AMERICAN SHARED HOSPITAL SERVICES (NYSE MKT:AMS),
a leading provider of turnkey technology solutions for advanced
radiosurgical and radiation therapy services, today announced
financial results for the second quarter and first half of
2014.
Second Quarter Results
For the three months ended June 30, 2014, medical services
revenue decreased to $3,379,000 compared to $4,583,000 for the
second quarter of 2013. In addition to lower procedure volume at
many of AMS' Gamma Knife sites and the sale of its Turkey
operations effective May 31, 2014, the decrease in revenue was
exacerbated by one site being down for the entire quarter due to
personnel issues that have now been resolved, and two sites which
generated significant procedure volumes in second quarter 2013
having an unusually slow second quarter this year. Both sites have
bounced back to their usual treatment levels in July. Gamma Knife
revenues in July improved 18% and 33% compared to average monthly
revenues for the first and second quarter of 2014, respectively,
and improved 5% compared to July 2013 revenues, net of volume in
Turkey.
The net loss for the second quarter of 2014 was $927,000, or
$0.20 per share, which included a pre-tax loss on the sale of the
Turkish subsidiary of $572,000, a pre-tax gain from foreign
currency transactions of $146,000 due to the strengthening of the
Turkish Lira against the U.S. Dollar, and an income tax charge of
$165,000, which offset an income tax benefit of $131,000 from the
Company’s operating loss. Although this sale resulted in a book
loss, it generated approximately $540,000 in cash for the Company.
This compares to a net loss for the second quarter of 2013 of
$122,000, or $0.03 per share, which included a pre-tax loss from
foreign currency transactions of $393,000.
The number of procedures performed on Gamma Knife® PerfexionTM
systems supplied by AMS decreased 25% for the second quarter and
12% for the first six months of 2014 compared to the same periods
of 2013. The total number of procedures performed in AMS' Gamma
Knife business, including Gamma Knife and Gamma Knife Perfexion
procedures, decreased 28% for the second quarter and 17% for the
first six months of 2014 compared to the same periods of 2013.
Medical services gross margin for the second quarter of 2014 was
25.0%, compared to medical services gross margin of 41.3% for the
second quarter of 2013. In addition to the impact of lower revenue,
the decrease in gross margin reflected higher depreciation and
maintenance costs associated with the opening of a new Perfexion
site in the second quarter of 2013, as well as the upgrade to
Perfexion specifications of a Gamma Knife at another site and two
cobalt reloads which occurred in the fourth quarter of 2013.
Because an upgrade or cobalt reload increases the book value of the
unit, depreciation expense also increases.
Selling and administrative expenses for the second quarter of
2014 decreased 18.7% to $937,000 compared to $1,153,000 for the
second quarter of 2013.
First Half Results
For the six months ended June 30, 2014, medical services revenue
decreased to $7,443,000, compared to medical services revenue of
$9,251,000 for the first six months of 2013.
The net loss for the first six months of 2014 of $1,023,000, or
$0.22 per share, included a pre-tax loss from the sale of the
Turkish subsidiary of $572,000, a pre-tax gain from foreign
currency transactions of $161,000, and an income tax charge of
$165,000, which offset an income tax benefit of $161,000. In
comparison, the net loss for the first six months of 2013 of
$97,000, or $0.02 per share, included a pre-tax loss from foreign
currency transactions of $534,000.
Balance Sheet Highlights
At June 30, 2014, cash, cash equivalents and certificates of
deposit were $9,944,000 compared to $10,909,000 at December 31,
2013. Shareholders' equity at June 30, 2014 was $25,021,000, or
$4.76 per outstanding share. This compares to shareholders' equity
at December 31, 2013 of $24,055,000, or $5.22 per outstanding
share.
Proceeds of approximately $5.2 million from the sale of the
Company's Gamma Knife business in Turkey were used to reduce
outstanding debt, including approximately $1.7 million of
short-term debt. Proceeds of approximately $1.6 million from the
private placement of common stock completed on June 13, 2014 were
used primarily to strengthen the Company's balance sheet in
anticipation of its proton therapy initiatives.
CEO Comments
Chairman and Chief Executive Officer Ernest A. Bates, M.D.,
said, "We were disappointed by the slow pace of Gamma Knife
procedures in this year's second quarter at many of our sites. We
are working diligently to resolve this issue and restore normal
procedure volume. A variety of non-recurring factors also affected
us in the first half, including scheduled downtime at a number of
our centers for maintenance and upgrades that have now been
completed, personnel issues at one center that have now been
resolved, and of course the extreme weather experienced by much of
the nation last winter and early spring. As previously noted, July
2014 Gamma Knife revenues have increased significantly, net of
volume in Turkey, an encouraging sign for the future.
"During the second quarter we closed the sale of our Gamma Knife
and radiation therapy business in Turkey. While we viewed our
Turkey operations as a good long term investment, the continued
volatility of the Turkish Lira against the U.S. Dollar (which
resulted in cumulative foreign currency transaction losses of
$908,000) and the opportunity to generate approximately $540,000 in
cash for our domestic operations were compelling reasons to
consummate the sale.
"We also completed a private placement of common stock to
several AMS Directors in the second quarter, which raised
approximately $1.6 million. We used the proceeds of this
transaction mainly to improve the strength of our balance sheet in
anticipation of our proton therapy initiatives.
"We also are encouraged by the continued growth of our domestic
Perfexion portfolio. We recently signed a contract to supply a
Perfexion system to PeaceHealth Sacred Heart Medical Center at
RiverBend, Springfield, Oregon. This new Perfexion system, the
fourteenth in AMS' portfolio, is expected to begin treating
patients in the fourth quarter of 2014. This installation will also
mark our 28th new Gamma Knife site.
"Another reason for optimism are the proposed Medicare hospital
outpatient prospective payment rates for calendar year 2015
recently posted by the Centers for Medicare and Medicaid Services
(CMS). Effective January 1, 2015, the proposed comprehensive
reimbursement rate for both Gamma Knife and LINAC one session
cranial radiosurgery of approximately $9,768 will be inclusive of
the delivery and ancillary codes but exclusive of co-insurance
payments or other adjustments. The average current CMS
reimbursement rate for delivery and ancillary codes (exclusive of
co-insurance and other adjustments) is approximately $5,600. While
these reimbursement rates are not final and could change, we are
pleased that CMS has proposed an increase for this life-saving
therapy.
"The cost reduction program we announced in April 2013 has
helped mitigate the impact of lower revenue on our financial
results. General and administrative expenses decreased 18.7% for
this year's second quarter and 22.2% for the first half versus the
same periods a year ago. We are on track to reduce cash outlays by
approximately $1,000,000 annually compared to our cash outlays in
2013."
Turning to the Company's proton therapy business, Dr. Bates said
that construction of the dedicated proton center at the University
of Florida Health Cancer Center at Orlando Health is moving
forward. AMS will supply a MEVION S250TM Proton Therapy System for
this facility. Delivery of the MEVION synchrocyclotron to the UF
Health Cancer Center is expected this fall, and the facility is
expected to begin treating patients in first quarter 2016. Dr.
Bates said that the UF Health Cancer Center at Orlando Health is
the model for additional proton centers AMS is developing.
Earnings Conference Call
American Shared has scheduled a conference call at 12:00 p.m.
PDT (3:00 p.m. EDT) today. To participate in the live call, dial
(800) 351-9852 at least 5 minutes prior to the scheduled start
time. A simultaneous WebCast of the call may be accessed through
the Company's website, www.ashs.com, or through CCBN,
www.earnings.com (individual investors) or www.streetevents.com
(institutional investors). A replay will be available for 30 days
at these same internet addresses, or by calling (888) 843-7419,
pass code 3787 3970.
About AMS
American Shared Hospital Services provides turnkey technology
solutions for advanced radiosurgical and radiation therapy
services. AMS is the world leader in providing Gamma Knife
radiosurgery equipment, a non-invasive treatment for malignant and
benign brain tumors, vascular malformations and trigeminal
neuralgia (facial pain). The Company also offers the latest IGRT
and IMRT systems, as well as its proprietary Operating Room for the
21st CenturySM concept. AMS owns a common stock investment in
Mevion Medical Systems, Inc., developer of the compact MEVION S250
Proton Therapy System.
Safe Harbor Statement
This press release may be deemed to contain certain
forward-looking statements with respect to the financial condition,
results of operations and future plans of American Shared Hospital
Services, which involve risks and uncertainties including, but not
limited to, the risks of the Gamma Knife and radiation therapy
businesses, the risks of developing The Operating Room for the 21st
Century program, and the risks of investing in a development-stage
company, Mevion Medical Systems, Inc., and the risks of the timing,
financing, and operations of the Company's proton therapy business.
Further information on potential factors that could affect the
financial condition, results of operations and future plans of
American Shared Hospital Services is included in the filings of the
Company with the Securities and Exchange Commission, including the
Company's Annual Report on Form 10-K and Form 10-K/A for the year
ended December 31, 2013, the Quarterly Report on Form 10-Q for the
quarter ended on March 31, 2014, and the definitive Proxy Statement
for the Annual Meeting of Shareholders held on June 10, 2014.
Selected Financial Data
(unaudited) Summary of Operations Data
Three months ended Six months ended June 30, June 30, 2014 2013
2014 2013 Medical services revenue $ 3,379,000 $
4,583,000 $ 7,443,000 $ 9,251,000 Costs of revenue 2,534,000
2,690,000 5,309,000
5,240,000
Gross margin
845,000
1,893,000 2,134,000 4,011,000 Selling & administrative expense
937,000 1,153,000 1,859,000 2,388,000 Interest expense
510,000 456,000 980,000
927,000 Operating (loss) income (602,000 ) 284,000 (705,000
) 696,000 (Loss) on sale of subsidiary (572,000 ) -- (572,000 ) --
Gain (loss) on foreign currency transaction 146,000 (393,000 )
161,000 (534,000 ) Other income (loss) 6,000
(6,000 ) 15,000 8,000 (Loss) income
before income taxes (1,022,000 ) (115,000 ) (1,101,000 ) 170,000
Income tax expense (benefit) 34,000 (12,000 )
4,000 40,000 Net (loss) income $
(1,056,000 ) $ (103,000 ) $ (1,105,000 ) $ 130,000
Less: Net loss (income) attributable to
non-controlling interest
129,000 (19,000 ) 82,000
(227,000 )
Net (loss) attributable to American Shared
Hospital Services
$ (927,000 ) $ (122,000 ) $ (1,023,000 ) $ (97,000 ) (Loss) per
common share: Basic $ (0.20 ) $ (0.03 ) $ (0.22 ) $ (0.02 )
Assuming dilution $ (0.20 ) $ (0.03 ) $ (0.22 ) $ (0.02 )
Balance Sheet Data
Jun. 30, Dec. 31, 2014 2013 Cash and cash equivalents $
944,000 $ 1,909,000 Certificate of deposit $ 9,000,000 $ 9,000,000
Current assets $ 15,369,000 $ 7,706,000 Investment in equity
securities $ 2,701,000 $ 2,701,000 Total assets $ 65,259,000 $
71,742,000 Current liabilities $ 17,591,000 $ 11,785,000
Shareholders' Equity $ 25,021,000 $ 24,055,000
American Shared Hospital ServicesErnest A. Bates, M.D., (415)
788-5300Chairman and Chief Executive
Officereabates@ashs.comorBerkman AssociatesNeil Berkman, (310)
477-3118Presidentinfo@berkmanassociates.com
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