SunLink Health Systems, Inc. (NYSE American: SSY) today
announced a loss from continuing operations of $1,544,000 (or a
loss of $0.22 per fully diluted share) for its first fiscal quarter
ended September 30, 2022 compared to earnings from continuing
operations of $2,006,000 (or $0.28 per fully diluted share) for the
fourth fiscal quarter ended September 30, 2021. Net loss for the
quarter ended September 30, 2022 was a loss of $1,558,000 (or a
loss of $0.22 per fully diluted share) compared to net earnings of
$1,939,000 (or $0.27 per fully diluted share) for the quarter ended
June 30, 2021.
The fiscal quarter ended September 30, 2021 included forgiveness
of Paycheck Protection Plan (“PPP”) loans of $3,010,000 (pre-tax)
which did not reoccur in the fiscal quarter ended September 30,
2022.
Consolidated net revenues for the quarters ended September 30,
2022 and 2021 were $11,037,000 and $10,525,000, respectively, an
increase of 4.9% in the current year’s quarter compared to the
comparable quarter of the prior fiscal year. Healthcare Services
Segment net revenues increased 8.2% from the prior year due to
increased hospital and nursing home net revenues this year and the
Pharmacy Segment net revenues increased 3.2% from the prior year
due to increased retail and institutional pharmacy sales this
year.
SunLink reported an operating loss for the quarter ended
September 30, 2022 of $1,613,000 compared to an operating loss for
the quarter ended September 30, 2021 of $993,000. The substantial
negative change in operating loss from last year’s comparable
quarter was due primarily to higher costs of goods sold, salaries,
wages and benefits, and purchased services incurred in both
segments 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 $14,000 (or a loss of
$0.00 per fully diluted share) for the quarter ended September 30,
2022 compared to a loss from discontinued operations of $67,000 (or
$0.01 per fully diluted share) for the quarter ended September 30,
2021.
The company’s cash and cash equivalents on September 30, 2022
was $4,951,000 and decline of $1,843,000, from June 30, 2022, due
to the current quarter’s operating loss and capital expenditures
which the company has reduced in the current quarter.
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 eleven 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 September 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 September 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 filed its Schedule of
Grant Income of HHS awards and audit report for the year ended June
30, 2021 with the Health Resources and Services Administration of
HHS on September 30, 2022.
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,
2022 and other filings with the Securities and Exchange Commission
which can be located at www.sec.gov.
SUNLINK HEALTH SYSTEMS, INC. ANNOUNCES FISCAL 2023 FIRST
QUARTER RESULTS AND COVID-19 UPDATE Amounts in 000's,
except per share CONSOLIDATED STATEMENTS OF EARNINGS
(LOSS)
Three Months Ended September
30, 2022
2022
2021
% of Net
% of Net
Amount
Revenues
Amount
Revenues
Net Revenues
$
11,037
100.0
%
$
10,525
100.0
%
Costs and Expenses: Cost of goods sold
4,369
39.6
%
4,073
38.7
%
Salaries, wages and benefits
5,330
48.3
%
4,698
44.6
%
Supplies
337
3.1
%
300
2.9
%
Purchased services
1,035
9.4
%
862
8.2
%
Other operating expenses
1,093
9.9
%
1,082
10.3
%
Rents and leases
118
1.1
%
170
1.6
%
Depreciation and amortization
368
3.3
%
333
3.2
%
Operating loss
(1,613
)
-14.6
%
(993
)
-9.4
%
Interest Expense - net
(4
)
0.0
%
(14
)
-0.1
%
Forgiveness of PPP loans and accrued interest
0
0.0
%
3,010
28.6
%
Federal pandemic stimulus- provider relief funds
61
0.6
%
0
0.0
%
Gain (loss) on sale of assets
12
0.1
%
5
0.0
%
Earnings (Loss) from Continuing Operations before Income
Taxes
(1,544
)
-14.0
%
2,008
19.1
%
Income Tax (benefit) expense
0
0.0
%
2
0.0
%
Earnings (Loss) from Continuing Operations
(1,544
)
-14.0
%
2,006
19.1
%
Loss from Discontinued Operations, net of tax
(14
)
-0.1
%
(67
)
-0.6
%
Net Earnings (Loss)
$
(1,558
)
-14.1
%
$
1,939
18.4
%
Earnings (Loss) Per Share from Continuing Operations: Basic
$
(0.22
)
$
0.29
Diluted
$
(0.22
)
$
0.28
Earnings (Loss) Per Share from Discontinued Operations: Basic
$
(0.00
)
$
(0.01
)
Diluted
$
(0.00
)
$
(0.01
)
Net Earnings (Loss) Per Share: Basic
$
(0.22
)
$
0.28
Diluted
$
(0.22
)
$
0.27
Weighted Average Common Shares Outstanding: Basic
6,983
6,924
Diluted
6,983
7,095
SUMMARY BALANCE SHEETS
September 30,
June 30,
2022
2022
ASSETS Cash and Cash Equivalents
$
4,951
$
6,794
Accounts Receivable - net
4,686
4,624
Other Current Assets
5,769
5,397
Property Plant and Equipment, net
8,482
8,217
Long-term Assets
2,938
2,911
$
26,826
$
27,943
LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities
$
8,163
$
7,691
Long-term Debt and Other Noncurrent Liabilities
1,053
1,132
Shareholders' Equity
17,610
19,120
$
26,826
$
27,943
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221115005997/en/
Robert M. Thornton, Jr. Chief Executive Officer
(770) 933-7004
Sunlink Health Systems (AMEX:SSY)
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