SunLink Health Systems, Inc. Announces Fiscal 2009 Annual and Fourth Quarter Results

October 2, 2009 9:39 AM EDT

ATLANTA--(BUSINESS WIRE)-- SunLink Health Systems, Inc. (NYSE Amex: SSY) today announced earnings from continuing operations for its fourth fiscal quarter ended June 30, 2009 of $850,000, or $0.11 per fully diluted share, compared to earnings from continuing operations of $579,000, or $0.07 per fully diluted share, for the quarter ended June 30, 2009. For the fiscal year ended June 30, 2009, SunLink reported earnings from continuing operations of $1,067,000, or $0.13 per fully diluted share, compared to earnings of $2,009,000, or $0.26 per fully diluted share, for the fiscal year ended June 30, 2008.

SunLink reported net earnings of $891,000, or $0.11 per fully diluted share, for the quarter ended June 30, 2009, compared to net earnings of $427,000, or $0.05 per fully diluted share, for the comparable quarter a year ago. For the fiscal year ended June 30, 2009, SunLink reported net earnings of $912,000, or $0.11 per fully diluted share compared to net earnings of $1,616,000, or $0.21 per share, for the fiscal year ended June 30, 2008.

Consolidated net revenues for the quarters ended June 30, 2009 and 2008 were $49,255,000 and $43,819,000, respectively, an increase of 12.4% for the fourth fiscal quarter. SunLink's Specialty Pharmacy segment, which began business when it acquired Carmichael's Cashway Pharmacy, Inc. on April 22, 2008, added $10,599,000 of net revenue for the quarter ended June 30, 2009 compared to $7,059,000 last year. The Healthcare Facilities segment net revenues for the quarter ended June 30, 2009 was $38,656,000 compared to $36,760,000 for the comparable quarter a year ago. The most recent fourth quarter's results included an aggregate of $775,000 from state indigent care programs and positive prior year third-party payor settlements compared to $1,612,000 in the quarter ended June 30, 2008. Consolidated net revenues for the fiscal year ended June 30, 2009 increased by 25.8% to $199,254,000 compared to $158,431,000 in the comparable period a year ago. The Specialty Pharmacy segment had $47,329,000 of net revenue for the year ended June 30, 2009 compared to $7,059,000 for the prior fiscal year. The Healthcare Facilities segment net revenues for the fiscal year ended June 30, 2009 were $151,925,000 compared to $151,372,000 for the fiscal year ended June 30, 2008.

The company's operating profit for the quarter ended June 30, 2009 was $2,354,000, or 4.8% of net revenues, compared to an operating profit for the quarter ended June 30, 2008 of $1,679,000, or 3.8% of net revenues. Operating profit as a percentage of net revenues increased in the fiscal year ended June 30, 2009 due to operating profit added by the Specialty Pharmacy segment. Operating profit for the fiscal year ended June 30, 2009 was $5,679,000, or 2.9% of net revenues, compared to $5,405,000, or 3.4% of net revenues, for the fiscal year ended June 30, 2008. Adjusted EBITDA (a non-GAAP measure of the liquidity of the company) at SunLink's Healthcare Facilities segment for the fourth fiscal quarter increased to $4,005,000 from $3,867,000 in the comparable quarter a year ago. Adjusted EBITDA for SunLink's Specialty Pharmacy segment was $1,205,000 in the fourth fiscal quarter compared to $821,000 in the comparable quarter a year ago which included Specialty Pharmacy results for 71 days.

SunLink Health Systems, Inc. currently operates seven community hospitals, three nursing homes and one home care business in the Southeast and Midwest and its specialty pharmacy business, SunLink ScriptsRx, in Louisiana. Each SunLink hospital is the only hospital in its community. SunLink's operating strategy is to link patients' needs with dedicated physicians and health professionals to deliver quality, efficient medical care and healthcare products and services in each area it serves. For additional information on SunLink Health Systems, Inc., please visit the company's website at www.sunlinkhealth.com.

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, 2009 and other filings with the Securities and Exchange Commission which can be located at www.sec.gov.

Earnings before income taxes, interest, depreciation and amortization ("EBITDA") represent the sum of income before income taxes, interest, depreciation and amortization. We understand that certain industry analysts and investors generally consider EBITDA to be one measure of the liquidity of the company, and it is presented to assist analysts and investors in analyzing the ability of the company to generate cash, service debt and meet capital requirements. We believe increased EBITDA is an indicator of improved ability to service existing debt and to satisfy capital requirements. EBITDA, however, is not a measure of financial performance under accounting principles generally accepted in the United States of America and should not be considered an alternative to net income as a measure of operating performance or to cash liquidity. Because EBITDA is not a measure determined in accordance with accounting principles generally accepted in the United States of America and is thus susceptible to varying calculations, EBITDA, as presented, may not be comparable to other similarly titled measures of other corporations. Net cash provided by (used in) operations for the three months and fiscal year ended June 30, 2009 and 2008, respectively, is shown below. Healthcare Facilities Adjusted EBITDA and Specialty Pharmacy Adjusted EBITDA is the EBITDA for those facilities without any allocation of corporate overhead.

                 Three Months ended              Fiscal Year ended

                 June 30,                        June 30,

                   2009            2008            2009            2008

Healthcare
Facilities       $ 4,005,000     $ 3,867,000     $ 14,631,000    $ 14,921,000
Adjusted EBITDA

Specialty
Pharmacy           1,205,000       821,000         3,394,000       821,000
Adjusted EBITDA

Corporate          (1,097,000 )    (1,338,000 )    (5,017,000 )    (4,825,000 )
overhead costs

Taxes and
interest           (1,517,000 )    (812,000   )    (4,668,000 )    (2,950,000 )
expense

Other non-cash
expenses and
net changes in     1,559,000       (2,797,000 )    (3,910,000 )    (6,287,000 )
operating
assets and
liabilities

Net cash
provided by      $ 4,155,000     $ (259,000   )  $ 4,430,000     $ 1,680,000
(used in)
operations

SUNLINK HEALTH SYSTEMS, INC. ANNOUNCES

FISCAL 2009 FOURTH QUARTER AND FULL YEAR

RESULTS

Amounts in 000's, except per share and volume amounts

CONSOLIDATED STATEMENTS OF EARNINGS

               Three Months Ended June 30,                     Twelve Months Ended June 30,

                  2009                      2008                 2009                  2008

                             % of Net                 % of                  % of                  % of Net
                                                      Net                   Net

                Amount       Revenues     Amount      Revenues Amount       Revenues Amount       Revenues

Net Revenues    $ 49,255       100.0   %  $ 43,819    100.0 %  $ 199,254    100.0 %  $ 158,431    100.0 %

Costs and
Expenses:

 Cost of goods    6,467        13.1    %    4,571     10.4  %    31,766     15.9  %    4,571      2.9   %
 sold

 Salaries,
 wages and        19,121       38.8    %    19,495    44.5  %    78,813     39.6  %    73,852     46.6  %
 benefits

 Provision for    6,402        13.0    %    5,142     11.7  %    24,533     12.3  %    22,013     13.9  %
 bad debts

 Supplies         3,841        7.8     %    3,272     7.5   %    14,744     7.4   %    14,615     9.2   %

 Purchased        2,834        5.8     %    2,476     5.7   %    11,548     5.8   %    9,961      6.3   %
 services

 Other
 operating        5,652        11.5    %    5,164     11.8  %    21,616     10.8  %    19,872     12.5  %
 expenses

 Rents and        825          1.7     %    349       0.8   %    3,226      1.6   %    2,630      1.7   %
 leases

 Impairment of
 construction     -            0.0     %    -         0.0   %    433        0.2   %    -          0.0   %
 in process

 Depreciation
 and              1,759        3.6     %    1,671     3.8   %    6,896      3.5   %    5,512      3.5   %
 amortization

Operating         2,354        4.8     %    1,679     3.8   %    5,679      2.9   %    5,405      3.4   %
Profit

 Gain on sales    -            0.0     %    -         0.0   %    180        0.1   %    -          0.0   %
 of assets

 Loss on early
 repayment of     -            0.0     %    (267   )  -0.6  %    -          0.0   %    (267    )  -0.2  %
 debt

 Interest         (947    )    -1.9    %    (850   )  -1.9  %    (3,765  )  -1.9  %    (2,114  )  -1.3  %
 Expense

 Interest         11           0.0     %    25        0.1   %    50         0.0   %    72         0.0   %
 Income

Earnings from
Continuing
Operations        1,418        2.9     %    587       1.3   %    2,144      1.1   %    3,096      2.0   %
before Income
Taxes

Income Tax        568          1.2     %    8         0.0   %    1,077      0.5   %    1,087      0.7   %
Expense

Earnings from
Continuing        850          1.7     %    579       1.3   %    1,067      0.5   %    2,009      1.3   %
Operations

Loss from
Discontinued
Operations,       41           0.1     %    (152   )  -0.3  %    (155    )  -0.1  %    (393    )  -0.2  %
net of income
taxes

 Net Earnings   $ 891          1.8     %  $ 427       1.0   %  $ 912        0.5   %  $ 1,616      1.0   %

Earnings Per Share from
Continuing Operations:

 Basic          $ 0.11                    $ 0.07               $ 0.13                $ 0.26

 Diluted        $ 0.11                    $ 0.07               $ 0.13                $ 0.26

Loss Per Share from
Discontinued Operations:

 Basic          $ 0.01                    $ (0.02  )           $ (0.02   )           $ (0.05   )

 Diluted        $ 0.01                    $ (0.02  )           $ (0.02   )           $ (0.05   )

Net Earnings
Per Share:

 Basic          $ 0.11                    $ 0.05               $ 0.11                $ 0.21

 Diluted        $ 0.11                    $ 0.05               $ 0.11                $ 0.21

Weighted Average Common
Shares Outstanding:

 Basic            8,001                     7,850                7,975                 7,605

 Diluted          8,020                     8,049                8,019                 7,855

HEALTHCARE FACILITIES VOLUME STATISTICS

 Admissions       1,952                     2,046                8,397                 8,865

 Equivalent       6,000                     6,118                24,548                25,390
 Admissions

 Surgeries        988                       1,032                3,805                 4,422

 Net revenue
 per            $ 6,443                   $ 6,009              $ 6,189               $ 5,962
 equivalent
 admission

 SUMMARY
 BALANCE        June 30,     June 30,
 SHEETS

                2009         2008

 ASSETS

 Cash and Cash  $ 2,364      $ 1,716
 Equivalents

 Accounts
 Receivable -     21,116       20,052
 net

 Other Current    13,543       13,404
 Assets

 Property
 Plant and        46,122       51,220
 Equipment,
 net

 Long-term        24,238       25,232
 Assets

                $ 107,383    $ 111,624

 LIABILITIES AND SHAREHOLDERS' EQUITY

 Current        $ 25,400     $ 27,069
 Liabilities

 Long-term Debt
 and Other        40,206       44,311
 Noncurrent
 Liabilities

 Shareholders'    41,777       40,244
 Equity

                $ 107,383    $ 111,624

    Source: SunLink Health Systems, Inc.

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