SunLink first quarter consolidated net revenues increase 5.4% to $43,053,000

SunLink Health Systems, Inc. (NYSE Amex Equities: SSY) today announced a loss from continuing operations for its first fiscal quarter ended September 30, 2011 of $305,000, or a loss of $0.04 per fully diluted share, compared to a loss from continuing operations of $2,263,000, or a loss of $0.28 per fully diluted share for the quarter ended September 30, 2010.

SunLink reported a net loss of $318,000, or a loss of $0.04 per fully diluted share for the quarter ended September 30, 2011, compared to a net loss of $2,768,000, or $0.34 per fully diluted share for the comparable quarter a year ago.

Consolidated net revenues from continuing operations for the quarters ended September 30, 2011 and 2010 were $43,053,000 and $40,866,000, respectively, an increase of 5.4% in the current year's quarter. The Healthcare Facilities Segment net revenues in the current quarter of $35,298,000 increased $3,334,000, or 10.4%, compared to $31,964,000 from the prior year. Net revenues from the Medicare and Medicaid Electronic Health Records Incentive Programs in the current year were $2,998,000. The Specialty Pharmacy Segment revenues of $7,755,000 in the quarter ended September 30, 2011 decreased 12.9% from the prior year.

The company had an operating profit for the quarter ended September 30, 2011 of $811,000, compared to an operating loss for the quarter ended September 30, 2010 of $2,109,000, an increase in the operating margin of $2,920,000 in the current year quarter. EBITDA (a non-GAAP measure of liquidity of the company) for the first fiscal quarter was $2,115,000 compared to an EBITDA loss of $516,000 for the comparable quarter a year ago. Adjusted EBITDA for SunLink's Healthcare Facilities Segment in the fiscal quarter ended September 30, 2011 increased to $3,259,000 from $458,000 in the comparable quarter a year ago. Adjusted EBITDA for SunLink's Specialty Pharmacy Segment was a loss of $46,000 in the first fiscal quarter compared to Adjusted EBITDA of $183,000 in the comparable quarter a year ago.

Interest expense for the quarter ended September 30, 2011 of $1,311,000 increased $463,000 from the quarter ended September 30, 2010 due to higher interest rates and a $131,000 amendment fee paid for the July 2011 modification of SunLink's existing credit agreement. The interest rates paid under the credit agreement were approximately 6% higher in current year than last year. The July 2011 credit agreement modification reduced the interest rate, revised certain financial and other covenants and extended the maturity date of the credit agreement until January 1, 2013.

Commenting on the results, Robert M. Thornton, Jr., chairman and CEO, stated, "Our Healthcare Facilities Segment had improved net revenues and Adjusted EBITDA for the first fiscal quarter, which is attributed to the revenues from Medicare and Medicaid Electronic Health Records incentive reimbursement programs and strong cost management. Our first quarter Healthcare Facilities equivalent admissions increased on a year-over-year basis for the first time in five quarters. We attribute this increase to specific initiatives we have taken at our hospitals and we continue to roll out additional initiatives. Our Specialty Pharmacy business continued to be impacted by economic conditions as well as our systems upgrades and selective paring of services, which resulted in a decline in its net revenue contribution and Adjusted EBITDA. We remain vigilant on cost efficiencies and ways in which we can better attract new patients and supporting physician services."

Mr. Thornton continued, "We also improved our balance sheet this quarter with the prepayment of $8,000,000 on our long-term debt from the proceeds of our July private placement of common shares and from internally generated funds. Our improved operating results and balance sheet this quarter are a major step toward positioning the company for growth opportunities."