Discontinued Operations

3 Months Ended

Sep. 30, 2011

Discontinued Operations [Abstract]

Discontinued Operations

Note 3. – Discontinued Operations

All of the businesses discussed 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 of the businesses included in discontinued operations are presented in the following table:

	Three Months Ended
	September 30,
	2011			2010
Net Revenues:
Chilton Medical Center	$	0		$	3,338
Loss from discontinued operations:
Life sciences and engineering segment:
Loss from operations	$	(22	)	$	(21	)
Income tax benefit		(9	)		(8	)
Loss from life sciences and engineering segment after taxes		(13	)		(13	)
Chilton Medical Center:
Loss from operations		0			(500	)
Income tax benefit		0			(119	)
Loss from Chilton Medical Center after taxes		0			(381	)
Mountainside Medical Center:
Loss from operations		0			(178	)
Income tax benefit		0			(67	)
Loss from Mountainside Medical Center after taxes		0			(111	)
Loss from discontinued operations	$	(13	)	$	(505	)

Chilton Medical Center – On March 1, 2011, SunLink entered into an agreement to lease its owned Chilton Medical Center ("Chilton") and sold its 83% membership interest in Clanton Hospital LLC ("Clanton"), which manages Chilton, to Carraway Medical Systems, Inc. ("Carraway"). The lease agreement is for a six-year term with monthly rent of $37 and includes an option under which Carraway can purchase Chilton from SunLink. The option purchase price is $3,700, less the amount paid, up to a maximum of $615, to purchase the 17% membership interest of Clanton owned by local physicians. The purchase price of SunLink's 83% membership interest in Clanton was a $1,000 six-year zero-coupon note plus a six-year 6% note for the net working capital of Clanton at purchase. If the purchase option for Chilton is exercised during the six-year term of the lease, any amount paid under the $1,000 note will be credited to the option purchase price and any remaining balance on the note will be cancelled. As a result, the note at September 30, 2011 was recorded on the balance sheet at net $0. Pursuant to the terms of the sale and lease and agreement, SunLink is entitled to receive 75% of the Electronic Health Records Medicare and Medicaid incentive reimbursements received by Clanton.

Mountainside Medical Center – On June 1, 2004, SunLink sold its Mountainside Medical Center ("Mountainside") hospital in Jasper, Georgia, for approximately $40,000 pursuant to the terms of an asset sale agreement. In connection with this sale, claims by the buyer and counter claims by SunLink were litigated which resulted in a judgment for SunLink. The judgment, which included damages, prejudgment interest and certain losses, was collected by SunLink in the amount of $1,246 in May 2010 and $540 in December 2010, and the parties executed a mutual release. Included in the pre-tax loss of Mountainside for the three months ended September 30, 2010 were legal expenses related to the litigation with the buyer's claim and SunLink's counterclaim.

Life Sciences and Engineering Segment – SunLink retained a defined benefit retirement plan which covered substantially all of 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 months ended September 30, 2011 and 2010. The components of pension expense for the three months ended September 30, 2011 and 2010, respectively, were as follows:

	Three Months Ended
	September 30,
	2011			2010
Interest Cost	$	18		$	18
Expected return on assets		(10	)		(11	)
Amortization of prior service cost		14			14
Net pension expense	$	22		$	21

SunLink did not contribute to the plan in the three months ended September 30, 2011. We expect to make no contribution to the plan through the end of the fiscal year ending June 30, 2012.

Discontinued Operations Reserves—Over the past 23 years, SunLink has discontinued operations carried on by its former Chilton Medical Center, Mountainside Medical Center, and its former industrial, U.K. leisure marine, life sciences and engineering, and European child safety segments, as well as the U.K. housewares segment. SunLink's reserves relating to discontinued operations of these segments represent management's best estimate of SunLink's possible liability for property, product liability and other claims for which SunLink may incur liability.