American Shared Hospital Services Reports Second Quarter Results

SAN FRANCISCO, Aug 08, 2011 (BUSINESS WIRE) -- AMERICAN SHARED HOSPITAL SERVICES /quotes/zigman/217821/quotes/nls/ams AMS -3.18% , 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 2011.

Second Quarter Results

For the three months ended June 30, 2011, revenue increased 1.2% to $4,206,000 compared to $4,155,000 for the second quarter of 2010. Net income for the second quarter of 2011 rose to $21,000, or $0.00 per share. This compares to net income of $3,000, or $0.00 per share, for the second quarter of 2010.

The number of procedures performed on Gamma Knife(R) Perfexion(TM) systems supplied by AMS increased 10.3% for the second quarter of 2011 and 15.9% for the first half, compared to the second quarter and first half of 2010, respectively. The total number of procedures performed in AMS' Gamma Knife business decreased 3.1% for the second quarter and increased 4.1% for the first half, compared to the second quarter and first half of 2010, respectively.

The primary reason for the decrease in total Gamma Knife procedures in the second quarter was that the Gamma Knife unit at Lehigh Valley Hospital in Allentown, Pennsylvania is being held for sale and AMS no longer gets credit for procedures performed there. In March 2011 AMS announced a contract to upgrade a Gamma Knife to Perfexion specifications at Lehigh. As part of this upgrade, AMS agreed to the early termination of the existing 10-year lease on the Gamma Knife system it supplied to Lehigh in 2004, and Lehigh has agreed to purchase the Perfexion system. AMS expects pre-tax income of approximately $1 million from this transaction to be recognized in the third quarter of 2011.

Gross margin for this year's second quarter increased to 43.7% compared to 42.1% for the second quarter of 2010. Operating income increased 37.2% to $225,000 for the second quarter of 2011 compared to $164,000 for the second quarter of 2010.

Selling and administrative expenses for the second quarter of 2011 decreased 3.9% to $1,041,000 compared to $1,083,000 for the second quarter of 2010. Reflecting the addition of new Perfexion systems to AMS' Gamma Knife portfolio, interest expense increased to $570,000 for this year's second quarter compared to $503,000 for the second quarter last year.

Cash flow, as measured by earnings before interest, taxes, depreciation and amortization (EBITDA), was $2,034,000 for the second quarter and $4,081,000 for the first six months of 2011, compared to $2,001,000 for the second quarter and $3,985,000 for the first six months of 2010.

Balance Sheet Highlights

At June 30, 2011, AMS reported cash, cash equivalents and certificates of deposit of $9,818,000 compared to $10,438,000 at December 31, 2010. Shareholders' equity at June 30, 2011 was $23,954,000, or $5.19 per outstanding share. This compares to shareholders' equity at December 31, 2010 of $23,044,000, or $5.01 per outstanding share.

First Half Results

For the six months ended June 30, 2011, revenue increased 4.0% to $8,573,000 compared to $8,243,000 for the first six months of 2010. Operating income increased 40.5% to $451,000 for this year's first half compared to $321,000 for the first half of last year. Net income for the first six months of 2011 increased to $42,000, or $0.01 per diluted share, compared to net income for the first six months of 2010 of $11,000, or 0.00 per diluted share.

CEO Comments

Chairman and Chief Executive Officer Ernest A. Bates, M.D., said, "Higher Perfexion procedure volume, the result of our strategy to upgrade many of our existing Gamma Knife sites to Gamma Knife Perfexion specifications, contributed to the improvements in gross margin and operating income for the second quarter and first half of 2011 versus prior year. We continue to move this upgrade program forward. In June we announced that the Perfexion system AMS supplied to Lovelace Medical Center in Albuquerque, New Mexico began treating patients. This system is an upgrade to the Gamma Knife supplied by AMS to Lovelace Medical Center in 2003. Additional Perfexion contracts are in the pipeline.

"Also in the second quarter, the Gamma Knife system we supplied to Baskent University, Adana, Turkey under a contract announced in March 2011 began treating patients. The Kisla Campus of Baskent University houses the largest and most modern oncology center in the Adana region, now including both a Gamma Knife and two linear accelerator devices used for radiation therapy. Turkey is the fastest growing economy in Europe and the third fastest growing economy in the world behind only China and India. Given the small number of radiosurgery devices and services in the country today, and the fact that more than 90% of the population of 77 million is covered by health insurance, Turkey represents a significant growth opportunity for AMS. We also anticipate that our Gamma Knife unit at Hospital Central FAP in Lima, Peru will begin treating patients later this year, and our linear accelerator site in Sao Paulo, Brazil is scheduled to go on-line in 2012."

Dr. Bates said that the Company is negotiating financing for the four proton therapy centers AMS currently is developing in Dayton, Ohio, Boston, Massachusetts, Orlando, Florida, and Long Beach, California. "Proton therapy is widely regarded as the optimal radiation treatment for an increasing variety of cancers. With our many years of experience in radiation therapy equipment selection and innovative financing, American Shared is ideally positioned to take advantage of this growth opportunity," he said.

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