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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 15, 1998
MEDICAL RESOURCES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-12461 13-3584552
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(State of other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
15 State Street, Hackensack, NJ 07601
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(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code: (201) 488-6230
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Item 5.
On May 13, 1998, Peter J. Powers resigned as a director of the Company.
Mr. Powers stated in his letter of resignation that his schedule no longer
allows him sufficient time to continue on the Board of Directors. As previously
announced, the Board of Directors is conducting a search for additional outside
directors. Also as previously announced, the Board intends to select a new
chairman upon the completion of this search process.
On May 15, 1998, Medical Resources, Inc. (the "Company") announced that
it would report a loss for the year ended December 31, 1997 and that it expected
to report a loss for the quarter ended March 31, 1998. A copy of the Press
Release issued by the Company is attached hereto as Exhibit 99.1 and
incorporated herein by reference.
Item 7. Financial Statements and Exhibits
99.1 Press Release, dated May 15, 1998, issued by Medical Resources, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MEDICAL RESOURCES, INC.
Dated: May 15, 1998 By:/s/ Geoffrey A. Whynot
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Name: Geoffrey A. Whynot
Title: Chief Financial Officer
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MEDICAL
RESOURCES, INC.
PRESS RELEASE
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MEDICAL RESOURCES, INC. TO REPORT LOSS FOR FOURTH QUARTER
AND FULL YEAR 1997 AND EXPECTS LOSS FOR FIRST QUARTER OF 1998
Hackensack, NJ, May 15, 1998 - Medical Resources, Inc. (NASDAQ:MRIIe) today
announced that it will report a loss for its fourth quarter and full year ended
December 31, 1997. Final 1997 results are expected to be released by May 22 and
the Company's Form 10-K is expected to be filed with the Securities and Exchange
Commission on or about May 28.
The loss for the fourth quarter, before income tax benefit, is expected to be in
the range of $45 to $50 million, due principally to reserve adjustments and
other unusual charges in the Company's Imaging business. Included in this
overall loss amount is a provision for doubtful accounts receivables of
approximately $15 million, an approximate $13 million write-down of goodwill and
other assets, and other unusual charges totaling approximately $10 million. Such
other unusual charges relate predominately to ongoing litigation, costs
associated with the delay in the effectiveness of the Company's pending
Registration Statement, higher than normal professional fees, and certain other
matters. Company-wide net revenues for the fourth quarter, after upward
year-to-date revision of estimates for contractual allowances including an
unusual $5 million component related to the collectibility of certain revenues,
are expected to be approximately $54 million.
The loss for the full year ended December 31, 1997, before income taxes, is
expected to range from $25 to $30 million, including an additional second
quarter 1997 non-cash charge of approximately $2.3 million for compensation
expense resulting from stock option grants in 1996 and early 1997 that were
approved by the Company's stockholders in May, 1997.
The Company also expects to report a loss for the three months ended March 31,
1998, its first quarter of 1998, due in significant part to an estimated $3.5 to
$4 million of additional other unusual charges of the aforementioned type. Final
results for the first quarter of 1998 are expected to be released around the end
of May and the Company's Form 10-Q is expected to be filed with the Securities
and Exchange Commission shortly thereafter.
Due to the Company's 1997 loss and its failure to file timely its Form 10-K, the
Company is now in technical non-compliance with certain covenants under its
unsecured Senior Notes. In that regard, management and the Senior Note lenders
have commenced discussions aimed at resolving this matter. In the event the
parties are unable to reach agreement, the lenders will be entitled, at their
discretion, to exercise certain remedies including acceleration of repayment.
Furthermore, the Company's auditors have indicated that in the absence of an
effective amendment or waiver,
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their report on the 1997 financial statements will include a going concern
modification.
On May 14, representatives of the Company appeared before the Nasdaq
Qualifications Hearing Panel. This hearing resulted from the Company's failure
to file timely its Form 10-K for 1997 and was held to determine if the Company's
common stock should continue to be listed on The Nasdaq Stock Market. The
Company expects to receive a response from the panel shortly, and no assurance
can be given that the Company's common stock will continue to be listed on
Nasdaq.
Commenting on the fourth quarter of 1997 and first quarter of 1998, Duane C.
Montopoli, Medical Resources' President and Chief Executive Officer, said, "It
is important to recognize that the fourth quarter loss is largely the result of
abnormal reserve and estimate increases and other unusual charges in our Imaging
business that should be non-recurring. The expected first quarter 1998 loss is
also significantly impacted by such charges. We have begun to take the
corrective actions necessary to avoid charges of this type in the future and we
are pursuing other ways to quickly improve our operating performance."
"While poor cash collections performance in 1997 and early 1998 necessitated a
very substantial increase in our bad debt reserves, we are now aggressively
pursuing the collection of all outstanding receivables, old and new. I am
pleased with our recent efforts in this area and I'm encouraged by recent cash
collections which have been trending up. Looking ahead, we are now estimating
bad debt expense at about 8% of normalized imaging net revenues. While we expect
to do better over time, we will think in these terms until we prove it, and we
will make business decisions regarding costs, sales activities and our overall
operations accordingly."
"The write-down of goodwill was necessitated by the fact that we have a number
of under-performing imaging centers. We are analyzing the causes and we will
take actions intended to increase the revenues or, as necessary, to reduce the
costs of such centers. We will apply our energies to returning such centers to
acceptable profit levels. If we ultimately have some centers where this can't be
achieved, those centers will be sold or closed."
"Regarding expected revenues, fourth quarter net revenues would have been higher
than third quarter levels, as would be expected considering recent acquisition
activity, but for the adverse effects of abnormal increases in contractual
allowances in the fourth quarter which, to a significant degree, should be
non-recurring. Also, as indicated, fourth quarter contractual allowances include
an unusual $5 million component related to the collectibility of certain
revenues."
"We are committed to restoring Medical Resources to renewed growth and
profitability. We are also committed to being the highest quality provider of
services at the lowest overall cost in our industry. With the help of all of the
Company's employees and affiliates, and with the support of our investors and
lenders, I'm optimistic about the future. Regarding communications with the
investment community, we intend to hold a conference call shortly after we
release first quarter 1998 results."
Medical Resources specializes in the ownership, operation and management of
diagnostic imaging
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centers. The Company operates approximately 100 imaging centers in the U.S. and
provides network management services to managed care organizations in regions
where its centers are concentrated. Through its StarMed Staffing subsidiary, the
Company also provides temporary healthcare staffing to acute and sub-acute care
facilities nationwide.
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Note: This release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Investors are cautioned that
forward-looking statements are inherently uncertain. Actual performance and
results may differ materially from that projected or suggested herein due to
certain risks and uncertainties including, without limitation: the ability of
the Company to effectively integrate the operations and information systems of
businesses acquired in 1997 and earlier; the ability of the Company to generate
net positive cash flows from operations; the payment timing and ultimate
collectibility of accounts receivable (including purchased accounts receivable)
from different payer groups (including Letter of Protection type); the economic
impact of involuntary share repurchases and other payments (including price
protection payments and penalty payments) caused by the delay in the
effectiveness of the Company's pending Registration Statement and by the recent
decline in the Company's share price; the ability of the Company to cure any
defaults under its debt agreements and/or other obligations, in general, and in
a manner that avoids significant common stock dilution; the impact of a changing
and increasing mix of managed care and personal injury claim business on
contractual allowance provisions, net revenues and bad debt provisions; the
ultimate economic impact of recent litigation including shareholder and former
management lawsuits against the Company and certain of its Directors; the
availability of debt and/or equity capital, on reasonable terms, to finance
operations as needed and to finance growth; and the effects of federal and state
laws and regulations on the Company's business over time. Additional information
concerning certain risks and uncertainties that could cause actual results to
differ materially from that projected or suggested is contained in the Company's
filings with the Securities and Exchange Commission (SEC) over the last 12
months, copies of which are available from the SEC or from the Company upon
request.
CONTACT:
MEDICAL RESOURCES, INC.
Geoffrey A. Whynot
Senior Vice President - Finance and
Chief Financial Officer
(201) 488-6230, Ext. 5460
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