SunLink Health Systems, Inc. (NYSE American: SSY) today
announced a loss from continuing operations of $2,317,000 (or a
loss of $0.33 per fully diluted share) for its fourth fiscal
quarter ended June 30, 2022 compared to earnings from continuing
operations of $4,555,000 (or $0.64 per fully diluted share) for the
fourth fiscal quarter ended June 30, 2021. Net loss for the quarter
ended June 30, 2022 was $2,365,000 (or a loss of $0.34 per fully
diluted share) compared to net earnings of $4,687,000 (or $0.66 per
fully diluted share) for the quarter ended June 30, 2021.
The fiscal quarter ended June 30, 2021 included recognition
(through other income or reduction of expense) of $5,271,000 of
U.S. government COVID-19 related programs which did not reoccur in
the fiscal quarter ended June 30, 2022. The fiscal quarter ended
June 30, 2021 included the Employee Retention Credit ("ERC”)
$3,586,000 (pre-tax) (included as a reduction of salaries, wages
and benefits in the consolidated statement of earnings), Provider
Relief Funds (“PRF”) of $1,421,000 (pre-tax) and forgiveness of
Paycheck Protection Plan (“PPP”) loans of $264,000 (pre-tax). PRF
distributions and PPP loans forgiveness have been recognized as
other income.
Consolidated net revenues for the quarters ended June 30, 2022
and 2021 were $9,881,000 and $10,335,000, respectively, a decrease
of 4.4% in the current year’s quarter compared to the comparable
quarter of the prior fiscal year. Net revenues decreased in the
current fiscal quarter primarily due to a decrease in Healthcare
Services Segment net revenues partially offset by increased
Pharmacy Segment institutional pharmacy net revenues.
SunLink reported an operating loss for the quarter ended June
30, 2022 of $2,211,000 compared to an operating profit for the
quarter ended June 30, 2021 of $2,988,000. The substantial negative
change in operating loss from last year’s comparable quarter was
due primarily to the non-recurrence of the ERC of $3,586 recorded
in last year’s comparable quarter and the higher costs of goods
sold, salaries, wages and benefits, and purchased services incurred
this year. The Company is experiencing substantial increases in its
salaries and in wage rates, as well as difficulty hiring new and
replacement staff. As a result, the Company, particularly in the
Healthcare Services Segment, has incurred higher costs for
temporary staff, agency staffing and overtime.
Loss from discontinued operations was $48,000 (or a loss of
$0.01 per fully diluted share) for the quarter ended June 30, 2022
compared to earnings from discontinued operations of $132,000 (or
$0.02 per fully diluted share) for the quarter ended June 30, 2021.
Included in the results for the quarter ended June 30, 2021 was a
positive Medicare cost report settlement for a business previously
sold.
For the twelve months ended June 30, 2022, SunLink reported a
loss from continuing operations of $1,722,000 (or a loss of $0.25
per fully diluted share) compared to earnings from continuing
operations of $6,937,000 ($0.99 per fully diluted share) for the
twelve months ended June 30,2021. Net loss for the twelve months
ended June 30, 2022 was $2,009,000 (or a loss of $0.29 per fully
diluted share) compared to net earnings of $6,890,000 ($0.99 per
fully diluted share) for the twelve months ended June 30, 2021.
Forgiveness of PPP loans of $3,010,000 (pre-tax) and PRF income of
$720,000 (pre-tax) were included in the results for the twelve
months ended June 30, 2022. Forgiveness of PPP loans of $264,000
(pre-tax), PRF income of $4,880,000 (pre-tax) and ERC recognized of
$3,586,000 (pre-tax), respectively, were included in the results
for the twelve months ended June 30, 2021.
Consolidated net revenues for the twelve months ended June 30,
2022 and 2021 were $41,344,000 and $40,685,000, respectively, an
increase of 1.6% in the current year’s twelve months compared to
the comparable period of the prior fiscal year. The increased net
revenues in the current twelve-month period occurred primarily in
the Pharmacy Segment’s institutional pharmacy business and
increased hospital net revenues in the Healthcare Services
Segment.
Capital expenditures for the twelve months ended June 30, 2022
were $3,190,000. The majority of the expenditures were under its
previously announced Trace Forward Capital Plan which expands,
upgrades and improves the physical plant, patient care, and
ancillary services at our Trace hospital and for capitalizable
durable medical equipment purchased by the Pharmacy Segment, which
is rented to customers. Remaining commitments under the Trace
Forward Capital Plan approximate $350,000 at June 30, 3022.
Loss from discontinued operations was $287,000 (or a loss of
$0.04 per fully diluted share) for the twelve months ended June 30,
2022 compared to a loss from discontinued operations of $47,000 (or
a loss of $0.01 per fully diluted share) for the twelve months
ended June 30, 2021.
COVID-19 Pandemic
COVID-19 was declared a global pandemic by the World Health
Organization on March 11, 2020. We have continued to monitor the
impact in our operations of the COVID-19 pandemic and its
aftermath, and we have taken significant steps intended to minimize
the risk to our employees and patients. Certain employees have been
working remotely, but we believe these remote work arrangements
have not materially affected our ability to maintain critical
business operations, which are being conducted substantially in
accordance with our understanding of applicable government health
and safety protocols and guidance issued in response to the
COVID-19 pandemic, although such protocols and guidance have been
subject to frequent changes and at times have been unclear.
Nevertheless, as in many healthcare environments, we have
experienced disruptions of our operations, COVID-19 illness,
including deaths, and some employees have tested positive and were
placed on leave or in quarantine. We believe the effect of the
COVID-19 pandemic and certain public and governmental responses to
it have negatively affected our last ten quarter’s results.
In late December 2020, we began receiving allotments of COVID-19
vaccine and have vaccinated patients, providers, employees, and
staff in accordance with the protocols and guidelines in the states
where we operate. Not all such individuals have been vaccinated to
date and some individuals have not consented to vaccination. The
Company and its subsidiaries are currently developing and
implementing plans to vaccinate (including boosters) employees to
the extent required by the final rules issued by CMS. The Company
believes the vaccine mandates resulted in the loss of staff,
including clinical staff, and together with the current state of
the labor market, have negatively affected the Company’s ability to
maintain the current levels of service.
In our Healthcare Services businesses, we have experienced
material reductions in demand and net patient revenues due to the
COVID-19. There continues to be reduced and volatile demand for
certain hospital services, and for extended care, rehabilitation
center and nursing home admissions, and clinic visits.
During the COVID-19 pandemic, our Pharmacy business has
experienced reduced sales trends in certain areas, increased costs
and reduced staff. Many of our primary physician referral sources
have been operating at reduced capacity, and until these referral
sources resume operating at full capacity, we believe the COVID-19
pandemic will have continuing effects on the demand for DME
products and Retail and Institutional Pharmacy drugs and products.
Reductions in employee hours have been made in response to the
lower demand. Extended care facilities and rehabilitation centers,
nursing homes and other customers of our Institutional Pharmacy
services continue to be adversely affected by the COVID-19
pandemic. Our Institutional Pharmacy services have experienced
increased costs and operational inefficiencies due to measures
taken to protect our employees and by access controls and other
restrictions implemented by our institutional customers. The impact
of the COVID-19 pandemic and its aftermath also continues to
negatively affect our supply processes and costs generally,
especially with respect to access to respiratory equipment and
certain personal protective equipment and cleaning products.
Our Healthcare and Pharmacy segments have received general and
targeted Provider Relief Funds ("PRF") during the period April 1,
2020 through June 30, 2022 under the CARES Act, which was enacted
in March 2020 in response to the COVID-19 pandemic. The PRF
distributions have been accounted for as government grants
recognized since April l, 2020 as other income under the gain
contingency recognition method.
During the quarter ended June 30, 2020, our Healthcare and
Pharmacy segments received Paycheck Protection Plan (“PPP”) loans
provided under the CARES Act. These loans were forgivable upon
compliance with conditions specified under the PPP loan program. As
of June 30, 2022, all our PPP loans have been forgiven. The Small
Business Administration which administers the PPP loan program has
requested additional information with regards to one of the
forgiven PPP loans which we are in the process of supplying.
The Taxpayer Certainty and Disaster Tax Relief Act of 2020,
enacted December 27, 2020, made a number of changes to employer
retention tax credits previously made available under the CARES
Act, including modifying and extending the Employee Retention
Credit ("ERC") for the six calendar months ending June 30, 2021. As
a result of such legislation, the Company qualified for ERC for the
first and second calendar quarters of 2021 due to the decrease in
its gross receipts and has applied for ERC of $3,586 through
amended quarterly payroll tax filings for the applicable quarters.
Through the date of this filing, the Company has received
$1,802,000 of ERC which we applied for. We continue to monitor
compliance with the terms and conditions of the ERC and PPP
programs and developing interpretations and enforcement of the ERC
and PPP program rules and the regulations.
PRF distributions are, subject to Federal audits and Single
audits, not subject to repayment provided we are able to attest to
and comply with the terms and conditions of the funding, including
demonstrating that the funds received have been used for
designated, allowable healthcare-related expenses and capital
expenditures attributable to COVID-19 and for "Lost Revenues" as
defined by the department of “HHS”. We continue to monitor
compliance with the terms and conditions of the PRF and developing
interpretations and enforcement of PRF rules and regulations, as
well as the impact of the pandemic on our revenues and expenses. If
we are unable to attest to or comply with current or future terms
and conditions, and there is no assurance we will be able to do so,
our ability to retain some or all of the PRF received may be
impacted, and we may have to return the unutilized portion of those
funds, if any, in the future.
The Company is unable to determine the extent to which the
COVID-19 pandemic and its aftermath will continue to affect its
assets and operations. Our ability to make estimates of the effect
of the COVID-19 pandemic on revenues, expenses or changes in
accounting judgments that have had or are reasonably likely to have
a material effect on our financial statements continues to be
limited. The nature and extent of the continuing effect of the
COVID-19 pandemic and its aftermath on our balance sheet and
results of operations will depend on the severity and length of the
pandemic or its evolving strains of COVID-19; any further
government actions to address the pandemic's continuing effect;
regulatory changes in response to the pandemic, especially those
that affect our hospital, extended care, rehabilitation center,
nursing home, clinics, and our pharmacy operations; existing and
potential government assistance that may be provided; and the
requirements of PRF receipts, including our ability to retain such
PRF received.
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,
2021 and other filings with the Securities and Exchange Commission
which can be located at www.sec.gov.
SUNLINK HEALTH SYSTEMS, INC. ANNOUNCES FISCAL 2022 FOURTH
QUARTER RESULTS AND ANNUAL RESULTS AND COVID-19 UPDATE
Amounts in 000's, except per share CONSOLIDATED
STATEMENTS OF EARNINGS (LOSS)
Three Months Ended June
30,
Twelve Months Ended June
30,
2022
2021
2022
2021
% of Net
% of Net
% of Net
% of Net
Amount
Revenues
Amount
Revenues
Amount
Revenues
Amount
Revenues
Net Revenues
$
9,881
100.0
%
$
10,335
100.0
%
$
41,344
100.0
%
$
40,685
100.0
%
Costs and Expenses: Cost of goods sold
4,248
43.0
%
3,944
38.2
%
16,416
39.7
%
15,614
38.4
%
Salaries, wages and benefits
4,783
48.4
%
983
9.5
%
19,006
46.0
%
13,797
33.9
%
Supplies
397
4.0
%
248
2.4
%
1,276
3.1
%
989
2.4
%
Purchased services
936
9.5
%
635
6.1
%
3,546
8.6
%
2,471
6.1
%
Other operating expenses
1,135
11.5
%
1,006
9.7
%
4,345
10.5
%
4,029
9.9
%
Rents and leases
133
1.3
%
127
1.2
%
552
1.3
%
553
1.4
%
Depreciation and amortization
460
4.7
%
404
3.9
%
1,543
3.7
%
1,361
3.3
%
Operating profit (loss)
(2,211
)
-22.4
%
2,988
28.9
%
(5,340
)
-12.9
%
1,871
4.6
%
Forgiveness of PPP loans and accrued interest
0
0.0
%
264
2.6
%
3,010
7.3
%
264
0.6
%
Interest Expense - net
3
0.0
%
(7
)
-0.1
%
(15
)
0.0
%
(28
)
-0.1
%
Federal pandemic stimulus- provider relief funds
0
0.0
%
1,421
13.7
%
720
1.7
%
4,880
12.0
%
Gain (loss) on sale of assets
(2
)
0.0
%
(1
)
0.0
%
10
0.0
%
13
0.0
%
Earnings (Loss) from Continuing Operations before Income
Taxes
(2,210
)
-22.4
%
4,665
45.1
%
(1,615
)
-3.9
%
7,000
17.2
%
Income Tax (benefit) expense
107
1.1
%
110
1.1
%
107
0.3
%
63
0.2
%
Earnings (Loss) from Continuing Operations
(2,317
)
-23.4
%
4,555
44.1
%
(1,722
)
-4.2
%
6,937
17.1
%
Earnings (loss) from Discontinued Operations, net of tax
(48
)
-0.5
%
132
1.3
%
(287
)
-0.7
%
(47
)
-0.1
%
Net Earnings (Loss)
$
(2,365
)
-23.9
%
$
4,687
45.4
%
$
(2,009
)
-4.9
%
$
6,890
16.9
%
Earnings (Loss) Per Share from Continuing Operations: Basic
$
(0.33
)
$
0.66
$
(0.25
)
$
1.00
Diluted
$
(0.33
)
$
0.64
$
(0.25
)
$
0.99
Earnings (Loss) Per Share from Discontinued Operations: Basic
$
(0.01
)
$
0.02
$
(0.04
)
$
(0.01
)
Diluted
$
(0.01
)
$
0.02
$
(0.04
)
$
(0.01
)
Net Earnings (Loss) Per Share: Basic
$
(0.34
)
$
0.68
$
(0.29
)
$
1.00
Diluted
$
(0.34
)
$
0.66
$
(0.29
)
$
0.99
Weighted Average Common Shares Outstanding: Basic
6,954
6,922
6,945
6,907
Diluted
6,954
7,112
6,945
6,989
SUMMARY BALANCE SHEETS
June 30,
June 30,
2022
2021
ASSETS Cash and Cash Equivalents
$
6,794
$
9,962
Accounts Receivable - net
4,624
4,189
Other Current Assets
5,397
7,790
Property Plant and Equipment, net
8,217
6,554
Long-term Assets
2,911
3,069
$
27,943
$
31,564
LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities
$
7,691
$
9,665
Long-term Debt and Other Noncurrent Liabilities
1,132
1,089
Shareholders' Equity
19,120
20,810
$
27,943
$
31,564
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220929005611/en/
Robert M. Thornton, Jr. Chief Executive Officer
(770) 933-7004
Grafico Azioni Sunlink Health Systems (AMEX:SSY)
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