AMN Healthcare Services Inc (AMN) 2007 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the AMN fourth quarter 2007 earnings conference call. At this time, all lines in are in a listen-only mode. Later there'll be an opportunity for questions and instructions will be given at that time. (OPERATOR INSTRUCTIONS) I'll now turn the conference over to Christopher Schwartz, VP, investor relations. Please go ahead, sir.

Good afternoon. I would like to welcome everyone to the AMN Healthcare Services conference call to discuss the Company's earnings results for the fourth quarter of 2007. For the call this afternoon we have Susan Nowakowski, AMN's President and Chief Executive Officer, and David Dreyer, AMN's Chief Financial Officer. A replay of this webcast is available at amnhealthcare.com/investors, and will be replayed until March 11, 2008. Details for the audio replay of the conference call can be found in our earnings press release. I would also like to mention our policy regarding forward-looking statements. As we conduct this call, various remarks that we make about future expectations and plans and prospects constitute forward-looking statements. Forward-looking statements are identified by words such as believe, anticipate, expect, intend, plan, will, may, and other similar expressions.

Any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. 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, 2006, our quarterly reports on Form 10-Q for the quarters ended March 31, 2007, June 30, 2007, and September 30, 2007, and our current reports on Form 8-K, which have been filed with and are publicly available from the SEC. 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 us. Developments subsequent to this call may cause these statements to become outdated.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.

I'll now turn the call over to Susan Nowakowski, AMN Healthcare's President and Chief Executive Officer.

Thank you, Chris. Good afternoon, everyone, and thank you for joining us today. We appreciate your interest in AMN Healthcare and in taking the time to participate in our earnings call. We'll talk today primarily about our outlook for the industry and our market positioning, but we also want to provide with you some color on the full year and fourth quarter results for 2007. There are many things going well and opportunity for growth in all of our business segments. But as is true for most staffing companies today, we are not without some short-term challenges, due to the uncertain economic conditions. This is a time when we believe our diversified service model helps AMN to expand our overall leadership position within the industry.

Revenue for 2007 was a Company in an industry record of $1.16 billion, an increase of 8% over 2006. While we did produce efficiencies in operations, these were partially offset, particularly during the first half of the year, by direct cost pressures causing diluted earnings per share to grow at a slower rate of 3% to $1.05. While these results are less than our original expectations and certainly less than what we think the industry will achieve in the long term, we do believe they are consistent, if not slightly higher than the organic growth rates for the overall healthcare staffing industry. The biggest driver of growth in 2007 came from our Locum Tenens staffing segment, which produced 16% year-over-year growth in revenue.

Nurse and Allied staffing started off with strong volume and pricing growth, but declined during the second half of the year due to weakening industry demand in certain large markets. While we remained very focused on execution within our current service offerings, we also took this opportunity to invest in the expansion of our business by launching new clinical disciplines and leveraging acquisitions that have enabled us to further diversify and tap into high-growth, high-margin market niches. I'll talk more on this later, but first, some detail on our individual business segments.

As I mentioned, our Nurse and Allied staffing segment started out relatively strong during the first half of 2007, but did not produce the expected seasonal volume increases during the third and fourth quarters. This was largely due to softness in demand in some key markets, such as California, Arizona and Florida. A more favorable reverse trend was in the gross margins, which were pressured for the first half of the year, but through careful management of expenses, we were able to increase gross margins over 100 basis points in the third and the fourth quarters.

Another contributor to the lower nurse volumes was the impact of a bottlenecked immigration environment and the effect on our International Nurse staffing division, O'Grady Peyton. Although O'Grady Peyton is currently less than 5% of our overall revenues, the contraction of this business did cause a slight drag on our annual and fourth-quarter results. As you may know, the availability of visas has been significantly restricted for over a year now and the lobbying efforts by the hospital community and the healthcare staffing industry to get the situation fixed have been unsuccessful due to the current political environment. Given the lack of progress on this issue, we are not anticipating a legislative solution in 2008.

If we get relief sooner, great, but in the meantime, we have taken steps to restructure our operations to align our business with the lower international volume we're forecasting. We're optimistic that this issue will be resolved in the long term, as foreign-educated nurses are a significant source of staffing for healthcare facilities nationwide. In fact, foreign-trained nurses represent almost one out of every six nurses who passed the NCLEX exam in 2007. While in aggregate travel nurse demand has been below prior-year levels, we still have more open orders than we have travelers coming off assignment each month, and there are several states where demand is higher than prior year. So this is not a national pervasive decline, but it is enough to have effected on our volume growth in the short term.

We are cautiously optimistic, as demand trends, including some of those states that I mentioned, have improved over the past month and we seem to be on track to close the year-over-year gap. To that point, just since January our orders are up about 20%, and the number of units with orders is also up 20% and the number of facilities with orders is up about 8%. This has helped drive stronger placement volume, which is now up about 7% year over year through February. While growing travelers on assignment has been challenging, we are pleased that average bill rates and renegotiated pricing levels have remained in line with our expectations, and we still believe that there is opportunity for continued bill rate increases in 2008. Our current expectations are to negotiate bill rate increases in the 3% to 5% range.

Within our Allied staffing business, the fastest growing disciplines are in the rehab therapy areas, such as physical and occupational therapists. However, our newer pharmacy staffing business also provides some nice opportunity for growth. The shortage of pharmacists for both retail and hospital employers is expected to severely deepen over the next decade, and we believe that we are well positioned to help these employers with both temporary and permanent placement services. While Allied healthcare staffing is still a relatively small piece of our overall business, it is one of the faster growing markets within the industry and we believe that with our leadership position and the synergies with our other staffing brands, we will be able to drive double-digit growth rates over the coming years.

Turning to our Locum Tenens staffing business, revenues grew 16% in 2007 compared to the prior year, above industry expectations for this market. Days filled in 2007 reached a new record, growing 10% over the prior year. We believe this is a strong indicator that healthcare facility executives continue to recognize the importance of ensuring that they have sufficient resources to expand their revenues and maximize their margins. While short-term specialty demands can certainly fluctuate, the longer-term demand for contract physicians continues to grow at a high rate relative to other staffing markets in the industry.

While we do not have enough supply to fill demand, the supply of new providers is growing at a healthy pace, driven in part by the demographic factors of an aging physician population and a generational shift towards part-time work among younger physicians. The majority of our specialties experienced solid growth in days filled in 2007, with the greatest growth experienced in primary care, radiology, and surgery. Primary care is still our largest division and has been a consistent contributor to our growth. However, during 2007, radiology and surgery were the fastest growing specialty divisions. The overall demand and supply trends remain strong and we are, again, expecting Locum Tenens staffing to be our fastest growing segment during 2008.

During '07, we launched a new division in the placement of dentists. While this is still a relatively small piece of business today, we are very excited about the long-term growth opportunities in this new and emerging market. Just like physicians, there is an extreme shortage of dentists to serve the needs of the aging population. We expect to invest more in this division in 2008 and it is likely to be one of our fastest growing specialties. Our Physician Perm Placement segment finished 2007 with $51 million in revenue and gross margin of 61%, which was relatively flat to the prior year. We believe the lack of growth had less to do with external growth opportunities and more to do with internal changes. One indicator of demand is the growth in new searches. During the second half of '07, our team drove a 10% increase in new searches over the prior year, setting us up very well as we move into 2008.

We continue to make investments to increase the number of producing recruiters to capitalize on this growing demand. The Merritt, Hawkins brand is extremely well recognized and respected as a recruitment expert throughout the physician community, and we believe there are additional ways that we can leverage our expertise and recruitment model to help other employers who are seeking to improve their recruitment effectiveness. We are currently exploring some new service models that we believe can expand our long-term growth opportunities in this area.

AMN Healthcare's strong commitment to high quality and superior client service is an important differentiator and we believe provides us with a competitive advantage. Recently we conducted a third-party anonymous survey of both current and perspective clients of Travel Nurse staffing services. The objective was to evaluate AMN's brands relative to our competitors. We were extremely encouraged by the survey findings. Clients ranked AMN significantly more favorable than our nearest competition in a number of key areas, such as nurse quality and experience, contribution towards improved patient outcomes, and clinical excellence.

AMN also received the top scores in terms of our capability to fill needs quickly, customer responsiveness, reputation and trust, and competitive pricing. We are known first and foremost for the high-quality professionals we place, but we are also recognized as being the most capable of helping healthcare providers to manage their clinical labor needs. This recognition has enabled AMN to build leading positions in the most attractive segments of our industry. Today, we are in a strong number one position within Travel Nurse staffing. We are number one in the fast-growing segment of Locum Tenens. We are number one in the very profitable segment of Physician Permanent Placement. And following our recent acquisition of Platinum Select, we are proud to be able to now claim the top spot in the attractive travel Allied healthcare segment of the industry.

This addition of Platinum Select to the AMN family provides an additional channel for helping our clients obtain the scarce and valuable talents of Allied professionals. In addition to being accretive to 2008 earnings, Platinum Select fits perfectly with our strategy of continuing to expand our service offering. The Platinum Select team has a very positive values-based passionate culture and it's led by a terrific management team. We feel fortunate to have them as part of AMN Healthcare. As we move into 2008, we are confident that AMN has the right market strategy and the right team in place to execute. However, we must continue to innovate and remain agile in order to further expand our leadership position.

And with that, I'd like to turn the call over to our CFO, David Dreyer. David?

Thank you, Susan, and good afternoon. Before I discuss our fourth quarter results, I'd like to recap on a few of the closing details of our recent acquisition of Platinum Select Staffing. We closed the transaction on February 15, 2008. The total potential purchase price is up to $50.3 million in cash, with the initial purchase price of $32.9 million and the potential additional earnout provision of up to $17.4 million based on Platinum Select achieving established 2008 revenue and EBITDA targets. We financed the acquisition using approximately $18 million of cash on hand and $15 million borrowed from our revolving credit facility. This borrowing increased our leverage ratio to 1.7 times at the date of close from a ratio of approximately 1.6 times at year end.

Now I'd like to turn your attention to AMN's fourth quarter financial results. We reported revenue of $286 million for the fourth quarter, which was slightly higher than the fourth quarter of last year, and 5% lower than third quarter of '07. Diluted earnings per share was $0.26 this quarter as compared to $0.29 last quarter and Q4 last year, yet the prior-year quarter did include a $0.05 benefit due to a significant actuarial adjustment recorded to our professional liability insurance reserves. Revenue generated by our Nurse and Allied staffing segment this quarter was $197 million compared to $202 million last year and $204 million last quarter. While it's typical to experience a slight sequential decline from the third to fourth quarter, this was further impacted by the softening in demand. which began mid-year. This also contributed to the year-over-year decline. In addition, our International Nurse division volume was lower by almost $200,000 year over year, which made up almost 40% of the decrease for the quarter.

Revenue generated by our Locum Tenens staffing segment this quarter was $76 million, an increase of 12% compared to last year and a decrease of 8% from last quarter. The year-over-year increase in revenue was due to a 4% increase in days filled combined with an 8% increase in revenue per day sales. The sequential decrease in revenue was due mainly to a decrease in days filled. The shortfall in volume was primarily due to the seasonal impact of a year-end holiday combined with one less government billing day in the fourth quarter. Revenue for our Physician Permanent Placement segment this quarter was $13 million, which was flat compared to last year and last quarter. Looking forward for this segment, a recent increase in the number of producing sales team members and new searches is expected to result in revenue growth during 2008.

Consolidated gross profit this quarter was $76 million, representing a gross margin of 26.6%, which compared to 26.2% reported last year and 26.6% reported last quarter. The year-over-year increase in gross margin was due primarily to an improved pay-the-bill spread in the Nurse and Allied staffing segment. On a segment basis, gross margins for the fourth quarter were 24.4% for Nurse and Allied, 26.1% for Locum Tenens, and 61.8% for Physician Permanent Placements. SG&A expenses this quarter were $56 million, or 19.6% of revenue -- excuse me -- which compared to 18.1% last year and 18.6% last quarter. The increase in SG&A compared to last year was due mainly to a $2.9 million favorable adjustment to our insurance reserves in the fourth quarter of 2006 and the restructuring charge of $700,000 taken during this fourth quarter related to downsizing our International division.

Net interest expense this quarter was $2.9 million, down from $4 million last year and $3.1 million last quarter. This -- these decreases are due to continued payments from our cash flow to reduce our debt outstanding. The income tax rate for the fourth quarter was 35.3% compared to 38.6% for the fourth quarter of last year, with both quarters including adjustments required to finalize year-end federal and state tax provisions. The full-year effective tax rate was 40%, which approximated the rate that we anticipate for 2008. We had an average of 34.2 million fully diluted shares outstanding during the fourth quarter and for the full year we had an average of 34.9 million fully diluted shares outstanding.

Turning to our financial position, this quarter we generated $25 million in operating cash flow and $80 million for the full year, which in addition to cash on hand, was used to reduce debt outstanding by $27 million for the year and to repurchase one million shares of stock in the third quarter. Total debt outstanding at year end was $147 million, resulting in a leverage ratio of 1.6 times. Day sales outstanding,, or DSO, at the end of this quarter was 59 days compared to 63 days last year and 60 days last quarter. The decrease in this quarter's DSO reflects our continuing improvements on our collection efforts.

Now I'd like to provide you with our revenue and earnings guidance for the first-quarter and full-year 2008. This guidance includes our expectations for Platinum Select, beginning on February 15, 2008. First quarter revenue is expected to range from $290 million to $293 million and diluted earnings per share is expected to range from $0.24 to $0.26, which includes the impact of one fewer billing day in our Nurse and Allied segment in the first quarter as compared to the fourth quarter. Revenue for the full-year 2008 is expected to grow at 7% to 12% from 2007 at a range from $1.25 billion to $1.30 billion. Our full-year estimate assumes that 2008 experiences typical business trends for healthcare staffing, namely normal seasonal growth and demand and placements heading into the second half of the year. We anticipate the revenue mix by segment will remain relatively similar to 2007. We expect earnings per share in 2008 to range from $1.16 to $1.22, which is an annual growth rate of 11% to 16%. This estimate includes a $0.01 accretion from Platinum Select, although we believe it may contribute more than that during the year.

This concludes my financial overview. At this time, we'd like to open up the call to any questions you might have.

Thank you. (OPERATOR INSTRUCTIONS) Our first question is from the line of Tobey Sommer with SunTrust Robinson Humphrey.

Thank you. I wanted to ask a question about -- if you just refresh us on the normal seasonality that you would experience in terms of demand on the travel nurse side, as we work our way through the year?

Sure, Tobey. Typically you start -- well, first, you end the year at a relatively low point because a lot of hospitals are dealing with budgetary concerns and trying to themselves plan for what the upcoming year is going to look like, so you typically see a fall-off at the latter part of December and then start to build again in January and February. And that's very, very in line with the trends that we saw this year. I think we troughed early in January, and as I mentioned, the positive news is we have seen a very nice recovery in our orders over the last month, to the tune of, almost a 20% increase from January to February. We then expect to see a continued building into February and March, although traveler count itself will often fall a little bit in the second quarter, just because the number of people ending in April is pretty significant. We're actually feeling pretty -- pretty positive about our second quarter and our April traveler count, so it remains to be seen whether that normal trend will happen or whether the buildup in orders we see will allow us to grow beyond that.

Then the biggest typical seasonal trend is to see your orders building in the summer for your fall placements, and if you recall, that's what we didn't see last year. We'd normally expect some of the key states, such as California, to have increased needs going into August, September and October, and usually second to third quarter would be your largest pickup in your placement volume and the number of travelers working. So, we are assuming similar trends to that this year. You can see based on our guidance that we've been cautious about the level at which that demand will pick up throughout the year. But actually based on some of the recent news we've heard from some of the hospitals that are reporting, they're looking at admission growth of anywhere of 0.5% to 2% for the year, so it gives us a little more confidence that we might see those normal seasonal trends resume.

If I may ask a follow up on any discernible impact related to what I guess is shaping up recently to be a pretty decently active flu season?

Yes, I think that has been contributing to the increase in orders. In fact, as we pulse our clients and ask them why their orders are going up, the flu season is one, but also the number of new units and the number of buildings that are opening are contributing to that, And we've also heard more anecdotally that some of the facilities felt that they may over-hired the number of new grads and have a greater proportion of new nurses on the floor than they would like. As you know, travelers typically have more experience. For us our average traveler has greater than five years of experience, and so they're seeking to create maybe a more balanced blend of experienced and new nurses. So I would say those three factors contributing, and then we have heard, again, from some of the hospitals that have been reporting, that the first quarter saw some positive trends in admissions.

Then lastly, I'll ask one last question and get into queue, any discernible differences in demand, again on the nursing side. geographically or by state that are noteworthy?

Sure. Probably the most important to us are the improvements that we've seen in the west. California is one of those states that has picked up more significantly. I'd say really throughout the whole west we've seen a nice pickup, but also we've seen a bit of a pickup in Arizona and Florida, which is really positive because those are huge markets for us and as I mentioned earlier, they had been pretty slow in the latter part of the fourth quarter. So we're real pleased with that pickup.

Thank you, Susan.

Thank you.

We will go next to Jeff Silber with BMO Capital Markets. Please go ahead.

Thanks so much. Wanted to shift gears a bit and just focus on Locum Tenens. The growth in the quarter was, I guess, a little bit slower than what we had been projecting and you mentioned, David, in your remarks about the year-end holiday. Was that the issue? Do you expect growth to go back to, I guess, what staffing industry is looking for, sort of the mid teens?

Well, we finished a 16% overall for the year, so that's, I think, pretty consistent or even a little better than what the staffing industry rates are. Our expectations going forward are pretty much to continue at those rates. What you saw in the fourth quarter, was a bit more seasonality than we'd seen certainly in prior years, and as we have said in the opening comments, there, was holiday season falling on a Tuesday had some impact as well. But we do believe that the overall growth is trending as we expected it to.

The other contributor, Jeff, is the government business. As you might recall, we tend to see a greater drop off sequentially in the fourth quarter from the government business, so as we looked at the declines from third to fourth quarter, I'd say they were pretty well spread across the specialties, although those that are more susceptible to actual closings, such as surgeries, were a little bit harder hit but that's to be expected. And the government business slowed at a slightly greater rate than the private business.

Okay, that's helpful. And then, just again, just focusing on the Locum Tenens business, adjusted EBITDA on the quarter was also a bit lighter than we had thought. Is it because, I guess, of the negative leverage of the slower growth?

Yes. There's also one other smaller factor we should probably mention as well, that the gross margins you'll see were a little bit lower as well and we had to make a slight accounting change in this division. We're -- if they accept a permanent placement fee, where it's actually billed but the permanent conversion occurs the following quarter, we had to defer it. It was about $0.5 million worth and so it had a pretty big impact on this particular quarter's gross margins, so that had some effect for the fourth quarter, as well.

Okay, great. Thank you for letting us know that. The charge that you took -- I guess the restructuring charge -- is that all on the Nursing and Allied side for O'Grady Peyton?

It is, it's all for International.

Yes, just wanted to check that's where it's booked. In terms of guidance, you gave us a little bit of color in terms of what what we should expect for Locum Tenens, and then in terms of the billing rates, potential increase on the Nursing and Allied side. What do you think we'll see in terms of volume in 2008 on the Nursing and Allied side?

Well, we expect volume increases throughout the year from certainly where we are today. As you know, we ended '07 below prior-year levels for our Nurse business. Some of that was driven by the international decline, but some of it was just the pure lower demand. We're closing that gap in the first quarter, although volumes year over year for that segment are still expected to be below prior-year levels. So we are expecting to build from there and it's just the magnitude of what that build will be. At the minimum we expect to end above prior-year levels, certainly in revenue, but we think there's much more opportunity for that -- I mean above that.

Okay, great. And just in terms, again, just on the guidance side, can you tell us what we should be looking for in terms of depreciation and amortization and capital spending in '08?

Sure. Capital spending, we pretty much trended that 1% of revenue, so $12 million to $13 million is pretty accurate. If you look at our depreciation and amortization, we've pretty much -- looking at the average of fourth quarter, we're going to trend at about the $2.2 million depreciation per quarter and about $1 million of amortization per quarter. That's fairly consistent.

And the $1 million in amortization does include the impact of the Platinum acquisition?

For the Platinum, you might round it up. On a go-forward it's probably about $1.2 million of amortization with Platinum in. You won't really see the effect of that until Q2.

Okay, great, and then one more and I'll jump back in. You mentioned the issues in terms of California, Arizona and Florida and how they're rebounded a bit the current quarter. Can you give us some order of magnitude how large those states are as a percentage of revenues, percentage of travelers? Anything you can help us out would be appreciated.

Yes, hey are our three largest states and I think the only one that we've called out historically is California, which within the nursing business runs around 25% of our travelers working, and that's been pretty consistent, although in the past it's maybe nudged up higher than that. That's about where it is now.

And would it be safe to say on that the other two, Florida and Arizona, combined would be equal to California --?

No, less.

A little less than that combined. Okay, great. All right, I'll jump back in. Thanks.

Thanks, Jeff.

We'll go to Jim Janesky with Stifel Nicolaus. Please go ahead.

Yes, thank you. Susan, when you look at the fact and as you have reported, that traveler count -- traveler and Allied had been -- has been a very tough segment now for -- not only for 2007, but for several years now, what gives you any degree of confidence that that is going to improve as the year goes on? Our -- certainly what I'm hearing from hospital admission rates, from analysts, including our own, that covers hospitals, is that it -- '08 could really turn out to be another tough year, so if you could just give us an idea? And then in your outlook for 2008, what are you counting on? I wasn't really clear what you were counting on in terms of a recovery to get to the range of numbers that you put out.

Okay. Well, first, starting with what we're doing and what we believe we can do to help drive that growth, we have several initiatives internally that we think can help us to put ourselves in a stronger competitive position and help gain market share, even within, let's assume, a flat market.

Okay.

I think there are things that we haven't been aggressive on in the past that you'll see us rolling out in a more aggressive manner and we've been seeing some wins on that, so we feel pretty optimist that we can grow market share within the existing environment. On top of that, we're seeing positive trends in our demand today. I mentioned the pickup in demand that we're seeing really across the country, but in particular, some of those very important states for us, so that's a sign of confidence that we're seeing a market that is certainly moving in the positive direction and for that matter, pretty significant increases over the last four to six weeks. And then we look even more externally to what our clients are saying and what they say their needs are going to be. I mentioned some of the quotes.

While you might be hearing other things, some of the things we're hearing are forecasts of admission growth anywhere from 0.5% to 1% to 2% to 2.5%. And as we talk anecdotally with our clients, they're talking about increased needs due to opening up more units and, you know, more facilities. So I think we're hearing enough positive news out there that makes us believe the demand growth that we're seeing today will continue. With that said, it's not certain. We just are looking at the external factors as well as knowing internally what we're doing to help drive things.

Okay, and can you give us an idea of where -- where in the spectrum of recovery you would need to get to in order to hit the numbers that you put out? Not so much in the first quarter, which is almost over, but in the second, third and fourth quarters?

Well, we're not going to be providing quarterly guidance or for that matter, segment guidance, so I don't think we want to start to put numbers out there to try to lead towards what the growth might be in Nursing versus Locum's versus Perm Placement. Clearly we are expecting growth from where we are today and it's a matter of when and at what pace that will occur. I would say second to third quarter, as always, is the most important transition for us during the year. So I'd look towards that call to be an important point for us to have a good view on what the growth's going to be in the latter half of the year.

Okay, great. With respect to the economy and the employment market, over time a more difficult employment environment, we've talked about that on many occasions that a more difficult employment environment could lead to nurses going back to work. What have you -- how has that factored into your outlook, not only -- for all of your businesses, frankly, how have you approached that?

Well, on the nursing side, I think we've already felt some impact from that, with the general unemployment rate rising at the latter part of '07 and again in January, I think it was up about 30 basis points over the prior year, and so I think that's part of what contributed to our lower demand. If it were to continue to rise at a more significant pace, let's say go from 4.9% to 6%, I think it could have an impact, but if it stays sub 5.3%, 5.5%, I don't -- I think our demand will be fine.

Okay, great. Thank you.

Thanks, Jim.

Next question is from Michel Morin with Merrill Lynch. Please go ahead.

Yes, good afternoon, everyone. Just on the quarter that just passed, the revenues came in a bit light relative to your expectations, and that doesn't happen very often. In fact, I don't think it's happened in the last couple of years, so I was wondering, what was the key thing that didn't turn out quite the way you'd predicted?

It was a little bit lower -- in the lower end of our guidance range, because our guidance range was the $286 million to $288 million. I would say really the seasonal factors we talked about were probably most of that. In fact, the Locum's impact, that was probably a little more impact on our seasonality than we'd probably estimated on the higher end of that guidance number, but overall, I think you can see by the margin and the end results, we believe it actually largely came in as expected.

Okay. And on the restructuring charge for International, is that pretty much as much as we're going to see at this point or if there's no resolution, should we expect that there could be some additional costs in '08?

No, that was it. We downsized both -- well, mostly building, but also people in order to more or less operate at this current level. I think it's -- there's no further downside to go. Clearly we've got the business fairly efficient. The more important thing would be to build it back up quickly when those visas become available and that is something that we are absolutely prepared to execute and that's probably the more likely event.

Okay. And then just finally in terms of the change that you noticed in the west, Susan, was it really about this over-hiring of less-experienced nurses and wanting to rebalance, or was there anything else at play there that might have changed the dynamic in that region?

No, that was just one of the factors. As I said, I think the stronger flu season, new units and buildings opening, just hearing hospitals within California, in particular, talking about bursting at the seams, so I think their staffing needs are pretty strong right now. I also think that we had not -- we had not attacked the northwest markets as proactively as we could have in the past and our team has done a great job of building demand within the northwest region.

Great, thanks very much.

Great. Thanks, Michel.

And we do have a follow up from Tobey Sommer with SunTrust Robinson Humphrey. Go ahead, please.

Thank you. Just wanted to dig into the Peyton O'Grady volumes as they relate to the -- your expectation for overall volume growth in the Nurse staffing segment. Is it about 5% -- 4%, 5% of revenue and you're currently modeling for that to dissipate as we work our way through the year?

Yes. In terms of the number of travelers on assignment, we ended the year at around 400 travelers on assignment for that business and we're expecting it to dwindle down to around the 100 range. It could be slightly better if we're able to get a few visas through here and there, but that's directionally a magnitude where we're going.

And you expect to -- with that effect, be able to show some volume growth in the year, or to what extent will, volume growth on an overall basis be impacted by that trend?

If we -- including that decline, we would expect to be able to grow volumes throughout the year. So, a significant offset to that towards the latter half of the year, obviously, through what we believe we can do in our domestic placements and through Allied as well.

Thanks. In the -- just to be clear, are you currently in this environment able to still squeak by and get a few visas, just not any magnitude that'll be impactful for the business?

Yes, it's a good point. They do readjust the visa dates on a monthly basis and most recently they actually did move them forward to 2005 for some countries, so we were able to get a few visas pushed through. So that will help us a little bit throughout the year, but you're talking 20, 30, maybe 40 visas at a time, so they're not big numbers that are going to change the trajectory of the business.

And one last question on this. If -- if we were to get some movement, let's say at year end or at any point in time here over the next couple quarters, how big is the queue of nurses that you have available that are documented and gone through some licensing procedure that could start and come fill positions?

It's fairly significant. Several hundred, and it's just a matter of when you could get them through and quite honestly, how long some of them will hang on. Part of the reason we need a very talented staff to remain on, even though we're not making a lot of new placements, is to keep that pipeline fresh and engaged and ready to go. Once we have the flood gates open with visas available, we'll start putting them through the system and it will take anywhere from four to six months, depending upon where they were in the process, to get them placed. So you wouldn't see an immediate impact from it. It would really be probably a two-quarter impact before we would start to see revenues flowing.

Thank you very much.

Thanks, Tobey.

Thank you. And that does conclude the Q&A portion of our call. I'll turn it back to Ms. Nowakowski for closing remarks.

Thanks so much. I know many of you have had the pleasure of meeting our Chairman and cofounder, Steve Francis, over the years. AMN is the realization of his vision to build the largest and finest healthcare staffing Company in the nation. This April, upon the completion of his term as Chairman of the board, Steve will step away from his AMN board role to devote himself full time to his campaign for mayor of San Diego. I know I speak for all of us when I wish Steve our very best in his new venture. And thank you, everyone, for joining our call today. We look forward to talking with many of you over the next few months and providing everyone with a further update on our performance during our first quarter earnings call.

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation, and for using AT&T executive teleconference. You may now disconnect.