<PAGE> 1
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) August 13, 1996
---------------
Physicians Resource Group, Inc.
---------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-13778 76-0456864
--------------- ----------- ------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
Three Lincoln Centre, Suite 1540, 5430 LBJ Freeway, Dallas, TX 75240
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (214) 982-8200
---------------------
<PAGE> 2
ITEM 5. OTHER EVENTS
Between February 14, 1996 and April 16, 1996, Physicians Resource Group,
Inc., a Delaware corporation (the "Company") acquired all of the assets (by
asset purchases, stock purchases or merger) of Medical and Surgical Eye
Associates, P.A. (the "Burlingame Acquisition"), Daniel I. Goldman, M.D.P.A.
(the "Goldman Acquisition"), The Clariday Eye Center, P.A. (the "Clariday
Acquisition") and Rudolf Churner, M.D.P.A. (the "Churner Acquisition"). The
consummation of the Goldman Acquisition and the Clariday Acquisition were
previously reported on the Company's Current Report on Form 8-K dated February
14, 1996.
The Company is filing this Current Report on Form 8-K in order to
voluntarily file financial statements relating to the practices so acquired as
more particularly described in Item 7 hereto.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) The audited combined balance sheet of Physicians Resource Group,
Inc. - Sundry Acquisition Practices as of December 31, 1995, and the related
combined statements of earnings, owners' equity and cash flows for the year then
ended, which are attached hereto as Annex A, are voluntarily being filed
herewith in order to permit their incorporation by reference.
(b) Exhibits.
Exhibit No. Description
- ---------- -----------
2.1 - Agreement and Plan of Reorganization by and among PRG
Texas Acquisition Corporation III, Inc., Physicians
Resource Group, Inc., Daniel I. Goldman, M.D., P.A.
and Daniel I. Goldman, M.D. dated December 7, 1995.(1)
2.2 - First Amendment to Agreement and Plan of Reorganization
by and among Texas PRG I, Inc., a Delaware corporation
(f/k/a PRG Texas Acquisition Corporation I, Inc.), PRG
Texas Acquisition Corporation III, Inc., Physicians
Resource Group, Inc., Daniel I. Goldman, M.D., P.A. and
Daniel I. Goldman, M.D. dated February 14, 1996.(2)
2.3 - Agreement and Plan of Reorganization by and among PRG
Texas Acquisition Corporation II, Inc., Physicians
Resource Group, Inc., The Clariday Eye Center, P.A. and
Gregory T. Clariday, M.D. dated December 7, 1995.(1)
2.4 - First Amendment to Agreement and Plan of Reorganization
by and among Texas PRG I, Inc., a Delaware corporation
(f/k/a PRG Texas Acquisition Corporation I, Inc.), PRG
Texas Acquisition Corporation II, Inc., Physicians
Resource Group, Inc., The Clariday Eye Center, P.A. and
Gregory T. Clariday, M.D. dated February 14, 1996.(2)
4.1 - Restated Certificate of Incorporation of Physicians
Resource Group, Inc.(3)
2
<PAGE> 3
4.2 - Certificate of Designations, Preferences, Rights and
Limitations of Class A Preferred Stock of Physicians
Resource Group, Inc.(3)
4.3 - Third Amended and Restated Bylaws of Physicians
Resource Group, Inc.(4)
4.4 - Form of Warrant Certificate.(3)
4.5 - Rights Agreement dated as of April 19, 1996 between
Physicians Resource Group, Inc. and Chemical Mellon
Shareholder Services.(5)
4.6 - Form of certificate evidencing ownership of Common
Stock of Physicians Resource Group, Inc.(3)
23.1 - Consent of Arthur Andersen LLP(6)
- ------------------------
(1) - Previously filed as an exhibit to the Company's
Registration Statement on Form S-4 (No. 333-00230) and
incorporated herein by reference.
(2) - Previously filed as an exhibit to the Company's Current
Report on Form 8-K filed February 29, 1996, and
incorporated herein by reference.
(3) - Previously filed as an exhibit to the Company's
Registration Statement on Form S-1 (No. 33-91440) and
incorporated herein by reference.
(4) - Previously filed as an exhibit to the Company's Annual
Report on Form 10-K for the year ended December 31,
1995, and incorporated herein by reference.
(5) - Previously filed as an exhibit to the Company's
Registration Statement on Form S-1 (No. 333-3852) and
incorporated herein by reference.
(6) - Filed herewith.
3
<PAGE> 4
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.
PHYSICIANS RESOURCE GROUP, INC.
Date: August 13, 1996 By: /s/ John N. Bingham
---------------------------------
John N. Bingham,
Vice President, Controller
and Chief Accounting Officer
4
<PAGE> 5
PHYSICIANS RESOURCE GROUP, INC. -
SUNDRY ACQUISITION PRACTICES
Combined Financial Statements
As Of December 31, 1995
Together With Report Of Independent Public Accountants
<PAGE> 6
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Physicians Resource Group, Inc.:
We have audited the accompanying combined balance sheet of Physicians Resource
Group, Inc. - Sundry Acquisition Practices (as identified in Note 1) as of
December 31, 1995, and the related combined statements of earnings, owners'
equity and cash flows for the year then ended. These financial statements are
the responsibility of the Physicians Resource Group, Inc. - Sundry Acquisition
Practices management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Physicians Resource Group, Inc.
- - Sundry Acquisition Practices as of December 31, 1995, and the results of
their operations and their cash flows for the year then ended in conformity
with generally accepted accounting principles.
Dallas, Texas
August 9, 1996
<PAGE> 7
PHYSICIANS RESOURCE GROUP, INC. - SUNDRY ACQUISITION PRACTICES
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
ASSETS 1995 1996
-----------------------------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 32,837 $ 107,516
Accounts receivable, less allowance for contractual
adjustments and bad debts of approximately $704,000
and $322,000 at December 31, 1995 and March 31, 1996 (unaudited) 920,720 391,356
Inventories 12,211 12,211
Prepaid expenses and other current assets 49,716 35,772
------------ ------------
Total current assets 1,015,484 546,855
PROPERTY AND EQUIPMENT, net 415,823 434,840
OTHER ASSETS 5,583 128,700
------------ ------------
Total assets $ 1,436,890 $ 1,110,395
============ ============
LIABILITIES AND OWNERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 69,376 $ 37,462
Accrued salaries and benefits 63,983 54,571
Current portion of long-term debt 44,864 70,690
------------ ------------
Total current liabilities 178,223 162,723
LONG-TERM DEBT, net of current portion - 158,635
------------ ------------
Total liabilities 178,223 321,358
OWNERS' EQUITY 1,258,667 789,037
------------ ------------
Total liabilities and owners' equity $ 1,436,890 $ 1,110,395
============ ============
</TABLE>
The accompanying notes are an integral part of these
combined financial statements.
<PAGE> 8
PHYSICIANS RESOURCE GROUP, INC. - SUNDRY ACQUISITION PRACTICES
COMBINED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
FOR THE YEAR ENDED MARCH 31,
DECEMBER 31, ---------------------------
1995 1995 1996
----------------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C>
MEDICAL SERVICE REVENUES, net $ 6,626,205 $ 1,698,191 $1,186,402
COSTS AND EXPENSES:
Compensation to physician owners 3,612,097 514,095 552,356
Salaries, wages, and benefits 1,321,156 331,435 287,322
Pharmaceuticals and supplies 260,458 58,434 35,424
General and administrative expenses 1,098,291 242,199 185,372
Depreciation and amortization 174,947 36,728 36,037
Interest expense 75 289 5,257
------------ ----------- ----------
Total costs and expenses 6,467,024 1,183,180 1,101,768
------------ ----------- ----------
Income from operations 159,181 515,011 84,634
------------ ----------- ----------
GAIN ON SALE OF NET ASSETS - - 3,927,296
------------ ----------- ----------
Net earnings $ 159,181 $ 515,011 $4,011,930
============ =========== ==========
SUPPLEMENTAL DISCLOSURE:
Combined compensation to and net earnings
of physician owners $ 3,771,278 $ 1,029,106 $4,564,286
============ =========== ==========
</TABLE>
The accompanying notes are an integral part of these
combined financial statements.
<PAGE> 9
PHYSICIANS RESOURCE GROUP, INC. - SUNDRY ACQUISITION PRACTICES
COMBINED STATEMENTS OF OWNERS' EQUITY
<TABLE>
<S> <C>
BALANCE, December 31, 1994 $ 1,099,486
Net earnings 159,181
-----------
BALANCE, December 31, 1995 1,258,667
Net earnings (unaudited) 4,011,930
Distributions to owners (unaudited) (4,481,560)
-----------
BALANCE, March 31, 1996 (unaudited) $ 789,037
===========
</TABLE>
The accompanying notes are an integral part of these
combined financial statements.
<PAGE> 10
PHYSICIANS RESOURCE GROUP, INC. - SUNDRY ACQUISITION PRACTICES
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
FOR THE YEAR ENDED MARCH 31,
DECEMBER 31, ------------------------------
1995 1995 1996
----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 159,181 $ 515,011 $ 4,011,930
Adjustments to reconcile net earnings to net cash
provided by operating activities-
Depreciation and amortization 174,947 36,728 36,037
Gain on sale of net assets - - (3,927,296)
Changes in assets and liabilities-
(Increase) decrease in-
Accounts receivable, net (164,080) (97,199) 134,024
Inventories 1,744 (500) -
Prepaid expenses and other current
assets 1,587 21,529 13,194
Increase (decrease) in-
Accounts payable and accrued expenses (412) (33,386) (63,596)
Accrued salaries and benefits (6,432) 62,938 22,866
----------- ----------- ------------
Net cash provided by operating activities 166,535 505,121 227,159
----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (138,390) (18,730) (148,420)
Additions to other assets - - (125,000)
Proceeds from sale of net assets - - 743,784
----------- ----------- ------------
Net cash provided by (used in) investing activities (138,390) (18,730) 470,364
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 46,055 20,055 209,826
Repayment of long-term debt (58,155) (35,259) (16,501)
Distributions to owners - - (816,169)
----------- ----------- ------------
Net cash used in financing activities (12,100) (15,204) (622,844)
----------- ----------- ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 16,045 471,187 74,679
CASH AND CASH EQUIVALENTS, beginning of period 16,792 16,792 32,837
----------- ----------- ------------
CASH AND CASH EQUIVALENTS, end of period $ 32,837 $ 487,979 $ 107,516
=========== =========== ============
SUPPLEMENTAL DISCLOSURE:
Noncash distributions to owners $ - $ - $ 3,665,392
</TABLE>
The accompanying notes are an integral part of these
combined financial statements.
<PAGE> 11
PHYSICIANS RESOURCE GROUP, INC. - SUNDRY ACQUISITION PRACTICES
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BUSINESS, ORGANIZATION AND BASIS OF PRESENTATION:
The accompanying combined financial statements of Physicians Resource
Group, Inc. - Sundry Acquisition Practices (the Companies) include four
entities in the practice of ophthalmic medical care acquired by Physicians
Resource Group, Inc. (PRG) in February and April of 1996. The Companies are
comprised of several legal entities and conduct business as Medical and
Surgical Eye Associates, P.A., Rudolf Churner, M.D., P.A., Daniel I. Goldman,
M.D., P.A., and The Clariday Eye Center, P.A. The Companies are based in
Texas.
The accompanying combined financial statements have been prepared on the
accrual basis of accounting. These combined financial statements have been
prepared to show the operations and financial position of the Companies, a
portion of whose assets and operations were acquired by PRG. The supplemental
caption on the statements of earnings, "Combined compensation to and net
earnings of physician owners," reflects the total earnings available to the
physician owners for each period.
The combined financial statements of the Companies are prepared as
supplemental information about the entities to which PRG will provide
management services following consummation of the acquisitions. The Companies
previously operated as separate independent entities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ACCOUNTS RECEIVABLE
Accounts receivable consist primarily of receivables from patients,
insurers, government programs and other third-party payors for medical
services provided by physicians. Such amounts are reduced by an allowance for
contractual adjustments and other uncollectible amounts. Contractual
adjustments result from the differences between the rates charged by the
physicians for services performed and the amounts allowed by Medicare and
Medicaid programs and other public and private insurers.
INVENTORIES
Inventories consist primarily of medical and surgical supplies and are
valued at the lower of cost or market, with cost determined using the first-in,
first-out (FIFO) method.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation of property and
equipment is calculated using straight-line and accelerated methods over the
estimated useful lives of the assets ranging from 3 to 10 years. Routine
maintenance and repairs are charged to expense as incurred, while costs of
betterments and renewals are capitalized.
OWNERS' EQUITY
Owners' equity includes common stock, additional paid-in capital, and
retained earnings of the Companies.
<PAGE> 12
PHYSICIANS RESOURCE GROUP, INC. - SUNDRY ACQUISITION PRACTICES
NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)
INCOME TAXES
Certain of the Companies are S corporations; accordingly, income taxes are
the responsibility of the respective owners. The remainder of the Companies
are taxable corporations which historically have not incurred significant tax
liabilities for federal or state income taxes. Compensation to the owners has
traditionally reduced taxable income to nominal levels. Because of this
practice, provisions for income taxes and deferred tax assets and liabilities
of the taxable entities are not reflected in these combined financial
statements. Accordingly, the accompanying combined financial statements do not
include a provision for income taxes.
REVENUES
Medical service revenues are accounted for in the period in which the
services are provided. The revenues are reported at the estimated realizable
amounts from patients, third-party payors and others. Provisions for estimated
third-party payor adjustments are estimated and recorded in the period the
related services are provided. Any adjustment to the amounts recorded are
recorded in the period in which the revised amount is determined. A
significant portion of the Companies' medical service revenues are related to
Medicare and other governmental programs. Medicare and other governmental
programs reimburse physicians based on fee schedules which are determined by
the related governmental agency. Additionally, the Companies participate in
agreements with managed care organizations to provide service at negotiated
rates or for capitated payments.
NEW ACCOUNTING PRONOUNCEMENT
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of." Adoption of this standard
is required for financial statements for fiscal years beginning after December
15, 1995. Earlier application is encouraged. The Companies do not expect the
new standard to have a material effect on the Companies' results of operations
or financial position.
CONCENTRATION OF CREDIT RISK
The Companies extend credit to patients covered by programs such as Medicare
and Medicaid and private insurers. The Companies manage credit risk with the
various public and private insurance providers, as appropriate. Allowances for
doubtful accounts are recognized for potential losses, where appropriate.
<PAGE> 13
PHYSICIANS RESOURCE GROUP, INC. - SUNDRY ACQUISITION PRACTICES
NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1995
-------------
<S> <C>
Equipment $ 1,171,639
Furniture and fixtures 337,750
Leasehold improvements 69,046
-----------
Total property and equipment 1,578,435
Less- Accumulated depreciation and amortization (1,162,612)
-----------
Property and equipment, net $ 415,823
===========
</TABLE>
4. NOTES PAYABLE:
The Companies had notes payable with certain banks at December 31, 1995.
The notes call for monthly interest payments with the entire principal due in
1996. The notes bear interest at 3.9% and 9.5%.
5. COMMITMENTS AND CONTINGENCIES:
The Companies are insured with respect to medical malpractice risks on a
claims-made basis. In the normal course of business, the Companies have been
named in various lawsuits. In the opinion of Companies' managements, final
settlement, if any, due as a result of the litigation is not expected to be
material to the operating results or the financial position of the Companies.
6. RELATED-PARTY TRANSACTIONS:
The Companies lease primary office space and equipment from certain
entities which include owners. Rent expense under related-party operating
leases amounted to $390,000 for the year ended December 31, 1995.
7. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS:
Statement of Financial Accounting Standards No. 107 requires all entities
to disclose the fair value of certain financial instruments in their financial
statements. Accordingly, the carrying amount of accounts receivable, accounts
payable, accrued expenses, and notes payable approximates fair value due to the
short maturity of these instruments.
8. USE OF ESTIMATES:
The preparation of combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the combined
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
<PAGE> 14
PHYSICIANS RESOURCE GROUP, INC. - SUNDRY ACQUISITION PRACTICES
NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)
9. SUBSEQUENT EVENTS:
On February 14, 1996, two of the Companies sold substantially all of their
net assets to PRG, in exchange for 175,008 shares of PRG common stock and
$743,784 cash. A gain of approximately $4,000,000 was recognized based on the
excess of the fair value of PRG shares and cash received over the net book
value of the net assets sold.
On April 16, 1996, the two remaining Companies sold substantially all of
their net assets to PRG, in exchange for 132,786 shares of PRG common stock.
In conjunction with the sale of net assets, certain physician owners of the
Companies entered into long-term agreements to lease office space and equipment
to PRG.
In January 1996, one of the Companies acquired a new office location in
Gainesville, Texas. The acquisition included certain equipment and other
assets and was financed from the proceeds of a $175,000 bank note.
10. UNAUDITED COMBINED FINANCIAL INFORMATION:
The unaudited combined financial statements for the periods ended March 31,
1995 and March 31, 1996 are prepared pursuant to the rules and regulations of
the Securities and Exchange Commission ("SEC"). The accompanying unaudited
financial statements reflect, in the opinion of management, all adjustments
necessary for the fair presentation of the unaudited combined financial
statements. All such adjustments are of a normal and recurring nature.
<PAGE> 15
EXHIBIT INDEX
Exhibit No. Description
- ---------- -----------
2.1 - Agreement and Plan of Reorganization by and among PRG
Texas Acquisition Corporation III, Inc., Physicians
Resource Group, Inc., Daniel I. Goldman, M.D., P.A.
and Daniel I. Goldman, M.D. dated December 7, 1995.(1)
2.2 - First Amendment to Agreement and Plan of Reorganization
by and among Texas PRG I, Inc., a Delaware corporation
(f/k/a PRG Texas Acquisition Corporation I, Inc.), PRG
Texas Acquisition Corporation III, Inc., Physicians
Resource Group, Inc., Daniel I. Goldman, M.D., P.A. and
Daniel I. Goldman, M.D. dated February 14, 1996.(2)
2.3 - Agreement and Plan of Reorganization by and among PRG
Texas Acquisition Corporation II, Inc., Physicians
Resource Group, Inc., The Clariday Eye Center, P.A. and
Gregory T. Clariday, M.D. dated December 7, 1995.(1)
2.4 - First Amendment to Agreement and Plan of Reorganization
by and among Texas PRG I, Inc., a Delaware corporation
(f/k/a PRG Texas Acquisition Corporation I, Inc.), PRG
Texas Acquisition Corporation II, Inc., Physicians
Resource Group, Inc., The Clariday Eye Center, P.A. and
Gregory T. Clariday, M.D. dated February 14, 1996.(2)
4.1 - Restated Certificate of Incorporation of Physicians
Resource Group, Inc.(3)
2
<PAGE> 16
4.2 - Certificate of Designations, Preferences, Rights and
Limitations of Class A Preferred Stock of Physicians
Resource Group, Inc.(3)
4.3 - Third Amended and Restated Bylaws of Physicians
Resource Group, Inc.(4)
4.4 - Form of Warrant Certificate.(3)
4.5 - Rights Agreement dated as of April 19, 1996 between
Physicians Resource Group, Inc. and Chemical Mellon
Shareholder Services.(5)
4.6 - Form of certificate evidencing ownership of Common
Stock of Physicians Resource Group, Inc.(3)
23.1 - Consent of Arthur Andersen LLP(6)
- ------------------------
(1) - Previously filed as an exhibit to the Company's
Registration Statement on Form S-4 (No. 333-00230) and
incorporated herein by reference.
(2) - Previously filed as an exhibit to the Company's Current
Report on Form 8-K filed February 29, 1996, and
incorporated herein by reference.
(3) - Previously filed as an exhibit to the Company's
Registration Statement on Form S-1 (No. 33-91440) and
incorporated herein by reference.
(4) - Previously filed as an exhibit to the Company's Annual
Report on Form 10-K for the year ended December 31,
1995, and incorporated herein by reference.
(5) - Previously filed as an exhibit to the Company's
Registration Statement on Form S-1 (No. 333-3852) and
incorporated herein by reference.
(6) - Filed herewith.
3
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 8-K and our report dated April 12, 1996, on
our audit of the combined financial statements of Key Whitman/Milauskas,
included in the Company's Form 8-K/A dated June 30, 1996, into the Company's
previously filed Form S-8 Registration Statement File No. 33-93712, Form S-8
Registration Statement File No. 33-93946, Form S-8 Registration Statement File
No. 333-03460, Form S-8 Registration Statement File No. 333-03478, Form S-4
Registration Statement File No. 333-00230, Form S-4 Registration Statement File
No. 333-4406, and Form S-4 Registration Statement File No. 333-09905.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Houston, Texas
August 13, 1996
