SunLink Health Systems, Inc. Announces Fiscal 2017 Second Quarter Results

ATLANTA--()--SunLink Health Systems, Inc. (NYSE MKT: SSY) today announced earnings from continuing operations of $2,949,000 or $0.31 per fully diluted share for its second fiscal quarter ended December 31, 2016 compared to a net loss of $8,566,000, or a loss of $0.91 per fully diluted share, for the quarter ended December 31, 2015. The earnings from continuing operations in the current fiscal year’s quarter are primarily due to the $2,819,000 gain on the previously announced sale of a medical office building complex in December 2016. The loss from continuing operations for the fiscal quarter ended December 31, 2015 included a non-cash charge of $7,101,000 to fully reserve the company’s deferred income tax assets. Net earnings for the quarter ended December 31, 2016 were $3,098,000 or $0.33 per fully diluted share compared to a net loss of $9,346,000 or a loss of $0.99 per fully diluted share, for the quarter ended December 31, 2015.

Consolidated net revenues from continuing operations for the quarters ended December 31, 2016 and 2015 were $14,255,000 and $16,584,000, respectively, a decrease of 14% in the current fiscal year’s second quarter compared to the comparable quarter of the prior fiscal year. Healthcare Facilities Segment net revenues in the quarter ended December 31, 2016 of $5,606,000 decreased $2,203,000 in the current fiscal year’s quarter primarily as a result of the closure of one hospital in June 2016. The Specialty Pharmacy Segment revenues of $8,407,000 in the quarter ended December 31, 2016 decreased $161,000, or 1.9%, over the comparable quarter of the prior fiscal year due primarily to lower durable medical equipment and retail pharmacy revenues, partially offset by increased institutional pharmacy revenues.

The company had an operating profit from continuing operations for the quarter ended December 31, 2016 of $28,000, compared to an operating loss from continuing operations for the quarter ended December 31, 2015 of $1,262,000. The operating profit in the quarter ended December 31, 2016 was due primarily to the closure of an unprofitable hospital in the prior fiscal year and $347,000 of favorable prior year Medicare cost report adjustments in the current quarter.

Earnings from discontinued operations were $149,000 ($0.02 per fully diluted share) for the quarter ended December 31, 2016 compared to a loss from discontinued operations of $780,000 (a loss of $0.08 per fully diluted share) for the quarter ended December 31, 2015, respectively. The earnings from discontinued operations for the current year result from positive settlements of prior year’s Medicare cost report settlements at a previously sold hospital.

For the six months ended December 31, 2016, SunLink reported earnings from continuing operations of $1,699,000 or $0.18 per fully diluted share, compared to a loss of $9,699,000 or a loss of $1.03 per fully diluted share, for the comparable period of the prior fiscal year. For the six months ended December 31, 2016, SunLink reported net earnings of $6,121,000, or $0.65 per fully diluted share compared to a net loss of $11,014,000, or a loss of $1.17 per fully diluted share for the six months ended December 31, 2015. Earnings from discontinued operations were $4,422,000 ($0.47 per fully diluted share) for the six months ended December 31, 2016 compared to a loss from discontinued operations of $1,315,000 (a loss of $0.14 per fully diluted share) for the six months ended December 31, 2015. The earnings from discontinued operations for the first six months of the current fiscal year result from a pre-tax gain of $7,270,000 on the August 2016 sale of a subsidiary’s Chestatee Regional Hospital in Dahlonega, GA.

Consolidated net revenues from continuing operations for the six months ended December 31, 2016 and 2015 were $27,301,000 and $33,168,000, respectively, a decrease of 18% in the current fiscal year’s second quarter. Healthcare Facilities Segment net revenues in the six months ended December 31, 2016 of $11,060,000 decreased $5,544,000 in the current fiscal year’s quarter primarily from the closure of one hospital in June 2016. The Specialty Pharmacy Segment revenues of $15,748,000 in the six months ended December 31, 2016 decreased $387,000, or 2.4%, over the comparable quarter of the prior fiscal year due primarily to lower durable medical equipment and retail pharmacy revenues.

The company had an operating loss from continuing operations for the six months ended December 31, 2016 of $925,000, compared to an operating loss from continuing operations for the six months ended December 31, 2015 of $2,428,000.

SunLink Health Systems, Inc. is the parent company of subsidiaries that own and operate healthcare businesses in the Southeast. Each of the Company’s healthcare businesses is operated locally with a strategy of linking patients’ needs with dedicated physicians and healthcare professionals. For additional information on SunLink Health Systems, Inc., please visit the Company’s website.

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, without limitation, statements regarding the company’s business strategy. These forward-looking statements are subject to certain risks, uncertainties and other factors, which could cause actual results, performance and achievements to differ materially from those anticipated. Certain of those risks, uncertainties and other factors are disclosed in more detail in the company’s Annual Report on Form 10-K for the year ended June 30, 2016 and other filings with the Securities and Exchange Commission which can be located at www.sec.gov.

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 to satisfy 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 used in operations for the six months ended December 31, 2016 and 2015, respectively, is shown below. Healthcare Facilities Adjusted EBITDA and Specialty Pharmacy Adjusted EBITDA is the EBITDA for those facilities without any allocation of corporate overhead, impairment charges and gains on sale of businesses.

     
Six Months Ended
December 31,
2016     2015
 
Healthcare Facilties Adjusted EBITDA $ 902,000 $ (1,137,000 )
Specialty Pharmacy Adjusted EBITDA 334,000 636,000
Corporate overhead costs (1,251,000 ) (1,048,000 )
Taxes and interest expense (150,000 ) (7,278,000 )

Other non-cash expenses and net change in operating assets and liabilities

  (3,749,000 )   7,906,000  
Net cash used in operations $ (3,914,000 ) $ (921,000 )
 
 
 
 
 
 
SUNLINK HEALTH SYSTEMS, INC. ANNOUNCES
FISCAL 2017 SECOND QUARTER RESULTS
Amounts in 000's, except per share and volume amounts
 
CONSOLIDATED STATEMENTS OF EARNINGS
    Three Months Ended December 31,   Six Months Ended December 31,
  2016   2015   2016   2015
  % of Net   % of Net   % of Net   % of Net
Amount Revenues Amount Revenues Amount Revenues Amount Revenues
Operating revenues (net of contractual allowances) $ 14,359 100.7 % $ 17,116 103.2 % $ 27,438 100.5 % $ 34,416 103.8 %
Less provision for bad debts of Healthcare Facilities Segment   104     0.7 %   532   3.2 %   137   0.5 %   1,248   3.8 %
Net Revenues 14,255 100.0 % 16,584 100.0 % 27,301 100.0 % 33,168 100.0 %
Costs and Expenses:
Cost of goods sold 5,433 38.1 % 5,371 32.4 % 10,069 36.9 % 9,968 30.1 %
Salaries, wages and benefits 5,759 40.4 % 7,926 47.8 % 11,604 42.5 % 16,243 49.0 %
Provision for bad debts of Specialty Pharmacy Segment 125 0.9 % 138 0.8 % 216 0.8 % 360 1.1 %
Supplies 482 3.4 % 923 5.6 % 918 3.4 % 1,839 5.5 %
Purchased services 713 5.0 % 880 5.3 % 1,421 5.2 % 1,749 5.3 %
Other operating expenses 1,111 7.8 % 1,959 11.8 % 2,821 10.3 % 4,160 12.5 %
Rents and leases 138 1.0 % 190 1.1 % 267 1.0 % 391 1.2 %
Electronic Health Records incentive payments - 0.0 % 7 0.0 % - 0.0 % 7 0.0 %
Depreciation and amortization   466     3.3 %   452   2.7 %   910   3.3 %   879   2.7 %
Operating Profit (Loss) 28 0.2 % (1,262 ) -7.6 % (925 ) -3.4 % (2,428 ) -7.3 %
 
Interest Expense - net (157 ) -1.1 % (209 ) -1.3 % (378 ) -1.4 % (426 ) -1.3 %
Loss on extinguishment of debt (289 ) -2.0 % - 0.0 % (243 ) -0.9 %
Gain on sale of assets   2,995     21.0 %   6   0.0 %   3,017   11.1 %   7   0.0 %
 

Earnings (Loss) from Continuing Operations before Income Taxes

2,577 18.1 % (1,465 ) -8.8 % 1,471 5.4 % (2,847 ) -8.6 %
Income Tax Expense (Benefit)   (372 )   -2.6 %   7,101   42.8 %   (228 ) -0.8 %   6,852   20.7 %
Earnings (Loss) from Continuing Operations 2,949 20.7 % (8,566 ) -51.7 % 1,699 6.2 % (9,699 ) -29.2 %
Earnings (Loss) from Discontinued Operations, net of tax   149     1.0 %   (780 ) -4.7 %   4,422   16.2 %   (1,315 ) -4.0 %
Net Earnings (Loss) $ 3,098     21.7 % $ (9,346 ) -56.4 % $ 6,121   22.4 % $ (11,014 ) -33.2 %
Eanings (Loss) Per Share from Continuing Operations:
Basic $ 0.31   $ (0.91 ) $ 0.18   $ (1.03 )
Diluted $ 0.31   $ (0.91 ) $ 0.18   $ (1.03 )
Earnings (Loss) Per Share from Discontinued Operations:
Basic $ 0.02   $ (0.08 ) $ 0.47   $ (0.14 )
Diluted $ 0.02   $ (0.08 ) $ 0.47   $ (0.14 )
Net Earnings (Loss) Per Share:
Basic $ 0.33   $ (0.99 ) $ 0.65   $ (1.17 )
Diluted $ 0.33   $ (0.99 ) $ 0.65   $ (1.17 )
Weighted Average Common Shares Outstanding:
Basic   9,443     9,443     9,443     9,443  
Diluted   9,450     9,443     9,449     9,443  
 
HEALTHCARE FACILITIES VOLUME STATISTICS
 
Admissions 185 276 374 609
Nursing Home Patient Days 14,128 14,491 28,561 29,012
 
 
SUMMARY BALANCE SHEETS Dec. 31, June 30,
2016 2016
ASSETS
Cash and Cash Equivalents $ 14,379 $ 3,261
Accounts Receivable - net 6,647 6,166
Other Current Assets 4,834 8,465
Property Plant and Equipment, net 10,832 12,994
Long-term Assets   3,951     13,219  
$ 40,643   $ 44,105  
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities $ 7,173 $ 20,051
Long-term Debt and Other Noncurrent Liabilities 7,806 4,565
Shareholders' Equity   25,664     19,489  
$ 40,643   $ 44,105  

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