just more and more comfortable with job changes. So, it feels like we are seeing some positive momentum there as well, so that combined with the increasing demand makes me feel very good about the travel nurse business.

Great. On the locum tenens side, when do you think that you will kind of base out in terms of radiology and anesthesiology?

Radiology, we are, I think, getting closer to 6% of our locums mix today and the industry average is around 4%, and so we are probably a quarter or 2 away from being at the industry mark in terms of how much of our business that constitutes. Anesthesia, we are still a tad high. It's about 10% of our business, and for the industry it tends to run more around 5%, so there again we have got a little more time I think before we get. Although, you know anesthesia is one of the areas where we occasionally see the business go up for a couple of quarters. So, it hasn't actually been as much as a constant decline as radiology it declines and then it rises, so there is a base line amount that makes sense for us to have in our portfolio, because it will be an ongoing need for many clients so we want to make sure we are there, but just we'll prefer to have a little bit less of our business there.

Great. And can you give a little more color with regards to Novation's contract with regards to how large it is?

You know the contract is an endorsement by group purchasing organization as Novation are the largest out there. What they do is they evaluate various vendors that are out there in the marketplace. We've been fortunate to have their endorsement and they have a sales force that's actually embedded often times in the client's location, often times that sales force resides in the finance department and has contact directly with the CFO. Therefore actually having that relationship with them allows us to get contact levels we might not otherwise get in more expeditiously and to tell our story with the support of their group purchasing organization and many of these clients are very aligned, but then they are on the boards, they are partners with them, there's a real strong alliance to these buying groups. In particular, Novation has been very, very good partner with us. The fact that they endorse this on the locums fees is very exciting for us. This is the first time that our locums businesses has been endorsed. They've endorsed other competitors in the past and actually made a switch from other competitors to us, but what's more exciting is that they've also looked at us as kind of the company that has a very broad range of services like you are trying to figure out nursing allied, locums all in one package I think really appeals to them and their clients. It's kind of like that who you are going to call, story of who would you go to if you were in this business and you wanted to find somebody that could provide all the services, so by bundling that along with some other new services like locums billing program and the MSP, they are excited about I think the partnership and going out to represent our products to their clients, so lot of leads come from that relationship.

Great, and can you talk a little bit about what you are seeing in terms of rental expense. You even mentioned obviously the gross margins this quarter are being impacted there. What's your expectation going forward?

The team has done a good job. If you look year-over-year in the third quarter our rents were up, probably around 4%, which is not that far off from kind of the overall industry rent increases. Where they've done a really good job though is work on reducing our vacancy rates, and we've seen that come down, so the overall impact to our cost haven't been as significant and continue to look for new property vendors and other where we can keep those cost lower. I did not mention the fact, sequentially it really is not much of an impact to the business. So, first half of the year was a greater impact to year-over-year. We saw that some in the third quarter, I think at this point we have done a really good job of stabilizing that, but it will continue to be a pressure for us that we need to be mindful of and continue to look for ways to have that cost grow at a slower rate in the market overall. And, again, use that as an opportunity to reengage with our clients, talk about why we need to have fill rates increases to cover those costs.

Our next question in queue will come from Josh Vogel.

I was bouncing between a couple of calls here, but I had question regarding the SG&A spending. I know you talked about the strategic initiative to expand future candidate supply. I was curious just an extra $1 million of spending you expect to see for several quarters or is this more of just Q4 event?

It will continue at some level Josh, and then the quarter these strategic initiatives which are primarily to drive candidate supply, but also is around expanding our workforce solutions offering and making sure that we are improving our position as that workforce solution's innovator, and roughly 800,000 in the third quarter and it's going to be just a tad over $1 million in the fourth quarter, and going into next year, we'll probably see it kind of continue at that pace for a quarter or 2 but a lot depends upon the results that we see, because we absolutely expect to see revenue benefit from this. In fact, starting in the first quarter and more so into the middle of the year. And, so we'll be able to calibrate our continued spending depending on the returns that we're seeing particularly around the candid applications and supply. But assuming all in, we complete the projects that we have our slate. You would start to see it taper off towards the later part of next year in terms of that candidate supply piece because some of it is truly upfront expense and investment and then whatever we have on an ongoing basis will be supported by the incremental revenue that it's driving.

Okay. Brain, did you say you expect interest expense in Q4 is going to be $3.2 million?

Correct.

Okay. And I know you don't, or you're not talking about 2013 yet, but just want to get a sense of your priority with debt repayment next year or if you could just give us some sort of idea in and around where you expect interest expense to fall next year?

Yes. I'll definitely give more color in our next call, but you've seen it come down from the third quarter into that fourth quarter forecast. So, as we continue to make debt payments, you'll see that go down. It's not going to be big chunks each quarter, but it will work its way down every quarter during 2013. As we said earlier on the call, right now we talk to some investments we are making really in the business, but outside of that in the excess cash flows, we'll use continue to pay down debt.

Okay. Now, shifting gears a little bit, could you give us a revenue breakdown by geography?

You know, we really haven't done that in the past in giving specific numbers. Certainly, we've talked about California being our largest market. Not only in nursing, but overall it's a big market for the company and then the other areas that have seen particular strength for us are Texas which has always been strong in the physician market, but actually saw some nice increases in the nursing business as well. So, I'd characterize that as a strength and then the Northeast have certainly been a strong for us as well as the Midwest, so it's not just a west coast or an east coast phenomena. I would say we have the best geographic dispersion I think I can remember for the company, but you've got particular growth happening in the northeast and probably on the West Coast and Texas. That helped?

Yes, definitely. I guess, so I just wanted to lead into the impact from Sandy. If there is any way to quantify what that did to your guidance for Q4 given the disruption there?

Sure. Yes. We mentioned briefly in the script that we haven't corporate that into our guidance as we can best estimate and there is probably 300,000 to 500,000 of lost revenue days when hospitals were close, particular with per diem shifts, where you just won't make those up again. And then we have an EMR implementation that was schedule to occur in the Northeast that might be delayed, so that's not lost revenue. It's more of a potential delay either later in December or it might even get pushed into the first quarter and that's upwards of $1 million. So, we carved that out of our guidance, now they could still occur and that would be some upside for us, but we felt it was probably more conservative to pull it out. We are working very collaboratively with our clients in New York City. We've got a large MSP there and particular where a lot of patients are being diverted to. And, so we've been working with a lot of the hospitals to help really deploy both, temporary nurses, not only ours but others, as well as permanent nurses from some of the closed hospitals and help get them deployed to where they are needed most. I have to say that New York hospitals have really joined hands and are working together very closely to make sure that the patient is their #1 priority and that they have the proper staffing to take care of the patients that are being brought into some of the larger facilities that are still open.

Thank you very much. At this time, we have no additional questions in queue. Please continue.

Okay. Great. Well, Josh, maybe we'll pick up that other question offline then if you have another one. We'd certainly like to thank everyone for joining us today and for your continued support of AMN Healthcare, and we look forward to updating you on our progress next quarter. Thank you.

Thank you. Ladies and gentlemen, that does conclude your conference call for today. We do thank you for your participation and for using AT&T Executive TeleConference. You may now disconnect.