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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) November 13, 1998
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Physicians Resource Group, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 1-13778 76-0456864
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
Three Lincoln Centre, Suite 1540, 5430 LBJ Freeway, Dallas, TX 75240
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (972) 982-8200
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ITEM 4. CHANGES IN REGISTRANTS' CERTIFYING ACCOUNTANT.
On November 13, 1998 Arthur Andersen LLP ("Arthur Andersen") informed
Physicians Resource Group, Inc. (the "Company") that Arthur Andersen resigned as
the Company's principal independent public accountant. Neither the Company's
board of directors nor any committee of the board recommended that Arthur
Andersen resign. Arthur Andersen's report on the Company's financial statements
for each of the years ended December 31, 1996 and December 31, 1997,
respectively, did not contain an adverse opinion or disclaimer of opinion.
Neither were such opinions qualified or modified as to uncertainty, audit scope
or accounting principles. Since January 1, 1996, there have not been any
disagreements between the Company and Arthur Andersen on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure, which if not resolved to the satisfaction of Arthur Andersen
would have caused it to make reference to the subject matter of the
disagreement(s) in connection with its reports on the Company's financial
statements. In connection with the increasing number of affiliated practices
which notified the Company of their disputes regarding compliance with their
respective service agreements with the Company during the third quarter of 1998,
Arthur Andersen expressed concerns to the Company about realizability of
recorded receivables and intangible assets, as well as recognition of revenues.
The principal reasons for its resignation which Arthur Andersen expressed
to the Company were (1) its belief that there do not exist internal financial
controls and adequate financial reporting from affiliated practices necessary
for the Company to develop reliable financial statements and (2) its belief that
prior management of the Company had not taken steps to remedy problems disclosed
to the Company by Arthur Andersen in a "material weakness" letter (the "Material
Weakness Letter") delivered in connection with Arthur Andersen's issuance of its
opinion with respect to the Company's financial statements for the year ended
December 31, 1997, as disclosed in the Company's Annual Report on Form 10-K for
that period. Arthur Andersen stated in the Material Weakness Letter that during
1997 (i) the Company did not maintain adequate control over the recording of
transactions between individual physician practices and the Company's corporate
accounting department and (ii) the reconciliation of many key general ledger
accounts, including certain cash, receivable and accrued liability accounts, was
not performed by the Company on a timely basis. These matters constituted a
material weakness as defined by standards established by the American Institute
of Certified Public Accountants in the internal control structure of the Company
for the period examined.
One or more current board members have discussed Arthur Andersen's reasons
for resigning with Arthur Andersen. The Company intends to authorize Arthur
Andersen to respond fully to successor accountant inquiries regarding Arthur
Andersen's reasons for resigning.
ITEM 5. OTHER EVENTS.
As previously reported on Form 12b-25, the Company will not file its
Quarterly Report on Form 10-Q for the quarter ended September 30, 1998 on a
timely basis. The inability to file on a timely basis has resulted from (1)
problems with the Company's internal controls and financial reporting systems,
(2) recent executive and employee terminations, including the resignations of
two Chief Financial Officers since October 2, 1998, as well as lack of other
staffing necessary to prepare financial statements on a timely basis and (3)
lack of adequate financial information from certain affiliated practices which
are in dispute with the Company with respect to their contracts with the
Company.
The Company anticipates recording material pre-tax charges for the quarter
ended September 30, 1998, for, among other things, the impairment of certain
assets associated with practices that have initiated legal proceedings against
the Company and receivable balances from other affiliates. At this time, the
Company cannot predict the amount of any such charges because of (1) problems
with the Company's internal controls and financial reporting systems, (2) recent
executive and employee terminations, as well as lack of other staffing
previously available to the Company and (3) lack of adequate financial
information from certain affiliated practices which are in dispute with the
Company with respect to their contracts with the Company.
The Company has been informed by its principal bank lender that the Company
is in default under its bank loan agreement, but the lender has not accelerated
the maturity of the indebtedness, which has a principal balance of $9,500,000.
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The New York Stock Exchange has announced that trading in the Company's
Common Stock on the New York Stock Exchange has been suspended and that the New
York Stock Exchange will make application with the Securities and Exchange
Commission to delist the Common Stock.
Recently announced events, including the Company's default on its bank loan
agreement and the New York Stock Exchange's intention to apply to delist the
Company's Common Stock, as well as the Company's financial condition and other
factors, if not remedied or waived, may cause additional defaults or trigger
other events under certain agreements to which the Company is a party, including
the Company's bank loan agreement and the indenture under which the Company has
issued $125.0 million in principal amount of 6% convertible subordinated
debentures.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits:
(16) Letter re change in certifying accountant.
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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.
PHYSICIANS RESOURCE GROUP, INC.
Date: November 19, 1998 By: /s/ David Meyer
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David Meyer, Chairman of the Board
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EXHIBIT INDEX
Exhibit No. Description
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16 Letter re change in certifying accountant.
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EXHIBIT 16
November 19, 1998
Office of the Chief Accountant
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sir:
We have read Item 4 included in the Form 8-K dated November 19, 1998 of
Physicians Resource Group, Inc. and are in agreement with the statements
contained therein.
Very truly yours,
/S/ ARTHUR ANDERSEN LLP
