SunLink Health Systems, Inc. (NYSE American: SSY) today
announced earnings from continuing operations of $4,555,000 ($0.64
per fully diluted share) for its fourth fiscal quarter ended June
30, 2021 compared to a loss from continuing operations of $600,000
(or a loss of $0.09 per fully diluted share) for the quarter ended
June 30, 2020. Net income for the quarter ended June 30, 2021 was
$4,687,000 ($0.66 per fully diluted share) compared to a net loss
of $679,000 (or a loss of $0.10 per fully diluted share) for the
quarter ended June 30, 2020. The Company’s earnings for the quarter
resulted from its recognition of income of $3,586,000 (pre-tax) for
Employee Retention Credits (“ERC”) and income of $1,421,000
(pre-tax) of Provider Relief Funds (“PRF”) received under the
Coronavirus Aid Relief and Economic Security (“CARES”) Act.
For the fiscal year ended June 30, 2021, SunLink reported
earnings from continuing operations of $6,937,000 ($0.99 per fully
diluted share), which earnings resulted from the recognition of
$4,880,000 (pre-tax) of PRF distributions and $3,586,000 (pre-tax),
of ERC compared to a loss from continuing operations of $586,000,
(or $0.08 per fully diluted share) for the fiscal year ended June
30, 2020.
Consolidated net revenues (exclusive of ERC and PRF) for the
quarters ended June 30, 2021 and 2020 were $10,335,000 and
$10,689,000, respectively, a decrease of 3.3% in the current fiscal
year’s fourth quarter compared to the comparable quarter of the
prior fiscal year. Net revenues decreased in the current fiscal
quarter primarily due to decreased extended care and rehabilitation
services net revenues and decreased Pharmacy segment revenues
primarily due to the continuing COVID-19 pandemic.
SunLink reported an operating profit for the quarter ended June
30, 2021 of $2,988,000, compared to an operating loss for the
quarter ended June 30, 2020 of $352,000. The operating profit for
the quarter ended June 30, 2021, resulted from the recognition of
$3,586,000 (pre-tax) of ERC.
Earnings from discontinued operations were $132,000 ($0.02 per
fully diluted share) for the quarter ended June 30, 2021 compared
to a loss from discontinued operations of $79,000 (or a loss of
$0.01 per fully diluted share) for the quarter ended June 20, 2020.
The earnings from discontinued operations for the quarter ended
June 30, 2021 resulted from a positive cost report settlement for a
sold hospital for periods when the Company owned the hospital.
Our Healthcare and Pharmacy segments have received approximately
$5,370,000 in general and targeted PRF distributions during the
period April 1, 2020 through June 30, 2021. The PRF funds were
received under the CARES Act enacted in March 2020 in response to
the COVID-19 pandemic. The PRF distributions have been accounted
for as government grants and a total of $4,934,000 has been
recognized since April 1, 2020 as other income under the gain
contingency recognition method. In addition, during the quarter
ended June 30, 2020, we received $3,234,000 in Paycheck Protection
Program (“PPP”) loans provided for by the CARES Act and
administered by the SBA. These loans are forgivable upon compliance
with conditions specified under the PPP loan program. During the
quarter ended June 30, 2021, $261,000 of our PPP loans and $3,000
of related accrued interest were forgiven by the SBA, and as a
result, $264,000 was recorded as income relating to the PPP loan
forgiveness. In July and August 2021, the Company received
notification that the remaining outstanding $2,972,000 of PPP loans
and $38,000 of related accrued interest was forgiven by the SBA.
During the quarter ended September 30, 2021, we expect to record
$3,010,000 (pre-tax) of income for PPP loan forgiveness.
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 eligible employers may claim a
refundable tax credit against the employer share of Social Security
taxes equal to 70% of the qualified wages they paid to employees
from January 1 through June 30, 2021. Qualified wages are limited
to $10,000 per employee per calendar quarter in 2021. Thus, the
maximum ERC available is $7,000 per employee per calendar quarter,
for a total of $14,000 in 2021. The Company qualified for ERC for
the first and second calendar quarter of 2021 due to the decrease
in its gross receipts and is applying for ERC through amended
quarterly payroll tax filings for the applicable quarters.
Net earnings for the fiscal year ended June 30, 2021 were
$6,890,000 ($0.99 per fully diluted share) compared to a net loss
of $1,140,000 (or a loss of $0.16 per fully diluted share) for the
fiscal year ended June 30, 2020. Net earnings for the fiscal year
ended June 30, 2021 resulted from the recognition of $8,466,000
(pre-tax) of ERC and PRF.
Consolidated net revenues (exclusive of ERC and PRF) for the
fiscal years ended June 30, 2021 and 2020 were $40,685,000 and
$47,183,000, respectively, a decrease of 14.8% in the current
fiscal year compared to the comparable period of the prior fiscal
year. SunLink reported operating profit for the fiscal year ended
June 30, 2021 of $1,871,000 compared to an operating loss for the
fiscal year ended June 30, 2020 of $329,000. The operating profit
for the fiscal year ended June 30,2021 resulted from the
recognition of $3,586,000 (pre-tax) of ERC.
Loss from discontinued operations was $47,000 (or a loss of
$0.01 per fully diluted share) for the fiscal year ended June 20,
2021 compared to a loss from discontinued operations of $554,000
(or a loss of $0.08 per fully diluted share) for the fiscal year
ended June 30, 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 are recent, rapidly changing
and at times, 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.
In late December 2020, we began receiving allotments of COVID-19
vaccine, and we 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.
In our Healthcare businesses, we have experienced material
reductions in demand and net revenues due to the COVID-19 outbreak.
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 reductions which were
previously furloughed, laid off or retired. There appears to be
minimal current demand for extended care and rehabilitation center
admissions and clinic visits, and hospital services have
substantially decreased, all as a result of the effects of the
pandemic. The availability and cost of labor and medical supplies
have adversely affected our Healthcare businesses, especially with
respect to access to personal protective equipment, cleaning
supplies and COVID-19 testing materials. We continue to monitor
supplies and seek additional sources of many supply items.
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 been operating at substantially reduced
capacity. Until these referral sources are able to return to 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 and rehabilitation
centers and other customers of such Institutional Pharmacy services
are currently being adversely affected by the spreading of the
COVID-19 pandemic, and this may be expected to have a further
negative effect on such demand. 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.
We believe the effect of the COVID–19 pandemic and public and
governmental responses to it negatively affected our last six
fiscal quarters results but the adverse effect of such responses
was offset in such quarters by financial assistance provided by
programs enacted by the CARES Act.
During the period April 1, 2020 through June 30, 2021, our
Healthcare and Pharmacy segments received approximately $5,370,000
in general and targeted PRF distributions. During the quarter ended
June 30, 2020, we also received $3,234,000 in Paycheck Protection
Program (“PPP”) loans administered by the SBA. Both the PRF and PPP
funds are provided for under the CARES Act and we have received a
total of $8,604,000 of such funding.
The distributions from the PRF 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. Such PRF are
accounted for as government grants and are recognized on a
systematic and rational basis once there is reasonable assurance
that the applicable terms and conditions required to retain the
funds have been met. Of the $5,370,000 of PRF received during the
period April 1, 2020 through June 30, 2021, we are reporting
$4,933,000 of PRF as other income in our consolidated statement of
operations for our fiscal year ended June 30, 2021 related to
COVID-19 related expenses and Lost Revenues. The unrecognized
amount of the PRF is recorded under the caption “Unearned CARES Act
Funds” in our consolidated balance sheets. We will 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.
PPP loan forgiveness is available if the loans were used to pay
wages, rent, utilities and interest on certain debt during the
24-week period following receipt of the loan proceeds, subject to
Federally-established terms and conditions. During the quarter
ended June 30, 2021, $261,000 of our PPP loans and $3,000 of
related accrued interest were forgiven by the SBA and as a result
$264,000 was recorded as income relating to the PPP loan
forgiveness in the quarter ended June 30, 2021.
Effective January 1, 2021, employers were eligible for ERC if
they operate a trade or business during January 1, 2021, through
June 30, 2021, and experience either (1) full or partial suspension
of the operation of their trade or business during this period
because of governmental orders limiting commerce, travel or group
meetings due to COVID-19, or (2) decline in gross receipts in a
calendar quarter in 2021 where the gross receipts of that calendar
quarter are less than 80% of the gross receipts in the same
calendar quarter in 2019. The Company qualified for ERC for the
first and second calendar quarter of 2021 due to the decrease in
gross receipts and is applying for ERC through amended quarterly
payroll tax filings for the applicable quarters.
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 and
rehabilitation center and 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,
2020 and other filings with the Securities and Exchange Commission
which can be located at www.sec.gov.
SUNLINK HEALTH SYSTEMS, INC. ANNOUNCES FISCAL 2021 FOURTH
QUARTER AND ANNUAL RESULTS AND COVID-19 UPDATE
Amounts in 000's, except per share and volume statistics
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
Three Months Ended June
30,
Twelve Months Ended June
30,
2021
2020
2021
2020
% of Net
% of Net
% of Net
% of Net
Amount
Revenues
Amount
Revenues
Amount
Revenues
Amount
Revenues
Net Revenues
$
10,335
100.0
%
$
10,689
100.0
%
$
40,685
100.0
%
$
47,813
100.0
%
Costs and Expenses: Cost of goods sold
3,944
38.2
%
4,212
39.4
%
15,614
38.4
%
19,023
39.8
%
Salaries, wages and benefits
983
9.5
%
4,912
46.0
%
13,797
33.9
%
19,563
40.9
%
Supplies
248
2.4
%
245
2.3
%
989
2.4
%
1,215
2.5
%
Purchased services
635
6.1
%
677
6.3
%
2,471
6.1
%
2,924
6.1
%
Other operating expenses
1,006
9.7
%
463
4.3
%
4,029
9.9
%
3,366
7.0
%
Rents and leases
127
1.2
%
138
1.3
%
553
1.4
%
601
1.3
%
Depreciation and amortization
404
3.9
%
394
3.7
%
1,361
3.3
%
1,450
3.0
%
Operating profit (loss)
2,988
28.9
%
(352
)
-3.3
%
1,871
4.6
%
(329
)
-0.7
%
Federal pandemic stimulus- provider relief funds
1,421
13.7
%
54
0.5
%
4,880
12.0
%
54
0.1
%
Interest Expense - net
(7
)
-0.1
%
(5
)
0.0
%
(28
)
-0.1
%
(29
)
-0.1
%
Forgiveness of PPP loans and accrued interest
264
2.6
%
0
0.0
%
264
0.6
%
0
0.0
%
Loss on extinguishment of debt, net
0
0.0
%
0
0.0
%
0
0.0
%
(178
)
-0.4
%
Gain (loss) on sale of assets
(1
)
0.0
%
(1
)
0.0
%
13
0.0
%
192
0.4
%
Earnings (Loss) from Continuing Operations before Income
Taxes
4,665
45.1
%
(304
)
-2.8
%
7,000
17.2
%
(290
)
-0.6
%
Income Tax expense
110
1.1
%
296
2.8
%
63
0.2
%
296
0.6
%
Earnings (Loss) from Continuing Operations
4,555
44.1
%
(600
)
-5.6
%
6,937
17.1
%
(586
)
-1.2
%
Earnings (Loss) from Discontinued Operations, net of tax
132
1.3
%
(79
)
-0.7
%
(47
)
-0.1
%
(554
)
-1.2
%
Net Earnings (Loss)
$
4,687
45.4
%
$
(679
)
-6.4
%
$
6,890
16.9
%
$
(1,140
)
-2.4
%
Earnings (Loss) Per Share from Continuing Operations: Basic
$
0.66
$
(0.09
)
$
1.00
$
(0.08
)
Diluted
$
0.64
$
(0.09
)
$
0.99
$
(0.08
)
Earnings (Loss) Per Share from Discontinued Operations: Basic
$
0.02
$
(0.01
)
$
(0.01
)
$
(0.08
)
Diluted
$
0.02
$
(0.01
)
$
(0.01
)
$
(0.08
)
Net Earnings (Loss) Per Share: Basic
$
0.68
$
(0.10
)
$
1.00
$
(0.16
)
Diluted
$
0.66
$
(0.10
)
$
0.99
$
(0.16
)
Weighted Average Common Shares Outstanding: Basic
6,922
6,899
6,907
6,957
Diluted
7,112
6,899
6,989
6,957
HEALTHCARE FACILITIES VOLUME STATISTICS
Hospital and Nursing Home Admissions
66
69
281
393
Hospital and Nursing Home Patient Days
4,954
5,302
19,577
25,946
SUMMARY BALANCE SHEETS
June 30,
June 30,
2021
2020
ASSETS Cash and Cash Equivalents
$
9,962
$
11,184
Accounts Receivable - net
4,189
4,315
Other Current Assets
7,790
4,424
Property Plant and Equipment, net
6,554
5,324
Long-term Assets
3,069
2,724
$
31,564
$
27,971
LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities
$
9,665
$
11,416
Long-term Debt and Other Noncurrent Liabilities
1,089
2,812
Shareholders' Equity
20,810
13,743
$
31,564
$
27,971
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210928005823/en/
Robert M. Thornton, Jr. Chief Executive Officer
(770) 933-7004
Sunlink Health Systems (AMEX:SSY)
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