SunLink Health Systems, Inc. (NYSE American: SSY) today
announced a loss from continuing operations of $477,000 (or a loss
of $0.07 per fully diluted share) for its second fiscal quarter
ended December 3, 2021 compared to earnings from continuing
operations of $3,146,000 ($0.46 per fully diluted share) for the
second fiscal quarter ended December 31, 2020.
Provider Relief Funds (“PRF”) of $614,000 (pre-tax) were
reported as income in the quarter ended December 31, 2021 compared
to $3,417,000 (pre-tax) in the quarter ended December 31, 2020. Our
Healthcare and Pharmacy segments have received approximately
$6,173,000 in general and targeted PRF distributions during the
period April 1, 2020 through December 31, 2021, The PRF funds were
received under the Coronavirus Aid Relief and Economic Security
(“CARES”) Act enacted in March 2020 in response to the COVID-19
pandemic. The PRF distributions have been accounted for as
government grants and are recognized as other income.
Net loss for the quarter ended December 31, 2021 was $593,000
(or a loss of $0.09 per fully diluted share) compared to net
earnings of $3,074,000 ($0.45 per fully diluted share) for the
quarter ended December 31, 2020.
Consolidated net revenues for the quarters ended December 31,
2021 and 2020 were $10,411,000 and $10,150 ,000, respectively, an
increase of 2.6% in the current year’s quarter compared to the
comparable quarter of the prior fiscal year. Net revenues increased
in the current fiscal quarter primarily due to an increase in
Healthcare Facilities net revenue and increased Pharmacy Segment
institutional pharmacy and durable medical equipment revenues.
SunLink reported an operating loss for the quarter ended
December 31, 2021 of $1,072,000 compared to an operating loss for
the quarter ended December 31, 2020 of $254,000, due primarily to
increased costs of salaries, wages and benefits, supplies,
purchased services and other operating expenses.
Loss from discontinued operations was $116,000 (or a loss of
$0.02 per fully diluted share) for the quarter ended December 31,
2021 compared to a loss from discontinued operations of $72,000 (or
a loss of $0.01 per fully diluted share) for the quarter ended
December 31, 2020.
For the six months ended December 31, 2021, SunLink reported
earnings from continuing operations of $1,529,000 ($0.22 per fully
diluted share) compared to earnings from continuing operations of
$2,855,000 ($0.41 per fully diluted share) for the six months ended
December 31, 2020. Net earnings for the six months ended December
31, 2021 were $1,346,000 ($0.19 per fully diluted share) compared
to net earnings of $2,734,000 ($0.40 per fully diluted share) for
the six months ended December 31, 2020.
Consolidated net revenues for the six months ended December 31,
2021 and 2020 were $20,936,000 and $20,572,000, respectively, an
increase of 1.8% in the current year’s six months compared to the
comparable period of the prior fiscal year. The net revenue
increased in the current six month period, was due primarily to
increased Pharmacy Segment retail pharmacy, institutional pharmacy
and durable medical equipment revenues.
Loss from discontinued operations was $183,000 (or a loss of
$0.03 per fully diluted share) for the six months ended December
31, 2021 compared to a loss from discontinued operations of
$121,000 (or a loss of $0.02 per fully diluted share) for the six
months ended December 31, 2020.
COVID-19 Pandemic
COVID-19 was declared a global pandemic by the World Health
Organization on March 11, 2020. We have been monitoring the
COVID-19 pandemic and its impact on our operations, 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 changed frequently and at
times, been unclear. Nevertheless, as in many healthcare
environments, we have experienced 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 of the public and governmental responses to it
have negatively affected our last eight quarters results.
In late December 2020, we began receiving allotments of COVID-19
vaccine and, when vaccinating patients, providers, employees and
staff, have done so in accordance with our understanding of the
Federal 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 employees to the extent required by the final rules
issued by CMS. The Company believes the vaccine mandates may result
in the loss of certain staff, including clinical staff, which may
impact the Company’s ability to maintain the current levels of
service.
In our Healthcare businesses, we have experienced material
reductions in demand and net revenues due to the COVID-19 outbreak.
Currently, there continues to be reduced demand for certain
hospital services, and for extended care, rehabilitation center and
nursing home admissions, and clinic visits. The availability and
cost of medical supplies have adversely affected our Healthcare
businesses, and we continue to monitor supplies and seek additional
sources of many supply items. In addition, a reduction in the
availability of qualified employees has also occurred, and, despite
good faith efforts to do so, we have not yet been able to rehire or
fully replace staff which were previously furloughed, laid off or
retired.
Since the beginning of 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 operated at reduced capacity, and until these
referral sources resume operations at full capacity, we believe the
COVID-19 pandemic will continue to affect 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 has negatively affected our supply
processes, especially with respect to access to respiratory
equipment and certain personal protective equipment and cleaning
products.
During the quarter ended June 30, 2020, our Healthcare and
Pharmacy segments received $3,234,000 in PPP loans provided under
the CARES Act. These loans were forgivable upon compliance with
conditions specified under the PPP loan program and, as of December
31, 2021, all our PPP loans have been forgiven and recognized as
other income.
Our Healthcare and Pharmacy segments have received approximately
$6,173,000 in general and targeted PRF distributions during the
period April 1, 2020 through December 31, 2021. The PRF
distributions have been accounted for as government grants, and a
total of $5,546,000 has been recognized since April l, 2020 as
other income.
PRF distributions are 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 HHS. We continue to monitor compliance with
the terms and conditions of the PRF and 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 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 recognized ERC of $3,586,000 as a reduction
of salaries, wages and benefits in its fiscal year ended June 30,
2021.
Going forward, the Company is unable to determine the extent to
which the COVID-19 pandemic 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 is currently limited. The nature
and extent of the effect of the COVID-19 pandemic on our balance
sheet and results of operations will depend on the severity and
length of the pandemic; government actions to mitigate the
pandemic's 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
SECOND QUARTER AND COVID-19 UPDATE Amounts in 000's, except
per share CONSOLIDATED STATEMENTS OF EARNINGS
(LOSS)
Three Months Ended December
31,
Six Months Ended December
31,
2021
2020
2021
2020
% of Net
% of Net
% of Net
% of Net
Amount
Revenues
Amount
Revenues
Amount
Revenues
Amount
Revenues
Net Revenues
$
10,411
100.0
%
$
10,150
100.0
%
$
20,936
100.0
%
$
20,572
100.0
%
Costs and Expenses: Cost of goods sold
4,016
38.6
%
3,918
38.6
%
8,089
38.6
%
7,988
38.8
%
Salaries, wages and benefits
4,789
46.0
%
4,226
41.6
%
9,487
45.3
%
8,611
41.9
%
Supplies
308
3.0
%
280
2.8
%
608
2.9
%
504
2.4
%
Purchased services
783
7.5
%
629
6.2
%
1,645
7.9
%
1,276
6.2
%
Other operating expenses
1,101
10.6
%
913
9.0
%
2,183
10.4
%
1,862
9.1
%
Rents and leases
120
1.2
%
120
1.2
%
290
1.4
%
290
1.4
%
Depreciation and amortization
366
3.5
%
318
3.1
%
699
3.3
%
618
3.0
%
Operating loss
(1,072
)
-10.3
%
(254
)
-2.5
%
(2,065
)
-9.9
%
(577
)
-2.8
%
Forgiveness of PPP loans and accrued interest
0
0.0
%
0
0.0
%
3,010
14.4
%
0
0.0
%
Interest Expense - net
(3
)
0.0
%
(7
)
-0.1
%
(17
)
-0.1
%
(14
)
-0.1
%
Federal pandemic stimulus- provider relief funds
614
5.9
%
3,417
33.7
%
614
2.9
%
3,448
16.8
%
Gain on sale of assets
7
0.1
%
5
0.0
%
12
0.1
%
13
0.1
%
Earnings (Loss) from Continuing Operations before Income
Taxes
(454
)
-4.4
%
3,161
31.1
%
1,554
7.4
%
2,870
14.0
%
Income Tax expense
23
0.2
%
15
0.1
%
25
0.1
%
15
0.1
%
Earnings (Loss) from Continuing Operations
(477
)
-4.6
%
3,146
31.0
%
1,529
7.3
%
2,855
13.9
%
Loss from Discontinued Operations, net of tax
(116
)
-1.1
%
(72
)
-0.7
%
(183
)
-0.9
%
(121
)
-0.6
%
Net Earnings (Loss)
$
(593
)
-5.7
%
$
3,074
30.3
%
$
1,346
6.4
%
$
2,734
13.3
%
Earnings (Loss) Per Share from Continuing Operations: Basic
$
(0.07
)
$
0.46
$
0.22
$
0.41
Diluted
$
(0.07
)
$
0.46
$
0.22
$
0.41
Earnings (Loss) Per Share from Discontinued Operations: Basic
$
(0.02
)
$
(0.01
)
$
(0.03
)
$
(0.02
)
Diluted
$
(0.02
)
$
(0.01
)
$
(0.03
)
$
(0.02
)
Net Earnings (Loss) Per Share: Basic
$
(0.09
)
$
0.45
$
0.19
$
0.40
Diluted
$
(0.09
)
$
0.45
$
0.19
$
0.40
Weighted Average Common Shares Outstanding: Basic
6,947
6,899
6,935
6,899
Diluted
6,947
6,905
7,099
6,904
SUMMARY BALANCE SHEETS
December 31,
June 30,
2021
2021
ASSETS
Cash and Cash Equivalents
$
8,315
$
9,962
Accounts Receivable - net
4,359
4,189
Other Current Assets
7,408
7,790
Property Plant and Equipment, net
7,382
6,554
Long-term Assets
2,719
3,069
$
30,183
$
31,564
LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities
$
6,870
$
9,665
Long-term Debt and Other Noncurrent Liabilities
1,106
1,089
Shareholders' Equity
22,207
20,810
$
30,183
$
31,564
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220214005530/en/
Robert M. Thornton, Jr. Chief Executive Officer
(770) 933-7004
Sunlink Health Systems (AMEX:SSY)
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