SunLink Health Systems, Inc. (NYSE American: SSY) today
announced earnings from continuing operations of $2,006,000 ($0.28
per fully diluted share) for its first fiscal quarter ended
September 30, 2021 compared to a loss from continuing operations of
$291,000 (or a loss of $0.04 per fully diluted share) for the first
fiscal quarter ended September 30, 2020. Net income for the quarter
ended September 30, 2021 was $1,939,000 ($0.27 per fully diluted
share) compared to a net loss of $340,000 (or a loss of $0.05 per
fully diluted share) for the quarter ended September 30, 2020. The
Company’s earnings for the quarter resulted from its recognition of
income of $3,010,000 (pre-tax) from forgiveness by the Small
Business Administration of the Company’s remaining loans and
accrued interest under the Paycheck Protection Program (“PPP”)
received as a result of the Coronavirus Aid Relief and Economic
Security Act. (“CARES Act”).
Consolidated net revenues for the quarters ended September 30,
2021 and 2020 were $10,525,000 and $10,422,000, respectively, an
increase of 1.0% in the current year’s quarter compared to the
comparable quarter of the prior fiscal year. Net revenues increased
slightly in the current fiscal quarter, primarily due to an
increase in Healthcare Facilities hospital net revenue and
increased Pharmacy Segment durable medical equipment revenues.
SunLink reported an operating loss for the quarter ended
September 30, 2021 of $993,000 compared to an operating loss for
the quarter ended September 30, 2020 of $323,000, due primarily to
increased cost of salaries, wages and benefits, supplies, purchased
services and other operating expenses.
Loss from discontinued operations was $67,000 (or a loss of
$0.01 per fully diluted share) for the quarter ended September 30,
2021 compared to a loss from discontinued operations of $49,000 (or
a loss of $0.01 per fully diluted share) for the quarter ended
September 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.
Such protocols and guidance are recent, rapidly changing and at
times, unclear. As in many healthcare environments, we have
experienced COVID-19 illness, including deaths, and some employees
have tested positive and have been placed on leave or in
quarantine. We believe the effect of the COVID-19 pandemic and
public and governmental responses to it have negatively affected
our last seven fiscal quarters 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 will
implement plans to vaccinate employees to the extent required by
the final rules issued by OSHA and 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
its current levels of service.
In our Healthcare businesses, we have experienced material
reductions in demand and net revenues due to the COVID-19 outbreak.
There continues to be reduced current 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. 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 are 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.
Our Healthcare and Pharmacy segments have received approximately
$5,446,000 in general and targeted Provider Relief Funds (“PRF”)
during the period April 1, 2020 through September 30, 2021 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, and a total of $4,933,000 have been recognized
since April 1, 2020 as other income under the gain contingency
recognition method.
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. As of September
30, 2021, all our PPP loans have been forgiven.
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 $3,586,000 through
amended quarterly payroll tax filings for the applicable
quarters.
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.
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 and nursing home and 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 FIRST
QUARTER AND COVID-19 UPDATE Amounts in 000's, except per
share and volume statistics CONSOLIDATED STATEMENTS
OF EARNINGS (LOSS)
Three Months Ended September
30,
2021
2020
% of Net
% of Net
Amount
Revenues
Amount
Revenues
Net Revenues
$
10,525
100.0
%
$
10,422
100.0
%
Costs and Expenses: Cost of goods sold
4,073
38.7
%
4,070
39.1
%
Salaries, wages and benefits
4,698
44.6
%
4,385
42.1
%
Supplies
300
2.9
%
224
2.1
%
Purchased services
862
8.2
%
647
6.2
%
Other operating expenses
1,082
10.3
%
949
9.1
%
Rents and leases
170
1.6
%
170
1.6
%
Depreciation and amortization
333
3.2
%
300
2.9
%
Operating loss
(993
)
-9.4
%
(323
)
-3.1
%
Forgiveness of PPP loans and accrued interest
3,010
28.6
%
0
0.0
%
Interest Expense - net
(14
)
-0.1
%
(7
)
-0.1
%
Federal pandemic stimulus- provider relief funds
0
0.0
%
31
0.3
%
Gain on sale of assets
5
0.0
%
8
0.1
%
Earnings (Loss) from Continuing Operations before Income
Taxes
2,008
19.1
%
(291
)
-2.8
%
Income Tax expense
2
0.0
%
0
0.0
%
Earnings (Loss) from Continuing Operations
2,006
19.1
%
(291
)
-2.8
%
Loss from Discontinued Operations, net of tax
(67
)
-0.6
%
(49
)
-0.5
%
Net Earnings (Loss)
$
1,939
18.4
%
$
(340
)
-3.3
%
Earnings (Loss) Per Share from Continuing Operations: Basic
$
0.29
$
(0.04
)
Diluted
$
0.28
$
(0.04
)
Earnings (Loss) Per Share from Discontinued Operations: Basic
$
(0.01
)
$
(0.01
)
Diluted
$
(0.01
)
$
(0.01
)
Net Earnings (Loss) Per Share: Basic
$
0.28
$
(0.05
)
Diluted
$
0.27
$
(0.05
)
Weighted Average Common Shares Outstanding: Basic
6,924
6,899
Diluted
7,095
6,899
SUMMARY BALANCE SHEETS
September 30,
June 30,
2021
2021
ASSETS Cash and Cash Equivalents
$
8,933
$
9,962
Accounts Receivable - net
4,687
4,189
Other Current Assets
7,794
7,790
Property Plant and Equipment, net
6,920
6,554
Long-term Assets
3,034
3,069
$
31,368
$
31,564
LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities
$
7,545
$
9,665
Long-term Debt and Other Noncurrent Liabilities
1,074
1,089
Shareholders' Equity
22,749
20,810
$
31,368
$
31,564
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211115005857/en/
Robert M. Thornton, Jr. Chief Executive Officer
(770) 933-7004
Sunlink Health Systems (AMEX:SSY)
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