SunLink Health Systems, Inc. Announces Fiscal 2011 Third Quarter And Nine-Month Results

SunLink Health Systems, Inc. (NYSE Amex Equities: SSY) today announced earnings from continuing operations for its fiscal quarter ended March 31, 2011 of $2,515,000, or $0.31 per fully diluted share, compared to earnings from continuing operations of $469,000, or $0.06 per fully diluted share, for the comparable quarter ended March 31, 2010. For the nine months ended March 31, 2011, SunLink reported a loss from continuing operations of $1,849,000, or a loss of $0.23 per fully diluted share, compared to earnings from continuing operations of $691,000, or $0.09 per fully diluted share, for the nine months ended March 31, 2010. Net revenues for the quarter and nine months ended March 31, 2011 include $4,810,000 from Medicare and certain Medicaid Electronic Health Records Incentive Programs (“EHR Incentive Programs”). The results for the nine months ended March 31, 2010 included a pre-tax gain of $2,342,000 from the sale of three home health businesses.

SunLink reported net earnings of $2,683,000, or $0.33 per fully diluted share, for the quarter ended March 31, 2011, compared to net earnings of $1,646,000, or $0.20 per fully diluted share, for the comparable quarter a year ago. For the nine months ended March 31, 2011, SunLink reported a net loss of $1,851,000, or a loss of $0.23 per fully diluted share, compared to net earnings of $1,618,000, or $0.20 per fully diluted share for the comparable period last year.

Consolidated net revenues from continuing operations for the quarter ended March 31, 2011 increased by 7.4% to $52,028,000 compared to $48,462,000 in the comparable period a year ago. The Healthcare Facilities Segment net revenues of $39,337,000 in the current quarter increased $2,797,000, or 7.7%, from the prior year and included $4,810,000 from Medicare and certain Medicaid EHR Incentive Programs. Additional reimbursement under the EHR Incentive Programs is expected to be received through fiscal 2014 if the annual requirements of the programs are met. Also included in net revenues of the Healthcare Facilities Segment for the quarter ended March 31, 2011 is $1,948,000 from state indigent care programs and positive prior year third-party payor settlements compared to $2,614,000 in the quarter ended March 31, 2010. The Specialty Pharmacy Segment net revenues of $12,691,000 in the quarter ended March 31, 2011 increased $769,000, or 6.5% from the prior year. Consolidated net revenues from continuing operations for the nine months ended March 31, 2011 decreased by 1.1% to $137,947,000 compared to $139,551,000 in the comparable period a year ago. The Healthcare Facilities Segment had net revenues in the nine months ended March 31, 2011 of $104,871,000 compared to $105,369,000 last year. The Specialty Pharmacy Segment had $33,076,000 of net revenue for the nine months ended March 31, 2011 compared to $34,182,000 in the comparable period a year ago.

The company reported operating profit from continuing operations for the quarter ended March 31, 2011 of $5,687,000 compared to an operating profit for the quarter ended March 31, 2010 of $1,720,000. The operating profit in the current year increased $3,967,000, primarily due to increased earnings of the Healthcare Facilities Segment’s which included the reimbursement of $4,810,000 under EHR Incentive Programs.

Operating profit from continuing operations for the nine months ended March 31, 2011 was $3,746,000 compared to $3,973,000 for the comparable period last year. Included in operating profit last year is the pre-tax gain of $2,342,000 on the September 2009 sale of the home health businesses. Included in the earnings from discontinued operations for the quarter and nine months ended March 31, 2011 and 2010 are the results of the company’s former hospital Chilton Medical Center which was leased on March 1, 2011 to a new operator.

Adjusted EBITDA for SunLink’s Healthcare Facilities Segment (a non-GAAP measure of the liquidity of a company) increased to $8,116,000 in the current quarter, primarily due to the EHR Incentive Programs, from $4,333,000 in the comparable quarter a year ago. Adjusted EBITDA for SunLink’s Specialty Pharmacy Segment in the quarter ended March 31, 2011 increased slightly to $254,000. Adjusted EBITDA for the nine-month period ended March 31, 2011 was $12,257,000 compared to $9,971,000. SunLink’s Healthcare Facilities Segment Adjusted EBITDA increased to $11,434,000 compared to $8,741,000, and its Specialty Pharmacy Segment’s Adjusted EBITDA was $823,000 versus $1,230,000.

On April 8, 2011, the company announced that it reached a preliminary agreement and executed a letter of intent with Foundation HealthCare Affiliates, LLC (“Foundation”), New Age Fuel, Inc. (“New Age”), and Foundation Investment Affiliates I, LLC (“FIA”) for the non-cash merger of certain Foundation, New Age and FIA, subsidiaries and affiliates with and into newly formed acquisition subsidiaries of SunLink. Additional information on the announcement can be found on the company’s website at www.sunlinkhealth.com.

SunLink Health Systems, Inc. currently operates six community hospitals, three nursing homes and one home care business in the Southeast and Midwest and its specialty pharmacy business, SunLink ScriptsRx, in Louisiana. Each SunLink hospital is the only hospital in its community. SunLink’s operating strategy is to link patients’ needs with dedicated physicians and health professionals to deliver quality, efficient medical care and healthcare products and services in each area it serves. For additional information on SunLink Health Systems, Inc., please visit the company’s website at www.sunlinkhealth.com.

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, 2010 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 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 (used in) operations for the three and nine months ended March 31, 2011 and 2010, 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 and gains on sale of businesses.
  Three Months Ended     Nine Months Ended
March 31, March 31,
  2011         2010     2011         2010  
 
Healthcare Facilties Adjusted EBITDA $ 8,116,000 $ 4,333,000 $ 11,434,000 $ 8,741,000
Specialty Pharmacy Adjusted EBITDA 254,000 234,000 823,000 1,230,000
Corporate overhead costs (1,116,000 ) (1,145,000 ) (3,804,000 ) (3,281,000 )
Taxes and interest expense (2,757,000 ) (1,590,000 ) (5,158,000 ) (3,492,000 )
Other non-cash expenses and net change in
operating assets and liabilities   (4,999,000 )   (289,000 )   (5,157,000 )   (1,616,000 )
Net cash provided by (used in) operations $ (502,000 ) $ 1,543,000   $ (1,862,000 ) $ 1,582,000  
 
 
SUNLINK HEALTH SYSTEMS, INC. ANNOUNCES
FISCAL 2011 THIRD QUARTER AND NINE-MONTH
RESULTS
Amounts in 000's, except per share and volume amounts
                     
CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Ended March 31, Nine Months Ended March 31,
2011   2010   2011   2010  
% of Net % of Net % of Net % of Net
Amount Revenues Amount Revenues Amount Revenues Amount Revenues
Net Revenues $ 52,028 100.0 % $ 48,462 100.0 % $ 137,947 100.0 % $ 139,551 100.0 %
Costs and Expenses:
Cost of goods sold 9,288 17.9 % 8,446 17.4 % 23,539 17.1 % 24,044 17.2 %
Salaries, wages and benefits 18,321 35.2 % 18,690 38.6 % 54,227 39.3 % 55,390 39.7 %
Provision for bad debts 4,636 8.9 % 5,856 12.1 % 14,175 10.3 % 16,529 11.8 %
Supplies 3,235 6.2 % 3,625 7.5 % 9,884 7.2 % 10,810 7.7 %
Purchased services 2,896 5.6 % 2,702 5.6 % 8,585 6.2 % 8,357 6.0 %
Other operating expenses 5,611 10.8 % 4,977 10.3 % 16,754 12.1 % 15,546 11.1 %
Rents and leases 787 1.5 % 744 1.5 % 2,330 1.7 % 2,185 1.6 %
Depreciation and amortization 1,567 3.0 % 1,702 3.5 % 4,707 3.4 % 5,059 3.6 %
Gain on sales of Home Health businesses   -     0.0 %   -   0.0 %   -   0.0 %   (2,342 ) -1.7 %
Operating Profit (Loss) 5,687 10.9 % 1,720 3.5 % 3,746 2.7 % 3,973 2.8 %
 
Interest Expense (1,607 ) -3.1 % (832 ) -1.7 % (5,684 ) -4.1 % (2,610 ) -1.9 %
Interest Income   2     0.0 %   3   0.0 %   4   0.0 %   12   0.0 %
 
Earnings (Loss) from Continuing Operations
before Income Taxes 4,082 7.8 % 891 1.8 % (1,934 ) -1.4 % 1,375 1.0 %
Income Tax Expense (Benefit)   1,567     3.0 %   422   0.9 %   (85 ) -0.1 %   684   0.5 %
Earnings (Loss) from Continuing Operations 2,515 4.8 % 469 0.9 % (1,849 ) -1.3 % 691 0.5 %
Earnings (Loss) from Discontinued Operations,
net of income taxes   168     0.3 %   1,177   2.4 %   (2 ) 0.0 %   927   0.7 %
Net Loss $ 2,683     5.2 % $ 1,646   3.2 % $ (1,851 ) -1.3 % $ 1,618   1.2 %
Earnings (Loss) Per Share from
Continuing Operations:
Basic $ 0.31   $ 0.06   $ (0.23 ) $ 0.09  
Diluted $ 0.31   $ 0.06   $ (0.23 ) $ 0.09  
Discontinued Operations:
Basic $ 0.02   $ 0.15   $ (0.00 ) $ 0.12  
Diluted $ 0.02   $ 0.15   $ (0.00 ) $ 0.11  
Net Loss Per Share:
Basic $ 0.33   $ 0.20   $ (0.23 ) $ 0.20  
Diluted $ 0.33   $ 0.20   $ (0.23 ) $ 0.20  
Weighted Average Common Shares Outstanding:
Basic   8,095     8,057     8,095     8,052  
Diluted   8,097     8,069     8,095     8,068  
 
HEALTHCARE FACILITIES VOLUME STATISTICS
 
Admissions 1,702 1,815 4,695 5,183
Equivalent Admissions 4,718 4,887 14,103 15,082
Surgeries 552 836 1,977 2,515
Net revenue per equivalent admission $ 8,216 $ 7,477 $ 7,395 $ 6,986
 
 
SUMMARY BALANCE SHEETS March June 30,
  2011     2010  
ASSETS
Cash and Cash Equivalents $ 755 $ 1,704
Accounts Receivable - net 17,780 16,036
Other Current Assets 21,570 16,894
Property Plant and Equipment, net 39,386 41,356
Long-term Assets   20,633     22,500  
$ 100,124   $ 98,490  
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities $ 51,069 $ 19,106
Long-term Debt and Other Noncurrent Liabilities 8,757 36,692
Shareholders' Equity   40,298     42,692  
$ 100,124   $ 98,490  

Copyright Business Wire 2010

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