Company Quick10K Filing
Sunlink Health Systems
Price1.36 EPS-0
Shares7 P/E-8
MCap10 P/FCF-6
Net Debt-5 EBIT-1
TEV5 TEV/EBIT-5
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-14
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10-Q 2018-12-31 Filed 2019-02-14
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10-Q 2014-12-31 Filed 2015-02-18
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10-K 2014-06-30 Filed 2014-09-26
10-Q 2014-03-31 Filed 2014-05-14
10-Q 2013-12-31 Filed 2014-02-14
10-Q 2013-09-30 Filed 2013-11-13
10-K 2013-06-30 Filed 2013-09-27
10-Q 2013-03-31 Filed 2013-05-15
10-Q 2012-12-31 Filed 2013-02-14
10-Q 2012-09-30 Filed 2012-11-14
10-K 2012-06-30 Filed 2012-09-20
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10-Q 2011-12-31 Filed 2012-02-14
10-Q 2011-09-30 Filed 2011-11-10
10-K 2011-06-30 Filed 2011-09-27
10-Q 2011-03-31 Filed 2011-05-16
10-Q 2010-12-31 Filed 2011-02-14
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8-K 2020-03-24
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8-K 2018-12-13
8-K 2018-11-29
8-K 2018-11-12
8-K 2018-10-11

SSY 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Note 1. - Basis of Presentation and Adoption of Recently Issued Accounting Standards
Note 2. - Business Operations
Note 4. - Shareholders' Equity
Note 5. - Revenue and Accounts Receivables
Note 6. - Intangible Assets
Note 7. - Long - Term Debt
Note 8. - Income Taxes
Note 9. - Leases
Note 10. - Accrued Sales Tax
Note 11. - Commitments and Contingencies
Note 12. - Related Party Transactions
Note 13. - Asset Sales
Note 14. - Land Acquisition
Note 15. - Financial Information By Segment
Note 15. - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 6. Exhibits
EX-31.1 ssy-ex311_6.htm
EX-31.2 ssy-ex312_8.htm
EX-32.1 ssy-ex321_7.htm
EX-32.2 ssy-ex322_9.htm

Sunlink Health Systems Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
806448321602012201420172020
Assets, Equity
3526178-1-102012201420172020
Rev, G Profit, Net Income
151050-5-102012201420172020
Ops, Inv, Fin

10-Q 1 ssy-10q_20200331.htm 10-Q ssy-10q_20200331.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number 1-12607

 

SUNLINK HEALTH SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

 

 

 

 

 

Ohio

 

31-0621189

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

900 Circle 75 Parkway, Suite 1120, Atlanta, Georgia 30339

(Address of principal executive offices)

(Zip Code)

(770) 933-7000

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered Symbol(s)

Common Shares without par value

 

SSY

 

NYSE American

Preferred Share Purchase Rights

 

 

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filings requirements for the past 90 days.    Yes       No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (of for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

  

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes       No  

Securities registered pursuant to Section 12(b) of the Act:

 The number of Common Shares, without par value, outstanding as of May 13, 2020 was 6,899,321 . 

 

 

 


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

 

SUNLINK HEALTH SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

 

 

March 31,

 

 

 

 

 

 

 

2020

 

 

June 30,

 

 

 

(unaudited)

 

 

2019

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

4,003

 

 

$

7,742

 

Receivables - net

 

 

5,677

 

 

 

4,715

 

Inventory

 

 

2,102

 

 

 

2,016

 

Prepaid expense and other assets

 

 

2,359

 

 

 

2,185

 

Total current assets

 

 

14,141

 

 

 

16,658

 

Property, plant and equipment, at cost

 

 

19,462

 

 

 

19,520

 

Less accumulated depreciation

 

 

14,039

 

 

 

14,277

 

Property, plant and equipment - net

 

 

5,423

 

 

 

5,243

 

Noncurrent Assets:

 

 

 

 

 

 

 

 

Intangible assets - net

 

 

1,266

 

 

 

1,353

 

Income tax receivable

 

 

0

 

 

 

153

 

Assets held for sale

 

 

0

 

 

 

249

 

Right of use assets

 

 

1,076

 

 

 

0

 

Other noncurrent assets

 

 

368

 

 

 

763

 

Total noncurrent assets

 

 

2,710

 

 

 

2,518

 

TOTAL ASSETS

 

$

22,274

 

 

$

24,419

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,908

 

 

$

1,564

 

Current maturities of long-term debt, net of debt issuance costs

 

 

34

 

 

 

2,836

 

Accrued payroll and related taxes

 

 

2,081

 

 

 

1,960

 

Accrued sales tax

 

 

1,316

 

 

 

843

 

Current operating lease liabilities

 

 

406

 

 

 

0

 

Other accrued expenses

 

 

708

 

 

 

1,207

 

Total current liabilities

 

 

6,453

 

 

 

8,410

 

Long-Term Liabilities

 

 

 

 

 

 

 

 

Long-term debt

 

 

98

 

 

 

127

 

Noncurrent liability for professional liability risks

 

 

414

 

 

 

705

 

Long-term operating lease liabilities

 

 

671

 

 

 

0

 

Other noncurrent liabilities

 

 

131

 

 

 

134

 

Total long-term liabilities

 

 

1,314

 

 

 

966

 

Commitment and Contingencies

 

 

 

 

 

 

 

 

Shareholders’ Equity

 

 

 

 

 

 

 

 

Preferred Shares, authorized and unissued, 2,000 shares

 

 

0

 

 

 

0

 

Common Shares, without par value:

 

 

 

 

 

 

 

 

Issued and outstanding, 6,899 shares at March 31, 2020 and 6,987 at  June 30, 2019

 

 

3,450

 

 

 

3,493

 

Additional paid-in capital

 

 

10,713

 

 

 

10,745

 

Retained earnings

 

 

597

 

 

 

1,058

 

Accumulated other comprehensive loss

 

 

(253

)

 

 

(253

)

Total Shareholders’ Equity

 

 

14,507

 

 

 

15,043

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

22,274

 

 

$

24,419

 

 

See notes to condensed consolidated financial statements.

2


SUNLINK HEALTH SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE EARNINGS (LOSS)

(In thousands, except per share amounts)

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net revenues

 

$

12,667

 

 

$

12,361

 

 

$

37,124

 

 

$

34,719

 

Costs and Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

5,370

 

 

 

5,539

 

 

 

14,811

 

 

 

14,711

 

Salaries, wages and benefits

 

 

4,893

 

 

 

4,931

 

 

 

14,651

 

 

 

14,225

 

Supplies

 

 

317

 

 

 

329

 

 

 

970

 

 

 

942

 

Purchased services

 

 

791

 

 

 

663

 

 

 

2,247

 

 

 

1,817

 

Other operating expenses

 

 

806

 

 

 

865

 

 

 

2,903

 

 

 

2,858

 

Rent and lease expense

 

 

157

 

 

 

155

 

 

 

463

 

 

 

458

 

Depreciation and amortization

 

 

371

 

 

 

367

 

 

 

1,056

 

 

 

1,056

 

Operating Profit (Loss)

 

 

(38

)

 

 

(488

)

 

 

23

 

 

 

(1,348

)

Other Income (Expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gains on sale of assets

 

 

0

 

 

 

0

 

 

 

193

 

 

 

454

 

Loss on extinguishment of debt

 

 

(18

)

 

 

0

 

 

 

(178

)

 

 

0

 

Interest income (expense), net

 

 

10

 

 

 

(63

)

 

 

(24

)

 

 

(185

)

Earnings (Loss) from Continuing Operations before income taxes

 

 

(46

)

 

 

(551

)

 

 

14

 

 

 

(1,079

)

Income Tax Benefit

 

 

0

 

 

 

(226

)

 

 

0

 

 

 

(226

)

Earnings (Loss) from Continuing Operations

 

 

(46

)

 

 

(325

)

 

 

14

 

 

 

(853

)

Income (Loss) from Discontinued Operations, net of tax

 

 

(112

)

 

 

1,367

 

 

 

(475

)

 

 

1,320

 

Net Income (Loss)

 

 

(158

)

 

 

1,042

 

 

 

(461

)

 

 

467

 

Other comprehensive income

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Comprehensive Earnings (Loss)

 

$

(158

)

 

$

1,042

 

 

$

(461

)

 

$

467

 

Earnings (Loss) Per Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.01

)

 

$

(0.05

)

 

$

0.00

 

 

$

(0.12

)

Diluted

 

$

(0.01

)

 

$

(0.05

)

 

$

0.00

 

 

$

(0.12

)

Discontinued Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.02

)

 

$

0.20

 

 

$

(0.07

)

 

$

0.18

 

Diluted

 

$

(0.02

)

 

$

0.20

 

 

$

(0.07

)

 

$

0.18

 

Net Earnings (Loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.02

)

 

$

0.15

 

 

$

(0.07

)

 

$

0.06

 

Diluted

 

$

(0.02

)

 

$

0.15

 

 

$

(0.07

)

 

$

0.06

 

Weighted-Average Common Shares Outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

6,956

 

 

 

6,987

 

 

 

6,976

 

 

 

7,203

 

Diluted

 

 

6,956

 

 

 

6,987

 

 

 

6,995

 

 

 

7,203

 

 

See notes to condensed consolidated financial statements.

3


SUNLINK HEALTH SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Nine Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Net Cash Used in Operating Activities

 

$

(300

)

 

$

(517

)

Cash Flows Provided by (Used in) Investing Activities:

 

 

 

 

 

 

 

 

Expenditures for property, plant and equipment - continuing

   operations

 

 

(884

)

 

 

(867

)

Expenditures for property, plant and equipment - discontinued

   operations

 

 

0

 

 

 

(172

)

     Proceeds from sale of Parkside

 

 

0

 

 

 

6,899

 

Proceeds from sale of other assets

 

 

558

 

 

 

937

 

Net Cash Provided by (Used in)  Investing Activities

 

 

(326

)

 

 

6,797

 

Cash Flows Used in Financing Activities:

 

 

 

 

 

 

 

 

Payments on long-term debt

 

 

(3,025

)

 

 

(193

)

Repurchase of common shares

 

 

(88

)

 

 

(383

)

Net Cash Used in Financing Activities

 

 

(3,113

)

 

 

(576

)

Net Increase (Decrease) in Cash and Cash Equivalents

 

 

(3,739

)

 

 

5,704

 

Cash and Cash Equivalents Beginning of Period

 

 

7,742

 

 

 

3,456

 

Cash and Cash Equivalents End of Period

 

$

4,003

 

 

$

9,160

 

Supplemental Disclosure of Cash Flow Information:

 

 

 

 

 

 

 

 

Cash Paid for:

 

 

 

 

 

 

 

 

Interest

 

$

74

 

 

$

168

 

Income taxes

 

$

(43

)

 

$

0

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Assets acquired under capital lease obligations

 

$

0

 

 

$

176

 

     Assets acquired in exchange for note receivable

 

$

371

 

 

$

0

 

     Right-of-use assets obtained in exchange for lease liabilities

 

$

1,462

 

 

$

0

 

 

See notes to condensed consolidated financial statements.

4


SUNLINK HEALTH SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE AND NINE MONTHS ENDED MARCH 31, 2020

(all dollar amounts in thousands except per share amounts)

(Unaudited)

Note 1. –Basis of Presentation and Adoption of Recently Issued Accounting Standards

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements as of March 31, 2020 and for the three and nine month periods ended March 31, 2020 and 2019 have been prepared in accordance with Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (“SEC”) and, as such, do not include all information required by accounting principles generally accepted in the United States of America (“GAAP”). The condensed consolidated June 30, 2019 balance sheet included in this interim filing has been derived from the audited financial statements at that date but does not include all the information and related notes required by GAAP for complete financial statements. These Condensed Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements included in the SunLink Health Systems, Inc. (“SunLink”, “we”, “our”, “ours”, “us” or the “Company”) Annual Report on Form 10-K for the fiscal year ended June 30, 2019, filed with the SEC on September 27, 2019. In the opinion of management, the Condensed Consolidated Financial Statements, which are unaudited, include all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position and results of operations for the periods indicated. The results of operations for the three and nine month periods ended March 31, 2020 are not necessarily indicative of the results that may be expected for the entire fiscal year or any other interim period.

Throughout these notes to the consolidated financial statements, SunLink Health Systems, Inc., and its consolidated subsidiaries are referred to on a collective basis as “SunLink”, “we”, “our”, “ours”, “us” or the “Company.” This drafting style is not meant to indicate that the publicly traded Company or any subsidiary of the Company owns or operates any particular asset, business or property. Each operation and business described in this filing is owned and operated by a distinct and indirect subsidiary of SunLink Health System, Inc.

Adoption of Recently Issued Accounting Standards

ASC 842, “Leases” – On July 1, 2019, the Company adopted cumulative accounting standard updates initially issued by the Financial Accounting Standards Board (“FASB”) that amend the accounting for leases and are codified as Accounting Standards Codification (“ASC”) 842. These lease accounting changes require operating leases be recorded on the balance sheet through the recognition of a liability for the discounted present value of future fixed lease payments and a corresponding right-of-use (“ROU”) asset.  The Company’s accounting for finance leases remained substantially unchanged from its prior accounting for capital leases. The ROU asset recorded at commencement of the lease represents the right to use the underlying asset over the lease term in exchange for the lease payments. Leases with an initial term of 12 months or less which do not have an option to purchase the underlying asset that is deemed reasonably certain to be exercised are not recorded on the balance sheet; rather, rent expense for these leases is recognized on a straight-line basis over the lease term, or when incurred if a month-to-month lease. When readily determinable, the Company uses the interest rate implicit in a lease to determine the present value of future lease payments. For leases where the implicit rate is not readily determinable, the Company’s incremental borrowing rate is utilized. Our lease agreements do not contain any material residual value guarantees.

The Company elected the amended transition requirements allowed for by the FASB in Accounting Standards Update (“ASU”) 2018-11, which provides relief from requirements to recast prior comparative periods under ASC 842. As a result, the prior year comparative financial statements have not been restated to reflect the adoption of ASC 842. Additionally, the Company elected the “package of practical expedients” available in ASC 842 whereby an entity need not reassess expired contracts for lease identification or classification as a finance or operating lease, or reassess the initial direct costs. The Company has not elected the practical expedient to use hindsight to determine the lease term for its leases at transition. Certain of the Company’s lease agreements have lease and non-lease components, which for the majority of leases the Company accounts for separately when the actual lease

5


and non-lease components are determinable. For equipment leases with immaterial non-lease components incorporated into the fixed rent payment, the Company accounts for the lease and non-lease components as a single lease component in determining the lease payment.

The adoption of ASC 842 on July 1, 2019 resulted in the Company recording $1,423 of operating lease liabilities and an equal amount of ROU assets with no impact on retained earnings. The adoption did not have a material impact on the Company’s condensed consolidated statement of operations or condensed consolidated statement of cash flows for the three and nine months ended March 31, 2020.   

Note 2. – Business Operations

SunLink Health Systems, Inc., through subsidiaries, owns businesses which are providers of healthcare services in certain markets in the United States. SunLink’s subsidiaries’ businesses are composed of two business segments:

Healthcare Services

 

A subsidiary which owns and operates Trace Regional Hospital and Floy Dyer Nursing Home (“Trace”), an 84 licensed-bed acute care hospital, located in Houston, Mississippi, which includes an 18-bed geriatric psychology unit (“GPU”), and a 66-bed nursing home. This facility focuses primarily on senior healthcare services.   

 

A subsidiary, SunLink Health Systems Technology (SHS Technology), based in Atlanta, Georgia, which provides information technology (IT) services to outside customers and to SunLink subsidiaries.

 

A subsidiary which owns approximately five (5) acres of unimproved land in Houston, Mississippi.

 

  A subsidiary which owns approximately 25 acres of unimproved land in Ellijay, Georgia.

Pharmacy

The Pharmacy segment is composed of four operational areas which are conducted primarily in rural markets in Louisiana:

 

Retail pharmacy products and services, provided by a retail pharmacy.

 

Institutional pharmacy services consisting of the provision of specialty and non-specialty pharmaceutical and biological products to institutional clients or to patients in institutional settings, such as nursing homes, assisted living facilities, behavioral and specialty hospitals, hospice, and correctional facilities.

 

Non-institutional pharmacy services consisting of the provision of specialty and non-specialty pharmaceutical and biological products to clients or patients in non-institutional settings including private residential homes.

 

Durable medical equipment products and services (“DME”), consisting primarily of the sale and rental of products for institutional clients or to patients in institutional settings and patient-administered home care.

SunLink subsidiaries have conducted the Healthcare Services business since 2001 and the Pharmacy operations since 2008. Our Pharmacy segment currently is operated through Carmichael’s Cashway Pharmacy, Inc. (“Carmichael”), a subsidiary of our SunLink ScriptsRx, LLC subsidiary.

 

COVID-19 Pandemic

A novel strain of coronavirus (“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

6


employees have been working remotely, but we believe these remote work arrangements have not 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 are very recent, rapidly changing and at times, unclear. Nevertheless, as in many healthcare environments, we have experienced COVID-19 illness, including deaths, and some employees have tested positive and have been place on leave or in quarantine.

Since the beginning of the COVID-19 pandemic, our Pharmacy business has experienced negative sales trends, increased costs and reduced staff.  Retail Pharmacy and DME locations are operating with curbside or drive-through services only and many of our primary physician referral sources have been closed or are operating at substantially reduced capacity.  Until these referral sources are open and fully-staffed, we believe the COVID-19 pandemic will continue to affect the demand for DME products and Pharmacy drugs and products. Reductions in employee hours have been made in response to the lower demand. Demand for our Institutional Pharmacy services has been less affected to date. Nursing homes and other customers of such Institutional Pharmacy services are currently being adversely affected by the spreading of the COVID-19 pandemic, and this may be expected to have a further negative effect on such demand.  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 protective equipment and cleaning products.   The effect of the COVID–19 pandemic and public and governmental responses to it negatively affected our third fiscal quarter results, principally in the last two weeks of March 2020.

 

In our Healthcare businesses, we have experienced material reductions in demand due to the COVID-19 outbreak. There appears to be no current demand for nursing home admissions, and clinic visits and hospital services have substantially decreased as well. The availability and cost of medical supplies have adversely affected our Healthcare businesses, especially with respect to access to protective equipment, cleaning supplies and COVID-19 testing materials. We continue to monitor supplies and seek additional sources of many supply items. A reduction of the availability of qualified employees has also occurred. Although the Healthcare and Pharmacy segments received the Paycheck Protection Program (“PPP”) loans totaling approximately $3,234 in April and May, despite good faith efforts to do so, they have not yet been able to rehire or fully replace staff reductions which were previously furloughed or laid off.

 

We believe that existing funds, cash generated from operations and additional sources of and access to financing from COVID-19 related government loans and grants will likely be adequate to satisfy our needs for working capital and capital expenditures in the near term. However, if the COVID-19 pandemic continues for an extended period, we expect to experience significant losses and additional financial assistance will likely be required. The Coronavirus Aid, Relief and Economic Security (“CARES”) Act was enacted by the U.S. government on March 27, 2020. As part of CARES, the PPP loan program was established.  The PPP is administered by the U.S. Small Business Administration. In April and May 2020, the Company and five subsidiaries received approximately $3,234 of PPP loans.  Forgiveness of PPP loans may be available if the loans are used to pay wages, rent, utilities and interest on certain debt during the eight-week period following receipt of the loan proceeds. There can be no assurance, however, that any of the PPP loans we received will be forgiven, or if forgiven, the amount of such forgiveness. Loan proceeds not forgiven are payable over two years  at a 1% annual interest rate. Also, as part of CARES, two subsidiaries of the Company received total payments of approximately $4,082 under the Relief Fund Payments (“RFP”). These RFP funds were allocated to Medicare facilities and providers affected by COVID-19 based on eligible providers net patient revenues and are required to be used for COVID-19 related costs and to offset the effect of COVID-19, including reduced revenues.     

                   

Going forward, the Company is unable to determine the extent to which the COVID-19 pandemic will continue to affect its assets. Our ability to make estimates of the effect 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

7


hospital, nursing home and pharmacy operations; and existing and potential government assistance that may be provided.

Note 3. – Discontinued Operations

All the businesses discussed in the note below are reported as discontinued operations and the condensed consolidated financial statements for all prior periods have been adjusted to reflect this presentation.

Results for all the businesses included in discontinued operations are presented in the following table:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Parkside Nursing Home

 

$

13

 

 

$

1,723

 

 

$

30

 

 

$

5,640

 

Sold Hospitals

 

 

(24

)

 

 

3

 

 

 

(4

)

 

 

15

 

 

 

$

(11

)

 

$

1,726

 

 

$

26

 

 

$

5,655

 

Loss before income taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Parkside Nursing Home

 

$

(13

)

 

$

(185

)

 

$

(193

)

 

$

(121

)

Sold Hospitals

 

 

(66

)

 

 

(126

)

 

 

(181

)

 

 

(188

)

Life sciences and engineering

 

 

(33

)

 

 

(25

)

 

 

(101

)

 

 

(74

)

Loss from discontinued operations before income taxes

 

 

(112

)

 

 

(336

)

 

 

(475

)

 

 

(383

)

      Gain on sale of businesses

 

 

0

 

 

 

2,136

 

 

 

0

 

 

 

2,136

 

Income tax expense

 

 

0

 

 

 

433

 

 

 

0

 

 

 

433

 

Earnings (Loss) from discontinued operations

 

$

(112

)

 

$

1,367

 

 

$

(475

)

 

$

1,320

 

 

Parkside Nursing Home — On March 17, 2019, a subsidiary of the Company sold its Parkside Ellijay Nursing Home and related real estate for $7,300 subject to adjustment for the book value of certain assets and liabilities on the sale date. The pre-tax gain on the sale was $2,136, which was recognized in the three and nine months ended March 31, 2019.  The net proceeds of the sale were retained for working capital and general corporate purposes.

 

Sold Hospitals – Subsidiaries of the Company have sold substantially all the assets of four hospitals (“Sold Hospitals”) during the period July 2, 2012 to August 19, 2016. The loss before income taxes of the Sold Hospitals results primarily from the effects of retained professional liability insurance and claims expenses.

Life Sciences and Engineering Segment —SunLink retained a defined benefit retirement plan which covered substantially all the employees of this segment when the segment was sold in fiscal 1998. Effective February 28, 1997, the plan was amended to freeze participant benefits and close the plan to new participants. Pension expense and related tax benefit or expense is reflected in the results of operations for this segment for the three and nine months ended March 31, 2020 and 2019, respectively.

The components of pension expense for the three months ended March 31, 2020 and 2019, respectively, were as follows:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Interest Cost

 

$

12

 

 

$

14

 

 

$

36

 

 

$

42

 

Expected return on assets

 

 

(8

)

 

 

(9

)

 

 

(25

)

 

 

(27

)

Amortization of prior service cost

 

 

29

 

 

 

20

 

 

 

90

 

 

 

59

 

Net pension expense

 

$

33

 

 

$

25

 

 

$

101

 

 

$

74

 

 

8


SunLink contributed $99  to the plan in the nine months ended March 31, 2020 and expects to contribute an additional $33 during the fourth fiscal quarter of the fiscal year ending June 30, 2020.

Note 4. – Shareholders’ Equity

2019-2020 Common Share Repurchase Program – On October 8, 2019, the Company announced a share repurchase program (“2019-2020 Program”) approved by its Board of Directors which authorizes the Company to purchase up to $750 of its common shares in the open market.  As of March 31, 2020, a total of 87,534 shares have been repurchased at a cost of approximately $101. The chart below shows by month the total shares repurchased and average price per share paid for the 2019-2020 Program through March 31, 2020.   On January 31, 2020, the Company announced its Board of Directors had extended the termination date of the 2019-2020 Program to June 1, 2020, unless it is further extended or earlier terminated by the Company. On March 24, 2020, the Company announced that it had suspended the 2019-2020 Program in light of the COVID-19 pandemic, and no shares have been purchased after that date.

 

 

 

Total Shares

 

 

Average Price

 

 

 

Purchased

 

 

Per Share Paid

 

November 2019

 

 

935

 

 

$

1.17

 

December 2019

 

 

2,879

 

 

 

1.18

 

January 2020

 

 

4,272

 

 

 

1.15

 

February 2020

 

 

33,873

 

 

 

1.22

 

March 2020

 

 

45,575

 

 

 

1.09

 

Total

 

 

87,534

 

 

$

1.15

 

2018 Common Share Repurchase Program – On November 29, 2018, the Company announced a share repurchase program (“2018 Program”) approved by its Board of Directors, which authorized the Company to purchase up to 300,000 shares of its common shares.  On December 13, 2018, the Company announced it had purchased the 300,000 shares authorized under the 2018 Program, and that its Board of Directors had authorized an additional 450,000 shares to be purchased under the 2018 Program.  As of October 3, 2019, the 2018 Program termination date, a total of 359,959 shares had been repurchased at a cost of approximately $372, excluding fees and expenses relating to the offer.  The chart below shows by month the total shares repurchased and average price per share paid for the 2018 Program prior to its termination.

 

 

Total Shares

 

 

Average Price

 

 

 

Purchased

 

 

Per Share Paid

 

November 2018

 

 

1,235

 

 

$

1.14

 

December 2018

 

 

358,724

 

 

 

1.03

 

Total

 

 

359,959

 

 

$

1.03

 

 

Stock-Based Compensation For the three months ended March 31, 2020 and 2019, the Company recognized  no stock-based compensation for options issued to employees and directors of the Company.  For the nine months ended March 31, 2020 and 2019, the Company recognized $27 and $0, respectively, in stock-based compensation for options issued to employees and directors of the Company. The fair value of the share options granted was estimated using the Black-Scholes option-pricing model.  There were 50,000 share options granted under the 2011 Director Stock Option Plan during the nine months ended March 31, 2020, and no shares granted under the 2011 Director Stock Option Plan during the nine months ended March 31, 2019.

9


Note 5. – Revenue and Accounts Receivables

Revenues by payor were as follows for the three and nine months ended March 31, 2020 and 2019:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Medicare

 

$

4,669

 

 

$

5,934

 

 

$

15,028

 

 

$

13,517

 

Medicaid

 

 

4,075

 

 

 

2,743

 

 

 

11,319

 

 

 

10,890

 

Retail and Institutional Pharmacy

 

 

1,826

 

 

 

1,698

 

 

 

4,967

 

 

 

4,973

 

Managed Care & Other Insurance

 

 

1,939

 

 

 

1,871

 

 

 

5,335

 

 

 

4,743

 

Self-pay

 

 

95

 

 

 

65

 

 

 

333

 

 

 

449

 

Rent

 

 

2

 

 

 

22

 

 

 

20

 

 

 

52

 

Other

 

 

61

 

 

 

28

 

 

 

122

 

 

 

95

 

Total Net Revenues

 

$

12,667

 

 

$

12,361

 

 

$

37,124

 

 

$

34,719

 

 

Summary information for accounts receivable is as follows:

 

 

 

March 31,

2020

 

 

June 30,

2019

 

Accounts receivable (net of contractual allowances)

 

$

6,334

 

 

$

5,230

 

Less allowance for concession adjustments

 

 

(657

)

 

 

(515

)

Patient and customer accounts receivable – net

 

$

5,677

 

 

$

4,715

 

 

The following is a summary of the activity in the allowance for concession adjustments for the Healthcare Services Segment and the Pharmacy Segment for the three and nine months ended March 31, 2020 and 2019:

 

Three Months Ended March 31, 2020

 

Healthcare

Services

 

 

Pharmacy

 

 

Total

 

Balance at January 1, 2020

 

$

393

 

 

$

255

 

 

$

648

 

Additions recognized as a reduction to revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing Operations

 

 

91

 

 

 

46

 

 

 

137

 

Discontinued Operations

 

 

(15

)

 

 

0

 

 

 

(15

)

Accounts written off, net of recoveries

 

 

(69

)

 

 

(44

)

 

 

(113

)

Balance at March 31, 2020

 

$

400

 

 

$

257

 

 

$

657

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended March 31, 2020

 

Healthcare

Services

 

 

Pharmacy

 

 

Total

 

Balance at July 1, 2019

 

$

331

 

 

$

184

 

 

$

515

 

Additions recognized as a reduction to revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing Operations

 

 

363

 

 

 

280

 

 

 

643

 

Discontinued Operations

 

 

(49

)

 

 

0

 

 

 

(49

)

Accounts written off, net of recoveries

 

 

(245

)

 

 

(207

)

 

 

(452

)

Balance at March 31, 2020

 

$

400

 

 

$

257

 

 

$

657

 

10


 

Three Months Ended March 31, 2019

 

Healthcare

Services

 

 

Pharmacy

 

 

Total

 

Balance at January 1, 2019

 

$

231

 

 

$

228

 

 

$

459

 

Additions recognized as a reduction to revenues: