SunLink Health Systems Inc (SSY, Financial) filed Amended Quarterly Report for the period ended 2008-09-30.
SunLink Health Systems Inc. operates two business segments the United States community hospital segment and the United Kingdom housewares segment. The U.S. community hospital segment is comprised of community hospitals and related businesses in the U.S. which are operated through its subsidiary SunLink Healthcare Corp. The United Kingdom housewares segment manufactures and distributes through its Beldray Limited subsidiary housewares products in the United Kingdom. Sunlink Health Systems Inc has a market cap of $17.8 million; its shares were traded at around $2.23 with a P/E ratio of 7.9 and P/S ratio of 0.1. Sunlink Health Systems Inc had an annual average earning growth of 7.1% over the past 5 years.
Interest expense was $1,254 and $410 for the three months ended September, 2008 and 2007, respectively. The increase in interest expense resulted from higher outstanding debt amounts due to capital expenditures, the $19,000 paid in cash in April 2008 for Carmichael and the $310 in derivative interest related to the Carmichael acquisition. The former owners of Carmichaels Cashway Pharmacy, Inc. received 334,000 common shares of SunLink as partial consideration for the business and SunLink is obligated to pay the difference between the market
value at business sale date and the price per share received for any shares sold less $1 per share if these shares are sold within a year. In April 2008, we entered into a $47,000 seven-year senior secured credit facility agreement. As of September 30, 2008, our outstanding balance on our current credit agreement was $40,117. As of September 30, 2007, our outstanding balance on our prior credit agreement was $14,627.
Income tax benefit of $566 ($519 federal tax benefit and $47 state tax benefit) and income tax expense of $218 ($195 federal tax expense and $23 state tax expense) was recorded for the three months ended September 30, 2008 and 2007, respectively. We had an estimated net operating loss carry-forward for federal income tax purposes of approximately $6,500 at September 30, 2008. Use of this net operating loss carry-forward is subject to the limitations of the provisions of Internal Revenue Code Section 382. As a result, not all of the net operating loss carry-forward is available to offset federal taxable income in the current year. At September 30, 2008, we have provided a partial valuation allowance against the domestic deferred tax asset so that the net domestic tax asset was $2,736. Based upon managements assessment that it was more likely than not that a portion of its domestic deferred tax asset (primarily its domestic net operating losses subject to limitation) would not be recovered, the Company established a valuation allowance for the portion of the domestic tax asset which may not be utilized. The Company has provided a valuation allowance for the entire amount of the foreign tax asset as it is more likely than not that none of the foreign deferred tax assets will be realized through future taxable income or implementation of tax planning strategies.
Loss from continuing operations was $603 ($0.08 per fully diluted share) for the quarter ended September 30, 2008 compared to earnings from continuing operations of $443 ($0.06 per fully diluted share) for the comparable quarter last year. Decreased operating profit and increased interest expense resulted in the lower earnings from continuing operations in the current years quarter.
Net loss was $664 ($0.08 per fully diluted share) in the quarter ended September 30, 2008 compared to net earnings of $393 ($0.05 per fully diluted share) in the quarter ended September 30, 2007.
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Highlight of Business Operations:
Depreciation and amortization expense increased $481 for the three months ended September 30, 2008 compared to the comparable prior year period. The increase in the current year was due primarily to the approximately $8,720 of capital expenditures made in the past 15 months and the addition of $12,859 in intangible assets relating to the Carmichael acquisition. Carmichael amortization expense for the three months ended September 30, 2008 was $182.Interest expense was $1,254 and $410 for the three months ended September, 2008 and 2007, respectively. The increase in interest expense resulted from higher outstanding debt amounts due to capital expenditures, the $19,000 paid in cash in April 2008 for Carmichael and the $310 in derivative interest related to the Carmichael acquisition. The former owners of Carmichaels Cashway Pharmacy, Inc. received 334,000 common shares of SunLink as partial consideration for the business and SunLink is obligated to pay the difference between the market
value at business sale date and the price per share received for any shares sold less $1 per share if these shares are sold within a year. In April 2008, we entered into a $47,000 seven-year senior secured credit facility agreement. As of September 30, 2008, our outstanding balance on our current credit agreement was $40,117. As of September 30, 2007, our outstanding balance on our prior credit agreement was $14,627.
Income tax benefit of $566 ($519 federal tax benefit and $47 state tax benefit) and income tax expense of $218 ($195 federal tax expense and $23 state tax expense) was recorded for the three months ended September 30, 2008 and 2007, respectively. We had an estimated net operating loss carry-forward for federal income tax purposes of approximately $6,500 at September 30, 2008. Use of this net operating loss carry-forward is subject to the limitations of the provisions of Internal Revenue Code Section 382. As a result, not all of the net operating loss carry-forward is available to offset federal taxable income in the current year. At September 30, 2008, we have provided a partial valuation allowance against the domestic deferred tax asset so that the net domestic tax asset was $2,736. Based upon managements assessment that it was more likely than not that a portion of its domestic deferred tax asset (primarily its domestic net operating losses subject to limitation) would not be recovered, the Company established a valuation allowance for the portion of the domestic tax asset which may not be utilized. The Company has provided a valuation allowance for the entire amount of the foreign tax asset as it is more likely than not that none of the foreign deferred tax assets will be realized through future taxable income or implementation of tax planning strategies.
Loss from continuing operations was $603 ($0.08 per fully diluted share) for the quarter ended September 30, 2008 compared to earnings from continuing operations of $443 ($0.06 per fully diluted share) for the comparable quarter last year. Decreased operating profit and increased interest expense resulted in the lower earnings from continuing operations in the current years quarter.
Net loss was $664 ($0.08 per fully diluted share) in the quarter ended September 30, 2008 compared to net earnings of $393 ($0.05 per fully diluted share) in the quarter ended September 30, 2007.
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