SunLink Health Systems, Inc. Announces Fiscal 2016 Second Quarter Results

ATLANTA--()--SunLink Health Systems, Inc. (NYSE MKT: SSY) today announced a loss from continuing operations for its second fiscal quarter ended December 31, 2015 of $9,288,000 or a loss of $0.98 per fully diluted share, compared to net earnings from continuing operations of $989,000 or $0.10 per fully diluted share, for the quarter ended December 31, 2014. The current quarter loss includes a non-cash charge to income tax expense of $7,306,000 to provide a full valuation allowance for deferred tax assets. Net loss for the quarter ended December 31, 2015 was $9,346,000, or a loss of $0.99 per fully diluted share, compared to net earnings of $977,000, or $0.10 per fully diluted share, for the quarter ended December 31, 2014.

Consolidated net revenues from continuing operations for the quarters ended December 31, 2015 and 2014 were $20,282,000 and $23,126,000, respectively, a decrease of 12.3% in the current year’s second quarter from the corresponding quarter of the prior year. Healthcare Facilities Segment net revenues in the second quarter of 2016 of $11,507,000 decreased $3,032,000, or 20.9%, compared to $14,539,000 for the comparable quarter of the prior year due to lower inpatient volume and surgeries. The Pharmacy Segment revenues of $8,568,000 for the quarter ended December 31, 2015 increased $138,000, or 1.6%, over the comparable quarter of the prior year due primarily to increased durable medical equipment sales.

The company had an operating loss from continuing operations for the quarter ended December 31, 2015 of $1,779,000, compared to an operating profit from continuing operations for the quarter ended December 31, 2014 of $2,022,000. The operating loss in the current year’s quarter compared to the operating profit for the comparable quarter of last year was primarily due to the lower Healthcare Facilities Segment net revenues and a $1,000,000 insurance settlement received in the quarter ended December 31, 2014.

Loss from discontinued operations was $58,000 (a loss of $0.01 per fully diluted share) for the quarter ended December 31, 2015 compared to a loss from discontinued operations of $12,000 (a loss of $0.00 per fully diluted share) for the quarter ended December 31, 2014, respectively.

For the six months ended December 31, 2015, SunLink reported a loss from continuing operations of $10,809,000 or a loss of $1.14 per fully diluted share, compared to earnings of $878,000, or $0.09 per fully diluted share, for the comparable period of the prior fiscal year. The quarter and six month results for fiscal 2016 include the non-cash charge of $7,306,000 to fully reserve the company’s deferred tax assets. For the six months ended December 31, 2015, SunLink reported a net loss of $11,014,000, or $1.17 per fully diluted share, compared to earnings of $564,000 or $0.06 per share, for the six months ended December 31, 2014.

Consolidated net revenues from continuing operations for the six months ended December 31, 2015 decreased by 10.4% to $40,754,000 compared to $45,502,000 in the comparable period a year ago. The Healthcare Facilities Segment had net revenues in the six months ended December 31, 2015 of $24,190,000 compared to $29,319,000 for the comparable period a year ago. The Pharmacy Segment had $16,135,000 of net revenues for the six months ended December 31, 2015 compared to $15,884,000 for the comparable six months of the prior fiscal year.

SunLink had an operating loss from continuing operations for the six months ended December 31, 2015 of $3,538,000 compared to an operating profit of $2,327,000 for the six months ended December 31, 2014.

SunLink Health Systems, Inc. is the parent company of subsidiaries that operate three hospitals, two nursing homes and related healthcare services and facilities in the Southeast, and a pharmacy company in Louisiana. Each of the company’s healthcare services is operated locally with a strategy of linking patients’ needs with dedicated physicians and healthcare professionals to deliver quality efficient medical care. For additional information on SunLink Health Systems, Inc., please visit the company’s website at www.sunlinkhealth.com.

This press release may contain certain statements of a forward-looking nature. The statements contained herein which are not historical facts are considered forward-looking statements under federal securities laws. Such forward-looking statements are based on the beliefs of our management as well as assumptions made by and information currently available to them. The company has no obligation to update such forward-looking statements. Actual results may vary significantly from these forward-looking statements.

Adjusted earnings before income taxes, interest, depreciation and amortization

Earnings before income taxes, interest, depreciation and amortization (“EBITDA”) represent the sum of income before income taxes, interest, depreciation and amortization. We understand that certain industry analysts and investors generally consider EBITDA to be one measure of the liquidity of the company, and it is presented to assist analysts and investors in analyzing the ability of the company to generate cash, service debt and meet capital requirements. We believe increased EBITDA is an indicator of improved ability to service existing debt and to satisfy capital requirements. EBITDA, however, is not a measure of financial performance under accounting principles generally accepted in the United States of America and should not be considered an alternative to net income as a measure of operating performance or to cash liquidity. Because EBITDA is not a measure determined in accordance with accounting principles generally accepted in the United States of America and is thus susceptible to varying calculations, EBITDA, as presented, may not be comparable to other similarly titled measures of other corporations. Net cash provided by operations for the three and six months ended December 31, 2015 and 2014, respectively, is shown below. Healthcare Facilities Adjusted EBITDA and Pharmacy Adjusted EBITDA is the EBITDA for those facilities without any allocation of corporate overhead, impairment charges and gains on sale of businesses.

 
        Three Months Ended       Six Months Ended
December 31, December 31,
2015     2014 2015     2014
 

Healthcare Facilities Adjusted EBITDA (loss)

$ (1,145,000 ) $ 2,705,000 $ (1,866,000 ) $ 3,987,000
Pharmacy Adjusted EBITDA 516,000 249,000 636,000 551,000
Corporate overhead costs (557,000 ) (352,000 ) (1,148,000 ) (996,000 )
Taxes and interest (expense) benefit (7,515,000 ) (1,033,000 ) (7,278,000 ) (1,449,000 )
Other non-cash expenses and net change in operating assets and liabilities
  8,595,000     (680,000 )   8,735,000     (2,145,000 )
Net cash provided by operations $ (106,000 ) $ 889,000   $ (921,000 ) $ (52,000 )
 
 

SUNLINK HEALTH SYSTEMS, INC. ANNOUNCES

FISCAL 2016 SECOND QUARTER RESULTS
Amounts in 000's, except per share and volume amounts
 
CONSOLIDATED STATEMENTS OF EARNINGS
 
       

Three Months Ended December 31, 2015

     

Six Months Ended December 31,

2015       2014 2015       2014
      % of Net       % of Net       % of Net       % of Net
Amount Revenues Amount Revenues Amount Revenues Amount Revenues
Operating revenues (net of contractual allowances) $ 21,417 105.6 % $ 25,108 108.6 % $ 43,687 107.2 % $ 49,717 109.3 %
Less provision for bad debts of Healthcare Facilities Segment   1,135     5.6 %   1,982   8.6 %   2,933   7.2 %   4,215   9.3 %
Net Revenues 20,282 100.0 % 23,126 100.0 % 40,754 100.0 % 45,502 100.0 %
Costs and Expenses:
Cost of goods sold 5,371 26.5 % 5,456 23.6 % 9,968 24.5 % 10,072 22.1 %
Salaries, wages and benefits 10,256 50.6 % 10,589 45.8 % 20,900 51.3 % 21,406 47.0 %
Provision for bad debts of Specialty Pharmacy Segment 138 0.7 % 123 0.5 % 360 0.9 % 123 0.3 %
Supplies 1,649 8.1 % 1,897 8.2 % 3,307 8.1 % 3,844 8.4 %
Purchased services 1,291 6.4 % 1,162 5.0 % 2,584 6.3 % 2,498 5.5 %
Other operating expenses 2,446 12.1 % 1,968 8.5 % 5,270 12.9 % 4,340 9.5 %
Rents and leases 310 1.5 % 329 1.4 % 643 1.6 % 677 1.5 %
Insurance settlement - 0.0 % (1,000 ) -4.3 % - 0.0 % (1,000 ) -2.2 %
Depreciation and amortization 593 2.9 % 580 2.5 % 1,160 2.8 % 1,215 2.7 %
Electronic Health Records incentive programs   7     0.0 %   -   0.0 %   100   0.2 %   -   0.0 %
Operating Profit (Loss ) (1,779 ) -8.8 % 2,022 8.7 % (3,538 ) -8.7 % 2,327 5.1 %
 
Interest Expense - net (209 ) -1.0 % (234 ) -1.0 % (426 ) -1.0 % (464 ) -1.0 %
Gain (loss) on sale of assets   6     0.0 %   -   0.0 %   7   0.0 %   -   0.0 %
 
Earnings (Loss) from Continuing Operations before
Income Taxes (1,982 ) -9.8 % 1,788 7.7 % (3,957 ) -9.7 % 1,863 4.1 %
Income Tax Expense   7,306     36.0 %   799   3.5 %   6,852   16.8 %   985   2.2 %

Earnings (Loss) from Continuing Operations

(9,288 ) -45.8 % 989 4.3 % (10,809 ) -26.5 % 878 1.9 %
Loss from Discontinued Operations, net of tax   (58 )   -0.3 %   (12 ) -0.1 %   (205 ) -0.5 %   (314 ) -0.7 %
Net Earnings (Loss) $ (9,346 )   -46.1 % $ 977   4.2 % $ (11,014 ) -27.0 % $ 564   1.2 %
Earnings (Loss) Per Share from Continuing Operations:
Basic $ (0.98 ) $ 0.10   $ (1.14 ) $ 0.09  
Diluted $ (0.98 ) $ 0.10   $ (1.14 ) $ 0.09  
Loss Per Share from Discontinued Operations:
Basic $ (0.01 ) $ (0.00 ) $ (0.02 ) $ (0.03 )
Diluted $ (0.01 ) $ (0.00 ) $ (0.02 ) $ (0.03 )
Net Earnings (Loss) Per Share:
Basic $ (0.99 ) $ 0.10   $ (1.17 ) $ 0.06  
Diluted $ (0.99 ) $ 0.10   $ (1.17 ) $ 0.06  
Weighted Average Common Shares Outstanding:
Basic   9,443     9,443     9,443     9,443  
Diluted   9,443     9,497     9,443     9,478  
 
HEALTHCARE FACILITIES VOLUME STATISTICS
 
Admissions 387 660 832 1,292
Equivalent Admissions 1,539 1,787 3,164 3,736
Surgeries 312 410 692 828
Net revenue per equivalent admission $ 7,477 $ 8,136 $ 7,645 $ 7,848
 
SUMMARY BALANCE SHEETS Dec. 31, June 30,
2015 2015
ASSETS
Cash and Cash Equivalents $ 3,742 $ 5,974
Accounts Receivable - net 9,067 9,625
Other Current Assets 6,184 9,493
Property Plant and Equipment, net 22,088 22,333
Long-term Assets   4,627     9,703  
$ 45,708   $ 57,128  
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities $ 17,991 $ 10,764
Long-term Debt and Other Noncurrent Liabilities 5,131 12,804
Shareholders' Equity   22,586     33,560  
$ 45,708   $ 57,128  
 

Contacts

SunLink Health Systems, Inc.
Robert M. Thornton, Jr., 770-933-7004
Chief Executive Officer

Contacts

SunLink Health Systems, Inc.
Robert M. Thornton, Jr., 770-933-7004
Chief Executive Officer