American Shared Hospital Services has a market cap of $13.6 million; its shares were traded at around $2.94 with a P/E ratio of 29.4 and P/S ratio of 0.6.
Highlight of Business Operations:The Company had nineteen Gamma Knife units in operation at June 30, 2012 compared to twenty Gamma Knife units at June 30, 2011. Three of the Company’s customer contracts are through subsidiaries where GKF or its subsidiary is the majority owner and managing partner. Twelve of the Company’s nineteen current Gamma Knife customers are under fee-per-use contracts, and seven customers are under retail arrangements. The Company’s two contracts to provide radiation therapy and related equipment services to existing Gamma Knife customers are considered retail arrangements. Retail arrangements are further classified as either turn-key or revenue sharing. Revenue from fee per use contracts is recorded on a gross basis as determined by each hospital’s contracted rate. Under turn-key arrangements, the Company receives payment from the hospital in the amount of its reimbursement from third party payors, and is responsible for paying all the operating costs of the equipment. Revenue is recorded on a gross basis and estimated based on historical experience of that hospital’s contracts with third party payors. For revenue sharing arrangements the Company receives a contracted percentage of the reimbursement received by the hospital. The gross amount the Company expects to receive is recorded as revenue and estimated based on historical experience.
Medical services revenue increased by $78,000 and $114,000 to $4,284,000 and $8,687,000 for the three and six month periods ended June 30, 2012 from $4,206,000 and $8,573,000 for the three and six month periods ended June 30, 2011, respectively. The increases for both the three and six month periods are primarily due to an increase in revenue from the Company’s radiation therapy sites, partially offset by a decrease in revenue from its Gamma Knife sites compared to the same periods in the prior year. The increase in radiation therapy revenue was due to a new contract that began operation in the fourth quarter 2011, and increased volume at its existing radiation therapy site. The decrease in Gamma Knife revenue for both the three and six month periods compared to the same periods in the prior year was primarily due to lost revenue from one unit that was sold to the customer in the third quarter 2011. For the three month period the decrease was also partially due to one site where the contract ended in the second quarter 2012 at the end of its term. For the six month period the revenue decrease was also partially due to a site that was out of service for one month for a cobalt reload during the first quarter 2012.
Total costs of revenue increased by $41,000 and $164,000 to $2,411,000 and $4,977,000 for the three and six month periods ended June 30, 2012 from $2,370,000 and $4,813,000 for the three and six month periods ended June 30, 2011, respectively. Maintenance and supplies decreased by $8,000 and increased by $38,000 for the three and six month periods ended June 30, 2012 compared to the same periods in the prior year. The variance for the three month period was due to lower costs for maintenance contracts, offset by higher costs for maintenance and repairs not covered under maintenance contracts. For the six month period the increase was due to higher maintenance contract expense because the warranty period ended for three Gamma Knife units and higher costs for maintenance and repairs not covered under maintenance contracts, partially offset by lower contract maintenance at several other sites. Depreciation and amortization increased by $1,000 and $119,000 for the three and six month periods ended June 30, 2012 compared to the same periods in the prior year, primarily because depreciation started on four new sites that began operation since the first quarter 2011. This was partially offset by a reduction in depreciation for three sites where depreciation was stopped because the remaining value of the equipment had reached its salvage value, and one site where the depreciable life was extended due to a customer contract extension. Other direct operating costs increased by $48,000 and $7,000 for the three and six month periods ended June 30, 2012 compared to the same periods in the prior year. For both the three and six month periods, the increase is primarily due to higher operating costs in connection with the Company’s retail sites, partially offset by lower marketing costs.
Net income attributable to non-controlling interest decreased by $39,000 and $17,000 to $211,000 and $431,000 for the three and six month periods ended June 30, 2012 from $250,000 and $448,000 for the three and six month periods ended June 30, 2011. Non-controlling interest primarily represents the 19% interest of GK Financing owned by a third party, as well as non-controlling interests in subsidiaries of GK Financing owned by third parties that began operations in 2011. Variances in net income attributable to non-controlling interest represents the relative increase or decrease in profitability of GKF and these ventures.
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