American Shared Hospital Services (AMS) 2007 Q4 法說會逐字稿

Good afternoon, everyone, and welcome to the fourth quarter and 2007 conference call for American Shared Hospital Services. (OPERATOR INSTRUCTIONS). I would now like to turn the call over to Dr. Ernest Bates, Chairman and Chief Executive Officer, Craig Tagawa, Chief Operating and Financial Officer, and Norm Houck, Controller of American Shared Hospital Services. Mr. Tagawa, you may begin.

Thank you, Rosa. Thank you all for joining us for AMS's fourth quarter and 2007 earnings conference call and Webcast. I'm going to ask Norm to begin with a review of our financial results; then I will be back with some additional comments. We'll be glad to answer your questions after our prepared remarks.

Thanks, Craig. Please note that various remarks that we may make on this conference call about future expectations, plans and prospects for the Company constitute forward-looking statements for the purposes of Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may vary materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Company's filings with the Securities and Exchange Commission, including the Company's annual report on Form 10-K and 10-KA for the year ended December 31st, 2006, Form 10-Q for the quarters ended March 31st, June 30th and September 30, 2007, and the definitive proxy statement for the annual meeting of shareholders held on June 14, 2007. The Company assumes no obligation to update the information contained in this conference call.

For the three months ended December 31, 2007, revenue increased to $8,311,000, compared to revenue of $4,793,000 for the fourth quarter of 2006. Revenue for the fourth quarter of 2007 included $3,200,000 from the sale of a Leksell Gamma Knife Perfexion system to a clinical partner whose lease agreement on a Gamma Knife expired under its terms in January 2008. Because we sold this system outright, AMS will recognize no further revenue from this particular device going forward. I will remind you that another Gamma Knife came off lease in October 2007.

Net of revenue from the sale of the Perfexion system, our revenue from radiosurgical and radiation therapy services actually increased 6.6% for the fourth quarter of 2007 versus the prior year, despite having one fewer Gamma Knife online than we had in the prior-year period. This increase primarily reflected the contributions of the IGRT and related equipment and services AMS began supplying another current Gamma Knife customer in September 2007. AMS also completed the upgrade of a clinical partner site from the Gamma Knife to the Perfexion system in October 2007.

Due to its increased therapeutic utility, we believe that per-site revenue from the Perfexion system may ultimately exceed per-site revenue from the previous Gamma Knife models. We expect to upgrade two additional sites to the Perfexion system over the next several quarters.

The increase in selling, general and administrative expenses for the fourth quarter of 2007 versus prior year primarily reflected higher business development costs as we increased our investment in marketing and intensified our efforts to win additional contracts from current and new clinical partners.

Primarily reflecting our increased investment in business development, net income for the fourth quarter 2007 declined to $178,000, or $0.04 per diluted share, reflecting a 57% effective income tax rate. This compares to net income for the fourth quarter of 2006 of $347,000, or $0.07 per diluted share, reflecting a 50% effective income tax rate. The higher effective income tax rate for the fourth quarter of 2007 reflected adjustments to estimated income taxes for the year, primarily due to higher-than-anticipated separate state income taxes at the subsidiary level.

For the 12 months ended December 31, 2007, revenue increased to $22,622,000, compared to $20,385,000 for 2006. Net income for 2007 was $951,000, or $0.19 per diluted share, reflecting a 49% effective income tax rate. For 2006, net income was $1,656,000, or $0.33 per diluted share, reflecting a 42% effective income tax rate. Once again, the higher effective income tax rate for 2007 is primarily the result of higher-than-anticipated state income taxes at the subsidiary level.

We currently expect the effective income tax rate for 2008 to be approximately 50%. This estimated rate will be reviewed and modified as necessary at the end of each successive interim period in 2008 to the Company's best estimate of its annual effective income tax rate.

Cash flow for 2007, as measured by earnings before interest, taxes, depreciation and amortization, was $9,405,000, compared to $10,672,000 for 2006. At December 31, 2007, AMS reported cash, cash equivalents and short and long-term securities of $10,010,000. At December 31, 2006, AMS reported cash, cash equivalents and short and long-term securities of $8,906,000. Shareholders equity at December 31, 2007 was $19,540,000, or $3.89 per outstanding share, compared to $19,009,000, or $3.78 per outstanding share at December 31, 2006. Craig?

Thank you, Norm. As we have been saying for quite some time now, the transition to the new technologies for radiation oncology and radiosurgery delivery that are now coming onto the market has created an outstanding long-term growth opportunity for AMS. Proton beam radiation therapy, image guided radiation therapy, the Leksell Gamma Knife Perfexion, and other new technologies, have the potential to significantly improve patient outcomes in the treatment of many formerly intractable cancers and other life-threatening conditions. Because our creative financing solutions can make the new systems available and affordable to clinical partners who might otherwise find the equipment beyond their reach, we believe this technology transition will drive demand for our services for years to come.

The incremental revenue we have long anticipated would be triggered by the introduction of the IGRT and Perfexion systems into our portfolio has now began to contribute to our financial results. As Norm mentioned, revenue from our first installed new-generation systems more than offset the loss of revenue we anticipated from having fewer Gamma Knifes in service than we had a year ago. We believe that this is only the beginning. We invested heavily in our marketing program in the fourth quarter to develop additional contracts with current and new clinical partners, and we believe that significant new business is on the horizon.

An update on the Monarch 250 proton beam radiation therapy system, under development by Still River Systems. The first of these single-treatment-room devices which is scheduled for a site other than our two sites is now under construction. This unit, which is expected to be delivered by the end of this year, will serve as the evaluation unit for the purposes of obtaining FDA clearance. AMS owns 7.6% of the equity of Still River, and we have already contracted to lease Monarch 250 systems to two clinical sites -- Tufts-New England Medical Center, and at M.D. Anderson Cancer Center Orlando, once FDA clearance is in hand. We expect many more PBRT contracts in the future.

Rosa, we are ready for the first question.

(OPERATOR INSTRUCTIONS). Mr. Tagawa, there are no questions.

Dr. Bates, would you like to make any comments?

Only to say that we're very happy with the way the proton beam system is coming along, and the fact that we're now in negotiations with probably 15 medical centers across the country. There's a tremendous interest in this new technology, and clearly, I think, we're in the forefront. I don't know of anyone at this point, with the exception of maybe one of our competitors, who has more signed contracts than us. That's all I have to say.

Thank you for joining us this afternoon, and we look forward speaking with you in about three months on our conference call for the first quarter of 2008. Rosa?

Thank you. This call will be available in digital replay immediately following today's conference. To access the system, dial 888-843-8996, and enter the passcode of 20893500, followed by #, to access the replay. The Webcast of this call will be available at www.ASHS.com, and www.earnings.com. This concludes today's teleconference. Thank you for participating. You may now disconnect.