SunLink second quarter consolidated net revenues decrease 4.0% to $27,850,000

SunLink Health Systems, Inc. (NYSE MKT: SSY) today announced net earnings for its second fiscal quarter ended December 31, 2012 of $3,935,000, or $0.42 per fully diluted share, compared to a net loss of $935,000, or a loss of $0.10 per fully diluted share, for the quarter ended December 31, 2011. The results for the quarter ended December 31, 2012 include earnings from discontinued operations of $5,330,000 which resulted primarily from an after tax gain of approximately $5,200,000 on the December 31, 2012 sale of substantially all of the assets of its Dexter Hospital, LLC subsidiary. SunLink reported a loss from continuing operations for its second fiscal quarter ended December 31, 2012 of $1,395,000, or $0.15 per fully diluted share, compared to a loss from continuing operations of $1,397,000, or a loss of $0.15 per fully diluted share, for the quarter ended December 31, 2011.

Consolidated net revenues from continuing operations for the quarters ended December 31, 2012 and 2011 were $27,850,000 and $29,025,000, respectively, a decrease of 4.0% in the current year's quarter. The Healthcare Facilities Segment net revenues in the current quarter of $18,610,000 increased $257,000, or 1.4%, compared to $18,353,000 from the prior year. The Specialty Pharmacy Segment revenues of $9,240,000 in the quarter ended December 31, 2012 decreased $1,432,000, or 13.4% from the prior year.

The company had an operating loss from continuing operations for the quarter ended December 31, 2012 of $974,000, compared to an operating loss from continuing operations for the quarter ended December 31, 2011 of $1,059,000. The operating margin increased in the current year's quarter primarily due to the $1,024,000 of Medicaid electronic health records incentive payments compared to $613,000 of Medicaid electronic health records incentive payments in the quarter ended December 31, 2011. Adjusted EBITDA (a non-GAAP measure of the liquidity of the company) at SunLink's Healthcare Facilities Segment in the second fiscal quarter of 2013 was $934,000, which included $1,024,000 of Medicaid electronic health records incentive payments, compared to $902,000 in the same quarter last year which included $613,000 of Medicaid electronic health records incentive payments. Adjusted EBITDA for SunLink's Specialty Pharmacy Segment was $124,000 in the second fiscal quarter compared to Adjusted EBITDA of $285,000 in the comparable quarter a year ago.

For the six months ended December 31, 2012, SunLink reported net earnings of $2,511,000, or $0.27 per fully diluted share, compared to a net loss of $2,490,000, or a loss of $0.27 per share, for the six months ended December 31, 2011. For the six months ended December 31, 2012, SunLink reported a loss from continuing operations of $3,017,000, or a loss of $0.32 per fully diluted share, compared to a loss of $3,140,000, or a loss of $0.34 per fully diluted share, for the comparable period last year.

Consolidated net revenues from continuing operations for the six months ended December 31, 2012 decreased by 3.0% to $53,540,000 compared to $55,202,000 in the comparable period a year ago. The Healthcare Facilities Segment had net revenues in the six months ended December 31, 2012 of $37,551,000 compared to $36,775,000 for the comparable period a year ago. The Specialty Pharmacy Segment had $15,989,000 of net revenues for the six months ended December 31, 2012 compared to $18,427,000 last year.

SunLink had an operating loss from continuing operations for the six months ended December 31, 2012 of $3,465,000 compared to an operating loss of $2,568,000 for the six months ended December 31, 2011. Adjusted EBITDA for SunLink's Healthcare Facilities Segment was $1,046,000 in the six months ended December 31, 2012, compared to $1,637,000 for the comparable period last year. Adjusted EBITDA for the six months ended December 31, 2012 for the Specialty Pharmacy Segment was $204,000 compared to $239,000 for the comparable period last year.