UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-26762
PEDIATRIX MEDICAL GROUP, INC.
(Exact name of registrant as specified in its charter)
Florida 65-0271219
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
1301 Concord Terrace
Sunrise, Florida 33323
(Address of principal executive offices)
(Zip Code)
(954) 384-0175
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
At November 6, 2000, the Registrant had 15,852,481 shares of $0.01 par value
common stock outstanding.
PEDIATRIX MEDICAL GROUP, INC.
INDEX
Page
PART I - FINANCIAL INFORMATION
- ------------------------------
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 2000 (Unaudited)
and December 31, 1999.........................................................................................3
Condensed Consolidated Statements of Income for the Three and Nine Months Ended
September 30, 2000 and 1999 (Unaudited).......................................................................4
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 2000 and 1999 (Unaudited).......................................................................5
Notes to Condensed Consolidated Financial Statements............................................................6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.....................................................9
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.......................................12
PART II - OTHER INFORMATION....................................................................................13
- ---------------------------
ITEM 1. Legal Proceedings................................................................................13
ITEM 2. Changes in Securities............................................................................14
ITEM 3. Defaults Upon Senior Securities..................................................................14
ITEM 4. Submission of Matters to a Vote of Security-Holders..............................................14
ITEM 5. Other Information................................................................................14
ITEM 6. Exhibits and Reports on Form 8-K.................................................................14
SIGNATURES.....................................................................................................15
- ----------
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PEDIATRIX MEDICAL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30,
2000 December 31,
(Unaudited) 1999
----------------- ------------------
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents ..................... $ 1,897 $ 825
Accounts receivable, net....................... 73,883 77,726
Prepaid expenses............................... 818 468
Income taxes receivable........................ 744 --
Other current assets........................... 1,012 962
----------------- ------------------
Total current assets....................... 78,354 79,981
Property and equipment, net......................... 14,263 13,567
Other assets, net................................... 243,451 241,242
----------------- ------------------
Total assets............................... $ 336,068 $ 334,790
================= ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses.......... $ 30,574 $ 29,099
Income taxes payable........................... -- 92
Line of credit................................. 38,800 48,393
Current portion of note payable................ 200 200
Deferred income taxes.......................... 17,497 18,549
----------------- ------------------
Total current liabilities.................. 87,071 96,333
Note payable........................................ 2,000 2,150
Deferred income taxes............................... 6,543 5,111
Deferred compensation............................... 3,642 2,309
----------------- ------------------
Total liabilities...................... 99,256 105,903
----------------- ------------------
Commitments and contingencies
Stockholders' equity:
Preferred stock................................ -- --
Common stock................................... 158 156
Additional paid-in capital..................... 134,523 133,516
Retained earnings.............................. 102,131 95,215
----------------- ------------------
Total stockholders' equity................. 236,812 228,887
----------------- ------------------
Total liabilities and stockholders' equity. $ 336,068 $ 334,790
================= ==================
The accompanying notes are an integral part of
these financial statements
3
PEDIATRIX MEDICAL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------ ------------------------------------
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
(in thousands, except for per share data)
Net patient service revenue ............... $ 64,272 $ 57,921 $ 178,859 $ 168,514
Operating expenses:
Salaries and benefits .................. 45,420 39,329 132,961 109,040
Supplies & other operating expenses..... 7,002 5,774 19,400 15,376
Depreciation and amortization........... 3,478 3,168 10,249 8,805
--------------- --------------- --------------- ---------------
Total operating expenses ......... 55,900 48,271 162,610 133,221
--------------- --------------- --------------- ---------------
Income from operations ........... 8,372 9,650 16,249 35,293
Investment income.......................... 58 59 212 211
Interest expense........................... (951) (964) (2,953) (1,656)
--------------- --------------- --------------- ---------------
Income before income taxes............. 7,479 8,745 13,508 33,848
Income tax provision ...................... 3,650 3,760 6,592 13,801
--------------- --------------- --------------- ---------------
Net income............................. $ 3,829 $ 4,985 $ 6,916 $ 20,047
=============== =============== =============== ===============
Per share data:
Net income per common and
common equivalent share:
Basic............................ $ .24 $ .32 $ .44 $ 1.30
=============== =============== =============== ===============
Diluted........................... $ .24 $ .32 $ .43 $ 1.27
=============== =============== =============== ===============
Weighted average shares used in
computing net income per
common and common equivalent
share:
Basic............................. 15,779 15,502 15,727 15,438
=============== =============== =============== ===============
Diluted........................... 16,187 15,724 15,926 15,846
=============== =============== =============== ===============
The accompanying notes are an integral part of
these financial statements
4
PEDIATRIX MEDICAL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
-----------------------------------------
2000 1999
--------------- ---------------
(in thousands)
Cash flows from operating activities:
Net income................................................... $ 6,916 $ 20,047
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 10,249 8,805
Deferred income taxes..................................... 380 5,135
Changes in assets and liabilities:
Accounts receivable.................................... 3,843 (16,224)
Prepaid expenses and other current assets ............. (400) (234)
Other assets........................................... (453) (10)
Accounts payable and accrued expenses.................. 1,475 3,598
Income taxes .......................................... (754) (6,877)
--------------- ---------------
Net cash provided from operating activities ........... 21,256 14,240
--------------- ---------------
Cash flows used in investing activities:
Physician group acquisition payments......................... (8,426) (50,629)
Purchase of subsidiary stock................................. -- (17,151)
Purchase of property and equipment........................... (2,942) (2,813)
--------------- ---------------
Net cash used in investing activities ................. (11,368) (70,593)
--------------- ---------------
Cash flows from (used in) financing activities:
(Payments) borrowings on line of credit, net................. (9,593) 48,943
Payments on note payable..................................... (150) (150)
Proceeds from issuance of common stock....................... 927 1,595
Proceeds from issuance of subsidiary stock................... -- 5,757
--------------- ---------------
Net cash (used in)provided from financing activities... (8,816) 56,145
--------------- ---------------
Net increase (decrease) in cash and cash equivalents ............. 1,072 (208)
Cash and cash equivalents at beginning of period ................. 825 650
--------------- ---------------
Cash and cash equivalents at end of period........................ $ 1,897 $ 442
============== ===============
The accompanying notes are an integral part of
these financial statements
5
PEDIATRIX MEDICAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
(Unaudited)
1. Basis of Presentation:
The accompanying unaudited condensed consolidated financial statements
of Pediatrix Medical Group, Inc. (the "Company" or "Pediatrix")
presented herein do not include all disclosures required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, these financial statements include all
adjustments, consisting of normal recurring adjustments and the
adjustment to the contractual allowance which is further described in
Note 3, necessary for a fair presentation of the results of interim
periods.
The results of operations for the three and nine months ended September
30, 2000 are not necessarily indicative of the results of operations to
be expected for the year ended December 31, 2000. The interim condensed
consolidated financial statements should be read in conjunction with
the consolidated financial statements and footnotes thereto included in
the Company's Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 27, 2000.
2. Business Acquisitions:
During the first nine months of 2000, the Company completed the
acquisition of four physician group practices. Total consideration for
acquisitions approximated $8.4 million in cash.
The Company has accounted for the acquisitions using the purchase
method of accounting and the excess of cost over fair value of net
assets acquired is being amortized on a straight-line basis over 25
years. The results of operations of the acquired practices have been
included in the consolidated financial statements from the dates of
acquisition.
The following unaudited pro forma information combines the consolidated
results of operations of the Company and the physician group practices
acquired during 1999 and 2000 as if the acquisitions had occurred on
January 1, 1999:
Nine Months Ended
September 30,
------------------------------------
2000 1999
-------------- --------------
(in thousands, except for per share data)
Net patient service revenue $ 179,357 $ 180,977
Net income 6,940 20,963
Net income per share:
Basic .44 1.36
Diluted .44 1.32
The pro forma results do not necessarily represent results which would
have occurred if the acquisitions had taken place at the beginning of
the period, nor are they indicative of the results of future combined
operations.
6
PEDIATRIX MEDICAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited)
3. Allowance for Contractual Adjustments and Uncollectible Accounts:
During the second quarter of 2000, the Company recorded a change in its
estimate of the allowance for contractual adjustments and uncollectible
accounts. As a result of the change, the Company increased its reserve
by $6.5 million. Such amount has been recorded as a reduction of
revenue.
4. Accounts Payable and Accrued Expenses:
Accounts payable and accrued expenses consist of the following:
September 30, December 31,
2000 1999
------------------ --------------------
(in thousands)
Accounts payable............................ $ 11,036 $ 9,664
Accrued salaries and bonuses................ 5,395 4,366
Accrued payroll taxes and benefits.......... 5,269 4,258
Accrued professional liability coverage..... 4,903 7,134
Other accrued expenses...................... 3,971 3,677
------------------- --------------------
$ 30,574 $ 29,099
=================== ====================
5. Net Income Per Share:
Basic net income per share is calculated by dividing net income by the
weighted average number of common shares outstanding during the period.
Diluted net income per share is calculated by dividing net income by
the weighted average number of common and potential common shares
outstanding during the period. Potential common shares consist of the
dilutive effect of outstanding options calculated using the treasury
stock method.
6. Contingencies:
In February 1999, the first of several federal securities law class
actions was commenced against the Company and three of its principal
officers in United States District Court for the Southern District of
Florida ("District Court"). The Plaintiffs are shareholders purporting
to represent a class of all open market purchasers of the Company's
common stock between April 28, 1998, and various dates through and
including April 1, 1999. They claim that during that period the Company
violated the antifraud provisions of the federal securities laws by
issuing false and misleading statements concerning its accounting
practices and financial results, focusing in particular on the
capitalization of certain payments made to employees in connection with
acquisitions and revenue recognition in light of recent inquiries
initiated by state investigators into the Company's billing practices.
The Plaintiffs seek damages in an undetermined amount based on the
alleged decline in the value of the common stock after the Company
disclosed the capitalization issue with respect to the capitalization
of certain payments and the inquiries by state investigators. On June
24, 1999, the Judge of the District Court entered an Order of
Consolidation consolidating into one case the several federal
securities law class action lawsuits. On August 20, 1999, the Judge
entered two Orders in the case. The first Order granted the motion made
by the three public pension funds to be appointed as lead Plaintiffs
and to have their counsel appointed as lead Plaintiffs' counsel. The
second Order set the administrative mechanism for handling the
consolidated cases, including the time limitations for the filing of a
Consolidated Amended Class Action Complaint. On October 7, 1999, the
Company filed a Motion to Dismiss the Consolidated Amended Class Action
Complaint.
7
PEDIATRIX MEDICAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited)
6. Contingencies, Continued:
On January 19, 2000, the Judge granted defendants' Motion to Dismiss
based on deficiencies in the allegations which rendered the pleading
insufficient as a matter of law. The Judge provided that the Plaintiffs
could file an Amended Complaint on or before February 3, 2000. The
Plaintiffs filed a Second Amended Complaint on February 3, 2000. On
March 10, 2000, the Company filed a Motion to Dismiss the Second
Amended Consolidated Class Action Complaint. The Plaintiffs answering
memorandum was filed on April 3, 2000, and the Company's reply
memorandum was filed on April 19, 2000. On June 6, 2000, the Judge
entered an Order holding that the allegations in the Plaintiff's Second
Amended Complaint satisfied the requirements to maintain a cause of
action and thus denied the Company's Motion to Dismiss. On July 5,
2000, the Company was served with Plaintiff's First Request for
Production of Documents, to which the Company has responded. Discovery
is continuing. On September 11, 2000, the Judge entered an Order for
Pre-Trial Conference scheduled for May 25, 2001, and an Order of
Referral to Mediation. The Company continues to believe that the claims
are without merit and intends to vigorously defend against them.
In April 1999, the Company received requests, and in one case a
subpoena, from investigators in Arizona, Colorado and Florida for
information related to its billing practices. On May 25, 2000, a
Settlement Agreement was entered into between the Company and the
Office of the Attorney General for the State of Florida ("OAG"). The
Company paid the OAG $40,000 to settle any possible overpayments by the
Florida Medicaid program from January 7, 1997 to the present time. The
Agreement settles all aspects of the billing inquiry in the State of
Florida. The Agreement states that the OAG investigation, together with
an independent audit performed by Ernst & Young, LLP, revealed that no
fraud was committed and the possible overpayment was due to lack of
clarity in the relevant billing codes. On August 28, 2000, a Settlement
Agreement was entered into between the Company and the State of
Arizona's Medicaid Agency. The Company paid the State $220,000 for
potential overpayments for neonatal and pediatric services provided
over a ten-year period, from January 1, 1990 to the effective date of
the Agreement. Additionally, the Company reimbursed the State of
Arizona for costs related to the investigation. The Agreement stated
that the State's investigation revealed a potential overpayment, but no
intentional fraud, and that any overpayment was due to a lack of
clarity in the relevant billing codes. The Company continues to
cooperate with the inquiry in Colorado. Although the Company believes
that its billing practices are proper, as confirmed by the results of
the billing inquiries by the States of Florida and Arizona, the
investigation in Colorado is ongoing and the Company is unable to
predict at this time whether it will have a material adverse effect on
the Company's business, financial condition or results of operations.
The Company believes that billing audits, inquiries and investigations
from government agencies, such as the one received by the Company in
August 2000, now occur in the ordinary course of business in the
healthcare services industry in general. As such, the Company believes
that, from time to time, it may be subject to additional billing
audits, inquiries and/or investigations by government and other payors.
During the ordinary course of business, the Company has become a party
to pending and threatened legal actions and proceedings, most of which
involve claims of medical malpractice and are generally covered by
insurance. These lawsuits are not expected to result in judgments which
would exceed professional liability insurance coverage, and therefore
will not have a material impact on the Company's consolidated results
of operations, financial position or liquidity, notwithstanding any
possible insurance recovery.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
----------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Results of Operations
Three Months Ended September 30, 2000 as Compared to Three Months Ended
September 30, 1999
The Company reported net patient service revenue of $64.3 million for
the three months ended September 30, 2000, as compared with $57.9 million for
the same period in 1999, a growth rate of 11.0%. Of this $6.4 million increase,
$2.9 million, or 45.3%, was attributable to new units, including units at which
the Company provides services as a result of acquisitions. Same unit patient
service revenue increased approximately $3.5 million, or 6.2%, for the three
months ended September 30, 2000. Same units are those units at which the Company
provided services for the entire current period and the entire comparable
period.
Salaries and benefits increased $6.1 million, or 15.5%, to $45.4
million for the three months ended September 30, 2000, as compared with $39.3
million for the same period in 1999. Of this $6.1 million increase, $2.9
million, or 47.5%, was attributable to hiring new physicians, primarily to
support new unit growth, and the remaining $3.2 million was primarily
attributable to increased support staff and resources added in the areas of
nursing, management and billing and reimbursement. Supplies and other operating
expenses increased $1.2 million, or 21.3%, to $7.0 million for the three months
ended September 30, 2000, as compared with $5.8 million for the same period in
1999. The increase was primarily the result of additional rent expense related
to the Company's corporate and regional offices and increased costs related to
the development of regional collection offices. Depreciation and amortization
expense increased by approximately $310,000, or 9.8%, to $3.5 million for the
three months ended September 30, 2000, as compared with $3.2 million for the
same period in 1999, primarily as a result of depreciation on fixed asset
additions.
Income from operations decreased approximately $1.3 million, or 13.2%,
to approximately $8.4 million for the three months ended September 30, 2000, as
compared with $9.7 million for the same period in 1999.
The Company recorded net interest expense of approximately $893,000 for
the three months ended September 30, 2000, as compared with net interest expense
of approximately $905,000 for the same period in 1999. The decrease in interest
expense in 2000 is primarily due to the reduction of the Company's line of
credit.
The effective income tax rate was approximately 48.8% and 43.0% for the
three month periods ended September 30, 2000 and 1999, respectively. The
increase in the tax rate is due to the growth of non-deductible amounts
associated with goodwill as a percentage of pretax income combined with the
decline in the Company's estimated annual pretax income as a result of the $6.5
million charge recorded in the second quarter of 2000.
Net income decreased 23.2% to $3.8 million for the three months ended
September 30, 2000 as compared to $5.0 million for the same period in 1999.
Diluted net income per common and common equivalent share decreased to 24 cents
for the three months ended September 30, 2000, compared to 32 cents for the same
period in 1999.
9
Nine Months Ended September 30, 2000 as Compared to Nine Months Ended
September 30, 1999
The Company reported net patient service revenue of $178.9 million for
the nine months ended September 30, 2000, as compared with $168.5 million for
the same period in 1999. Net patient service revenue for the nine months ended
September 30, 2000 includes a charge of $6.5 million, which was recorded during
the quarter ended June 30, 2000, to increase the allowance for contractual
adjustments and uncollectible accounts. Excluding the $6.5 million charge, net
patient service revenue increased by $16.9 million for the nine months ended
September 30, 2000. Of this $16.9 million increase, $7.4 million, or 43.8%, was
attributable to new units, including units at which the Company provides
services as a result of acquisitions. Same unit patient service revenue
increased approximately $9.5 million, or 5.7%, for the nine months ended
September 30, 2000. Same units are those units at which the Company provided
services for the entire current period and the entire comparable period.
Salaries and benefits increased $24.0 million, or 21.9%, to $133.0
million for the nine months ended September 30, 2000, as compared with $109.0
million for the same period in 1999. Of this $24.0 million increase, $13.4
million, or 55.8%, was attributable to hiring new physicians, primarily to
support new unit growth, and the remaining $10.6 million was primarily
attributable to increased support staff and resources added in the areas of
nursing, management and billing and reimbursement. Supplies and other operating
expenses increased $4.0 million, or 26.2%, to $19.4 million for the nine months
ended September 30, 2000, as compared with $15.4 million for the same period in
1999. The increase was primarily the result of additional rent expense related
to the Company's corporate and regional offices, increased legal fees related to
government investigations, increased costs related to regional collection
offices, and the addition of new outpatient offices. Outpatient services require
a higher level of office supplies than do inpatient services. Depreciation and
amortization expense increased by approximately $1.4 million, or 16.4%, to $10.2
million for the nine months ended September 30, 2000, as compared with $8.8
million for the same period in 1999, primarily as a result of depreciation on
fixed asset additions and amortization of goodwill in connection with
acquisitions.
Income from operations decreased approximately $19.1 million, or 54.0%,
to approximately $16.2 million for the nine months ended September 30, 2000, as
compared with $35.3 million for the same period in 1999. Excluding the $6.5
million charge to revenue, income from operations declined $12.6 million.
The Company recorded net interest expense of approximately $2.7 million
for the nine months ended September 30, 2000, as compared with net interest
expense of approximately $1.4 million for the same period in 1999. The increase
in interest expense in 2000 is primarily the result of funds used for the
acquisition of physician practices and the use of the Company's line of credit
for such purposes.
The effective income tax rate was approximately 48.8% and 40.8% for the
nine-month periods ended September 30, 2000 and 1999, respectively. The increase
in the tax rate is due to the growth of non-deductible amounts associated with
goodwill as a percentage of pretax income combined with the decline in the
Company's estimated annual pretax income as a result of the $6.5 million charge.
Net income decreased 65.5% to $6.9 million for the nine months ended
September 30, 2000, as compared to $20.0 million for the same period in 1999.
Diluted net income per common and common equivalent share decreased to 43 cents
for the nine months ended September 30, 2000, compared to $1.27 for the same
period in 1999.
10
Liquidity and Capital Resources
As of September 30, 2000, the Company had a working capital deficit of
approximately $8.7 million, a decrease of $7.7 million from the working capital
deficit of $16.4 million at December 31, 1999. The working capital deficit is
due to the classification of the Company's line of credit as current at
September 30, 2000 and December 31, 1999. Excluding the line of credit, the
Company had working capital of approximately $30.1 million at Steptember 30,
2000.
The Company refinanced its $75 million line of credit which matured on
September 30, 2000. The total amount of the refinanced line of credit is $75
million. At the Company's option, the line of credit bears interest at LIBOR
plus 2.0% or prime. The line of credit is secured by substantially all the
assets of the Company, its subsidiaries and its affiliated practices, and
matures on September 30, 2001.
As of September 30, 2000, the Company had $36.2 million available under
its $75 million line of credit. The Company anticipates that funds generated
from operations, together with cash on hand, and funds available under its line
of credit will be sufficient to meet its working capital requirements and
finance required capital expenditures for at least the next twelve months.
11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
The Company's unsecured revolving credit facility, mortgage note
payable and certain operating lease agreements are subject to market risk and
interest rate changes. The total amount available under the credit facility is
$75 million. At the Company's option, the credit facility bears interest at
LIBOR plus 2.0% or prime. The mortgage note payable bears interest at prime and
the leases bear interest at LIBOR based variable rates. The outstanding
principal balances on the credit facility and note payable were approximately
$38.8 million and $2.2 million, respectively, at September 30, 2000. The
outstanding balances related to the operating leases totaled approximately $16.9
million at September 30, 2000. Considering the total outstanding balances under
these instruments at September 30, 2000 of approximately $57.9 million, a 1.0%
change in interest rates would result in an impact to pretax earnings of
approximately $579,000 per year.
12
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
-----------------
In February 1999, the first of several federal securities law
class actions was commenced against the Company and three of its
principal officers in United States District Court for the Southern
District of Florida ("District Court"). The Plaintiffs are
shareholders purporting to represent a class of all open market
purchasers of the Company's common stock between April 28, 1998, and
various dates through and including April 1, 1999. They claim that
during that period the Company violated the antifraud provisions of
the federal securities laws by issuing false and misleading statements
concerning its accounting practices and financial results, focusing in
particular on the capitalization of certain payments made to employees
in connection with acquisitions and revenue recognition in light of
recent inquiries initiated by state investigators into the Company's
billing practices. The Plaintiffs seek damages in an undetermined
amount based on the alleged decline in the value of the common stock
after the Company disclosed the capitalization issue with respect to
the capitalization of certain payments and the inquiries by state
investigators. On June 24, 1999, the Judge of the District Court
entered an Order of Consolidation consolidating into one case the
several federal securities law class action lawsuits. On August 20,
1999, the Judge entered two Orders in the case. The first Order
granted the motion made by the three public pension funds to be
appointed as lead Plaintiffs and to have their counsel appointed as
lead Plaintiffs' counsel. The second Order set the administrative
mechanism for handling the consolidated cases, including the time
limitations for the filing of a Consolidated Amended Class Action
Complaint. On October 7, 1999, the Company filed a Motion to Dismiss
the Consolidated Amended Class Action Complaint.
On January 19, 2000, the Judge granted defendants' Motion to
Dismiss based on deficiencies in the allegations which rendered the
pleading insufficient as a matter of law. The Judge provided that the
Plaintiffs could file an Amended Complaint on or before February 3,
2000. The Plaintiffs filed a Second Amended Complaint on February 3,
2000. On March 10, 2000, the Company filed a Motion to Dismiss the
Second Amended Consolidated Class Action Complaint. The Plaintiffs
answering memorandum was filed on April 3, 2000, and the Company's
reply memorandum was filed on April 19, 2000. On June 6, 2000, the
Judge entered an Order holding that the allegations in the Plaintiff's
Second Amended Complaint satisfied the requirements to maintain a
cause of action and thus denied the Company's Motion to Dismiss. On
July 5, 2000, the Company was served with Plaintiff's First Request
for Production of Documents, to which the Company has responded.
Discovery is continuing. On September 11, 2000, the Judge entered an
Order for Pre-Trial Conference scheduled for May 25, 2001, and an
Order of Referral to Mediation. The Company continues to believe that
the claims are without merit and intends to vigorously defend against
them.
In April 1999, the Company received requests, and in one case
a subpoena, from investigators in Arizona, Colorado and Florida for
information related to its billing practices. On May 25, 2000, a
Settlement Agreement was entered into between the Company and the
Office of the Attorney General for the State of Florida ("OAG"). The
Company paid the OAG $40,000 to settle any possible overpayments by
the Florida Medicaid program from January 7, 1997 to the present time.
The Agreement settles all aspects of the billing inquiry in the State
of Florida. The Agreement states that the OAG investigation, together
with an independent audit performed by Ernst & Young, LLP, revealed
that no fraud was committed and the possible overpayment was due to
lack of clarity in the relevant billing codes. On August 28, 2000, a
Settlement Agreement was entered into between the Company and the
State of Arizona's Medicaid Agency. The Company paid the State
$220,000 for potential overpayments for neonatal and pediatric
services provided over a ten-year period, from January 1, 1990 to the
effective date of the Agreement. Additionally, the Company reimbursed
the State of Arizona for costs related to the investigation. The
Agreement stated that the State's investigation revealed a potential
overpayment, but no intentional fraud, and that any overpayment was
due to a lack of clarity in the relevant billing codes. The Company
continues to cooperate with the inquiry in Colorado. Although the
Company believes that its billing practices are proper, as confirmed
by the results of the billing inquiries by the States of Florida and
Arizona, the investigation in Colorado is ongoing and the Company is
unable to predict at this time whether it will have a material adverse
effect on the Company's business, financial condition or results of
operations.
13
The Company believes that billing audits, inquiries and
investigations from government agencies, such as the one received by
the Company in August 2000, now occur in the ordinary course of
business in the healthcare services industry in general. As such, the
Company believes that, from time to time, it may be subject to
additional billing audits, inquiries and/or investigations by
government and other payors.
During the ordinary course of business, the Company has become
a party to pending and threatened legal actions and proceedings, most
of which involve claims of medical malpractice and are generally
covered by insurance. These lawsuits are not expected to result in
judgments which would exceed professional liability insurance
coverage, and therefore will not have a material impact on the
Company's consolidated results of operations, financial position or
liquidity, notwithstanding any possible insurance recovery.
ITEM 2. Changes in Securities
---------------------
Not applicable.
ITEM 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
ITEM 4. Submission of Matters to a Vote of Security-Holders
---------------------------------------------------
Not applicable
ITEM 5. Other Information
-----------------
This quarterly report contains statements which, to the extent
they are not historical fact, constitute "forward looking statements"
under the securities laws. All forward looking statements involve
risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company to differ
materially from those expressed or implied by or in such forward
looking statements. The forward looking statements in this document
are intended to be subject to the safe harbor protection provided
under the securities laws.
The Company's shareholders should also be aware that while the
Company does, at various times, communicate with securities analysts,
it is against the Company's policies to disclose to such analysts any
material non-public information or other confidential information.
Accordingly, our shareholders should not assume that the Company
agrees with all statements or reports issued by such analysts. To the
extent statements or reports issued by analysts contain certain
projections, forecasts or opinions about our Company, such reports and
statements are not the responsibility of the Company.
For additional information identifying certain other important
factors which may affect the Company's operations and could cause
actual results to vary materially from those anticipated in the
forward looking statements, see the Company's Securities and Exchange
Commission filings, including but not limited to, the discussion
included in the Business section of the Company's Form 10-K under the
heading "Factors to be Considered".
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
10.39 Employment Agreement between Pediatrix and Kristen Bratberg
11.1 Statement Re: Computation of Per Share Earnings
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None.
14
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 thereunto duly authorized.
PEDIATRIX MEDICAL GROUP, INC.
Date: November 13, 2000 By: /s/ Roger J. Medel, M.D.
-----------------------------------------
Roger J. Medel, M.D., Chief Executive
Officer (Principal Executive Officer)
Date: November 13, 2000 By: /s/ Karl B. Wagner
-----------------------------------------
Karl B. Wagner, Chief Financial Officer
(Principal Financial and Accounting Officer)
15
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
the 8th day of May, 2000, by and between PEDIATRIX MEDICAL GROUP, INC., a
Florida corporation (hereinafter called the "Company"), and KRISTEN BRATBERG
(hereinafter called the "Executive").
P r e l i m i n a r y S t a t e m e n t s
A. The Company is presently engaged in the business of providing
neonatal and pediatric physician management services to hospitals (the
"Business").
B. The Executive has had many years of business experience in the
health care industry and the management and operations of a health care company.
C. The Company is desirous of employing the Executive and benefiting
from his contributions to the Company.
A g r e e m e n t
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties agree as follows:
1. Employment.
1.1. Employment and Term. The Company hereby agrees to employ
the Executive and the Executive hereby agrees to serve the Company, on the terms
and conditions set forth herein, for an "Initial Term" commencing on May 8, 2000
and expiring on December 31, 2001 (the "Expiration Date") unless sooner
terminated as hereinafter set forth. The Initial Term of this Agreement, and the
employment of the Executive hereunder, shall be automatically renewed for one
(1) year periods thereafter until terminated in accordance hereunder. (The
Initial Term and any automatic renewals shall be hereinafter referred to as the
"Employment Period").
1.2. Duties of the Executive. During the Employment Period,
the Executive shall serve as President of the Company. The Executive shall
report to, and shall be subject to the supervision and direction of, the Chief
Executive Officer. During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote substantially all of his attention and business time during normal
business hours to the business and affairs of the Company and, to the extent
necessary to discharge the responsibilities assigned to the Executive hereunder
as a senior executive officer involved with the general management of the
Company, to use the Executive's reasonable best efforts to perform faithfully
and efficiently such responsibilities. During the Employment Period it shall not
be a violation of this Agreement for the Executive to (i) serve on corporate,
civic or charitable boards or committees; (ii) deliver lectures, fulfill
speaking engagements or teach at
-1-
educational institutions; or (iii) manage personal investments and engage in
other business activities, so long as such activities do not significantly
interfere with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities have been
conducted by the Executive prior to the date hereof, the continued conduct of
such activities (or the conduct of activities similar in nature and scope
thereto) subsequent to the date hereof shall not thereafter be deemed to
interfere with the performance of the Executive's responsibilities to the
Company.
1.3. Place of Performance. The Executive shall be based at the
Company's principal executive offices located in Broward County, Florida, except
for required travel relating to the Company's Business.
2. Base Compensation and Bonus.
2.1. Base Salary. Commencing on the date hereof, the Executive
shall receive a base salary at the annual rate of not less than Three Hundred
Thousand Dollars ($300,000.00) (the "Base Salary") during the term of this
Agreement, with such Base Salary payable in installments consistent with the
Company's normal payroll schedule, subject to required applicable withholding
for taxes. The Base Salary shall be reviewed, at least annually, for merit
increases and may, by action and in the discretion of the Company, be increased
at any time or from time to time.
2.2. Performance Bonus. The Executive shall be entitled to a
performance bonus for each of the Company's fiscal years during the Employment
Period (the "Performance Bonus") of at least Two Hundred Thousand Dollars
($200,000.00) per year. The Compensation Committee of the Company's Board of
Directors ("Board") shall have the exclusive right to increase or decrease
(subject to the $200,000.00 minimum) the Executive's Performance Bonus to
reflect the Executive's and the Company's performance for the year.
3. Other Benefits.
3.1. Expense Reimbursement. The Company shall promptly
reimburse the Executive for all reasonable expenses actually paid or incurred by
the Executive in the course of and pursuant to the Business of the Company,
including expenses for travel and entertainment. The Executive shall account and
submit reasonably supporting documentation to the Company in connection with any
expense reimbursement hereunder in accordance with the Company's policies.
3.2. Other Benefits. During the Employment Period, the Company
shall continue in force all existing comprehensive major medical and
hospitalization insurance coverages, either group or individual for the
Executive and his dependents; shall continue in force all existing life
insurance for the Executive; and shall continue in force all existing disability
insurance for the Executive (collectively, the "Policies"), which Policies the
Company shall keep in effect at its sole expense throughout the term of this
Agreement. The Executive
-2-
and/or the Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under all welfare benefit plans,
practices, policies and programs provided by the Company (including, without
limitation, medical, prescription, dental, disability, salary continuance,
employee life, group life, accidental death and travel accident insurance plans
and programs) to the extent applicable generally to senior executive officers or
other peer executives of the Company. The Executive shall also be entitled to
participate in all incentive, savings and retirement plans, practices, policies
and programs and such other perquisites as applicable generally to senior
executive officers or other peer executives of the Company. Nothing paid to the
Executive under any plan or arrangement presently in effect or made available in
the future shall be deemed to be in lieu of the Base Salary payable to the
Executive pursuant to this agreement.
3.3. Working Facilities. The Company shall furnish the
Executive with such facilities and services suitable to his position and
adequate for the performance of his duties hereunder.
3.4. Vacation. The Executive shall be entitled to such number
of paid vacation and leave days in each calendar year as determined by the Board
from time to time for its senior executive officers, but in no event less than
four (4) weeks of paid vacation during each calendar year. Unused vacation days
may be carried forward from year to year at the option of the Executive;
provided that the Executive notifies the Company of his intention to accrue any
unused vacation or leave time.
3.5. Stock Options. The Executive shall be entitled to
participate in the Company's Stock Option Plan or any other similar plan adopted
by the Company that provides for the issuance of stock options to its employees.
4. Termination.
4.1. Termination for Cause.
(a) The Company may terminate this Agreement for
Cause. As used in this Agreement, the term "Cause" shall mean:
(i) A material willful breach committed in bad
faith by the Executive of the Executive's obligations under Section 1.2 hereof
(other than as a result of incapacity due to physical or mental illness) which
is not remedied in a reasonable period of time after receipt of written notice
from the Company specifying such breach; or
(ii) The conviction of the Executive of a felony
based upon a violent crime or a sexual crime involving baseness, vileness or
depravity; or
(iii) Substance abuse by the Executive in a
manner which materially affects the performance of the Executive's obligations
under Section 1.2 hereof; or
-3-
(iv) Any act or omission of the Executive which
is materially contrary to the business interests, representations or goodwill of
the Company.
(b) The Termination Date for a termination of this
Agreement pursuant to this Section 4.1 shall be the date specified by the
Company in a written notice to the Executive of finding of Cause.
(c) Upon any termination of this Agreement pursuant
to this Section 4.1, the Executive shall be entitled to the compensation
specified in Section 5.1 hereof.
4.2. Disability. The Company may terminate this Agreement upon
the Disability (as defined below) of the Executive in strict accordance with the
following procedure: Upon a good faith determination by not less than a majority
of the Board of the entire membership of the Board (excluding the Executive)
that the Executive has suffered a Disability, the Company shall give the
Executive written notice of its intention to terminate this Agreement due to
such Disability. In such event, the Executive's employment with the Company
shall terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for six consecutive months or twelve
months whether or not consecutive as a result of incapacity due to mental or
physical illness which is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or the
Executive's legal representative (such agreement as to acceptability not to be
withheld unreasonably). The Termination Date for a termination of this Agreement
pursuant to this Section 4.2 shall be the date specified by the Board in the
resolution finding that the Executive has suffered a Disability, which date may
not be any earlier than 30 days after the date of Board's finding. Upon any
termination of this Agreement pursuant to this Section 4.2, the Executive shall
be entitled to the compensation specified in Section 5.2 hereof.
4.3. Death. This Agreement shall terminate automatically upon
the death of the Executive, without any requirement of notice by the Company to
the Executive's estate. The date of the Executive's death shall be the
Termination Date for a termination of this Agreement pursuant to this Section
4.3. Upon any termination of this Agreement pursuant to this Section 4.3, the
Executive shall be entitled to the compensation specified in Section 5.3 hereof.
4.4 Termination by the Company Without Cause. The Company may
terminate the Executive's employment, without cause, as provided in this Section
4.4. To terminate the Executive's employment without cause in accordance with
this Section 4.4, the Company shall give the Executive written notice of such
termination. The Termination Date shall be the date specified by the Company in
such notice. Upon any termination of this Agreement pursuant to this Section
4.4, the Executive shall be entitled to the compensation specified in Section
5.4 hereof.
-4-
4.5. Termination Upon a Change in Control of the Company. In
the event a Change in Control (as hereafter defined) in the Company shall occur
during the Employment Period, and the Executive elects to terminate his
employment with Company because Executive is (i) assigned any position, duties
or responsibilities that are significantly diminished or changed when compared
with the position, duties, responsibilities or compensation of the Executive
prior to such Change in Control, or (ii) forced to relocate to another location
more than 25 miles from the Executive's location prior to the Change in Control,
or (iii) Executive is terminated by Company, then the Executive shall be
entitled to the compensation specified in Section 5.5 hereof and any other
compensation and benefits provided in this Agreement in connection with a Change
in Control of the Company. For purposes of this Section 4.5, "Change in Control
of the Company" shall mean (i) the acquisition by a person or an entity or a
group of persons and entities, directly or indirectly, of more than fifty (50%)
percent of the Company's common stock in a single transaction or a series of
transactions (hereinafter referred to as a "50% Change in Control"); (ii) a
merger or other form of corporate reorganization resulting in an actual or de
facto 50% Change in Control; or (iii) the failure of Applicable Directors
(defined below) to constitute a majority of the Board during any two (2)
consecutive year period after the date of this Agreement (the "Two-Year
Period"). "Applicable Directors" shall mean those individuals who are members of
the Board at the inception of a Two-Year Period and any new director whose
election to the Board or nomination for election to the Board was approved
(prior to any vote thereon by the shareholders) by a vote of at least two-thirds
(2/3) of the directors then still in office who either were directors at the
beginning of the Two-Year Period at issue or whose election or nomination for
election during such Two-Year Period was previously approved as provided in this
sentence. If the Executive elects to terminate his employment pursuant to the
terms of this Section 4.5, the Executive shall give the Company a written
termination notice. The Termination Date shall be the date specified in such
notice, which date may not be earlier than 30 days nor later than 90 days from
the Company's receipt of such notice.
4.6. Termination by the Executive Due to Poor Health. The
Executive may terminate his employment under this Agreement upon written notice
to the Company if the Executive's health should become impaired to any extent
that makes the continued performance of the Executive's duties under this
Agreement hazardous to the Executive's physical or mental health or his life
(regardless of whether such condition would be deemed a Disability under any
other section of this Agreement), provided that the Executive shall have
furnished the Company with a written statement from a qualified doctor to that
effect and provided further that, at the Company's written request and expense,
the Executive shall submit to a medical examination by a qualified doctor
selected by the Company and acceptable to the Executive (which acceptance shall
not be unreasonably withheld) which doctor shall substantially concur with the
conclusions of the Executive's doctor. The Termination Date shall be the date
specified in the Executive's notice to the Company, which date may not be
earlier than 30 days nor later than 90 days from the Company's receipt of such
notice. Upon any termination of this Agreement pursuant to this Section 4.6, the
Executive shall be entitled to the compensation specified in Section 5.6 hereof.
4.7. Termination by the Executive. The Executive may terminate
his employment under this Agreement for any reason whatsoever upon not less than
90 days prior written notice to the Company. The Termination Date under this
Section 4.7 shall be the date
-5-
specified in the Executive's notice to the Company, which date may not be
earlier than 90 days from the Company's receipt of such notice. Upon any
termination of this Agreement pursuant to this Section 4.7, the Executive shall
be entitled to the compensation specified in Section 5.7 hereof.
5. Compensation and Benefits Upon Termination.
5.1. Cause. If the Executive's employment is terminated for
Cause, the Company shall pay the Executive his full Base Salary through the
Termination Date specified in Section 4.1 at the rate in effect at the
Termination Date, and the Company shall have no further obligation to the
Executive under this Agreement.
5.2. Disability. During any period that the Executive is
unable to perform his duties under this Agreement as a result of incapacity due
to physical or mental illness, the Executive shall continue to receive his full
Base Salary until the Termination Date specified in Section 4.2, plus the
prorated amounts specified in Section 5.10. After such termination, the
Executive shall receive 50% of his annual Base Salary at the rate in effect at
the Termination Date, payable in six equal monthly installments, reduced by any
disability payments otherwise payable by or pursuant to plans provided by the
Company.
5.3. Death. Upon the Executive's death, the Company shall pay
to the person designated by the Executive in a notice filed with the Company or,
if no person is designated, to his estate (i) any unpaid amounts of his Base
Salary and accrued vacation to the date of the Executive's death, plus the
prorated amounts specified in Section 5.10; and (ii) any payments the
Executive's spouse, beneficiaries or estate may be entitled to receive pursuant
to any pension or employee benefit plan or life insurance policy or similar plan
or policy then maintained by the Company. Upon full payment of all amounts
required to be paid under this Section 5.3, the Company shall have no further
obligation under this Agreement.
5.4 Termination by the Company Without Cause. If the Company
terminates the Executive's employment without cause in accordance with and
subject to Section 4.4, then (i) the Company shall pay the Executive his full
Base Salary through the Termination Date specified in Section 4.4 at the rate in
effect at such Termination Date, plus the prorated amounts specified in Section
5.10; and (ii) in lieu of further salary payments to the Executive for periods
subsequent to the Termination Date and in consideration of the rights of the
Company under Section 8, the Company shall pay Executive an amount equal to 50%
of his annual Base Salary at the highest rate in effect during the 12 months
immediately preceding the Termination Date, payable to the Executive in six
equal monthly installments. Upon payment of the amounts specified under this
Section 5.4, the Company shall have no further obligation under this Agreement.
5.5 Termination by the Executive Upon a Change in Control. If
this Agreement is terminated as contemplated by Section 4.5, then (i) the
Company shall pay the Executive his full Base Salary through the Termination
Date specified in Section 4.5, at the rate
-6-
in effect at such Termination Date, plus the amounts specified in Section 5.10;
(ii) the Executive shall receive all other compensation and benefits provided in
this Agreement in connection with a termination of employment due to a Change in
Control of the Company; and (iii) in lieu of any further salary payments to the
Executive for periods subsequent to such Termination Date (but without affecting
compensation or benefits to the Executive in accordance with the preceding
clauses 5.5 (i) and 5.5 (ii) and in consideration of the rights of the Company
under Section 8), the Company shall pay as severance pay to the Executive an
amount equal to 100% of the average annual taxable compensation of the Executive
for the five taxable years prior to such termination (all as determined to
compute the "base amount" for purposes of Section 280G of the Internal Revenue
Code of 1986, as amended (the" Code")), reduced, but not below zero, by the
amount of compensation or benefits from the Company to the Executive which would
cause the severance pay payable pursuant to this Section 5.5 to exceed the
excess parachute payment limitation imposed under Section 280G of the Code,
payable to the Executive in 12 equal monthly installments, commencing upon such
termination. It is understood and agreed that (i) any partial year during which
the Executive has been employed by the Company shall be deemed to be a full
year, with the taxable compensation for such year deemed to be the taxable
compensation received by the Executive in such partial year increased so as to
annualize such amount for the full year and (ii) if the Executive has not been
employed by the Company for the four consecutive years immediately prior to the
year in which such termination occurs, then the five taxable years referenced in
the immediately preceding sentence shall be deemed to be the lesser period that
the Executive has been employed by the Company. In addition, in the event the
Termination Date as a result of a Change in Control occurs within the
twelve-month period of a Change in Control, any stock options held by the
Executive on the Termination Date shall become vested in full and immediately
exercisable.
5.6. Termination by the Executive Due to Poor Health. If the
Executive terminates this Agreement pursuant to Section 4.6 hereof, the Company
shall pay to the Executive any unpaid amounts of his Base Salary and accrued
vacation to the Termination Date specified in Section 4.6, plus any disability
payments otherwise payable by or pursuant to plans provided by the Company, plus
the prorated amounts specified in Section 5.10.
5.7. Termination by the Executive. If this Agreement
terminates pursuant to Section 4.7 hereof, the Company shall pay to the
Executive any unpaid amounts of his Base Salary and accrued vacation to the
Termination Date specified in Section 4.7, as the case may be, plus the prorated
amounts specified in Section 5.10.
5.8. Health and Medical Plans. The Executive shall be entitled
to all continuation of health, medical, hospitalization and other programs
during the period that the Executive is receiving payments under this Agreement
and, in all cases, as provided by any applicable law. The Executive shall also
be entitled to receive those benefits as are provided by the Company to its
employees upon termination of employment with the Company.
5.9. Mitigation. Except with respect to a termination in
accordance with Section 4.5, the Executive shall be required to mitigate the
amount of any payment provided for
-7-
in this Section 5 by seeking other employment or otherwise, any payment provided
for in this Section 5 shall be reduced by any compensation earned by the
Executive as the result of employment by another employer after the Termination
Date.
5.10. Incentive Bonus, Performance Bonus and Expense
Reimbursement. If the Executive's employment with the Company is terminated for
any reason, other than Cause (defined in Section 4.1(a) above), the Executive
shall be paid, solely in consideration for services rendered by the Executive
prior to such termination, a Bonus with respect to the Company's fiscal year in
which the Termination Date occurs, equal to the Performance Bonus that would
have been payable to the Executive for the fiscal year if the Executive's
employment had not been terminated, multiplied by the number of days in the
fiscal year prior to and including the date of termination and divided by 365.
The Executive shall be entitled to reimbursement for reasonable business
expenses incurred prior to the Termination Date, subject, however to the
provisions of Section 3.1.
6. Successors; Binding Agreement.
6.1. Successors. The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
acquiring a majority of the Company's voting common stock or any other successor
to all or substantially all of the business and/or assets of the Company to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean the
Company as previously defined and any successor to its business and/or assets
which executes and delivers the agreement provided for in this Section 6 or
which otherwise becomes bound by all the terms and provisions of this Agreement
by operation of law.
6.2. Benefit. This Agreement and all rights of the Executive
under this Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amounts would still be payable to him under this Agreement,
including all payments payable under Section 5, if he had continued to live, all
such amounts shall be paid in accordance with the terms of this Agreement to the
Executive's devisee, legatee, or other designee or, if there is no such
designee, the Executive's estate.
7. Conflicts With Prior Employment Contract. Except as otherwise
provided in this Agreement, this Agreement constitutes the entire agreement
among the parties pertaining to the subject matter hereof, and supersedes and
revokes any and all prior or existing agreements, written or oral, relating to
the subject matter hereof, and this Agreement shall be solely determinative of
the subject matter hereof.
8. Noncompetition; Unauthorized Disclosure; Injunctive Relief.
8.1. No Material Competition. Except with respect to services
performed under this Agreement on behalf of the Company, and subject to the
obligations of the Executive
-8-
as an officer of the Company and the employment obligations of the Executive
under this Agreement, the Executive agrees that at no time during the Employment
Period or, for a period of one year immediately following any termination of
this Agreement for any reason, for himself or on behalf of any other person,
persons, firm, partnership, corporation or company:
(a) Solicit or accept business from any clients of the
Company or its affiliates, from any prospective clients whose business the
Company or any affiliate of the Company is in the process of soliciting at the
time of the Executive's termination, or from any former clients which had been
doing business with the Company within one year prior to the Executive's
termination;
(b) Solicit any employee of the Company or its affiliates
to terminate such employee's employment with the Company; or
(c) Engage in any neonatology or perinatology-related
business of the types performed by the Company in the geographical area where
the Company is actively doing business or soliciting business, including, but
not limited to, employment or association with Sheridan Healthcare, Inc., its
subsidiaries, affiliates or successors-in-interest, and Magella Healthcare
Corporation, its subsidiaries, affiliates or successors-in-interest.
8.2. Unauthorized Disclosure. During the Employment Period and
for two years following the termination of this Agreement for any reason, the
Executive shall not, without the written consent of the Board or a person
authorized by the Board or as may otherwise be required by law or court order,
disclose to any person, other than an employee of the Company or person to whom
disclosure is reasonably necessary or appropriate in connection with the
performance by the Executive of his duties as an executive of the Company, any
material confidential information obtained by him while in the employ of the
Company with respect to any of the company's clients, physicians, creditors,
lenders, investment bankers or methods of marketing, provided, however, that
confidential information shall not include any information generally known to
the public (other than as a result of unauthorized disclosure by the Executive)
or any information of a type not otherwise considered confidential by persons
engaged in the same business or a business similar to that conducted by the
Company.
8.3. Injunction. The Company and the Executive acknowledge
that a breach by the Executive of any of the covenants contained in this Section
8 may cause irreparable harm or damage to the Company or its subsidiaries, the
monetary amount of which may be virtually impossible to ascertain. As a result,
the Executive agrees that the Company shall be entitled to an injunction issued
by any court of competent jurisdiction enjoining and restraining all violations
of this Section 8 by the Executive or his associates, affiliates, partners or
agents, and that the right to an injunction shall be cumulative and in addition
to all other remedies the Company may possess.
8.4. Certain Provisions. The provisions of this Section 8
shall apply during the time the Executive is receiving Disability payments from
the Company as a result of a termination of this Agreement pursuant to Section
4.2 hereof.
-9-
9. Arbitration. Any dispute or controversy (except for disputes arising
under Section 8) arising under or in connection with this Agreement shall be
settled exclusively by arbitration in accordance with the rules of the American
Arbitration Association then in effect (except to the extent that the procedures
outlined below differ from such rules). Within 7 days after receipt of written
notice from either party that a dispute exists and that arbitration is required,
both parties must within 7 business days agree on an acceptable arbitrator. If
the parties cannot agree on an arbitrator, then the parties shall list the "Big
Five" accounting firms (other than the Company's auditors) in alphabetical order
and the first firm that does not have a conflict of interest and is willing to
serve will be selected as the arbitrator. The parties agree to act as
expeditiously as possible to select an arbitrator and conclude the dispute. The
arbitrator must render his decision in writing within 30 days of his or its
appointment. The cost and expenses of the arbitration and of legal counsel to
the prevailing party shall be borne by the non-prevailing party. Each party will
advance one-half of the estimated fees and expenses of the arbitrator. Judgment
may be entered on the arbitrator's award in any court having jurisdiction;
provided that the Company shall be entitled to seek a restraining order or
injunction in any court of competent jurisdiction to prevent any continuation of
any violation of Section 8 hereof.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without regard to its conflict
of laws principles to the extent that such principles would require the
application of laws other than the laws of the State of Florida.
11. Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given when
delivered by hand or when deposited in the United States mail by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Company: If to the Executive:
Roger J. Medel, M.D., M.B.A. Kristen Bratberg
Pediatrix Medical Group, Inc. 2980 Windmill Ranch Road
1301 Concord Terrace Weston, FL 33331
Sunrise, Florida 33323
or to such other addresses as either party hereto may from time to time give
notice of to the other in the aforesaid manner.
12. Benefits: Binding Effect. This Agreement shall be for the benefit
of and binding upon the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and, where applicable,
assigns. Notwithstanding the foregoing, neither party may assign its rights or
benefits hereunder without the prior written consent of the other party hereto.
13. Severability. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and, in the event that any one or more of the words, phrases,
-10-
sentences, clauses or sections contained in this Agreement shall be declared
invalid, this Agreement shall be construed as if such invalid word or words,
phrase or phrases, sentence or sentences, clause or clauses, or section or
sections had not been inserted. If such invalidity is caused by length of time
or size of area, or both, the otherwise invalid provision will be considered to
be reduced to a period or area which would cure such invalidity.
14. Waivers. The waiver by either party hereto of a breach or violation
of any term or provision of this Agreement shall not operate nor be construed as
a waiver of any subsequent breach or violation.
15. Damages. Nothing contained herein shall be construed to prevent the
Company or the Executive from seeking and recovering from the other damages
sustained by either or both of them as a result of its or his breach of any term
or provision of this Agreement. In the event that either party hereto brings
suit for the collection of any damages resulting from, or the injunction of any
action constituting, a breach of any of the terms or provisions of this
Agreement, then the party found to be at fault shall pay all reasonable court
costs and attorneys' fees of the other, whether such costs and fees are incurred
in a court of original jurisdiction or one or more courts of appellate
jurisdiction.
16. No Third Party Beneficiary. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
(other than the parties hereto and, in the case of the Executive, his heirs,
personal representative(s) and/or legal representative) any rights or remedies
under or by reason of this Agreement. No agreements or representations, oral or
otherwise, express or implied, have been made by either party with respect to
the subject matter of this agreement which agreements or representations are not
set forth expressly in this Agreement, and this Agreement supersedes any other
employment agreement between the Company and the Executive.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
PEDIATRIX MEDICAL GROUP, INC. THE EXECUTIVE:
/s/ Roger J. Medel, M.D., M.B.A. /s/ Kristen Bratberg
- ----------------------------------- --------------------------------
Roger J. Medel, M.D., M.B.A. Kristen Bratberg
Chairman of the Board and
Chief Executive Officer
-11-
Exhibit 11.1
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
2000 1999 2000 1999
------------- ------------- ------------- -------------
(in thousands, except for per share data)
Basic:
Net income applicable to
common stock $ 3,829 $ 4,985 $ 6,916 $ 20,047
============= ============= ============= =============
Weighted average number of
common shares outstanding 15,779 15,502 15,727 15,438
============= ============= ============= =============
Basic net income per share $ .24 $ .32 $ .44 $ 1.30
============= ============= ============= =============
Diluted:
Net income applicable to
common stock $ 3,829 $ 4,985 $ 6,916 $ 20,047
============= ============= ============= =============
Weighted average number of
common shares outstanding 15,779 15,502 15,727 15,438
Weighted average number of
dilutive common stock equivalents 408 222 199 408
------------- ------------- ------------- -------------
Weighted average number of
common and common equivalent
shares outstanding 16,187 15,724 15,926 15,846
============= ============= ============= =============
Diluted net income per share $ .24 $ .32 $ .43 $ 1.27
============= ============= ============= =============
5
1000
9-MOS
DEC-31-2000
JAN-01-2000
SEP-30-2000
1897
0
73883
0
0
78354
14263
0
336068
87071
2000
0
0
158
236654
336068
0
178859
0
162610
(212)
0
2953
13508
6592
6916
0
0
0
6916
0.44
0.43
AMOUNTS FOR RECEIVABLES AND PROPERTY, PLANT AND
EQUIPMENT ARE NET OF ANY ALLOWANCES AND ACCUMULATED
DEPRECIATION.
