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SunLink Health Systems, Inc. Announces Fiscal 2017 Fourth Quarter and Annual Results

ATLANTA--(BUSINESS WIRE)-- SunLink Health Systems, Inc. (NYSE American: SSY) today announced a loss from continuing operations of $2,768,000 or a loss of $0.30 per fully diluted share for its fourth fiscal quarter ended June 30, 2017 compared to a loss of $823,000, or a loss of $0.09 per fully diluted share, for the quarter ended June 30, 2016. Included in the loss for the fourth fiscal quarter ended June 30, 2017 is a $1,427,000 pre-tax impairment charge to write down the goodwill and unamortized intangible assets of SunLink’s Pharmacy Segment. Net loss for the quarter ended June 30, 2017 was a loss of $2,408,000 or a loss of $0.26 per fully diluted share compared to a net loss of $1,234,000 or a loss of $0.13 per fully diluted share for the quarter ended June 30, 2016. Income tax benefit from continuing operations was $276,000 for the quarter ended June 30, 2017 compared to income tax benefit of $2,293,000 for the quarter ended June 30, 2016. The results for the fourth fiscal quarter of 2016 include non-cash income tax benefits of $2,322,000 which correspondingly reduced the valuation allowance of the company’s deferred income tax assets available to offset future taxable income.

Consolidated net revenues from continuing operations for the quarters ended June 30, 2017 and 2016 were $12,288,000 and $14,060,000, respectively, a decrease of 13% in the current fiscal year’s fourth quarter compared to the comparable quarter of the prior fiscal year. Healthcare Services Segment net revenues of $5,328,000 for the quarter ended June 30, 2017 decreased $1,160,000 (18%) in the current fiscal year’s quarter primarily as a result of the closure of one hospital in June 2016. The Pharmacy Segment revenues of $6,960,000 in the quarter ended June 30, 2017 decreased $612,000, (8%), below revenues for the comparable quarter of the prior fiscal year due to lower revenues in all product categories.

SunLink had an operating loss for the quarter ended June 30, 2017 of $2,814,000, compared to an operating loss for the quarter ended June 30, 2016 of $2,908,000.

Earnings from discontinued operations were $360,000 ($0.04 per fully diluted share) for the quarter ended June 30, 2017 compared to a loss from discontinued operations of $411,000 (a loss of $0.04 per fully diluted share) for the quarter ended June 30, 2016. The earnings from discontinued operations for the current fiscal year resulted primarily from positive settlements of prior years’ Medicare cost reports at a previously sold hospital.

For the fiscal year ended June 30, 2017, SunLink reported a loss from continuing operations of $1,959,000 (a loss of $0.21 per fully diluted share) compared to a loss of $11,914,000 (a loss of $1.26 per fully diluted share) for the comparable period of the prior fiscal year. For the fiscal year ended June 30, 2017, SunLink reported net earnings of $2,688,000 ($0.29 per fully diluted share) compared to a net loss of $14,083,000(a loss of $1.49 per fully diluted share) for the fiscal year ended June 30, 2016. The loss from continuing operations for the fiscal year ended June 30, 2016 included a non-cash charge in income tax expense of $7,350,000 to fully reserve the company’s deferred income tax assets. Earnings from discontinued operations were $4,647,000 ($0.50 per fully diluted share) for the fiscal year ended June 30, 2017 compared to a loss from discontinued operations of $2,169,000 (a loss of $0.23 per fully diluted share) for the fiscal year ended June 30, 2016. The earnings from discontinued operations for the current fiscal year resulted from a pre-tax gain of $7,265,000 on the August 2016 sale of a hospital.

Consolidated net revenues from continuing operations for the fiscal year ended June 30, 2017 and 2016 were $53,288,000 and $63,433,000, respectively, a decrease of 16% in the current fiscal year. Healthcare Services Segment net revenues in the fiscal year ended June 30, 2017 of $22,381,000 represented a decrease of $8,836,000 (28%) in the current fiscal year resulting primarily from the closure of one hospital in June 2016. The Pharmacy Segment revenues of $30,907,000 in the fiscal year ended June 30, 2017 represented a decrease of $1,309,000, (4%) over the comparable fiscal year of the prior fiscal year due primarily to lower durable medical equipment and retail pharmacy revenues.

SunLink had an operating loss for the fiscal year ended June 30, 2017 of $4,510,000, compared to an operating loss for the fiscal year ended June 30, 2016 of $6,523,000.

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, 2017 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 fiscal year ended June 30, 2017 and 2016, 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.

Fiscal Years Ended
June 30,
2017 2016
Healthcare Services Adjusted EBITDA $ 195,000 $ (2,554,000 )
Pharmacy Adjusted EBITDA 440,000 912,000
Corporate Overhead Adjusted EBITDA (1,804,000 ) (2,145,000 )
Taxes and interest expense (366,000 ) (5,392,000 )

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

(4,075,000 ) 8,753,000
Net cash used in operations $ (5,610,000 ) $ (426,000 )
SUNLINK HEALTH SYSTEMS, INC. ANNOUNCES
FISCAL 2017 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,

2017 2016 2017 2016
% of Net % of Net % of Net % of Net
Amount Revenues Amount Revenues Amount Revenues Amount Revenues
Operating revenues (net of contractual allowances) $ 12,445 101.3 % $ 14,037 99.8 % $ 53,766 100.9 % $ 64,871 102.3 %
Less provision for bad debts of Healthcare Facilities Segment 157 1.3 % (23 ) -0.2 % 478 0.9 % 1,438 2.3 %
Net Revenues 12,288 100.0 % 14,060 100.0 % 53,288 100.0 % 63,433 100.0 %
Costs and Expenses:
Cost of goods sold 4,325 35.2 % 4,822 34.3 % 19,917 37.4 % 20,404 32.2 %
Salaries, wages and benefits 5,902 48.0 % 6,865 48.8 % 23,378 43.9 % 30,783 48.5 %
Provision for bad debts of Specialty Pharmacy Segment 96 0.8 % 201 1.4 % 438 0.8 % 630 1.0 %
Supplies 471 3.8 % 840 6.0 % 1,844 3.5 % 3,326 5.2 %
Purchased services 654 5.3 % 738 5.2 % 2,767 5.2 % 3,248 5.1 %
Other operating expenses 1,601 13.0 % 1,906 13.6 % 5,616 10.5 % 8,031 12.7 %
Rents and leases 152 1.2 % 209 1.5 % 561 1.1 % 791 1.2 %
Impairments 1,427 11.6 % 858 6.1 % 1,427 2.7 % 858 1.4 %
Depreciation and amortization 538 4.4 % 522 3.7 % 1,914 3.6 % 1,878 3.0 %
Electronic Health Records incentive programs (64 ) -0.5 % 7 0.0 % (64 ) -0.1 % 7 0.0 %
Operating Profit (Loss ) (2,814 ) -22.9 % (2,908 ) -20.7 % (4,510 ) -8.5 % (6,523 ) -10.3 %
Interest Expense - net (128 ) -1.0 % (206 ) -1.5 % (635 ) -1.2 % (843 ) -1.3 %
Loss on extinguishment of debt - net - 0.0 % - 0.0 % (243 ) -0.5 % - 0.0 %
Gain (loss) on sale of assets (102 ) -0.8 % (2 ) 0.0 % 2,917 5.5 % 10 0.0 %
Earnings (Loss) from Continuing Operations before
Income Taxes (3,044 ) -24.8 % (3,116 ) -22.2 % (2,471 ) -4.6 % (7,356 ) -11.6 %
Income Tax Expense (Benefit) (276 ) -2.2 % (2,293 ) -16.3 % (512 ) -1.0 % 4,558 7.2 %
Earnings (Loss) from Continuing Operations (2,768 ) -22.5 % (823 ) -5.9 % (1,959 ) -3.7 % (11,914 ) -18.8 %
Earnings (Loss) from Discontinued Operations, net of tax 360 2.9 % (411 ) -2.9 % 4,647 8.7 % (2,169 ) -3.4 %
Net Earnings (Loss) $ (2,408 ) -19.6 % $ (1,234 ) -8.8 % $ 2,688 5.0 % $ (14,083 ) -22.2 %
Earnings (Loss) Per Share from Continuing Operations:
Basic $ (0.30 ) $ (0.09 ) $ (0.21 ) $ (1.26 )
Diluted $ (0.30 ) $ (0.09 ) $ (0.21 ) $ (1.26 )
Earnings (Loss) Per Share from Discontinued Operations:
Basic $ 0.04 $ (0.04 ) $ 0.50 $ (0.23 )
Diluted $ 0.04 $ (0.04 ) $ 0.50 $ (0.23 )
Net Earnings (Loss) Per Share:
Basic $ (0.26 ) $ (0.13 ) $ 0.29 $ (1.49 )
Diluted $ (0.26 ) $ (0.13 ) $ 0.29 $ (1.49 )
Weighted Average Common Shares Outstanding:
Basic 9,163 9,443 9,346 9,443
Diluted 9,163 9,443 9,346 9,443
HEALTHCARE FACILITIES VOLUME STATISTICS
Admissions 173 149 573 828
Hospital and Nursing Home Patient Days 14,484 15,369 59,756 61,926
SUMMARY BALANCE SHEETS June 30, June 30,
2017 2016
ASSETS
Cash and Cash Equivalents $ 10,494 $ 3,261
Accounts Receivable - net 5,906 6,166
Other Current Assets 6,221 8,465
Property Plant and Equipment, net 10,290 12,994
Long-term Assets 2,425 13,219
$ 35,336 $ 44,105
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities $ 12,314 $ 20,051
Long-term Debt and Other Noncurrent Liabilities 1,329 4,565
Shareholders' Equity 21,693 19,489
$ 35,336 $ 44,105

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SunLink Health Systems, Inc.
Robert M. Thornton, Jr., 770-933-7004
Chief Executive Officer

Source: SunLink Health Systems, Inc.