SunLink Health Systems, Inc. Announces Fiscal 2011 Fourth Quarter And Full-Year Results

SunLink Health Systems, Inc. (NYSE Amex Equities: SSY) today announced a loss from continuing operations for its fourth fiscal quarter ended June 30, 2011 of $388,000 excluding pre-tax impairment charges of $13,347,000 to write down goodwill and certain intangible assets acquired in the April 2008 acquisition of Carmichael’s Cashway Pharmacy.

For the fourth fiscal quarter ended June 30, 2011, SunLink reported a loss from continuing operations of $8,703,000 or a loss of $1.07 per fully diluted share (after impairment charges), compared to a loss from continuing operations of $1,549,000, or a loss of $0.19 per fully diluted share (after impairment charges), for the quarter ended June 30, 2010.

SunLink reported a net loss of $8,864,000, or a loss of $1.09 per fully diluted share (after impairment charges), for the quarter ended June 30, 2011, compared to a net loss of $1,516,000, or $0.19 per fully diluted share (after impairment charges), for the comparable quarter a year ago. Excluding impairment charges for goodwill and certain intangible assets of Carmichael’s Cashway Pharmacy, the net loss for the quarter ended June 30, 2011 would have been $549,000, and excluding impairment charges, the net loss for the quarter ended June 30, 2010 would have been $767,000.

Consolidated net revenues from continuing operations for the quarters ended June 30, 2011 and 2010 were $43,214,000 and $43,615,000, respectively, a decrease of 0.9% in the current year’s quarter. The Healthcare Facilities Segment net revenues in the current quarter of $36,369,000 increased $1,532,000, or 4.4%, compared to $34,837,000 from the prior year. The Specialty Pharmacy Segment revenues of $6,845,000 in the quarter ended June 30, 2011 decreased 22.0% from the prior year.

The company had an operating loss from continuing operations, which included charges of $13,347,000 for impairment of goodwill and certain intangible assets of Carmichael’s Cashway Pharmacy, for the quarter ended June 30, 2011 of $12,477,000, compared to an operating loss for continuing operations for the quarter ended June 30, 2010 of $2,119,000, which included $1,202,000 impairment of construction in progress. Excluding the impairment charges for both periods, the operating margin increased by $1,787,000 due to the $4,116,000 in net revenues from the Medicare and certain Medicaid EHR Incentive Programs in the current year. Adjusted EBITDA (a non-GAAP measure of the liquidity of the company) at SunLink’s Healthcare Facilities Segment in the fourth fiscal quarter increased to $4,073,000 from $2,174,000 in the comparable quarter a year ago. Adjusted EBITDA for SunLink’s Specialty Pharmacy Segment was a loss of $377,000 in the fourth fiscal quarter compared to Adjusted EBITDA loss of $12,000 in the comparable quarter a year ago.

Commenting on the results, Robert M. Thornton, Jr., chairman and CEO, stated, “Our Healthcare Facilities segment had improvement in net revenues and adjusted EBITDA for fourth quarter and full-year, which is attributed to the revenues from Medicare and Medicaid Electronic Records incentive reimbursement programs. We believe that our fourth quarter and full-year Healthcare Facilities admissions, equivalent admissions and surgeries declined on a year-over-year basis due to continued challenging macro-economic effects, increasing healthcare costs and a reduction in elective outpatient procedures. Our Specialty Pharmacy business continued to be impacted by economic conditions, our systems upgrades and selective paring of services, which resulted in a modest decline in its net revenue contribution and adjusted EBITDA. We remain vigilant on cost efficiencies and ways in which we can better attract new patients and supporting physician services.”

Fiscal 2011 Full-Year Results

For the fiscal year ended June 30, 2011, SunLink reported a loss from continuing operations of $10,552,000, or a loss of $1.30 per fully diluted share (after impairment charges), compared to a loss of $858,000, or a loss of $0.11 per fully diluted share (after impairment charges), for the comparable period last year. Excluding impairment charges for goodwill and certain intangible assets of Carmichael’s Cashway Pharmacy, the loss from continuing operations for the fiscal year ended June 30, 2011 would have been $2,237,000, and excluding impairment charges for construction in progress of $1,202,000, the loss from continuing operations would have been $109,000 for the fiscal year ended June 30, 2010.

For the fiscal year ended June 30, 2011, SunLink reported a net loss of $10,715,000, or $1.32 per fully diluted share compared to net earnings of $102,000, or $0.01 per share, for the fiscal year ended June 30, 2010. Excluding impairment charges for goodwill and certain intangible assets of Carmichael’s Cashway Pharmacy, the net loss for the fiscal year ended June 30, 2011 would have been $2,400,000 and excluding impairment charges, net earnings for the fiscal year ended June 30, 2010 would have been $851,000.

Consolidated net revenues from continuing operations for the fiscal year ended June 30, 2011 decreased by 1.1% to $181,161,000 compared to $183,166,000 in the comparable period a year ago. The Healthcare Facilities Segment had net revenues in the fiscal year ended June 30, 2011 of $141,241,000 compared to $140,204,000 for the comparable period a year ago. The Specialty Pharmacy Segment had $39,920,000 of net revenue for the year ended June 30, 2010 compared to $42,962,000 last year.

Operating profit from continuing operations for the fiscal year ended June 30, 2011, which included charges of $13,347,000 for impairment of goodwill and certain intangible assets of Carmichael’s Cashway Pharmacy, was a loss of $8,731,000 compared to operating profit of $1,854,000 for the fiscal year ended June 30, 2010. Adjusted EBITDA for SunLink’s Healthcare Facilities Segment increased to $15,507,000 in the fiscal year ended June 30, 2011, from $10,915,000 last fiscal year. Adjusted EBITDA for the year ended June 30, 2011 for the Specialty Pharmacy Segment was $446,000 compared to $1,218,000 last fiscal year.

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.

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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 twelve months ended June 30, 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, impairment charges and gains on sale of businesses.
    Three Months Ended     Twelve Months Ended
June 30, June 30,
2011     2010 2011     2010
 
Healthcare Facilties Adjusted EBITDA $ 4,073,000 $ 2,174,000 $ 15,507,000 $ 10,915,000
Specialty Pharmacy Adjusted EBITDA (377,000 ) (12,000 ) 446,000 1,218,000
Corporate overhead costs (1,302,000 ) (1,335,000 ) (5,106,000 ) (4,616,000 )
Taxes and interest expense 3,192,000 677,000 (1,966,000 ) (2,815,000 )
Other non-cash expenses and net change in
operating assets and liabilities   1,239,000     842,000     (4,102,000 )   (774,000 )
Net cash provided by operations $ 6,825,000   $ 2,346,000   $ 4,779,000   $ 3,928,000  
 

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SUNLINK HEALTH SYSTEMS, INC. ANNOUNCES
FISCAL 2011 FOURTH QUARTER AND ANNUAL
RESULTS
Amounts in 000's, except per share and volume amounts
                                       
CONSOLIDATED STATEMENTS OF EARNINGS
 
Three Months Ended June 30, Twelve Months Ended June 30,
2011 2010 2011 2010
% of Net % of Net % of Net % of Net
Amount Revenues Amount Revenues Amount Revenues Amount Revenues
Net Revenues $ 43,214 100.0 % $ 43,615 100.0 % $ 181,161 100.0 % $ 183,166 100.0 %
Costs and Expenses:
Cost of goods sold 4,296 9.9 % 5,495 12.6 % 27,835 15.4 % 29,539 16.1 %
Salaries, wages and benefits 18,484 42.8 % 18,132 41.6 % 72,711 40.1 % 73,522 40.1 %
Provision for bad debts 5,515 12.8 % 6,063 13.9 % 19,690 10.9 % 22,592 12.3 %
Supplies 3,156 7.3 % 3,414 7.8 % 13,040 7.2 % 14,224 7.8 %
Purchased services 2,841 6.6 % 3,061 7.0 % 11,426 6.3 % 11,418 6.2 %
Other operating expenses 5,686 13.2 % 5,858 13.4 % 22,440 12.4 % 21,404 11.7 %
Rents and leases 842 1.9 % 765 1.8 % 3,172 1.8 % 2,950 1.6 %
Impairments of goodwill and intangible assets 13,347 30.9 % - 0.0 % 13,347 7.4 % - 0.0 %
Impairment of construction in progress - 0.0 % 1,202 2.8 % - 0.0 % 1,202 0.7 %
Depreciation and amortization 1,524 3.5 % 1,744 4.0 % 6,231 3.4 % 6,803 3.7 %
Gain on sales of Home Health businesses   -     0.0 %   -   0.0 %   -   0.0 %   (2,342 ) -1.3 %
Operating Profit (Loss) (12,477 ) -28.9 % (2,119 ) -4.9 % (8,731 ) -4.8 % 1,854 1.0 %
 
Interest Expense (1,749 ) -4.0 % (861 ) -2.0 % (7,433 ) -4.1 % (3,471 ) -1.9 %
Interest Income   1     0.0 %   2   0.0 %   5   0.0 %   14   0.0 %
 
Loss from Continuing Operations before
Income Taxes (14,225 ) -32.9 % (2,978 ) -6.8 % (16,159 ) -8.9 % (1,603 ) -0.9 %
Income Tax Expense   (5,522 )   -12.8 %   (1,429 ) -3.3 %   (5,607 ) -3.1 %   (745 ) -0.4 %
Loss from Continuing Operations (8,703 ) -20.1 % (1,549 ) -3.6 % (10,552 ) -5.8 % (858 ) -0.5 %
Earnings (Loss) from Discontinued Operations,
net of income taxes   (161 )   -0.4 %   33   0.1 %   (163 ) -0.1 %   960   0.5 %
Net Earnings (Loss) $ (8,864 )   -20.5 % $ (1,516 ) -3.5 % $ (10,715 ) -5.9 % $ 102   0.1 %
Loss Per Share from Continuing Operations:
Basic $ (1.07 ) $ (0.19 ) $ (1.30 ) $ (0.11 )
Diluted $ (1.07 ) $ (0.19 ) $ (1.30 ) $ (0.11 )
Earnings (Loss) Per Share from Discontinued Operations:
Basic $ (0.02 ) $ 0.00   $ (0.02 ) $ 0.12  
Diluted $ (0.02 ) $ 0.00   $ (0.02 ) $ 0.12  
Net Earnings (Loss) Per Share:
Basic $ (1.09 ) $ (0.19 ) $ (1.32 ) $ 0.01  
Diluted $ (1.09 ) $ (0.19 ) $ (1.32 ) $ 0.01  
Weighted Average Common Shares Outstanding:
Basic   8,119     8,058     8,094     8,052  
Diluted   8,119     8,058     8,094     8,052  
 
HEALTHCARE FACILITIES VOLUME STATISTICS
 
Admissions 1,502 1,635 6,197 6,818
Equivalent Admissions 4,599 4,980 18,702 20,062
Surgeries 634 786 2,635 3,301
Net revenue per equivalent admission $ 7,811 $ 6,996 $ 7,552 $ 6,989
 
SUMMARY BALANCE SHEETS

June 30,

June 30,

2011
2010
ASSETS
Cash and Cash Equivalents $ 7,250 $ 1,704
Accounts Receivable - net 16,302 16,036
Other Current Assets 17,519 16,894
Property Plant and Equipment, net 38,519 41,356
Long-term Assets   9,946     22,500  
$ 89,536   $ 98,490  
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities $ 23,650 $ 19,106
Long-term Debt and Other Noncurrent Liabilities 34,430 36,692
Shareholders' Equity   31,456     42,692  
$ 89,536   $ 98,490  

Copyright Business Wire 2010

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