EX-99.1 2 ex99-1.htm EXHIBIT 99.1 03-02-06 Exhibit 99.1 03-02-06
For more information contact: 
Stephen P. Cotugno
Executive Vice President-Corporate Development
PDI, Inc.
201.574.8617



PDI Reports Fourth Quarter and Year End 2005 Financial Results

Saddle River, New Jersey (March 1, 2006). PDI, Inc. (NASDAQ: PDII) a diversified sales and marketing services provider to the biopharmaceutical industry, announced today its fourth quarter and year end 2005 financial results.

Twelve Months Results
Revenues for the twelve months ended December 31, 2005 was $319.4 million, 12.4% lower than revenue of $364.4 million for the twelve months ended December 31, 2004. There was an operating loss of $26.9 million for the twelve months ended December 31, 2005 compared to operating income of $35.2 million for the twelve months ended December 31, 2004. There was a net loss of $19.5 million for the twelve months ended December 31, 2005 versus net income of $21.1 million for the twelve months ended December 31, 2004. The net loss per diluted share for the twelve months ended December 31, 2005 was $1.37 compared to diluted net income per share of $1.42 for the twelve months ended December 31, 2004. As discussed below, there were significant events that affected the Company’s operating expenses in the period and they will be discussed more fully in the Company’s 10K.

Fourth Quarter Results
Revenues for the quarter ended December 31, 2005 was $81.3 million, 7.4% less than revenue of $87.8 million for the quarter ended December 31, 2004. There was an operating loss of $17.9 million for the quarter ended December 31, 2005, versus operating income of $8.1 million for the quarter ended December 31, 2004. There was a net loss of $19.7 million for the quarter ended December 31, 2005, compared to net income of $4.6 million for the quarter ended December 31, 2004. The net loss per diluted share for the quarter ended December 31, 2005 was $1.43 versus diluted net income per share of $0.31 for the quarter ended December 31, 2004. As discussed below, there were significant events that affected the Company’s operating expenses in the period and they will be discussed more fully in the Company’s 10K.

Larry Ellberger, PDI’s interim CEO, stated, “2005 was a year of significant changes for PDI including the announcement of a number of executive changes. We are continuing to implement the initiatives we announced in November 2005 to improve our performance.”

“First of all, we have significantly strengthened our business development and marketing efforts, including those directed toward the emerging and biotech segment of the industry. We are pleased with our initial progress here. We have won four new business opportunities since September, adding close to 200 representatives. Two of these wins are multi-year engagements. We believe there is considerable potential for new business from this segment of the pharmaceutical industry. There are over one hundred companies in this segment with products in phase three or awaiting FDA approval. Additionally, the majority of FDA approvals in 2005 came from this segment. PDI’s marketing services businesses already have many customers in this area and we look to leverage more of those relationships into new business wins in the future. We are committed to maintaining and growing our leadership position in contract sales and believe that the dynamics are favorable over the long term within the pharmaceutical industry to lead to a greater outsourcing of sales and marketing services.

“Second, we expect total compensation and other selling, general and administrative expenses to be significantly below the approximately $65 million incurred in 2005. We are taking the steps necessary to improve our performance without compromising the high level of service we provide our customers or our ability to compete and win new business. The fourth quarter decision to close down the medical device and diagnostics (MD&D) business unit demonstrates our commitment to swift corrective action on underperforming business units.

“Additionally, we are continuing to seek accretive acquisitions that will strengthen our ability to compete and win new contract sales engagements, especially with the emerging and biotech segment. We plan to grow and augment our current marketing services business to broaden our service offering and diversify our business base via targeted acquisitions.

“Despite a difficult and challenging year, and notwithstanding continued investments in our capabilities, an outflow of $13 million to repurchase our shares, and almost $6 million in executive severance, we ended the year with cash and short term investments of $98 million and working capital of $86 million, which highlights the Company’s financial strength and liquidity.”

Events during Year Ended December 31, 2005
·  
The Company incurred $14.4 million in asset impairment costs in 2005. This amount included the write down of: (i) goodwill and intangible assets associated with the Company’s MD&D business unit in the amount of $8.2 million; (ii) goodwill associated with the Company’s Select Access business unit in the amount of $3.3 million; and (iii) the Company’s Siebel sales force automation software asset in the amount of $2.8 million.
·  
Included in the full year results is $5.7 million of executive severance and settlement costs, which, combined with non-executive severance costs incurred in the first quarter resulted in $6.7 million in severance and settlement costs for the year.
·  
As previously announced, the Company recorded a legal accrual in the third quarter of $3.3 million related to potential California Labor Code penalties. The Company reduced this reserve by $2.7 million in the fourth quarter partially due to reaching a tentative settlement.
·  
The Company accrued $2.4 million for facilities realignment expenses related to excess office facilities.
·  
The Company established a $755,000 allowance against its loans to TMX Interactive based upon its impairment.

The foregoing items are included in total operating expenses and reduced operating income by $24.7 million for the year.

Fourth Quarter Events
·  
The Company wrote down goodwill and intangible assets associated with its MD&D business unit in the amount of $8.2 million and goodwill associated with its Select Access business unit in the amount of $3.3 million.
·  
Included in the fourth quarter is $3.4 million of severance and settlement amounts with certain executives.
·  
The Company accrued $2.4 million for facilities realignment expenses related to excess office facilities.
·  
As previously announced, the Company took a legal accrual in the third quarter of $3.3 million related to potential California Labor Code penalties. The Company reduced this reserve by $2.7 million in the fourth quarter partially due to reaching a tentative settlement.

The foregoing items are included in total operating expenses and reduced operating income by a net amount of $14.6 million in the fourth quarter.

Other Events
As announced on Tuesday, February 28, 2006, the Company has been notified by AstraZeneca that its fee for service agreements will be terminated effective April 30, 2006. The termination affects approximately 800 field representatives. The revenue impact is projected to be approximately $65 to $70 million in 2006. In light of this event, the Company is assessing the ramifications it may have on the Company’s operations, including the need to further reduce operating expenses beyond the reductions already planned.

The Company did not repurchase any shares during the fourth quarter.

As previously announced, the Board of Directors has retained an executive search firm and initiated a search for a permanent CEO. The search for a permanent CEO is progressing.

About PDI

PDI, Inc. (NASDAQ: PDII) is a diversified sales and marketing services provider to the biopharmaceutical industry. PDI’s comprehensive set of outsourced sales and marketing solutions is designed to increase its clients’ strategic flexibility and enhance their efficiency and profitability. Headquartered in Saddle River, New Jersey, PDI also has offices in Pennsylvania and Illinois.

PDI’s sales and marketing services include our Performance Sales Teams™, which are dedicated teams for specific clients; and Select Access™, our targeted sales solution that leverages an existing infrastructure; marketing research and consulting; and medical education and communications. PDI’s experience extends across multiple therapeutic categories and includes office and hospital-based initiatives.

PDI’s commitment is to deliver innovative solutions, unparalleled execution and superior results for its clients. Through strategic partnership and client-driven innovation, PDI maintains some of the longest standing sales and marketing relationships in the industry. Recognized as an industry pioneer, PDI remains committed to continued innovation.

For more information, visit the Company’s website at www.pdi-inc.com.

Forward-Looking Statements

This press release contains forward-looking statements regarding future events and financial performance. These statements involve a number of risks and uncertainties and are based on numerous assumptions involving judgments with respect to future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond PDI's control. Some of the important factors that could cause actual results to differ materially from those indicated by the forward-looking statements are general economic conditions, the termination of or material reduction in the size of any of our customer contracts, changes in our operating expenses, adverse patent rulings, FDA, legal or accounting developments, competitive pressures, failure to meet performance benchmarks in significant contracts, changes in customer and market requirements and standards, the impact of any stock repurchase programs, the adequacy of the reserves PDI has taken, the financial viability of certain companies whose debt and equity securities we hold, the outcome of certain litigations, PDI's ability to implement its current business plans, and the risk factors detailed from time to time in PDI's periodic filings with the Securities and Exchange Commission, including without limitation, PDI's Annual Report on Form 10-K for the year ended December 31, 2004, and PDI's periodic reports on Form 10-Q and current reports on Form 8-K filed with the Securities and Exchange Commission since January 1, 2005. The forward looking-statements in this press release are based upon management's reasonable belief as of the date hereof. PDI undertakes no obligation to revise or update publicly any forward-looking statements for any reason.


PDI, INC.
  
CONSOLIDATED BALANCE SHEETS
  
(in thousands)
  
           
   
December 31,
  
December 31,
  
   
2005
  
2004
  
ASSETS
  
(unaudited)
      
Current assets:
              
Cash and cash equivalents
  
$
90,827
  
$
81,000
  
Short-term investments
    
6,807
   
28,498
 
Accounts receivable, net of allowance for doubtful accounts of
             
$778 and $74 as of December 31, 2005 and 2004, respectively
    
27,148
   
26,662
 
Unbilled costs and accrued profits on contracts in progress
    
5,974
   
3,393
 
Income tax refund receivable
    
6,292
   
-
 
Other current assets
    
14,078
   
15,883
 
Total current assets
    
151,126
   
155,436
 
Property and equipment, net
   
16,053
   
17,170
 
Goodwill
   
13,112
   
23,791
 
Other intangible assets, net
   
17,305
   
19,548
 
Other long-term assets
   
2,710
   
8,760
 
Total assets
  
$
200,306
  
$
224,705
  
               
LIABILITIES AND STOCKHOLDERS' EQUITY
              
Current liabilities:
              
Accounts payable
 
$
5,693
  
$
7,217
  
Income taxes payable
    
6,805
   
5,263
 
Unearned contract revenue
   
12,598
   
6,924
 
Accrued returns
   
231
   
4,316
 
Accrued incentives
   
12,028
   
16,282
 
Accured payroll and related benefits
   
7,556
   
8,414
 
Other accrued expenses
    
19,785
   
10,864
 
Total current liabilities
   
64,696
   
59,280
 
               
Stockholders’ equity:
              
Preferred stock, $.01 par value; 5,000,000 shares authorized, no
             
shares issued and outstanding
    
-
   
-
 
Common stock, $.01 par value; 100,000,000 shares authorized;
             
14,947,771 and 14,820,499 shares issued at December 31, 2005 and
              
2004, respectively; 13,929,765 and 14,815,499 shares outstanding at
             
December 31, 2005 and 2004, respectively
    
150
   
148
 
Additional paid-in capital
   
118,324
   
116,737
 
Retained earnings
   
31,183
   
50,637
 
Accumulated other comprehensive income
   
71
   
76
 
Unamortized compensation costs
    
(904
)
  
(2,063
)
Treasury stock, at cost: 1,018,006 and 5,000 shares at
             
December 31, 2005 and 2004, respectively
    
(13,214
)
  
(110
)
Total stockholders' equity
  
$
135,610
  
$
165,425
  
Total liabilities & stockholders' equity
  
$
200,306
  
$
224,705
  


PDI, INC.
  
CONSOLIDATED STATEMENTS OF OPERATIONS
  
(in thousands, except for per share data)
  
                   
   
For The Three Months Ended
 
For The Years Ended
 
   
December 31,
  
December 31,
  
   
2005
  
2004
  
2005
  
2004
  
   
(unaudited)
      
(unaudited)
      
Revenue
                          
Service, net
  
$
81,290
  
$
88,299
  
$
319,415
  
$
365,965
  
Product, net
    
-
   
(487
)
  
-
   
(1,521
)
Total revenue, net
    
81,290
   
87,812
   
319,415
   
364,444
 
Cost of goods and services:
                          
Program expenses (including related party
                          
amount of $180 for the year ended
                         
December 31, 2004)
    
65,244
   
61,690
   
257,479
   
265,360
 
Cost of goods sold
    
-
   
10
   
-
   
254
 
Total cost of goods and services
    
65,244
   
61,700
   
257,479
   
265,614
 
                           
Gross profit
    
16,046
   
26,112
   
61,936
   
98,830
 
                           
Compensation expense
    
6,750
   
7,776
   
29,367
   
33,830
 
Other selling, general and administrative
   
12,180
   
8,969
   
35,330
   
26,916
 
Asset impairment
    
11,518
   
-
   
14,351
   
-
 
Executive severance
    
3,384
   
-
   
5,730
   
495
 
Legal and related costs
    
(2,274
)
  
1,255
   
1,691
   
2,398
 
Facilities realignment
    
2,354
   
-
   
2,354
   
-
 
Total operating expenses
    
33,912
   
18,000
   
88,823
   
63,639
 
                           
Operating (loss) income
    
(17,866
)
  
8,112
   
(26,887
)
  
35,191
 
                           
(Loss) gain on investments
    
-
   
(1,000
)
  
4,444
   
(1,000
)
Interest income, net
    
1,057
   
918
   
3,190
   
1,779
 
                           
(Loss) income before taxes
    
(16,809
)
  
8,030
   
(19,253
)
  
35,970
 
Provision for income taxes
    
2,912
   
3,383
   
201
   
14,838
 
                           
Net (loss) income
  
$
(19,721
)
$
4,647
  
$
(19,454
)
$
21,132
  
                           
Net (loss) income per share of common stock:
                          
Basic
  
$
(1.43
)
$
0.32
  
$
(1.37
)
$
1.45
  
Assuming dilution
  
$
(1.43
)
$
0.31
  
$
(1.37
)
$
1.42
  
                           
Weighted average number of common shares and
                          
common share equivalents outstanding:
                          
Basic
    
13,797
   
14,641
   
14,232
   
14,564
 
Assuming dilution
    
13,797
   
14,922
   
14,232
   
14,893
 



PDI, INC.
  
CONSOLIDATED STATEMENTS OF CASH FLOWS
  
(in thousands)
  
           
   
For The Years Ended
 
   
December 31,
  
   
2005
  
2004
  
   
(unaudited)
      
Cash Flows From Operating Activities
              
Net (loss) income from operations
  
$
(19,454
)
$
21,132
  
Adjustments to reconcile net income to net cash
              
provided by operating activities:
              
Depreciation and amortization
    
5,820
   
5,916
 
(Gain) loss on investments
    
(4,444
)
  
1,000
 
Asset impairment
    
14,351
   
-
 
Loss on disposal of assets
    
269
   
622
 
Stock compensation costs
    
1,520
   
1,232
 
Deferred taxes, net
    
6,449
   
9,199
 
Provision for bad debt
    
1,385
   
683
 
Other changes in assets and liabilities, net of acquisitions:
              
(Increase) decrease in accounts receivable
    
(1,229
)
  
15,807
 
(Increase) decrease in unbilled costs
    
(2,581
)
  
648
 
(Increase) in income tax refund receivable
    
(6,292
)
  
-
 
Decrease in inventory
    
-
   
43
 
Decrease (increase) in other current assets
    
446
   
(33
)
Decrease (increase) in other long-term assets
    
218
   
(28
)
(Decrease) in accounts payable
    
(41
)
  
(3,439
)
Increase (decrease) in income taxes payable
    
1,542
   
(3,529
)
Increase in unearned contract revenue
    
5,674
   
507
 
(Decrease) in accrued returns
    
(4,085
)
  
(18,495
)
(Decrease) in accrued incentives
    
(4,254
)
  
(4,204
)
(Decrease) in accrued payroll and related benefits
    
(858
)
  
(617
)
Increase in accrued liabilities
    
8,676
   
2,538
 
Net cash provided by operating activities
    
3,112
   
28,982
 
Cash Flows From Investing Activities
             
Sales (purchases) of short-term investments, net
    
21,686
   
(27,103
)
Proceeds from sale of investment
    
4,444
   
-
 
Repayments from (loans to) Xylos and TMX
    
100
   
(1,500
)
Purchase of property and equipment
    
(5,832
)
  
(8,104
)
Proceeds from sale of assets
    
63
   
-
 
Cash paid for acquisition, including acquisition costs
    
(1,936
)
  
(28,443
)
Net cash provided by (used in) investing activities
    
18,525
   
(65,150
)
Cash Flows From Financing Activities
             
Net proceeds from employee stock purchase plan
             
and the exercise of stock options
    
1,294
   
3,880
 
Cash paid to repurchase shares
    
(13,104
)
  
-
 
Net cash (used in) provided by financing activities
    
(11,810
)
  
3,880
 
Net increase (decrease) in cash and cash equivalents
    
9,827
   
(32,288
)
Cash and cash equivalents - beginning
    
81,000
   
113,288
 
Cash and cash equivalents - ending
  
$
90,827
  
$
81,000
  
               
Cash paid for interest
  
$
2
  
$
3
  
Cash paid for taxes
  
$
1,513
  
$
7,389