SunLink Health Systems, Inc. Announces Fiscal 2024 Second Quarter Results
- SunLink Health Systems, Inc. reported a loss from continuing operations for the second fiscal quarter ended December 31, 2023, compared to earnings in 2022.
- The net loss included an impairment charge related to the sale of Trace Regional Hospital.
- The company announced revised agreements for the sale of Trace to Progressive Health of Houston, LLC.
- Consolidated net revenues decreased, and the company reported an operating loss for the quarter.
- SunLink reported a loss from continuing operations for the six months ended December 31, 2023.
- Adverse effects from the COVID-19 pandemic impacted the company's operations.
- The net loss for the quarter included a loss from discontinued operations of $2,668,000.
- Consolidated net revenues decreased from $10,640,000 to $8,510,000 for the quarters ended December 31, 2022 and 2023, respectively.
- The company reported an operating loss of $433,000 for the quarter ended December 31, 2023.
- SunLink reported a net loss for the six months ended December 31, 2023, including a loss from discontinued operations of $3,584,000.
Insights
The reported financial outcomes for SunLink Health Systems, Inc. indicate a significant year-over-year decline in both quarterly and semi-annual performance. A critical aspect of this downturn is the operating loss of $433,000 for the quarter and $883,000 for the six-month period, which contrasts starkly with the operating profits reported in the previous year. This shift from profit to loss is a red flag for investors and stakeholders, suggesting a need to reassess the company's operational efficiency and cost management strategies.
Moreover, the reported impairment charge of $1,974,000 on the sale of certain assets is a notable event, reflecting adjustments to the carrying value of the assets to reflect their fair market value. While this is a non-cash expense, it does affect the company's balance sheet and could influence investor perception of asset quality and management's ability to realize value from asset sales.
Lastly, the consolidated net revenue decline from $10,640,000 to $8,510,000 for the quarter is concerning, especially considering that the previous year's figures were bolstered by a one-time reversal of sales tax reserves. The underlying revenue trend, excluding these one-time effects, suggests a need to analyze the company's revenue drivers and market positioning to understand the sustainability of its business model.
The healthcare sector, where SunLink Health Systems operates, has been subject to significant pressures due to the COVID-19 pandemic, including workforce shortages, supply chain disruptions and inflationary pressures. These factors are likely contributing to the company's reported financial challenges. The mention of increased pharmacy script volumes indicates a potential area of growth, but it is unclear if this is sufficient to offset the broader negative impacts on the company's financial health.
Additionally, the sale of assets such as Trace Regional Hospital and related properties suggests a strategic repositioning or a need for liquidity. The outcome of these transactions will be critical for the company's future financial stability. The ongoing marketing of the Trace Extended Care & Rehabilitation facility could further impact the company's financial position, depending on the success of the sale and the terms achieved.
The disclosure of the asset purchase agreement and the real estate purchase agreement with Progressive Health of Houston, LLC, as well as the management and lease agreements, indicates a complex transaction that may have significant legal and financial implications for SunLink Health Systems. The termination of the previous agreement with Progressive and the entry into revised agreements could reflect negotiations that have potential risks and benefits that stakeholders should monitor closely.
Furthermore, the company's reference to discussions with taxing authorities and legal counsel regarding sales tax accruals suggests that there may be ongoing tax liabilities or contingencies that could affect future financial statements. This highlights the importance of understanding the legal and regulatory environment in which the company operates and how changes in such can have material effects on the company's financial health.
Net loss for the quarter ended December 31, 2023 was
On January 22, 2024, the Company's indirect subsidiary, Southern Health Corporation of
Consolidated net revenues for each fiscal quarters ended December 31, 2023 and 2022 were
SunLink reported an operating loss for the quarter ended December 31, 2023 of
SunLink reported a loss from continuing operations of
Consolidated net revenues for each of the six months ended December 31, 2023 and 2022 were
SunLink reported an operating loss for the six months ended December 31, 2023 of
COVID-19 Pandemic
The Company continued to experience adverse after-effects of the COVID-19 pandemic in the quarter ended December 31, 2023 and believes such effects will likely continue to affect its assets and operations in the foreseeable future particularly from salaries and wages pressure, workforce shortages, supply chain disruption and broad inflationary pressures. Our ability to make estimates of any such continuing effects on future revenues, expenses or changes in accounting judgments that have had or are reasonably likely to have a material effect on our financial statements is very limited, depending as they do on the severity and length thereof; as well as any further government actions and/or regulatory changes intended to address such effects.
SunLink Health Systems, Inc. is the parent company of subsidiaries that own and operate a pharmacy business and an information technology business in the Southeast. 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, 2023 and other filings with the Securities and Exchange Commission which can be located at www.sec.gov.
| SUNLINK HEALTH SYSTEMS, INC. ANNOUNCES | |||||||||||||||||||||||||||||
| FISCAL 2024 SECOND QUARTER RESULTS | |||||||||||||||||||||||||||||
| Amounts in 000's, except per share | |||||||||||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) | |||||||||||||||||||||||||||||
| Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||||||||||||||||
2023 |
2022 |
2023 |
2022 |
||||||||||||||||||||||||||
| % of Net | % of Net | % of Net | % of Net | ||||||||||||||||||||||||||
| Amount | Revenues | Amount | Revenues | Amount | Revenues | Amount | Revenues | ||||||||||||||||||||||
| Net revenues | $ |
8,510 |
|
|
100.0 |
% |
$ |
10,640 |
|
100.0 |
% |
$ |
17,065 |
|
100.0 |
% |
$ |
18,089 |
|
100.0 |
% |
||||||||
| Costs and Expenses: | |||||||||||||||||||||||||||||
| Cost of goods sold |
|
4,761 |
|
|
55.9 |
% |
|
4,518 |
|
42.5 |
% |
|
9,532 |
|
55.9 |
% |
|
8,887 |
|
49.1 |
% |
||||||||
| Salaries, wages and benefits |
|
2,668 |
|
|
31.4 |
% |
|
2,481 |
|
23.3 |
% |
|
5,285 |
|
31.0 |
% |
|
5,004 |
|
27.7 |
% |
||||||||
| Supplies |
|
39 |
|
|
0.5 |
% |
|
35 |
|
0.3 |
% |
|
73 |
|
0.4 |
% |
|
65 |
|
0.4 |
% |
||||||||
| Purchased services |
|
281 |
|
|
3.3 |
% |
|
236 |
|
2.2 |
% |
|
567 |
|
3.3 |
% |
|
486 |
|
2.7 |
% |
||||||||
| Other operating expenses |
|
784 |
|
|
9.2 |
% |
|
720 |
|
6.8 |
% |
|
1,690 |
|
9.9 |
% |
|
1,253 |
|
6.9 |
% |
||||||||
| Rent and leases |
|
92 |
|
|
1.1 |
% |
|
92 |
|
0.9 |
% |
|
183 |
|
1.1 |
% |
|
184 |
|
1.0 |
% |
||||||||
| Depreciation and amortization |
|
318 |
|
|
3.7 |
% |
|
288 |
|
2.7 |
% |
|
618 |
|
3.6 |
% |
|
557 |
|
3.1 |
% |
||||||||
| Operating profit (loss) |
|
(433 |
) |
|
-5.1 |
% |
|
2,270 |
|
21.3 |
% |
|
(883 |
) |
-5.2 |
% |
|
1,653 |
|
9.1 |
% |
||||||||
| Interest Income - net |
|
29 |
|
|
0.3 |
% |
|
5 |
|
0.0 |
% |
|
51 |
|
0.3 |
% |
|
5 |
|
0.0 |
% |
||||||||
| Gain on sale of assets |
|
0 |
|
|
0.0 |
% |
|
1 |
|
0.0 |
% |
|
2 |
|
0.0 |
% |
|
13 |
|
0.1 |
% |
||||||||
| Earnings (Loss) from Continuing Operations before Income Taxes |
|
(404 |
) |
|
-4.7 |
% |
|
2,276 |
|
21.4 |
% |
|
(830 |
) |
-4.9 |
% |
|
1,671 |
|
9.2 |
% |
||||||||
| Income Tax (benefit) expense |
|
3 |
|
|
0.0 |
% |
|
(1 |
) |
0.0 |
% |
|
5 |
|
0.0 |
% |
|
(1 |
) |
0.0 |
% |
||||||||
| Earnings (Loss) from Continuing Operations |
|
(407 |
) |
|
-4.8 |
% |
|
2,277 |
|
21.4 |
% |
|
(835 |
) |
-4.9 |
% |
|
1,672 |
|
9.2 |
% |
||||||||
| Loss from Discontinued Operations, net of tax |
|
(2,668 |
) |
|
-31.4 |
% |
|
(326 |
) |
-3.1 |
% |
|
(3,584 |
) |
-21.0 |
% |
|
(1,279 |
) |
-7.1 |
% |
||||||||
| Net Earnings (Loss) | $ |
(3,075 |
) |
|
-36.1 |
% |
$ |
1,951 |
|
18.3 |
% |
$ |
(4,419 |
) |
-25.9 |
% |
$ |
393 |
|
2.2 |
% |
||||||||
| Earnings (Loss) Per Share from Continuing Operations: | |||||||||||||||||||||||||||||
Basic |
$ |
(0.06 |
) |
$ |
0.32 |
|
$ |
(0.12 |
) |
$ |
0.24 |
|
|||||||||||||||||
Diluted |
$ |
(0.06 |
) |
$ |
0.32 |
|
$ |
(0.12 |
) |
$ |
0.24 |
|
|||||||||||||||||
| Earnings (Loss) Per Share from Discontinued Operations: | |||||||||||||||||||||||||||||
| Basic | $ |
(0.38 |
) |
$ |
(0.05 |
) |
$ |
(0.51 |
) |
$ |
(0.18 |
) |
|||||||||||||||||
| Diluted | $ |
(0.38 |
) |
$ |
(0.05 |
) |
$ |
(0.51 |
) |
$ |
(0.18 |
) |
|||||||||||||||||
| Net Earnings (Loss) Per Share: | |||||||||||||||||||||||||||||
| Basic | $ |
(0.44 |
) |
$ |
0.28 |
|
$ |
(0.63 |
) |
$ |
0.06 |
|
|||||||||||||||||
| Diluted | $ |
(0.44 |
) |
$ |
0.28 |
|
$ |
(0.63 |
) |
$ |
0.06 |
|
|||||||||||||||||
| Weighted Average Common Shares Outstanding: | |||||||||||||||||||||||||||||
| Basic |
|
7,040 |
|
|
7,031 |
|
|
7,039 |
|
|
7,007 |
|
|||||||||||||||||
| Diluted |
|
7,040 |
|
|
7,033 |
|
|
7,039 |
|
|
7,010 |
|
|||||||||||||||||
| SUMMARY BALANCE SHEETS | December 31, | June 30, | |||||||||||||||||||||||||||
2023 |
2023 |
||||||||||||||||||||||||||||
| ASSETS | |||||||||||||||||||||||||||||
| Cash and Cash Equivalents | $ |
2,055 |
|
$ |
4,486 |
|
|||||||||||||||||||||||
| Receivable - net |
|
3,061 |
|
|
2,592 |
|
|||||||||||||||||||||||
| Current Assets Held for Sale |
|
5,328 |
|
|
1,920 |
|
|||||||||||||||||||||||
| Other Current Assets |
|
3,266 |
|
|
3,276 |
|
|||||||||||||||||||||||
| Property Plant and Equipment, net |
|
2,921 |
|
|
2,717 |
|
|||||||||||||||||||||||
| Long-term Assets |
|
2,156 |
|
|
8,277 |
|
|||||||||||||||||||||||
$ |
18,787 |
|
$ |
23,268 |
|
||||||||||||||||||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||||||||||||||||||
| Current Liabilities | $ |
5,228 |
|
$ |
4,869 |
|
|||||||||||||||||||||||
| Noncurrent Liabilities |
|
555 |
|
|
982 |
|
|||||||||||||||||||||||
| Shareholders' Equity |
|
13,004 |
|
|
17,417 |
|
|||||||||||||||||||||||
$ |
18,787 |
|
$ |
23,268 |
|
||||||||||||||||||||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20240213146430/en/
Robert M.
Chief Executive Officer
(770) 933-7004
Source: SunLink Health Systems, Inc.
FAQ
What was SunLink Health Systems, Inc.'s loss from continuing operations for the second fiscal quarter ended December 31, 2023?
What was the net loss for the quarter ended December 31, 2023?
What were the revised agreements for the sale of Trace to Progressive Health of Houston, LLC?
What were the consolidated net revenues for the quarters ended December 31, 2023 and 2022?
What were the operating results for the quarter ended December 31, 2023?
What was SunLink Health Systems, Inc.'s loss from continuing operations for the six months ended December 31, 2023?
How did the COVID-19 pandemic impact SunLink Health Systems, Inc.?
