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

SunLink Health Systems, Inc. (NYSE MKT: SSY) today announced net earnings of $3,023,000 or $0.32 per fully diluted share for its first fiscal quarter ended September 30, 2016 compared to a net loss of $1,668,000, or a loss of $0.18 per fully diluted share, for the quarter ended September 30, 2015. The net earnings in the current year's quarter are due to the gain on the previously announced sale of a subsidiary hospital, Chestatee Regional Hospital in Dahlonega, GA. The company had a loss from continuing operations for its first fiscal quarter ended September 30, 2016 of $1,250,000 or a loss of $0.13 per fully diluted share, compared to a loss from continuing operations of $1,133,000 or a loss of $0.12 per fully diluted share, for the quarter ended September 30, 2015.

Consolidated net revenues from continuing operations for the quarters ended September 30, 2016 and 2015 were $13,046,000 and $16,584,000, respectively, a decrease of 21% in the current year's first quarter. Healthcare Facilities Segment net revenues in the quarter ended September 30, 2016 of $5,455,000 decreased $3,340,000 in the current year's quarter primarily as a result of the closure one hospital in June 2016. The Specialty Pharmacy Segment revenues of $7,341,000 in the quarter ended September 30, 2016 decreased $226,000, or 5.2%, over the comparable quarter of the prior year due primarily to lower durable medical equipment revenues.

The company had an operating loss from continuing operations for the quarter ended September 30, 2016 of $953,000, compared to an operating loss from continuing operations for the quarter ended September 30, 2015 of $1,166,000. Despite the lower net revenues this year, the operating loss decreased due to the closure of an unprofitable hospital last fiscal year.

Earnings from discontinued operations were $4,273,000 ($0.45 per fully diluted share) for the quarter ended September 30, 2016 compared to a loss from discontinued operations of $535,000 ($0.06 per fully diluted share) for the quarter ended September 30, 2015, respectively. The earnings from discontinued operations for the current year result from a pre-tax gain of $7,246,000 on the August 2016 sale of a subsidiary's Chestatee Regional Hospital in Dahlonega, GA.

SunLink Health Systems, Inc. is the parent company of subsidiaries that own and operate healthcare facilities in the Southeast and a pharmacy company in Louisiana. Each of the company's healthcare facilities 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 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 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 three months ended September 30, 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.
       
Three Months Ended
September 30,
2016       2015
 
Healthcare Facilties Adjusted EBITDA $ 251,000 $ (317,000 )
Specialty Pharmacy Adjusted EBITDA 62,000 119,000
Corporate overhead costs (822,000 ) (541,000 )
Taxes and interest expense (365,000 ) 32,000
Other non-cash expenses and net change in operating assets and liabilities
  (2,316,000 )   (108,000 )
Net cash used in operations $ (3,190,000 ) $ (815,000 )
 
                         
SUNLINK HEALTH SYSTEMS, INC. ANNOUNCES
FISCAL 2017 FIRST QUARTER RESULTS
Amounts in 000's, except per share and volume amounts
 
CONSOLIDATED STATEMENTS OF EARNINGS

Three Months Ended September 30,

2016
2015
% of Net % of Net
Amount Revenues Amount Revenues
Operating revenues (net of contractual allowances) $ 13,079 100.3 % $ 17,300 104.3 %
Less provision for bad debts of Healthcare Facilities Segment   33     0.3 %   716   4.3 %
Net Revenues 13,046 100.0 % 16,584 100.0 %
Costs and Expenses:
Cost of goods sold 4,636 35.5 % 4,597 27.7 %
Salaries, wages and benefits 5,845 44.8 % 8,317 50.2 %
Provision for bad debts of Specialty Pharmacy Segment 91 0.7 % 222 1.3 %
Supplies 436 3.3 % 916 5.5 %
Purchased services 708 5.4 % 869 5.2 %
Other operating expenses 1,710 13.1 % 2,201 13.3 %
Rents and leases 129 1.0 % 201 1.2 %
Depreciation and amortization   444     3.4 %   427   2.6 %
Operating Loss (953 ) -7.3 % (1,166 ) -7.0 %
 
Interest Expense - net (221 ) -1.7 % (217 ) -1.3 %
Gain on extinguishment of debt 46 0.4 % - 0.0 %
Gain (loss) on sale of assets   22     0.2 %   1   0.0 %
 
Loss from Continuing Operations before Income Taxes (1,106 ) -8.5 % (1,382 ) -8.3 %
Income Tax Expense (Benefit)   144     1.1 %   (249 ) -1.5 %
Loss from Continuing Operations (1,250 ) -9.6 % (1,133 ) -6.8 %
Earnings (Loss) from Discontinued Operations, net of tax   4,273     32.8 %   (535 ) -3.2 %
Net Earnings (Loss) $ 3,023     23.2 % $ (1,668 ) -10.1 %
Loss Per Share from Continuing Operations:
Basic $ (0.13 ) $ (0.12 )
Diluted $ (0.13 ) $ (0.12 )
Earnings (Loss) Per Share from Discontinued Operations:
Basic $ 0.45   $ (0.06 )
Diluted $ 0.45   $ (0.06 )
Net Earnings (Loss) Per Share:
Basic $ 0.32   $ (0.18 )
Diluted $ 0.32   $ (0.18 )
Weighted Average Common Shares Outstanding:
Basic   9,443     9,443  
Diluted   9,443     9,443  
 
HEALTHCARE FACILITIES VOLUME STATISTICS
 
Admissions 124 269
Nursing Home Patient Days 14,433 14,521
 
SUMMARY BALANCE SHEETS Sept. 30, June 30,
2016 2016
ASSETS
Cash and Cash Equivalents $ 12,801 $ 3,261
Accounts Receivable - net 5,906 6,166
Other Current Assets 5,331 8,465
Property Plant and Equipment, net 10,692 12,994
Long-term Assets   5,933     13,219  
$ 40,663   $ 44,105  
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities $ 14,364 $ 20,051
Long-term Debt and Other Noncurrent Liabilities 3,738 4,565
Shareholders' Equity   22,561     19,489  
$ 40,663   $ 44,105  
 

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