SunLink Health Systems, Inc. (NYSE American: SSY) today
announced a loss from continuing operations of $934,000 (or a loss
of $0.13 per fully diluted share) for its third fiscal quarter
ended March 31, 2022 compared to a loss from continuing operations
of $473,000 (or a loss of $0.07 per fully diluted share) for the
third fiscal quarter ended March 31, 2021.
Provider Relief Funds (“PRF”) of $106,000 (pre-tax) were
reported as income in the quarter ended March 31, 2022 compared to
$11,000 (pre-tax) in the quarter ended March 31, 2021. Our
Healthcare and Pharmacy segments have received approximately
$6,173,000 in general and targeted PRF distributions during the
period April 1, 2020 through March 31, 2022. 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 March 31, 2022 was $990,000 (or a
loss of $0.14 per fully diluted share) compared to a net loss of
$531,000 (or a loss of $0.08 per fully diluted share) for the
quarter ended March 31, 2021.
Consolidated net revenues for the quarters ended March 31, 2022
and 2021 were $10,527,000 and $9,778,000, respectively, an increase
of 7.7% 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
Services Segment net revenues and increased Pharmacy Segment
institutional and retail pharmacy net revenues.
SunLink reported an operating loss for the quarter ended March
31, 2022 of $1,064,000 compared to an operating loss for the
quarter ended March 31, 2021 of $540,000. The increased loss was
due primarily to higher costs of goods sold, salaries, wages and
benefits, and purchased services. The Company is experiencing
substantial increases in its salaries and in wage rates, as well as
difficulty hiring for 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 $56,000 (or a loss of
$0.01 per fully diluted share) for the quarter ended March 31, 2022
compared to a loss from discontinued operations of $58,000 (or a
loss of $0.01 per fully diluted share) for the quarter ended March
31, 2021.
For the nine months ended March 31, 2022, SunLink reported
earnings from continuing operations of $595,000 ($0.08 per fully
diluted share) compared to earnings from continuing operations of
$2,382,000 ($0.34 per fully diluted share) for the nine months
ended March 31, 2021. Net earnings for the nine months ended March
31, 2022 were $356,000 ($0.05 per fully diluted share) compared to
net earnings of $2,203,000 ($0.32 per fully diluted share) for the
nine months ended March 31, 2021. Forgiveness of Paycheck
Protection Plan (“PPP”) loans and PRF income were $3,730,000
(pre-tax) in the nine months ended March 31, 2022, $3,010,000 of
which was received last fiscal year and $720,000 which was received
in quarter ended December 31, 2021.
Consolidated net revenues for the nine months ended March 31,
2022 and 2021 were $31,463,000 and $30,350,000, respectively, an
increase of 3.7% in the current year’s nine months compared to the
comparable period of the prior fiscal year. The net revenues
increased in the current nine-month period due primarily to
increased Pharmacy Segment institutional pharmacy and durable
medical equipment revenues and increased hospital net revenues in
the Healthcare Services Segment.
Capital expenditures for the nine months ended March 31, 2022
were $2,436,000. The majority of the expenditures were under its
previously announced Trace Forward Capital Plan which expands,
upgrades and improves the physical plant, patient care, ancillary
services at our Trace hospital and for capitalizable durable
medical equipment purchased by the Pharmacy Segment, which is then
rented to customers. Remaining commitments under the Trace Forward
Capital Plan approximate $431,000 at March 31, 3022.
Loss from discontinued operations was $239,000 (or a loss of
$0.03 per fully diluted share) for the nine months ended March 31,
2022 compared to a loss from discontinued operations of $179,000
(or a loss of $0.03 per fully diluted share) for the nine months
ended March 31, 2021.
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 effects 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 the Centers for Medicare & Medicaid Services. The
Company believes the vaccine mandates may result in the further
loss of certain staff, including clinical staff, which may impact
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 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 compared to
pre-pandemic levels.
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 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 Services and Pharmacy Segments have received
approximately $6,173,000 in general and targeted PRF distributions
during the period April 1, 2020 through March 31, 2022. The PRF
distributions have been accounted for as government grants, and a
total of $5,642,000 has been recognized since April l, 2020 as
other income.
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. Subsequent to March 31, 2022, the Company has received
$1,747,000 of ERC 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
programs rules and regulations.
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 the Department of Health & Human
Services. We continue to monitor compliance with the terms and
conditions of the PRF program and developing interpretations and
enforcement of PRF program rules and regulations 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 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 the CARES Act programs and
other pandemic assistance which may affect our ability to retain
such funds received thereunder.
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 THIRD
QUARTER AND COVID-19 UPDATE Amounts in 000's, except per
share CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
Three Months Ended March
31,
Nine Months Ended March
31,
2022
2021
2022
2021
% of Net % of Net % of Net % of Net
Amount Revenues Amount Revenues
Amount Revenues Amount Revenues Net
Revenues
$
10,527
100.0%
$
9,778
100.0%
$
31,463
100.0%
$
30,350
100.0%
Costs and Expenses: Cost of goods sold
4,079
38.7%
3,682
37.7%
12,168
38.7%
11,670
38.5%
Salaries, wages and benefits
4,736
45.0%
4,203
43.0%
14,223
45.2%
12,814
42.2%
Supplies
271
2.6%
237
2.4%
879
2.8%
741
2.4%
Purchased services
965
9.2%
560
5.7%
2,610
8.3%
1,836
6.0%
Other operating expenses
1,027
9.8%
1,161
11.9%
3,210
10.2%
3,023
10.0%
Rents and leases
129
1.2%
136
1.4%
419
1.3%
426
1.4%
Depreciation and amortization
384
3.6%
339
3.5%
1,083
3.4%
957
3.2%
Operating loss
(1,064
)
-10.1%
(540
)
-5.5%
(3,129
)
-9.9%
(1,117
)
-3.7%
Forgiveness of PPP loans and accrued interest
0
0.0%
0
0.0%
3,010
9.6%
0
0.0%
Interest Expense - net
(1
)
0.0%
(7
)
-0.1%
(18
)
-0.1%
(21
)
-0.1%
Federal pandemic stimulus- provider relief funds
106
1.0%
11
0.1%
720
2.3%
3,459
11.4%
Gain on sale of assets
0
0.0%
1
0.0%
12
0.0%
14
0.0%
Earnings (Loss) from Continuing Operations before Income
Taxes
(959
)
-9.1%
(535
)
-5.5%
595
1.9%
2,335
7.7%
Income Tax benefit
(25
)
-0.2%
(62
)
-0.6%
0
0.0%
(47
)
-0.2%
Earnings (Loss) from Continuing Operations
(934
)
-8.9%
(473
)
-4.8%
595
1.9%
2,382
7.8%
Loss from Discontinued Operations, net of tax
(56
)
-0.5%
(58
)
-0.6%
(239
)
-0.8%
(179
)
-0.6%
Net Earnings (Loss)
$
(990
)
-9.4%
$
(531
)
-5.4%
$
356
1.1%
$
2,203
7.3%
Earnings (Loss) Per Share from Continuing Operations: Basic
$
(0.13
)
$
(0.07
)
$
0.09
$
0.35
Diluted
$
(0.13
)
$
(0.07
)
$
0.08
$
0.34
Earnings (Loss) Per Share from Discontinued Operations: Basic
$
(0.01
)
$
(0.01
)
$
(0.03
)
$
(0.03
)
Diluted
$
(0.01
)
$
(0.01
)
$
(0.03
)
$
(0.03
)
Net Earnings (Loss) Per Share: Basic
$
(0.14
)
$
(0.08
)
$
0.05
$
0.32
Diluted
$
(0.14
)
$
(0.08
)
$
0.05
$
0.32
Weighted Average Common Shares Outstanding: Basic
6,954
6,908
6,942
6,902
Diluted
6,954
6,908
7,063
6,948
SUMMARY BALANCE SHEETS March 31, June 30,
2022
2021
ASSETS Cash and Cash Equivalents
$
7,144
$
9,962
Accounts Receivable - net
4,709
4,189
Other Current Assets
7,327
7,790
Property Plant and Equipment, net
7,922
6,554
Long-term Assets
2,855
3,069
$
29,957
$
31,564
LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities
$
7,493
$
9,665
Long-term Debt and Other Noncurrent Liabilities
1,247
1,089
Shareholders' Equity
21,217
20,810
$
29,957
$
31,564
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220516005975/en/
Robert M. Thornton, Jr. Chief Executive Officer
(770) 933-7004
Sunlink Health Systems (AMEX:SSY)
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