American Shared Hospital Services Reports Operating Results (10-Q)

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Nov 15, 2010
American Shared Hospital Services (AMS, Financial) filed Quarterly Report for the period ended 2010-09-30.

American Shared Hospital Services has a market cap of $13.79 million; its shares were traded at around $3 with and P/S ratio of 0.82.

Highlight of Business Operations:

Medical services revenue increased by $354,000 and decreased by $153,000 to $4,280,000 and $12,523,000 for the three and nine month periods ended September 30, 2010 from $3,926,000 and $12,676,000 for the three and nine month periods ended September 30, 2009, respectively. The increase for the three month period is primarily due to an increase in Gamma Knife volume at several sites compared to the same period in the prior year, particularly at sites where the Company has upgraded its existing Gamma Knife units or replaced Gamma Knife units with Perfexion units. As a result, revenue from Gamma Knife operations increased by $414,000 to $4,040,000 from $3,626,000 for the same quarter in the prior year. The increase for the quarter was partially offset by a $60,000 decrease in revenue from $300,000 to $240,000 from the Company s radiation therapy contract. The decrease for the nine month period is primarily due to a shift in volume during the period to Gamma Knife sites with relatively lower payment rates per procedure compared to the same period in the prior year, partially offset by revenue generated from a 5% increase in overall Gamma Knife procedure volume. As a result, revenue from Gamma Knife operations during the nine month period decreased $10,000 to $11,703,000 from $11,713,000 compared to the same period in the prior year. In addition, revenue from the Company s radiation therapy contract for the nine month period decreased by $143,000 to $820,000 from $963,000 for the same period in the prior year due to lower volume at that site.

Total costs of revenue increased by $92,000 and decreased by $349,000 to $2,435,000 and $7,229,000 for the three and nine month periods ended September 30, 2010 from $2,343,000 and $7,578,000 for the three and nine month periods ended September 30, 2009. Maintenance and supplies increased by $91,000 and $113,000 for the three and nine month periods ended September 30, 2010 compared to the same periods in the prior year, primarily due to maintenance contracts that started in fourth quarter 2009 and second quarter 2010 at two sites after coming off warranty, and higher costs for repairs and maintenance that were not covered by maintenance contracts. Depreciation and amortization decreased by $143,000 and $433,000 for the three and nine month periods ended September 30, 2010 compared to the same periods in the prior year. The decrease for both the three and nine month periods is partially due to a change in the asset life of one Gamma Knife unit because the contract with the customer was extended. In addition, depreciation on three other units ended because the remaining value of the equipment had reached salvage value. Other direct operating costs increased by $144,000 and decreased by $29,000 for the three and nine month periods ended September 30, 2010 compared to the same periods in the prior year. For the three month period, the increase is primarily due to higher insurance, marketing and operating costs in connection with the Company s retail sites, partially offset by a decrease in property taxes. For the nine month period, the decrease is primarily due to lower insurance expense, property taxes and operating costs in connection with the Company s retail sites, partially offset by higher marketing costs.

Other income - net increased by $27,000 and $73,000 to $27,000 and $89,000 for the three and nine month periods ended September 30, 2010 from zero and $16,000 for the same periods in the prior year, respectively. The increase for both the three and nine month periods was primarily due to an increase in interest income as a result of higher interest rates available on invested cash balances. For both the three and nine month periods this was partially offset by a cost of approximately $9,000 from the early extinguishment of debt. For the nine month period ended September 30, 2009 there was a cost of approximately $20,000 from the early extinguishment of debt.

The Company had income tax expense of $19,000 and $51,000 for the three and nine month periods ended September 30, 2010 compared to income tax expense of $16,000 and an income tax benefit of $49,000 for the three and nine month periods ended September 30, 2009, respectively. For both the three and nine month periods ended September 30, 2009 this increase is due to an increase in income before income taxes to $223,000 and $606,000 compared to income before income taxes of $172,000 and $376,000 for the same period in 2009. Also, based on the Company s current estimated effective income tax rate for 2010, a 75% income tax provision was applied to net income before income taxes and net income attributable to non-controlling interest, compared to a 49% rate applied in 2009 which resulted in an income tax benefit. The Company s effective income tax rate is higher than the expected statutory federal and state income tax rates at a consolidated level, primarily due to higher income at the Company s subsidiary levels in certain states where there are separate state income tax filing requirements.

The Company had net income of $6,000, or $0.00 per diluted share, and $17,000, or $0.00 per diluted share, for the three and nine month periods ended September 30, 2010, compared to net income of $17,000, or $0.00 per diluted share, and a net loss of $51,000, or ($0.01) per diluted share, in the same periods in the prior year, respectively. The decrease for the three month period was primarily due to higher costs of revenue, selling and administrative costs and net income attributable to non-controlling interest, partially offset by an increase in medical services revenue compared to the prior year. The increase for the nine month period was primarily due to reduced costs of revenue and no transaction costs compared to the prior year, partially offset by lower medical services revenue, higher selling and administrative costs and increased income tax expense.

The Company had cash and cash equivalents of $1,091,000 at September 30, 2010 compared to $833,000 at December 31, 2009. The Company s cash position increased by $258,000 due to net cash from operating activities of $4,727,000, capital lease and long term debt financing on the purchase of property and equipment of $1,928,000 and advances on the Company s line of credit with a bank of $600,000. These increases were partially offset by payments for the purchase of property and equipment of $451,000, principal payments on long term debt and capital leases of $6,109,000 and distributions to the non-controlling interest of $437,000.

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