SunLink Health Systems, Inc. (NYSE American: SSY) disclosed today a loss from continuing operations of $824,000 (equating to a loss of $0.12 per fully diluted share) for its third fiscal quarter concluding on March 31, 2024. This contrasts with a loss from continuing operations of $453,000 (or a loss of $0.06 per fully diluted share) for the same quarter in the prior fiscal year.
The net loss for the quarter ending March 31, 2024, stood at $1,396,000 (or a loss of $0.20 per fully diluted share), compared to a net loss of $762,000 (or a loss of $0.11 per fully diluted share) for the corresponding quarter in 2023. The net loss for the third fiscal quarter of 2024 encompassed a loss from discontinued operations of $572,000 (or a loss of $0.08 per fully diluted share). This included a loss of $613,000 arising from the sale of Trace Regional Hospital, an associated medical office building, and three patient clinics. In comparison, the loss from discontinued operations for the quarter ending March 31, 2023, amounted to $309,000 (or a loss of $0.04 per fully diluted share), primarily attributable to Trace’s outcomes.
On January 22, 2024, SunLink’s indirect subsidiary, Southern Health Corporation of Houston, Inc. (“Southern”), finalized revised agreements for the sale of Trace Regional Hospital, a medical office building, and three patient clinics in Chickasaw County, MS, to Progressive Health of Houston, LLC (“Progressive”). As part of these revised agreements, Southern sold certain intangible and personal property assets to Progressive for $500,000 under an asset purchase agreement, entered into a six-month net lease of certain hospital real property to Progressive for $20,000 per month, and engaged Progressive under a management agreement to oversee Trace’s operations until the receipt of specific regulatory approvals. Additionally, Southern entered a real estate purchase agreement with Progressive for the purchase of certain Trace real estate for $2,000,000 by July 31, 2024. These transactions resulted in an impairment charge of $1,974,000 in the quarter ending December 31, 2023, to adjust the net assets to be sold, as well as a $613,000 loss recorded in the quarter ending March 31, 2024, due to the net change in assets sold and liabilities assumed post-impairment charge calculation. SunLink is presently marketing for sale Trace Extended Care & Rehabilitation, a skilled care nursing facility adjacent to Trace’s campus, which Southern retains ownership of. The financial outcomes for Trace and Trace Extended Care are reflected in discontinued operations for the current fiscal year, with prior period financial information restated to incorporate them in discontinued operations. However, there’s no assurance regarding the completion of the Trace transactions or the sale of Trace Extended Care.
Consolidated net revenues for the fiscal quarters ending March 31, 2024, and 2023, amounted to $7,462,000 and $8,181,000, respectively, primarily driven by pharmacy net revenues. Pharmacy net revenues for the quarter ending March 31, 2024, decreased by $729,000 (9%) compared to the same period in the prior year, attributed to reduced pharmacy scripts and durable medical equipment shipments. Notably, the quarter ending March 31, 2024, includes $57 of prior period sales tax credits related to such sales tax refund claims.
SunLink reported an operating loss of $853,000 for the quarter ending March 31, 2024, in contrast to an operating loss of $467,000 for the quarter ending March 31, 2023. This year’s operating loss primarily stemmed from decreased net revenues.
For the nine months ending March 31, 2024, SunLink reported a loss from continuing operations of $1,659,000 (or a loss of $0.24 per fully diluted share), compared to earnings from continuing operations of $1,219,000 (or $0.17 per fully diluted share) for the same period in 2023. The net loss for the nine months ending March 31, 2024, amounted to $5,815,000 (or a loss of $0.83 per fully diluted share), compared to a net loss of $369,000 (or $0.05 per fully diluted share) for the same period in 2023. The net loss for the nine months ending March 31, 2024, included a loss from discontinued operations of $4,156,000 (or a loss of $0.59 per fully diluted share), compared to a loss from discontinued operations of $1,588,000 (or a loss of $0.23 per fully diluted share) for the nine months ending March 31, 2023.
Consolidated net revenues for the nine months ending March 31, 2024, and 2023, stood at $24,527,000 and $26,270,000, respectively. Pharmacy net revenues for the nine months ending March 31, 2023, included $2,615,000 from the reversal of reserves for certain sales taxes previously accrued. However, excluding the effect of sales tax refunds and reversal of sales tax accruals, net revenues increased by 2% in the nine months ending March 31, 2024, compared to the previous year, primarily due to increased volume of Retail and Institutional pharmacy scripts.
SunLink reported an operating loss of $1,736,000 for the nine months ending March 31, 2024, compared to an operating profit of $1,186,000 for the same period in 2023. Last year’s operating profit primarily resulted from the reversal of accrued sales tax reserves.
Regarding the COVID-19 pandemic, SunLink experienced ongoing adverse effects in the quarter ending March 31, 2024, and anticipates such effects to persist, particularly concerning salaries and wages pressure, workforce shortages, supply chain disruption, and broad inflationary pressures. Estimating the continuing effects on future revenues, expenses, or changes in accounting judgments that could materially affect financial statements remains challenging, contingent upon the severity and duration of these effects, as well as any additional government actions or regulatory changes addressing them.
SunLink Health Systems, Inc. functions as the parent company of subsidiaries operating a pharmacy business and an information technology business in the Southeast. For further information, visit the Company’s website.
This press release contains forward-looking statements subject to risks, uncertainties, and other factors, which could lead to actual results differing materially from anticipated outcomes. Detailed risks, uncertainties, and other factors are disclosed in the company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023, and other filings with the Securities and Exchange Commission available at www.sec.gov.
