DELAWARE
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0-24249
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22-2919486
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(State or other jurisdiction of incorporation)
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(Commission File Number)
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(IRS Employer Identification No.)
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99.1
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Press Release dated May 3, 2011.
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* * * * * * * | |||
SIGNATURE |
PDI, INC. | |
By: /s/ Jeffrey Smith | |
Jeffrey Smith | |
Chief Financial Officer |
PDI CONTACT: | INVESTOR CONTACT: |
Amy Lombardi | Melody Carey |
PDI, Inc. | Rx Communications Group, LLC |
(862) 207-7866 | (917) 322-2571 |
Alombardi@pdi-inc.com, www.pdi-inc.com | Mcarey@RxIR.com |
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First quarter 2011 revenue of $46.1 million rose 48% vs. first quarter of 2010
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Reported first quarter 2011 operating loss from continuing operations of $1.5 million; Without impact of Group DCA acquisition, earned $1.0 million operating income
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Reported positive cash flow from operations of $1.8 million in first quarter 2011
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Launched new clinical educator division, EngageCE and signed exclusive partnership with QForma, a leading provider of advanced analytics and predictive modeling technologies for the health sciences industry
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·
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Group DCA expanded reach with launch of eDetailing across Apple(R)(1) and Android(TM)(2) mobile devices
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1st Quarter Ended
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March 31,*
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$'s in millions except EPS
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2011
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2010
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Revenue, net
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$ | 46.1 | $ | 31.1 | ||||
Gross profit
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$ | 9.0 | $ | 6.5 | ||||
Operating expenses:
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Compensation expense
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6.0 | 4.4 | ||||||
Other SG&A
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4.5 | 3.6 | ||||||
Total operating expenses
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10.5 | 8.0 | ||||||
Operating loss
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$ | (1.5 | ) | $ | (1.5 | ) | ||
Other (expense) income, net
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(0.1 | ) | 0.1 | |||||
(Benefit) provision for income tax
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(1.0 | ) | 0.1 | |||||
Loss from continuing operations
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$ | (0.5 | ) | $ | (1.5 | ) | ||
Diluted loss from continuing
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operations per share
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$ | (0.04 | ) | $ | (0.11 | ) | ||
*Unaudited
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Reconciliation of Condensed Consolidating Summary of Continuing Operations*
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For the Quarter Ended March 31, 2011
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$'s in millions
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Legacy
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Total
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Cons.
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PDI**
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Group DCA
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PDI***
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Revenue, net
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$ | 44.3 | $ | 1.8 | $ | 46.1 | ||||||
Gross Profit
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9.7 | (0.7 | ) | 9.0 | ||||||||
Total Operating Expenses
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8.6 | 1.9 | 10.5 | |||||||||
Operating Income (Loss)
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$ | 1.0 | $ | (2.5 | ) | $ | (1.5 | ) | ||||
Ø
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Sales Services segment revenue for the first quarter of 2011 of $42.4 million was 50% higher than the first quarter of 2010. This increase in revenue was due to the carryover of 2010 new business wins, contracts renewals and expansions of existing contracts through the first quarter of 2011.
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Ø
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Marketing Services segment revenue for the first quarter of 2011 of $3.7 million was 33% higher than the first quarter of 2010 due to $1.8 million of Group DCA revenue recorded, partially offset by a decrease in Pharmakon revenue as a result of fewer projects being won and executed.
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Ø
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Sales Services segment gross profit for the first quarter of 2011 of $8.8 million was 60% higher than the first quarter of 2010. This increase was primarily the result of higher revenue.
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Ø
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Marketing Services segment gross profit for the first quarter of 2011 of $0.2 million was down compared to 2010 as a result of lower Pharmakon revenue and the inclusion of Group DCA’s negative $0.7 million gross margin. Group DCA’s negative gross margin is primarily the result of the impact of acquisition accounting which eliminated the overwhelming majority of deferred revenue on the acquisition date.
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Ø
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The company had positive net cash provided by operations of $1.8 million for the first quarter of 2011. This represents the sixth consecutive quarter that the company has been cash flow positive.
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Ø
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As of March 31, 2011, the company’s cash equivalents were predominantly invested in U.S. Treasury money market funds and the company had no commercial debt.
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Ø
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On the purchase date, Group DCA had approximately $13 million of deferred revenue on its historical GAAP basis closing balance sheet. Had Group DCA not been purchased, that amount would be recorded as revenue by Group DCA as projects were completed through the remainder of 2010 and 2011. However, as required by the rules of acquisition accounting, a large part of the approximately $13 million of deferred revenue at the date of the acquisition did not carry over to PDI after the acquisition. In fact, approximately $10 million of the deferred revenue was eliminated by acquisition accounting, leaving only $3 million carrying over as revenue to PDI. The majority of the impact will be reflected over the full year of 2011.
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Ø
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Revenue recognition rules, as modified by new rules that became effective as of January 1, 2011 and applied to Group DCA, are delaying the start of recording revenue from the date a project is initiated and stretching out the total revenue recognition process. The near-term impact on reported revenue from contracts signed and initiated in 2011 was that no revenue was recorded in the first quarter of 2011 and very little will be recorded in the second quarter of 2011, as the flow of revenue recognition builds by quarter. This accounting, in and of itself, would not be an issue if deferred revenue from 2010 carried over in full; however, because it did not, the first quarter 2011 revenue does not and the second quarter 2011 revenue will not reflect the amount of business being signed or the normal carryover of deferred revenue at the time of acquisition, making reported revenue much lower than it would be on a normal going-forward basis.
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Ø
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Acquisition accounting requires ongoing amortization of finite lived intangibles acquired and valued for accounting purposes as of the date of the acquisition. These include the acquired proprietary technology and the extensive health care provider database. Amortization of these intangibles will result in annual charges of approximately $0.9 million.
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Ø
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While not impacting first quarter 2011 results, the accounting for potential earn out payments is influenced by acquisition accounting. Up to $5.0 million of the initial potential $30.0 million of earn out payments must be charged against earnings as they are earned over 2011 and 2012. However, in determining the amount that was recorded in the initial purchase price, acquisition accounting required the company to estimate the fair value for the remainder of the $25.0 million of potential earn out payments which were determined by estimating the present value of earn out payments the company estimated would be probable on a weighted risk-adjusted basis. The amount the company recorded as the fair value of these estimated earn out payments was $1.6 million which is considered part of the initial purchase price for accounting purposes. Going forward, the difference between what the company estimated as part of the initial purchase price and the company's updated estimates of what it actually expect to pay in 2012 and 2013 will be adjusted through the statement of operations. This will result in a charge if the amount the company expects to pay is higher than its original estimates or a gain if the amounts it expects to pay are lower than its original estimates. During the first quarter of 2011, there was no change to the initial assumptions used to determine the fair value of the potential earn out payments and therefore no financial impact.
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PDI, INC.
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
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(in thousands, except per share data)
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Three Months Ended
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March 31,
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2011
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2010
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Revenue, net
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$ | 46,102 | $ | 31,132 | ||||
Cost of services
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37,115 | 24,648 | ||||||
Gross profit
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8,987 | 6,484 | ||||||
Compensation expense
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5,998 | 4,436 | ||||||
Other selling, general and administrative expenses
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4,509 | 3,565 | ||||||
Total operating expenses
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10,507 | 8,001 | ||||||
Operating loss
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(1,520 | ) | (1,517 | ) | ||||
Other (expense) income, net
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(59 | ) | 65 | |||||
Loss from continuing operations before
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income tax
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(1,579 | ) | (1,452 | ) | ||||
(Benefit) provision for income tax
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(1,043 | ) | 66 | |||||
Loss from continuing operations
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(536 | ) | (1,518 | ) | ||||
Loss from discontinued operations, net of tax
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(14 | ) | (181 | ) | ||||
Net loss
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$ | (550 | ) | $ | (1,699 | ) | ||
Basic loss per share of common stock:
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From continuing operations
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$ | (0.04 | ) | $ | (0.11 | ) | ||
From discontinued operations
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- | (0.01 | ) | |||||
Net loss per basic share of common stock
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$ | (0.04 | ) | $ | (0.12 | ) | ||
Diluted loss per share of common stock:
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From continuing operations
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$ | (0.04 | ) | $ | (0.11 | ) | ||
From discontinued operations
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- | (0.01 | ) | |||||
Net loss per diluted share of common stock
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$ | (0.04 | ) | $ | (0.12 | ) | ||
Weighted average number of common shares and
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common share equivalents outstanding:
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Basic
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14,469 | 14,259 | ||||||
Diluted
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14,469 | 14,259 |
Segment Data (Unaudited)
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($ in thousands)
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Sales
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Marketing
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Services
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Services
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Consolidated
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Three months ended March 31, 2011:
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Revenue, net
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$ | 42,355 | $ | 3,747 | $ | 46,102 | |||||
Gross profit
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$ | 8,777 | $ | 210 | $ | 8,987 | |||||
Gross profit %
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20.7 | % | 5.6 | % | 19.5 | % | |||||
Three months ended March 31, 2010:
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Revenue, net
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$ | 28,318 | $ | 2,814 | $ | 31,132 | |||||
Gross profit
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$ | 5,475 | $ | 1,009 | $ | 6,484 | |||||
Gross profit %
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19.3 | % | 35.9 | % | 20.8 | % |
Selected Balance Sheet Data (Unaudited)
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(in thousands)
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March 31,
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December 31,
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2011
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2010
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Cash and cash equivalents
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$ | 64,329 | $ | 62,711 | |||
Total current assets
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$ | 79,127 | $ | 80,652 | |||
Total current liabilities
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42,053 | 43,328 | |||||
Working capital
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$ | 37,074 | $ | 37,324 | |||
Total assets
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$ | 121,711 | $ | 124,389 | |||
Total liabilities
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$ | 52,027 | $ | 54,876 | |||
Total stockholders' equity
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$ | 69,684 | $ | 69,513 |
Selected Cash Flow Data (Unaudited)
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(in thousands)
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March 31,
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2011
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2010
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Net loss
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$ | (550 | ) | $ | (1,699 | ) | ||
Non-cash items
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1,619 | 781 | ||||||
Net change in assets and liabilities
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686 | 1,852 | ||||||
Net cash provided by operations
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$ | 1,755 | $ | 934 | ||||
Change in cash and cash equivalents
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$ | 1,618 | $ | 228 |