Discontinued Operations

12 Months Ended

Jun. 30, 2012

Discontinued Operations [Abstract]

DISCONTINUED OPERATIONS

4. DISCONTINUED OPERATIONS

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

Memorial Hospital of Adel—On July 2, 2012, the Company and its HealthMont of Georgia, Inc. subsidiary completed the sale of substantially of all the assets of Memorial to Tift for approximately $8,350. The net proceeds from the sale of approximately $7,500 were used to repay a portion of the Company’s senior debt under the Term Loan under the Company’s Credit Facility.

Memorial’s operations have been reclassified as discontinued operations in our consolidated financial statements as of and for the fiscal year ended June 30, 2012, 2011 and 2010.

Chilton Medical Center—On March 1, 2011, SunLink entered into an agreement to sell its 83% membership interest in its Clanton Hospital LLC (“Clanton”) subsidiary, which operated Chilton Medical Center (“Chilton”), to Carraway Medical Systems, Inc. (“Carraway”) and to lease the physical facility to Carraway. The lease agreement is for a six-year term with monthly rent of $37 and includes an option under which Carraway can purchase the physical facility from SunLink. The option purchase price is $3,700, less the amount paid to purchase the 17% membership interest of Clanton that Carraway does not currently own, up to a maximum of $615. 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 the physical facility 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 June 30, 2012 and 2011 was recorded on the balance sheet at net $0. Pursuant to the terms of the sale and lease agreement, SunLink is entitled to receive 75% of the Electronic Health Records Medicare incentive reimbursement received with respect to Chilton. The Company received $188 of Medicaid EHR funds with respect to Chilton in the fourth fiscal quarter of 2012 and $790 of Medicare EHR incentive payments in the fourth fiscal quarter of 2011.

Housewares Segment—All claims in a liquidation proceeding with respect to SunLink’s former Housewares segment were settled on April 13, 2010. In connection with the settlement of such claim SunLink paid approximately $1,400, of which $480 was covered under a directors and officers insurance policy. The Company cancelled all preferred stock of its SunLink subsidiary held by the former Housewares segment subsidiary. The pre-tax loss of $464 for the fiscal year ended June 30, 2010 resulted from legal expenses incurred.

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 earnings of Mountainside for the fiscal year ended June 30, 2011 is the judgment of $540 related to the litigation. Also included in pre-tax earnings for the fiscal year ended June 30, 2011 were legal expenses of $194 related to the litigation. Included in the pre-tax earnings of Mountainside for the fiscal year ended June 30, 2010 was the judgment of $1,829, composed of a total of a $1,560 payment plus $266 of accrued judgment interest. Also included in pre-tax earnings for the fiscal year ended June 30, 2010 were legal expenses related to the litigation with the buyer 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 fiscal years ended June 30, 2012, 2011 and 2010.

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 related 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. With the settlement of litigation related to the Housewares Segment and Mountainside during fiscal year 2010, no reserve for discontinued operations has been included in the Company’s consolidated balance sheets since June 30, 2010.

The following is a summary of the loss reserves for discontinued operations:

	Years Ended June 30,
	2012		2011		2010
Beginning balance	$	0	$	0	$	643
Usage		0		0		(643	)
	$	0	$	0	$	0

Results of discontinued operations were as follows:

Discontinued Operations—Summary Statement of Earnings Information

	Years Ended June 30,
	2012			2011			2010
Net Revenues:
Memorial	$	18,031		$	17,856		$	16,844
Chilton		0			9,447			14,615
Net revenues	$	18,031		$	27,303		$	31,459
Earnings (Loss) Before Income Taxes:
Memorial	$	445		$	(782	)	$	(603	)
Chilton		0			(724	)		(134	)
Life sciences and engineering		(88	)		(83	)		(71	)
Mountainside		1			347			1,731
Housewares		0			0			(464	)
Earnings (loss) before income taxes		358			(1,242	)		459
Gain on Sale—Chilton Medical Center		0			438			0
Income tax benefit		71			117			65
Earnings (loss) from discontinued operations	$	429		$	(687	)	$	524