SunLink Health Systems, Inc. Announces Fiscal 2019 Second Quarter Results

Business Wire 13-Feb-2019 6:05 PM

SunLink Health Systems, Inc. (NYSE:SSY) today announced earnings from continuing operations of $354,000 ($0.05 per fully diluted share) for its second fiscal quarter ended December 31, 2018 compared to earnings of $799,000, ($0.09 per fully diluted share) for the quarter ended December 31, 2017. Net earnings for the quarter ended December 31, 2018 were $305,000 (a $0.04 per fully diluted share) compared to net earnings of $726,000 ($0.08 per fully diluted share) for the quarter ended December 31, 2017. Included in the net earnings for the second quarter ended December 31, 2018 was a $452 gain on the sale of a medical office building and adjacent undeveloped land. Included in the earnings for the second quarter ended December 31, 2017 were:

  • A $944,000 pre-tax gain by the Pharmacy segment from the settlement of an economic damages claims resulting from the Deepwater Horizon Settlement Program,
  • A pre-tax loss of $238,000 on the extinguishment debt resulting from a partial prepayment of debt, and
  • An income tax benefit of $296,000 resulting from the change in usage of Federal Alternative Minimum Tax carryforwards as a result of the Tax Cuts and Jobs Act enacted on December 22, 2017.

Consolidated net revenues from continuing operations for the quarters ended December 31, 2018 and 2017 were $14,223,000 and $13,790,000, respectively, an increase of 3% in the current fiscal year's second quarter compared to the comparable quarter of the prior fiscal year. Healthcare Services Segment net revenues of $6,153,000 for the quarter ended December 31, 2018 increased $431,000 (8%) primarily due to increased hospital and nursing home net revenues. The Pharmacy Segment revenues of $8,070,000 in the quarter ended December 31, 2018 were unchanged from the comparable quarter of the prior fiscal year.

SunLink incurred an operating loss for the quarter ended December 31, 2018 of $37,000, compared to an operating loss for the quarter ended December 31, 2017 of $80,000.

Loss from discontinued operations was $49,000 ($0.01 per fully diluted share) for the quarter ended December 31, 2018 compared to a loss from discontinued operations of $73,000 ($0.01 per fully diluted share) for the quarter ended December 31, 2017. The loss from discontinued operations for the current fiscal quarter resulted primarily from certain retained liabilities from sold facilities.

For the six months ended December 31, 2018, SunLink reported a loss from continuing operations of $463,000 (a loss of $0.06 per fully diluted share) compared to earnings of $575,000 ($0.06 per fully diluted share) for the comparable six month period of the prior year. For the six months ended December 31, 2018, SunLink reported a net loss of $575,000 (a loss of $0.08 per fully diluted share) compared to net earnings of $449,000 ($0.05 per fully diluted share) for the six months ended December 31, 2017. Loss from discontinued operations was $112,000 (a loss of $0.02 per fully diluted share) for the six months ended December 31, 2018 compared to a loss from discontinued operations of $126,000 (a loss of $0.01 per fully diluted share) for the six months ended December 31, 2017. Earnings for the six months ended December 31, 2017 resulted from the items listed above.

SunLink had approximately 17% and 21% fewer fully diluted weighted average common shares outstanding for the three and six months ended December 31, 2018 due to share repurchases in December 2017 and December 2018.

Consolidated net revenues from continuing operations for the six months ended December 31, 2018 and 2017 were $26,275,000 and $27,033,000, respectively, a decrease of 3% in the current six months. Healthcare Services Segment net revenues in the six months ended December 31, 2018 of $11,689,000 represented an increase of $313,000 (3%) resulting from higher nursing home revenues. The Pharmacy Segment revenues of $14,586,000 in the six months ended December 31, 2018 represented a decrease of $1,071,000 (7%) from the comparable six months of the prior year due primarily to the sale of a retail pharmacy operation in January 2017 and higher durable medical equipment revenues during the comparable period last year which were realized from increased Medicare reimbursement under the provisions of the 21st Century Cures Act.

SunLink had an operating loss for the six months ended December 31, 2018 of $795,000, compared to an operating loss for the six months ended December 31, 2017 of $179,000.

SunLink Health Systems, Inc. is the parent company of subsidiaries that own and operate healthcare properties and businesses in the Southeast. Each of the Company's businesses is operated locally with a strategy of linking patients' needs with 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, 2018 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 provided by (used in) operations for the six months ended December 31, 2018 and 2017, respectively, is shown below. Healthcare Services 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.

   
Six Months Ended
December 31,
2018     2017
 
Healthcare Services Adjusted EBITDA $ 500,000 $ 322,000
Pharmacy Adjusted EBITDA 526,000 1,200,000
Corporate Overhead Adjusted EBITDA (972,000 ) (833,000 )
Taxes and interest expense (122,000 ) (188,000 )

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

  212,000     (236,000 )
Net cash provided by operations $ 144,000   $ 265,000  
 
 
SUNLINK HEALTH SYSTEMS, INC. ANNOUNCES
FISCAL 2019 SECOND QUARTER RESULTS

Amounts in 000's, except per share and volume amounts

                               
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
Three Months Ended December 31, Six Months Ended December 31,
2018 2017 2018 2017
% of Net % of Net % of Net % of Net
Amount Revenues Amount Revenues Amount Revenues Amount Revenues
Net Revenues $ 14,223 100.0 % $ 13,790 100.0 % 26,275 100.0 % 27,033 100.0 %
Costs and Expenses:
Cost of goods sold 5,255 36.9 % 5,092 36.9 % 9,172 34.9 % 9,550 35.3 %
Salaries, wages and benefits 5,985 42.1 % 5,888 42.7 % 11,932 45.4 % 11,652 43.1 %
Supplies 459 3.2 % 488 3.5 % 869 3.3 % 913 3.4 %
Purchased services 722 5.1 % 662 4.8 % 1,429 5.4 % 1,349 5.0 %
Other operating expenses 1,239 8.7 % 1,145 8.3 % 2,513 9.6 % 2,587 9.6 %
Rents and leases 169 1.2 % 160 1.2 % 306 1.2 % 314 1.2 %
Depreciation and amortization 431 3.0 % 439 3.2 % 849 3.2 % 868 3.2 %
Electronic Health Records incentive programs   0     0.0 %   (4 ) 0.0 %   0   0.0 %   (21 ) -0.1 %
Operating Loss (37 ) -0.3 % (80 ) -0.6 % (795 ) -3.0 % (179 ) -0.7 %
 
Interest Expense - net (61 ) -0.4 % (119 ) -0.9 % (122 ) -0.5 % (246 ) -0.9 %
Gain on economic damages claim, net 0 0.0 % 944 6.8 % 0 0.0 % 944 3.5 %
Loss on extinguishment of debt, net 0 0.0 % (238 ) -1.7 % 0 0.0 % (238 ) -0.9 %
Gains (Losses) on sale of assets   452     3.2 %   (4 ) 0.0 %   454   1.7 %   (2 ) 0.0 %
 

 

Earnings (Loss) from Continuing Operations before Income Taxes

354 2.5 % 503 3.6 % (463 ) -1.8 % 279 1.0 %
Income Tax benefit   0     0.0 %   (296 ) -2.1 %   0   0.0 %   (296 ) -1.1 %
Earnings (Loss) from Continuing Operations 354 2.5 % 799 5.8 % (463 ) -1.8 % 575 2.1 %
Loss from Discontinued Operations, net of tax   (49 )   -0.3 %   (73 ) -0.5 %   (112 ) -0.4 %   (126 ) -0.5 %
Net Earnings (Loss) $ 305     2.1 % $ 726   5.3 % $ (575 ) -2.2 % $ 449   1.7 %
Earnings (Loss) Per Share from Continuing Operations:
Basic $ 0.05   $ 0.09   $ (0.06 ) $ 0.06  
Diluted $ 0.05   $ 0.09   $ (0.06 ) $ 0.06  
Loss Per Share from Discontinued Operations:
Basic $ (0.01 ) $ (0.01 ) $ (0.02 ) $ (0.01 )
Diluted $ (0.01 ) $ (0.01 ) $ (0.02 ) $ (0.01 )
Net Earnings (Loss) Per Share:
Basic $ 0.04   $ 0.08   $ (0.08 ) $ 0.05  
Diluted $ 0.04   $ 0.08   $ (0.08 ) $ 0.05  
Weighted Average Common Shares Outstanding:
Basic   7,271     8,688     7,309     9,125  
Diluted   7,278     8,758     7,309     9,196  
 
HEALTHCARE FACILITIES VOLUME STATISTICS
 
Hospital and Nursing Home Admissions 160 156 311 322
Hospital and Nursing Home Patient Days 15,679 14,128 30,517 28,873
 
SUMMARY BALANCE SHEETS December 31, June 30,
2018 2018
ASSETS
Cash and Cash Equivalents $ 3,326 $ 3,456
Accounts Receivable - net 5,808 4,823
Other Current Assets 4,060 4,831
Property Plant and Equipment, net 10,003 10,406
Long-term Assets   2,529     2,660  
$ 25,726   $ 26,176  
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities $ 5,678 $ 4,851
Long-term Debt and Other Noncurrent Liabilities 3,815 4,139
Shareholders' Equity   16,233     17,186  
$ 25,726   $ 26,176  
 

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