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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to __________________
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
incorporation or organization) identification No.)
1455 North Park Drive
Ft. Lauderdale, FL 33326
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: ________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, New York Stock Exchange
$.01 par value
Securities registered pursuant to Section 12(g) of the Act:
NONE
(Title of Class)
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 for 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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of shares of Common Stock held by
non-affiliates of the registrant as of March 8, 1999, was approximately
$205,917,000 based on a $22.63 closing sales price for the Common Stock on the
New York Stock Exchange on such date. For purposes of this computation, all
executive officers, directors and 5% beneficial owners of the common stock of
the registrant have been deemed to be affiliates. Such determination should not
be deemed to be an admission that such directors, officers or 5% beneficial
owners are, in fact, affiliates of the registrant.
The number of shares of Common Stock, $.01 par value, of the registrant
outstanding as of March 8, 1999 were 15,439,417.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
MANAGEMENT
The executive officers and directors of the Company are as follows:
Name Age Position with the Company
- --------------------------------------------- ------- -----------------------------------------------------
Roger J. Medel, M.D., M.B.A ............. 52 President, Chief Executive Officer and Director
Lawrence M. Mullen ...................... 56 Vice President and Chief Operating Officer
Karl B. Wagner .......................... 33 Vice President and Chief Financial Officer
Kristen Bratberg ........................ 37 Vice President, Business Development
Bruce A. Jordan ......................... 45 Vice President, General Counsel and Corporate
Secretary
M. Douglas Cunningham, M.D............... 59 Director
Cesar L. Alvarez(2) ..................... 51 Director
Michael B. Fernandez(1)(2)............... 45 Director
Bruce R. Evans(1)........................ 40 Director
E. Roe Stamps, IV(2)..................... 52 Director
- -----------------
(1) Member of Compensation Committee
(2) Member of Audit Committee.
Roger J. Medel, M.D. M.B.A. has held the position of President, Chief
Executive Officer and director of Pediatrix since he founded the Company in 1979
with Dr. Gregory Melnick. Dr. Medel has been an instructor in pediatrics at the
University of Miami and participates as a member of several medical and
professional organizations. Dr. Medel also holds a Masters Degree in Business
Administration from the University of Miami. Dr. Medel has served on the boards
of directors of Sechrist Industries Inc., ARC Broward Inc. and Physicians
Healthcare Plans, Inc.
Lawrence M. Mullen joined the Company in May 1995. Mr. Mullen has held
the position of Vice President and Chief Operating Officer of Pediatrix since
August 1998. Prior to his appointment as Chief Operating Officer, Mr. Mullen
served as the Company's Vice President and Chief Financial Officer. Mr. Mullen
was Senior Vice President and Chief Financial Officer of Medical Care America,
Inc. from May 1993 until its acquisition by Columbia/HCA Healthcare Corporation
in September 1994. Mr. Mullen served as a consultant to Columbia/HCA from
November 1994 until joining Pediatrix. Prior to joining Medical Care America,
Inc., Mr. Mullen was a partner of KPMG LLP, where he was employed from 1964 to
1993.
Karl B. Wagner joined Pediatrix Medical Group, Inc. in May 1997 and was
appointed Chief Financial Officer in August 1998. Prior to his appointment, Mr.
Wagner served as Controller, and was responsible for all accounting and
financial operations, including Securities and Exchange Commission reporting.
Prior to joining Pediatrix, Mr. Wagner was Chief Financial Officer for the East
Region of Columbia/HCA's Ambulatory Surgery Division from January 1995 until
joining the Company. From July 1993 through January 1995, Mr. Wagner was
Assistant Controller of Medical Care International, Inc., a subsidiary of
Medical Care America, Inc.
2
Kristen Bratberg joined the Company in November 1995 as Vice President,
Business Development. Prior to joining the Company, Mr. Bratberg was employed by
Dean Witter Reynolds Inc. in the Corporate Finance Department from May 1987 to
November 1995, most recently as a Senior Vice President specializing in the
healthcare industry.
Bruce A. Jordan joined the Company in April 1997 as Vice President,
General Counsel and Corporate Secretary. Prior to joining the Company, Mr.
Jordan was Vice President and General Counsel of Del Monte Fresh Produce ("Del
Monte") from May 1994 until joining the Company, and from October 1990 until May
1994 he served as Assistant General Counsel of Del Monte.
M. Douglas Cunningham, M.D. has been employed by the Company since June
1996. Dr. Cunningham served as Vice President and Chief Medical Officer from
June 1996 to June 1997, at which time he was appointed Vice President, Regional
Medical Operations. In October 1996, Dr. Cunningham was appointed director. Dr.
Cunningham has over 25 years experience as a practicing neonatologist and
professor of pediatrics and neonatology. From 1988 until joining the Company,
Dr. Cunningham served as the Senior Vice President, Medical Operations with
Infant Care Management Services, Inc. Dr. Cunningham has also served as a
professor at several medical schools, most recently as a Clinical Professor of
Pediatrics at the University of California, Irvine, and has published numerous
medical articles.
Cesar L. Alvarez was appointed as a director in March 1997. Mr. Alvarez
has been a lawyer with the law firm of Greenberg Traurig, P.A. for over 20
years, where he has served as the chairman of its corporate, securities and
banking department and currently serves as the firm's Chief Executive Officer
and Managing Shareholder. Mr. Alvarez also serves as a director of Atlantis
Plastics, Inc., Texpack, N.V. and Watsco, Inc.
Michael B. Fernandez was appointed as a director in October 1995. Mr.
Fernandez has served since 1992 as Chairman of the Board and Chief Executive
Officer of Physicians Healthcare Plans, Inc., a Florida - based health
maintenance organization. Prior to that time, Mr. Fernandez served from 1990 to
1992 as Executive Vice President of Product Development and Marketing as well as
Chief Executive Officer of certain indemnity subsidiaries of CAC-United
Healthcare Plans of Florida, Inc., a publicly - held managed care company.
Bruce R. Evans was elected a director of the Company in October 1992.
Mr. Evans has been employed by Summit Partners since 1986, and is currently a
General Partner. Mr. Evans is also a director of Omtool, Ltd. and DSET
Corporation.
E. Roe Stamps, IV was elected a director of the Company in October
1992. Mr. Stamps co-founded Summit Partners in 1984 and is currently its
Managing General Partner. Mr. Stamps is also a director of Ameripath, Inc.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's directors and executive officers, and persons who
own more than 10 percent of the Company's Common Stock, to file with the
Securities and Exchange Commission (the "SEC") initial reports of ownership and
reports of changes in ownership of Common Stock. Officers, directors and greater
than 10 percent shareholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and representations that no other reports
were required, during the fiscal year ending December 31, 1998 all Section 16(a)
filing requirements applicable to its officers, directors and greater than 10
percent beneficial owners were complied with, except that one report with
respect to one transaction was filed late by Michael Fernandez.
3
ITEM 11. EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table sets forth certain summary information concerning
compensation paid or accrued by the Company and its subsidiaries to or on behalf
of the Company's Chief Executive Officer and each of the most highly compensated
executive officers of the Company who were serving as executive officers at the
end of the last completed fiscal year, whose total annual salary and bonus,
determined as of the end of the last fiscal year, exceeded $100,000
(collectively, the "Named Executive Officers"), for the fiscal years ended
December 31, 1998, 1997, and 1996.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation(1) ------------
--------------------------------------- No. of Securities All Other
Fiscal Underlying Compensation
Name and Principal Position Year Salary($) Bonus ($) Options (3)
--------------------------- ---- --------- --------- ------- ---
Roger J. Medel, M.D., M.B.A. 1998 $400,000 $782,350(2) 50,000 $6,400
President and Chief Executive Officer 1997 400,000 100,000(2) 200,000 6,400
1996 397,984 539,000(2) 200,000 3,595
- ---------------------------------------
Lawrence M. Mullen 1998 $250,000 $150,000(2) 50,000 $6,400
Vice President and Chief 1997 250,000 50,000(2) 50,000 6,400
Operating Officer................ 1996 169,309 50,000(2) 50,000 6,000
- ---------------------------------------
Karl B. Wagner 1998 $105,000 $50,000(2) 25,000 $4,600
Vice President and Chief Financial
Officer (4)
- ---------------------------------------
Kristen Bratberg 1998 $200,000 $1,138,722 50,000 $6,400
Vice President, Business 1997 200,000 1,017,077 50,000 6,400
Development...................... 1996 200,000 699,000 -0- 6,000
- ---------------------------------------
Bruce A. Jordan 1998 $180,000 $30,000(2) 0 $6,400
Vice President, General Counsel 1997 117,778 20,000(2) 20,000 3,533
and Corporate Secretary (5)......
- ----------------------------------
(1) The column for "Other Annual Compensation" has been omitted because there
is no compensation required to be reported in such columns. The aggregate
amount of perquisites and other personal benefits provided to each
officer listed above is less than 10% of the total annual salary and
bonus of such officer.
(2) Includes bonuses paid in a subsequent year for services performed in the
year reported.
(3) Reflects matching contributions to the Company's
401(k) plan.
(4) Mr. Wagner joined the Company as Controller in May 1997 and was appointed
as Chief Financial Officer in August 1998.
(5) Mr. Jordan joined the Company in April 1997.
4
Option Grants Table
The following table sets forth certain information concerning grants of
stock options made during fiscal 1998 to the Named Executive Officers.
Individual Option Grants in 1998 Fiscal Year
--------------------------------------------
% of Total
Options Potential Realizable Value
Granted to Exercise at Assumed Annual Rates of
Number Employees Price Stock Price Appreciation
of Options in Fiscal Per Expiration For Option Term(1)
--------------------------
Name Granted 1998 Share(2) Date 5% 10%
---- ------- ---- -------- ---- -- ---
Roger J. Medel, M.D. M.B.A....... 50,000 5.76% $38.125 1/28/2008 $1,198,830 $3,038,072
Lawrence M. Mullen............... 50,000 5.76% 36.125 1/9/2008 1,135,941 2,878,697
Karl B. Wagner................... 15,000 1.15% 36.125 1/9/2008 340,782 863,609
10,000 1.73% 32.500 6/15/2008 204,391 517,966
Kristen Bratberg................. 50,000 5.76% 36.125 1/9/2008 1,135,941 2,878,697
Bruce A. Jordan.................. 0 - - - 0 0
- -------------------
(1) The dollar amounts set forth in these columns are the result of
calculations at the five percent and ten percent rates set by the
Securities and Exchange Commission, and therefore are not intended to
forecast possible future appreciation, if any, of the market price of the
Common Stock.
(2) All options were granted at exercise prices equal to the fair market
value of the Common Stock on the date of grant.
Stock Option Exercises and Year-End Option Value Table
The following table sets forth certain information concerning option
exercises in fiscal 1998, the number of stock options held by the Named
Executive Officers as of December 31, 1998 and the value (based on the fair
market value of a share of stock at fiscal year-end) of in-the-money options
outstanding as of such date.
Number of
Shares Number of Unexercised Value of Unexercised In-the-Money
Acquired Options at Options at
on Value December 31, 1998 December 31, 1998(1)
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
Roger J. Medel, M.D. M.B.A.... -- -- 770,000 250,000 $32,401,540 $5,1111,460
- -------------------------------
Lawrence M. Mullen............ -- -- 150,000 100,000 5,823,960 2,672,915
- -------------------------------
Karl B. Wagner................ -- -- 3,334 31,666 103,146 837,792
- -------------------------------
Kristen Bratberg.............. -- -- 116,667 83,333 4,584,385 2,221,865
- -------------------------------
Bruce A. Jordan............... -- -- 6,667 13,333 206,260 412,490
- -------------------------------
- -----------------
(1) The closing sale price for the Company's Common Stock as reported on the
New York Stock Exchange on December 31, 1998 was $59.94. Value is
calculated by multiplying (a) the difference between $59.94 and the option
exercise price by (b) the number of shares of Common Stock underlying the
option.
Director Compensation
The Company pays each director who is neither an employee nor is
associated with one of the Company's principal shareholders an annual director's
fee of $7,500, payable quarterly, a $1,000 fee for each meeting of the Board of
Directors attended by such director and, if not held in conjunction with a
regular meeting of the Board of Directors, a $500 fee for each committee meeting
attended. In addition, each non-employee director is not affiliated with one of
the Company's principal shareholders (an "Outside Director") receives options to
purchase 5,000 shares of Common Stock on such director's initial appointment to
5
the Board, which options become fully exercisable on the one-year anniversary
date of the grant. The unexercised portion of any option granted to an Outside
Director becomes null and void three months after the date on which such Outside
Director ceases to be a director of the Company for any reason. The Company also
reimburses all directors for out-of-pocket expenses incurred in connection with
the rendering of services as a director. Dr. Cunningham also serves as Vice
President, Regional Medical Operations pursuant to an employment agreement with
the Company which provides for an annual salary of $150,000 plus a performance
bonus. During 1998, Dr. Cunningham received compensation of $336,017 including
bonuses for services rendered to the Company.
Employment Contracts and Termination of Employment Agreements
The Company has entered into employment agreements with each of the
executive officers (collectively the "Employment Agreements"). Pursuant to the
Employment Agreements, Dr. Medel, Messrs. Mullen, Bratberg, and Mr. Jordan
receive base salaries of $400,000, $250,000, $200,000 and $180,000,
respectively. The Employment Agreements also provide that such executives are
eligible to receive performance bonuses. The Employment Agreements provide for
payments to the executives upon termination after a Change in Control (as
defined) in amount equal to 200% of average annual compensation for Dr. Medel,
and 100% of the average annual compensation for each of Mr. Mullen, Mr. Bratberg
and Mr. Jordan for the five taxable years prior to such termination. The
executive officers each hold options to purchase Common Stock granted under the
Company's Stock Option Plan. The Employment Agreements provide that, to the
extent not already exercisable, such options will become exercisable if the
executive's employment is terminated within a 12-month period after a Change in
Control. The Employment Agreements further provide that each executive shall not
compete with the Company during the employment term and for a period of one year
thereafter following the termination of the agreement for any reason.
Compensation Committee Interlocks and Insider Participation
Mr. Fernandez, a member of the Company's Compensation Committee, is
also a director and executive officer of Physicians Healthcare Plans, Inc. Dr.
Medel served on the Board of Directors of PHP Holdings, Inc., the parent company
of Physicians Healthcare Plans, Inc., through October, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the
beneficial ownership of the Company's Common Stock as of April 26, 1999 by (a)
each person known to the Company to own beneficially more than five percent of
the Company's outstanding Common Stock, (b) each director who owns any such
shares, (c) each Named Executive Officer who owns any such shares (see
"Executive Compensation and Other Information--Summary of Cash and Certain Other
Compensation"), and (d) the directors and executive officers of the Company as a
group:
Common Stock
Beneficially Owned(2)
---------------------
Name of Beneficial Owner(1) Shares Percent
- --------------------------- ------ -------
Roger J. Medel, M.D., M.B.A.(3)................................... 1,656,875 10.06%
Lawrence M. Mullen(4)............................................. 190,760 1.21%
Karl B. Wagner (5) ............................................... 15,036 *
Kristen Bratberg (6).............................................. 153,702 *
Bruce A. Jordan (7)............................................... 13,436 *
M. Douglas Cunningham, M.D.(8).................................... 50,300 *
Cesar L. Alvarez(9)............................................... 5,000 *
Michael B. Fernandez(10).......................................... 7,400 *
Bruce R. Evans(11)................................................ 10,000 *
E. Roe Stamps, IV(11)............................................. 2,000 *
Denver Investment Advisors LLC (12)............................... 820,900 5.30%
Pilgrim Baxter & Associates (13).................................. 1,471,600 9.49%
Putnam Investments, Inc. (14)..................................... 2,195,312 14.16%
Franklin Resources, Inc. (15)..................................... 1,146,100 7.39%
Zak Capital, Inc. (16)............................................ 877,335 5.66%
Wasatch Advisors, Inc.(17)....................................... 1,770,290 11.42%
All directors and executive officers
as a group (10 persons)(18)..................................... 2,104,509 12.46%
6
- ----------------------
* Less than one percent.
(1) Unless otherwise indicated, the address of each of the beneficial
owners identified is 1455 North Park Drive, Ft.Lauderdale, Florida 33326.
(2) Based on 15,502,022 shares of Common Stock outstanding. Pursuant to the
rules of the Securities and Exchange Commission (the "Commission"),
certain shares of Common Stock which a person has the right to acquire
within 60 days of April 26, 1999 pursuant to the exercise of stock
options are deemed to be outstanding for the purpose of computing the
percentage ownership of such person but are not deemed outstanding for
the purpose of computing the percentage ownership of any other person.
(3) Includes (i) 240 shares owned by Dr. Medel's children, as to which Dr.
Medel disclaims beneficial ownership, (ii) 643,665 shares held by Medel
Family Limited Partnership, L.P., a Delaware limited partnership, (iii)
27,970 shares held by Medel Investments, Inc., a Nevada corporation, (iv)
25,000 shares directly owned (v) 920,000 shares subject to presently
exercisable options, and (vi) 40,000 shares subject to presently
exercisable options held by his wife.
(4) Includes (i) 7,427 shares directly owned, 2,427 of which were acquired
through the Employee Stock Purchase Plan, and (ii) 183,333 shares subject
to presently exercisable options.
(5) Includes (i) 35 shares accumulated through the Company's 401(k) Thrift
and Profit Sharing Plan, and (ii) 15,001 shares subject to presently
exercisable options.
(6) Includes (i) 3,702 shares directly owned, 2,702 of which were acquired
through the Employee Stock Purchase Plan and (ii) 150,000 shares subject
to presently exercisable options.
(7) Includes (i) 103 shares directly owned which were acquired through the
Employee Stock Purchase Plan, and (ii) 13,333 shares subject to presently
exercisable options.
(8) Includes (i) 300 shares directly owned, and (ii) 50,000 shares subject to
presently exercisable options.
(9) All 5,000 shares are subject to presently exercisable options. The
address of Mr. Alvarez is 1221 Brickell Avenue, 22nd Floor, Miami,
Florida 33131.
(10) Includes 5,000 shares which are subject to presently exercisable options.
The address of Mr. Fernandez is 2333 Ponce de Leon Boulevard, Suite 303,
Coral Gables, Florida 33134.
(11) The address of Messrs. Stamps and Evans is c/o Summit Partners,
600 Atlantic Avenue, Suite 2800, Boston, Massachusetts 02210.
(12) Denver Investment Advisors LLC, a registered investment advisor, is
deemed to have beneficial ownership of 820,900 shares, based upon the
most recent Schedule 13G filing. The address of Denver Investment
Advisors is 1225 17th Street, 26th Floor, Denver, Colorado 80202.
(13) Pilgrim Baxter & Associates, a registered investment advisor, is deemed
to have beneficial ownership of 1,471,600 shares based upon the most
recent Schedule 13G. The address of Pilgrim Baxter and Associates is 825
Duportail Road, Wayne, Pennsylvania 19087.
(14) Putnam Investments, Inc., a registered investment advisor, is deemed to
have beneficial ownership of 2,195,312 shares based upon the most recent
Schedule 13G. The address of Putnam Investments, Inc. is One Post Office
Square, Boston, Massachusetts 02109.
(15) Franklin Resources, a registered investment advisor, is deemed to have
beneficial ownership of 1,146,100 shares based on the most recent
Schedule 13G. The address of Franklin Resources, Inc. is 777 Mariner's
Island Boulevard, San Mateo, California 94404.
7
(16) Zak Capital, Inc., a registered investment advisor, is deemed to have
beneficial ownership of 877,335 shares based on the most recent Schedule
13G. The address of Zak Capital, Inc. is 100 N. Sixth Street, Ste. 476 A,
Minneapolis, MN 55403.
(17) The Company has been advised of the following: Wasatch Advisors, Inc. is
the investment advisor to Wasatch Funds, Inc., a registered investment
company comprised of a series of funds, and to a number of private client
accounts. No single fund and no single private account owns 5% or more
of the Company. The funds and private accounts hold the Company's shares
solely for investment purposes, with no intent to control the business
or affairs of the Company. The address of Wasatch Advisors, Inc. is 150
Social Hall Avenue, 4th Floor, Salt Lake City, Utah 84111.
(18) Includes 1,378,333 shares subject to presently exercisable options.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 1997 Cesar L. Alvarez was appointed to the Board of Directors
of the Company. Mr. Alvarez is the Chief Executive Officer and Managing
Shareholder of Greenberg Traurig, P.A. which serves as the Company's principal
outside counsel and receives customary fees for legal services. The Company
currently anticipates that such arrangement will continue.
8
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By:/s/ Karl B. Wagner
-----------------------
Karl B. Wagner
Chief Financial Officer
Dated: April 30, 1999
