x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number: 0-24249 | ||
PDI, Inc. | ||
(Exact name of registrant as specified in its charter) | ||
Delaware | 22-2919486 | |
(State or other jurisdiction of Incorporation or organization) | (I.R.S. Employer Identification No.) | |
Morris Corporate Center 1, Building A | ||
300 Interpace Parkway, Parsippany, NJ 07054 | ||
(Address of principal executive offices and zip code) | ||
(800) 242-7494 | ||
(Registrant's telephone number, including area code) |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company x |
(Do not check if a smaller reporting company) |
Class | Shares Outstanding August 7, 2011 | |
Common stock, $0.01 par value | 14,723,168 | |
Page No. | |||
PART I - FINANCIAL INFORMATION | |||
Item 1. | |||
Item 2. | |||
Item 3. | |||
Item 4. | |||
PART II - OTHER INFORMATION | |||
Item 1. | |||
Item 1A. | |||
Item 6. | |||
June 30, 2011 | December 31, 2010 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 64,020 | $ | 62,711 | |||
Short-term investments | 124 | 147 | |||||
Accounts receivable, net | 4,730 | 11,057 | |||||
Unbilled costs and accrued profits on contracts in progress | 1,978 | 3,363 | |||||
Other current assets | 4,261 | 3,374 | |||||
Total current assets | 75,113 | 80,652 | |||||
Property and equipment, net | 3,267 | 3,947 | |||||
Goodwill | 23,976 | 23,976 | |||||
Other intangible assets, net | 9,758 | 10,393 | |||||
Other long-term assets | 4,837 | 5,421 | |||||
Total assets | $ | 116,951 | $ | 124,389 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 4,075 | $ | 3,266 | |||
Unearned contract revenue | 15,266 | 13,417 | |||||
Accrued salary and bonus | 9,910 | 10,664 | |||||
Other accrued expenses | 9,032 | 15,981 | |||||
Total current liabilities | 38,283 | 43,328 | |||||
Long-term liabilities | 9,348 | 11,548 | |||||
Total liabilities | 47,631 | 54,876 | |||||
Commitments and contingencies (Note 7) | |||||||
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; | |||||||
15,797,167 and 15,463,995 shares issued, respectively; | |||||||
14,722,834 and 14,390,788 shares outstanding, respectively | 158 | 155 | |||||
Additional paid-in capital | 126,043 | 124,787 | |||||
Accumulated deficit | (43,262 | ) | (41,817 | ) | |||
Accumulated other comprehensive income | 10 | 8 | |||||
Treasury stock, at cost (1,074,333 and 1,073,207 shares, respectively) | (13,629 | ) | (13,620 | ) | |||
Total stockholders' equity | 69,320 | 69,513 | |||||
Total liabilities and stockholders' equity | $ | 116,951 | $ | 124,389 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||
Revenue, net | $ | 40,626 | $ | 32,849 | $ | 86,728 | $ | 63,981 | |||||||
Cost of services | 31,640 | 25,074 | 68,755 | 49,721 | |||||||||||
Gross profit | 8,986 | 7,775 | 17,973 | 14,260 | |||||||||||
Compensation expense | 6,174 | 4,528 | 12,172 | 8,963 | |||||||||||
Other selling, general and administrative expenses | 3,484 | 3,300 | 7,993 | 6,866 | |||||||||||
Facilities realignment | — | 583 | — | 583 | |||||||||||
Total operating expenses | 9,658 | 8,411 | 20,165 | 16,412 | |||||||||||
Operating loss | (672 | ) | (636 | ) | (2,192 | ) | (2,152 | ) | |||||||
Other (loss) income, net | (23 | ) | 10 | (82 | ) | 75 | |||||||||
Loss from continuing operations before income tax | (695 | ) | (626 | ) | (2,274 | ) | (2,077 | ) | |||||||
Provision (benefit) for income tax | 188 | 70 | (855 | ) | 137 | ||||||||||
Loss from continuing operations | (883 | ) | (696 | ) | (1,419 | ) | (2,214 | ) | |||||||
Loss from discontinued operations, net of tax | (12 | ) | (194 | ) | (26 | ) | (375 | ) | |||||||
Net loss | $ | (895 | ) | $ | (890 | ) | $ | (1,445 | ) | $ | (2,589 | ) | |||
Basic loss per share of common stock from: | |||||||||||||||
Continuing operations | $ | (0.06 | ) | $ | (0.05 | ) | $ | (0.10 | ) | $ | (0.16 | ) | |||
Discontinued operations | — | (0.01 | ) | — | (0.02 | ) | |||||||||
Net loss per basic share of common stock | $ | (0.06 | ) | $ | (0.06 | ) | $ | (0.10 | ) | $ | (0.18 | ) | |||
Diluted loss per share of common stock from: | |||||||||||||||
Continuing operations | $ | (0.06 | ) | $ | (0.05 | ) | $ | (0.10 | ) | $ | (0.16 | ) | |||
Discontinued operations | — | (0.01 | ) | — | (0.02 | ) | |||||||||
Net loss per diluted share of common stock | $ | (0.06 | ) | $ | (0.06 | ) | $ | (0.10 | ) | $ | (0.18 | ) | |||
Weighted average number of common shares and common share equivalents outstanding: | |||||||||||||||
Basic | 14,413 | 14,289 | 14,386 | 14,274 | |||||||||||
Diluted | 14,413 | 14,289 | 14,386 | 14,274 |
Six Months Ended | |||||||
June 30, | |||||||
2011 | 2010 | ||||||
Cash Flows From Operating Activities | |||||||
Net loss | $ | (1,445 | ) | $ | (2,589 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation and amortization | 1,564 | 763 | |||||
Contingent consideration and realignment accrual accretion | 179 | 67 | |||||
Reversal of contingent consideration accrual | (191 | ) | — | ||||
Provision for bad debt | 3 | 15 | |||||
Stock-based compensation | 1,259 | 788 | |||||
Other changes in assets and liabilities: | |||||||
Decrease in accounts receivable | 6,327 | 4,149 | |||||
Decrease (increase) in unbilled costs | 1,385 | (1,459 | ) | ||||
Decrease in income tax refund receivable | — | 3,298 | |||||
Increase in other current assets | (302 | ) | (728 | ) | |||
Increase in other long-term assets | (4 | ) | — | ||||
Increase (decrease) in accounts payable | 809 | (1,263 | ) | ||||
Increase in unearned contract revenue | 1,849 | 5,200 | |||||
(Decrease) increase in accrued salaries and bonus | (754 | ) | 1,298 | ||||
(Decrease) increase in other accrued expenses | (6,924 | ) | 128 | ||||
Decrease in long-term liabilities | (2,188 | ) | (191 | ) | |||
Net cash provided by operating activities | 1,567 | 9,476 | |||||
Cash Flows From Investing Activities | |||||||
Purchase of property and equipment | (249 | ) | (1,024 | ) | |||
Net cash used in investing activities | (249 | ) | (1,024 | ) | |||
Cash Flows From Financing Activities | |||||||
Cash paid for repurchase of restricted shares | (9 | ) | (24 | ) | |||
Net cash used in financing activities | (9 | ) | (24 | ) | |||
Net increase in cash and cash equivalents | 1,309 | 8,428 | |||||
Cash and cash equivalents – beginning | 62,711 | 72,463 | |||||
Cash and cash equivalents – ending | $ | 64,020 | $ | 80,891 |
1. | BASIS OF PRESENTATION |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Three Months Ended | Six Months Ended | ||||||||||
June 30, | June 30, | ||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||
Basic weighted average number of common shares | 14,413 | 14,289 | 14,386 | 14,274 | |||||||
Dilutive effect of stock-based awards | — | — | — | — | |||||||
Diluted weighted average number of common shares | 14,413 | 14,289 | 14,386 | 14,274 |
Three and Six Months Ended | ||||||
June 30, | ||||||
2011 | 2010 | |||||
Options | 143 | 233 | ||||
Stock-settled stock appreciation rights (SARs) | 363 | 490 | ||||
Restricted stock/units | 614 | 469 | ||||
Performance contingent SARs | 280 | 305 | ||||
1,400 | 1,497 |
• | eliminates the need for objective and reliable evidence of fair value of the undelivered element in order for a delivered item to be treated as a separate unit of accounting; |
• | eliminates the residual value method of allocation and requires that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method, which allocates any discount in the arrangement proportionally to each deliverable on the basis of each deliverable's selling price; |
• | establishes a selling price hierarchy for determining the selling price of a deliverable, which is based on: |
◦ | vendor-specific objective evidence (VSOE) if available; |
◦ | third party evidence (TPE) if VSOE is not available; or |
◦ | an estimated selling price if neither VSOE nor TPE is available; |
• | requires that a vendor determine its best estimate of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a stand-alone basis; and |
• | expands the disclosure requirements for multiple-deliverable revenue arrangements. |
• | for Pharmakon: |
◦ | recruitment mailings (Recruitment) to generate attendance at interactive meetings and events; and |
◦ | the various forms of interactive meetings and events (Events); and |
• | for Group DCA; |
◦ | the content development phase (Development) of an interactive digital program; and |
◦ | the hosting period (Delivery) of an interactive digital program, which could include various services, but is primarily comprised of i) the design and delivery of recruitment activities to generate participation in a program and ii) the online hosting, program management and progress reporting services. |
3. | INVESTMENTS IN MARKETABLE SECURITIES |
Maturing | Maturing | ||||||||||||||||||||||
June 30, 2011 | within 1 year | after 1 year through 3 years | December 31, 2010 | within 1 year | after 1 year through 3 years | ||||||||||||||||||
Cash/money accounts | $ | 65 | $ | 65 | $ | — | $ | 80 | $ | 80 | $ | — | |||||||||||
US Treasury securities | 4,032 | — | 4,032 | 4,093 | — | 4,093 | |||||||||||||||||
Government agency securities | 1,143 | 490 | 653 | 1,181 | — | 1,181 | |||||||||||||||||
Total | $ | 5,240 | $ | 555 | $ | 4,686 | $ | 5,354 | $ | 80 | 5,274 |
June 30, 2011 | December 31, 2010 | ||||||
Other current assets | $ | 555 | $ | 80 | |||
Other long-term assets | 4,685 | 5,274 | |||||
Total | $ | 5,240 | $ | 5,354 |
4. | GOODWILL AND OTHER INTANGIBLE ASSETS |
As of June 30, 2011 | As of December 31, 2010 | ||||||||||||||||||||
Life | Carrying | Accumulated | Carrying | Accumulated | |||||||||||||||||
(Years) | Amount | Amortization | Net | Amount | Amortization | Net | |||||||||||||||
Pharmakon: | |||||||||||||||||||||
Customer relationships | 7 | $ | 1,751 | $ | 375 | $ | 1,376 | $ | 1,751 | $ | 250 | $ | 1,501 | ||||||||
Corporate tradename | 7 | 791 | 170 | 621 | 791 | 113 | 678 | ||||||||||||||
Group DCA: | |||||||||||||||||||||
Technology | 6 | 4,097 | 455 | 3,642 | 4,097 | 113 | 3,984 | ||||||||||||||
Healthcare professional database | 10 | 2,203 | 147 | 2,056 | 2,203 | 36 | 2,167 | ||||||||||||||
Corporate tradename | NA | 2,063 | — | 2,063 | 2,063 | — | 2,063 | ||||||||||||||
Total | $ | 10,905 | $ | 1,147 | $ | 9,758 | $ | 10,905 | $ | 512 | $ | 10,393 |
2011 | 2012 | 2013 | 2014 | 2015 | ||||||||||
$ | 1,266 | $ | 1,266 | $ | 1,266 | $ | 1,266 | $ | 1,266 |
5. | FACILITIES REALIGNMENT |
Sales Services | Marketing Services | Total | |||||||||
Balance as of December 31, 2010 | $ | 5,029 | $ | 1,272 | $ | 6,301 | |||||
Accretion | 74 | 14 | 88 | ||||||||
Adjustments | (2 | ) | (11 | ) | (13 | ) | |||||
Payments | (739 | ) | (444 | ) | (1,183 | ) | |||||
Balance as of June 30, 2011 | $ | 4,362 | $ | 831 | $ | 5,193 |
6. | FAIR VALUE MEASUREMENTS |
As of June 30, 2011 | Fair Value Measurements | ||||||||||||||||||
Carrying | Fair | as of June 30, 2011 | |||||||||||||||||
Amount | Value | Level 1 | Level 2 | Level 3 | |||||||||||||||
Assets: | |||||||||||||||||||
Cash and cash equivalents: | |||||||||||||||||||
Cash | $ | 22,192 | $ | 22,192 | $ | 22,192 | $ | — | $ | — | |||||||||
Money Market Funds | 41,828 | 41,828 | 41,828 | — | — | ||||||||||||||
$ | 64,020 | $ | 64,020 | $ | 64,020 | $ | — | $ | — | ||||||||||
Marketable securities: | |||||||||||||||||||
Money Market Funds | $ | 62 | $ | 62 | $ | 62 | $ | — | $ | — | |||||||||
Mutual Funds | 62 | 62 | 62 | — | — | ||||||||||||||
U.S. Treasury securities | 4,032 | 4,032 | 4,032 | — | — | ||||||||||||||
Government agency securities | 1,143 | 1,143 | 1,143 | — | — | ||||||||||||||
Total | $ | 5,299 | $ | 5,299 | $ | 5,299 | $ | — | $ | — | |||||||||
Liabilities: | |||||||||||||||||||
Contingent Consideration | $ | 1,445 | $ | 1,445 | $ | — | $ | — | $ | 1,445 |
Contingent Consideration | |||
Balance as of December 31, 2010 | $ | 1,557 | |
Accretion | 79 | ||
Adjustment | (191 | ) | |
Balance as of June 30, 2011 | $ | 1,445 |
7. | COMMITMENTS AND CONTINGENCIES |
8. | COMPREHENSIVE LOSS |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||
Net loss | $ | (895 | ) | $ | (890 | ) | $ | (1,445 | ) | $ | (2,589 | ) | |||
Other comprehensive loss: | |||||||||||||||
Unrealized holding gain (loss) on available-for-sale securities, net | (1 | ) | (3 | ) | 2 | (1 | ) | ||||||||
Comprehensive loss | $ | (896 | ) | $ | (893 | ) | $ | (1,443 | ) | $ | (2,590 | ) |
June 30, 2011 | December 31, 2010 | ||||||
Rent Payable | $ | 2,221 | $ | 2,374 | |||
Uncertain tax positions | 2,843 | 4,088 | |||||
Restructuring | 2,688 | 3,435 | |||||
Contingent earn-out fee | 1,445 | 1,557 | |||||
Other | 151 | 94 | |||||
$ | 9,348 | $ | 11,548 |
10. | STOCK-BASED COMPENSATION |
Three Months Ended | Six Months Ended | |||
June 30, 2010 | June 30, 2010 | |||
Risk-free interest rate | 1.31% | 1.34% | ||
Expected life | 3.5 years | 3.5 years | ||
Expected volatility | 51.70% | 51.08% | ||
Dividend yield | 0.0% | 0.0% |
11. | INCOME TAXES |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||
Provision (benefit) for income tax | $ | 188 | $ | 70 | $ | (855 | ) | $ | 137 | ||||||
Effective income tax rate | 27.1 | % | 11.2 | % | (37.6 | )% | 6.6 | % |
12. | SEGMENT INFORMATION |
Sales Services | Marketing Services | Product Commercialization | Consolidated | ||||||||||||
Three months ended June 30, 2011: | |||||||||||||||
Revenue | $ | 34,585 | $ | 5,357 | $ | 684 | $ | 40,626 | |||||||
Operating income (loss) | $ | 438 | $ | (1,194 | ) | $ | 84 | $ | (672 | ) | |||||
Capital expenditures | $ | 111 | $ | 10 | $ | — | $ | 121 | |||||||
Depreciation expense | $ | 370 | $ | 93 | $ | — | $ | 463 | |||||||
Three months ended June 30, 2010: | |||||||||||||||
Revenue | $ | 30,327 | $ | 2,522 | $ | — | $ | 32,849 | |||||||
Operating loss | $ | (590 | ) | $ | (46 | ) | $ | — | $ | (636 | ) | ||||
Capital expenditures | $ | 875 | $ | — | $ | — | $ | 875 | |||||||
Depreciation expense | $ | 241 | $ | 14 | $ | — | $ | 255 | |||||||
Six months ended June 30, 2011: | |||||||||||||||
Revenue | $ | 76,940 | $ | 9,104 | $ | 684 | $ | 86,728 | |||||||
Operating income (loss) | $ | 2,037 | $ | (4,313 | ) | $ | 84 | $ | (2,192 | ) | |||||
Capital expenditures | $ | 119 | $ | 130 | $ | — | $ | 249 | |||||||
Depreciation expense | $ | 736 | $ | 194 | $ | — | $ | 930 | |||||||
Six months ended June 30, 2010: | |||||||||||||||
Revenue | $ | 58,645 | $ | 5,336 | $ | — | $ | 63,981 | |||||||
Operating loss | $ | (1,876 | ) | $ | (276 | ) | $ | — | $ | (2,152 | ) | ||||
Capital expenditures | $ | 1,024 | $ | — | $ | — | $ | 1,024 | |||||||
Depreciation expense | $ | 478 | $ | 28 | $ | — | $ | 506 |
13. | DISCONTINUED OPERATIONS |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||
Revenue, net | $ | — | $ | 675 | $ | — | $ | 1,916 | |||||||
Loss from discontinued operations, before income tax | (11 | ) | (194 | ) | (38 | ) | (375 | ) | |||||||
Provision for income tax | 1 | — | (12 | ) | — | ||||||||||
Loss from discontinued operations, net of tax | $ | (12 | ) | $ | (194 | ) | $ | (26 | ) | $ | (375 | ) |
June 30, 2011 | December 31, 2010 | ||||||
Current assets | $ | 39 | $ | 277 | |||
Non-current assets | 300 | 300 | |||||
Total assets | $ | 339 | $ | 577 | |||
Current liabilities | $ | 421 | $ | 816 | |||
Non-current liabilities | 1,458 | 1,560 | |||||
Total liabilities | $ | 1,879 | $ | 2,376 |
▪ | Sales Services, which is comprised of the following business units: |
• | Dedicated Sales Teams; |
• | Shared Sales Teams; and |
• | EngageCE. |
▪ | Marketing Services, which is comprised of the following business units: |
• | Pharmakon; |
• | Group DCA; and |
• | Voice. |
▪ | PC Services; |
• | Interpace BioPharma. |
Three Months Ended | Six Months Ended | ||||||||||
June 30, | June 30, | ||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||
Revenue, net | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||
Cost of services | 77.9 | % | 76.3 | % | 79.3 | % | 77.7 | % | |||
Gross profit | 22.1 | % | 23.7 | % | 20.7 | % | 22.3 | % | |||
Compensation expense | 15.2 | % | 13.8 | % | 14.0 | % | 14.0 | % | |||
Other selling, general and administrative expenses | 8.6 | % | 10.0 | % | 9.2 | % | 10.7 | % | |||
Facilities realignment | — | % | 1.8 | % | — | % | 0.9 | % | |||
Total operating expenses | 23.8 | % | 25.6 | % | 23.3 | % | 25.7 | % | |||
Operating loss | (1.7 | )% | (1.9 | )% | (2.5 | )% | (3.4 | )% | |||
Other (loss) income, net | (0.1 | )% | — | % | (0.1 | )% | 0.1 | % | |||
Loss from continuing operations before income tax | (1.7 | )% | (1.9 | )% | (2.6 | )% | (3.2 | )% | |||
Provision (benefit) for income tax | 0.5 | % | 0.2 | % | (1.0 | )% | 0.2 | % | |||
Loss from continuing operations | (2.2 | )% | (2.1 | )% | (1.6 | )% | (3.5 | )% | |||
Loss from discontinued operations, net of tax | — | % | (28.7 | )% | — | % | (19.6 | )% | |||
Net loss | (2.2 | )% | (2.7 | )% | (1.7 | )% | (4.0 | )% |
• | As of the purchase date, Group DCA had deferred revenue on its historical closing balance sheet. Had Group DCA not been purchased, that amount would be recorded as revenue by Group DCA as projects were completed through 2011. However, as required by the rules of acquisition accounting, a large part of the deferred revenue at the date of the acquisition did not carry over to PDI after the acquisition, the majority of which impacts 2011, making reported revenue for the first six months of 2011 lower than we believe it will be on a normal go-forward basis. |
• | 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. |
• | The accounting for potential earn-out payments is influenced by acquisition accounting. Up to $5.0 million of the 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 we determined by estimating the present value of earn-out payments we think are probable on a weighted risk-adjusted basis. The amount we 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. During the quarter ended June 30, 2011 we recognized a benefit of $0.2 million in our Marketing Services segment, as the amount we expect to pay as of June 30, 2011 is lower than our original estimate. Going forward, any difference between our June 30, 2011 estimate and our updated estimates of expected payments in 2012 and 2013 will be adjusted through the statement of operations. This will result in a charge if the amounts we expect to pay are higher than our June 30, 2011 estimate or an additional gain if the amounts we expect to pay are lower than our June 30, 2011 estimate. |
Revenue, net (in thousands) | Three Months Ended | |||||||||||||
June 30, | ||||||||||||||
2011 | 2010 | Change ($) | Change (%) | |||||||||||
Sales Services | $ | 34,585 | $ | 30,327 | $ | 4,258 | 14.0 | % | ||||||
Marketing Services | 5,357 | 2,522 | 2,835 | 112.4 | % | |||||||||
PC Services | 684 | — | 684 | — | ||||||||||
Total | $ | 40,626 | $ | 32,849 | $ | 7,777 | 23.7 | % |
Cost of services (in thousands) | Three Months Ended | |||||||||||||
June 30, | ||||||||||||||
2011 | 2010 | Change ($) | Change (%) | |||||||||||
Sales Services | $ | 28,223 | $ | 23,658 | $ | 4,565 | 19.3 | % | ||||||
Marketing Services | 3,017 | 1,416 | 1,601 | 113.1 | % | |||||||||
PC Services | 400 | — | 400 | NA | ||||||||||
Total | $ | 31,640 | $ | 25,074 | $ | 6,566 | 26.2 | % |
Gross profit (in thousands) | ||||||||||||||||||||||||||||
Three Months Ended | Sales | % of | Marketing | % of | PC | % of | % of | |||||||||||||||||||||
June 30, | Services | Sales | Services | Sales | Services | Sales | Total | Sales | ||||||||||||||||||||
2011 | $ | 6,362 | 18.4 | % | $ | 2,340 | 43.7 | % | $ | 284 | 41.5 | % | $ | 8,986 | 22.1 | % | ||||||||||||
2010 | 6,669 | 22.0 | % | 1,106 | 43.9 | % | — | — | 7,775 | 23.7 | % | |||||||||||||||||
Change | $ | (307 | ) | $ | 1,234 | $ | 284 | $ | 1,211 |
Compensation expense (in thousands) | ||||||||||||||||||||||||||||
Three Months Ended | Sales | % of | Marketing | % of | PC | % of | % of | |||||||||||||||||||||
June 30, | Services | Sales | Services | Sales | Services | Sales | Total | Sales | ||||||||||||||||||||
2011 | $ | 3,705 | 10.7 | % | $ | 2,366 | 44.2 | % | $ | 103 | 15.1 | % | $ | 6,174 | 15.2 | % | ||||||||||||
2010 | 3,765 | 12.4 | % | 763 | 30.3 | % | — | — | 4,528 | 13.8 | % | |||||||||||||||||
Change | $ | (60 | ) | $ | 1,603 | $ | 103 | $ | 1,646 |
Other selling, general and administrative expenses (in thousands) | ||||||||||||||||||||||||||||
Three Months Ended | Sales | % of | Marketing | % of | PC | % of | % of | |||||||||||||||||||||
June 30, | Services | Sales | Services | Sales | Services | Sales | Total | Sales | ||||||||||||||||||||
2011 | $ | 2,219 | 6.4 | % | $ | 1,168 | 21.8 | % | $ | 97 | 14.2 | % | $ | 3,484 | 8.6 | % | ||||||||||||
2010 | 2,911 | 9.6 | % | 389 | 15.4 | % | — | — | 3,300 | 10.0 | % | |||||||||||||||||
Change | $ | (692 | ) | $ | 779 | $ | 97 | $ | 184 |
Revenue, net (in thousands) | Six Months Ended | |||||||||||||
June 30, | ||||||||||||||
2011 | 2010 | Change ($) | Change (%) | |||||||||||
Sales Services | $ | 76,940 | $ | 58,645 | $ | 18,295 | 31.2 | % | ||||||
Marketing Services | 9,104 | 5,336 | 3,768 | 70.6 | % | |||||||||
PC Services | 684 | — | 684 | — | ||||||||||
Total | $ | 86,728 | $ | 63,981 | $ | 22,747 | 35.6 | % |
Cost of services (in thousands) | Six Months Ended | |||||||||||||
June 30, | ||||||||||||||
2011 | 2010 | Change ($) | Change (%) | |||||||||||
Sales Services | $ | 61,801 | $ | 46,500 | $ | 15,301 | 32.9 | % | ||||||
Marketing Services | 6,554 | 3,221 | 3,333 | 103.5 | % | |||||||||
PC Services | 400 | — | 400 | — | ||||||||||
Total | $ | 68,755 | $ | 49,721 | $ | 19,034 | 38.3 | % |
Gross profit (in thousands) | ||||||||||||||||||||||||||||
Six Months Ended | Sales | % of | Marketing | % of | PC | % of | % of | |||||||||||||||||||||
June 30, | Services | Sales | Services | Sales | Services | Sales | Total | Sales | ||||||||||||||||||||
2011 | $ | 15,139 | 19.7 | % | $ | 2,550 | 28.0 | % | $ | 284 | 41.5 | % | $ | 17,973 | 20.7 | % | ||||||||||||
2010 | 12,145 | 20.7 | % | 2,115 | 39.6 | % | — | — | 14,260 | 22.3 | % | |||||||||||||||||
Change | $ | 2,994 | $ | 435 | $ | 284 | $ | 3,713 |
Compensation expense (in thousands) | ||||||||||||||||||||||||||||
Six Months Ended | Sales | % of | Marketing | % of | PC | % of | % of | |||||||||||||||||||||
June 30, | Services | Sales | Services | Sales | Services | Sales | Total | Sales | ||||||||||||||||||||
2011 | $ | 7,898 | 10.3 | % | $ | 4,171 | 45.8 | % | $ | 103 | 15.1 | % | $ | 12,172 | 14.0 | % | ||||||||||||
2010 | 7,431 | 12.7 | % | 1,532 | 28.7 | % | — | — | 8,963 | 14.0 | % | |||||||||||||||||
Change | $ | 467 | $ | 2,639 | $ | 103 | $ | 3,209 |
Other selling, general and administrative expenses (in thousands) | ||||||||||||||||||||||||||||
Six Months Ended | Sales | % of | Marketing | % of | PC | % of | % of | |||||||||||||||||||||
June 30, | Services | Sales | Services | Sales | Services | Sales | Total | Sales | ||||||||||||||||||||
2011 | $ | 5,204 | 6.8 | % | $ | 2,692 | 29.6 | % | $ | 97 | 14.2 | % | $ | 7,993 | 9.2 | % | ||||||||||||
2010 | 6,007 | 10.2 | % | 859 | 16.1 | % | — | — | 6,866 | 10.7 | % | |||||||||||||||||
Change | $ | (803 | ) | $ | 1,833 | $ | 97 | $ | 1,127 |
Exhibit No. | Description | |
10.1* | Form of Indemnification Agreement (Directors and Executive Officers)(incorporated by reference to the registrant's current report on Form 8-K filed the SEC on April 20, 2011). | |
31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith. | |
31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith. | |
32.1 | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith. | |
32.2 | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith. |
Date: | August 10, 2011 | PDI, Inc. | |
(Registrant) | |||
/s/ Nancy S. Lurker | |||
Nancy S. Lurker | |||
Chief Executive Officer | |||
/s/ Jeffrey E. Smith | |||
Jeffrey E. Smith | |||
Chief Financial Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 of PDI, Inc. (the “registrant”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | August 10, 2011 | /s/ Nancy S. Lurker |
Chief Executive Officer | ||
(Principal Executive Officer) | ||
1. | I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 of PDI, Inc. (the “registrant”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | August 10, 2011 | /s/ Jeffrey E. Smith |
Chief Financial Officer | ||
(Principal Financial Officer) | ||
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | August 10, 2011 | /s/ Nancy S. Lurker |
Chief Executive Officer | ||
(Principal Executive Officer) |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | August 10, 2011 | /s/ Jeffrey E. Smith |
Chief Financial Officer | ||
(Principal Financial Officer) | ||
Balance Sheet Parenthetical (USD $)
|
Jun. 30, 2011
|
Dec. 31, 2010
|
---|---|---|
Treasury stock outstanding | 1,074,333 | 1,073,207 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 15,797,167 | 15,463,995 |
Common stock, shares outstanding | 14,722,834 | 14,390,788 |
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Condensed Consolidated Statements of Operations (USD $)
In Thousands, except Per Share data |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
|
Revenue, net | $ 40,626 | $ 32,849 | $ 86,728 | $ 63,981 |
Cost of services | 31,640 | 25,074 | 68,755 | 49,721 |
Gross profit | 8,986 | 7,775 | 17,973 | 14,260 |
Compensation expense | 6,174 | 4,528 | 12,172 | 8,963 |
Other selling, general and administrative expenses | 3,484 | 3,300 | 7,993 | 6,866 |
Facilities realignment | 0 | 583 | 0 | 583 |
Total operating expenses | 9,658 | 8,411 | 20,165 | 16,412 |
Operating loss | (672) | (636) | (2,192) | (2,152) |
Other (loss) income, net | (23) | 10 | (82) | 75 |
Loss from continuing operations before income tax | (695) | (626) | (2,274) | (2,077) |
Provision (benefit) for income tax | 188 | 70 | (855) | 137 |
Loss from continuing operations | (883) | (696) | (1,419) | (2,214) |
Loss from discontinued operations, net of tax | (12) | (194) | (26) | (375) |
Net loss | $ (895) | $ (890) | $ (1,445) | $ (2,589) |
Basic loss per share of common stock from: | Â | Â | Â | Â |
Continuing operations | $ (0.06) | $ (0.05) | $ (0.10) | $ (0.16) |
Discontinued operations | $ 0.00 | $ (0.01) | $ 0.00 | $ (0.02) |
Net loss per basic share of common stock | $ (0.06) | $ (0.06) | $ (0.10) | $ (0.18) |
Diluted loss per share of common stock from: | Â | Â | Â | Â |
Continuing operations | $ (0.06) | $ (0.05) | $ (0.10) | $ (0.16) |
Discontinued operations | $ 0.00 | $ (0.01) | $ 0.00 | $ (0.02) |
Net loss per diluted share of common stock | $ (0.06) | $ (0.06) | $ (0.10) | $ (0.18) |
Weighted average number of common shares and common share equivalents outstanding: | Â | Â | Â | Â |
Basic | 14,413 | 14,289 | 14,386 | 14,274 |
Diluted | 14,413 | 14,289 | 14,386 | 14,274 |
Document and Entity Information
|
6 Months Ended | |
---|---|---|
Jun. 30, 2011
|
Aug. 07, 2011
|
|
Entity Information [Line Items] | Â | Â |
Entity Registrant Name | PDI INC | Â |
Entity Central Index Key | 0001054102 | Â |
Current Fiscal Year End Date | --12-31 | Â |
Entity Filer Category | Smaller Reporting Company | Â |
Document Type | 10-Q | Â |
Document Period End Date | Jun. 30, 2011 | |
Document Fiscal Year Focus | 2011 | Â |
Document Fiscal Period Focus | Q2 | Â |
Amendment Flag | false | Â |
Entity Common Stock, Shares Outstanding | Â | 14,723,168 |
Entity Well-known Seasoned Issuer | No | Â |
Entity Voluntary Filers | No | Â |
Entity Current Reporting Status | Yes | Â |
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Commitments and Contingencies
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6 Months Ended |
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Jun. 30, 2011
|
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COMMITMENTS AND CONTINGENCIES [Abstract] | Â |
Commitments and Contingencies Disclosure [Text Block] | COMMITMENTS AND CONTINGENCIES Letters of Credit As of June 30, 2011, the Company had outstanding letters of credit of $5.0 million as required by its existing insurance policies and facility leases. These letters of credit are supported by investments in held-to-maturity securities. See Note 3, Investments in Marketable Securities, for additional detail regarding investments in marketable securities. Litigation Due to the nature of the businesses in which the Company is engaged, such as product detailing and in the past, the distribution of products, it could be exposed to certain risks. Such risks include, among others, risk of liability for personal injury or death to persons using products the Company promotes or distributes. There can be no assurance that substantial claims or liabilities will not arise in the future due to the nature of the Company's business activities and recent increases in litigation related to healthcare products, including pharmaceuticals. The Company seeks to reduce its potential liability under its service agreements through measures such as contractual indemnification provisions with customers (the scope of which may vary from customer to customer, and the performance of which is not secured) and insurance. The Company could, however, also be held liable for errors and omissions of its employees in connection with the services it performs that are outside the scope of any indemnity or insurance policy. The Company could be materially adversely affected if it were required to pay damages or incur defense costs in connection with a claim that is outside the scope of an indemnification agreement; if the indemnity, although applicable, is not performed in accordance with its terms; or if the Company's liability exceeds the amount of applicable insurance or indemnity. |
Segment Information
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Jun. 30, 2011
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SEGMENT INFORMATION [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting Disclosure [Text Block] | SEGMENT INFORMATION The accounting policies of the segments are described in Note 1 of the Company’s audited consolidated financial statements in its Annual Report on Form 10-K for the year ended December 31, 2010. Corporate charges are allocated to each of the reporting segments on the basis of total salary expense. Corporate charges include corporate headquarters costs and certain depreciation expenses. Certain corporate capital expenditures have not been allocated from the Sales Services segment to the other reporting segments since it is impracticable to do so. On August 1, 2011 the Company announced the formation of its new business unit, Interpace BioPharma. Interpace BioPharma provides biopharmaceutical clients with full-service product commercialization solutions. These services include full supply chain management, operations, sales, marketing, compliance, and regulatory/medical management. The initial revenue and costs associated with this unit are reflected in the Product Commercialization Services (PC Services) segment for both the three- and six-month periods ended June 30, 2011.
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Investments in Marketable Securities
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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INVESTMENTS IN MARKETABLE SECURITIES [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marketable Securities [Text Block] | INVESTMENTS IN MARKETABLE SECURITIES Available-for-sale securities are carried at fair value with the unrealized holding gains or losses, net of tax, included as a component of accumulated other comprehensive income (loss) in stockholders’ equity. Realized gains and losses on available-for-sale securities are computed based upon specific identification and included in other income (expense), net in the consolidated statement of operations. Declines in value judged to be other-than-temporary on available-for-sale securities are recorded in other income (expense), net in the consolidated statement of operations and the cost basis of the security is reduced. The fair values for marketable equity securities are based on quoted market prices. Held-to-maturity investments are stated at amortized cost which approximates fair value. Interest income is accrued as earned. Realized gains and losses on held-to-maturity investments are computed based upon specific identification and included in other income (expense), net in the condensed consolidated statement of operations. The Company does not have any investments classified as trading. Available-for-sale securities consist of assets in a rabbi trust associated with the Company’s deferred compensation plan. As of June 30, 2011 and December 31, 2010, the carrying value of available-for-sale securities was approximately $124,000 and $147,000, respectively, and is included in short-term investments. Available-for-sale securities at June 30, 2011 and December 31, 2010 consisted of approximately $62,000 and $76,000, respectively, in money market accounts, and approximately $62,000 and $71,000, respectively, in mutual funds. At June 30, 2011, there were no gross unrealized holding gains and $10,000 of gross unrealized holding losses included in accumulated other comprehensive income. At December 31, 2010, accumulated other comprehensive income included gross unrealized holding gains of approximately $8,000 and no gross unrealized holding losses. There were no gross realized gains or losses included in other income, net in the three- and six-month periods ended June 30, 2011 and 2010. The Company’s other marketable securities consist of investment grade debt instruments such as obligations of U.S. Treasury and U.S. Federal Government agencies. These investments are categorized as held-to-maturity since the Company’s management has the ability and intent to hold these securities to maturity. The Company’s held-to-maturity investments are carried at amortized cost which approximates fair value and are maintained in separate accounts to support the Company’s letters of credit. The Company had standby letters of credit of approximately $5.0 million and $5.4 million at June 30, 2011 and December 31, 2010, respectively, as collateral for its existing insurance policies and facility leases. At June 30, 2011 and December 31, 2010, held-to-maturity investments included the following:
At June 30, 2011 and December 31, 2010, held-to-maturity investments were recorded in the following accounts:
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Long Term Liabilities
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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LONG TERM LIABILITIES [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Liabilities Disclosure [Text Block] | 9. LONG-TERM LIABILITIES Long-term liabilities consisted of the following as of June 30, 2011 and December 31, 2010:
See Note 6, Fair Value Measurements, for additional information related to the Group DCA contingent earn-out fee above. |
Stock Based Compensation
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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STOCK BASED COMPENSATION [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Text Block] | STOCK-BASED COMPENSATION On March 3, 2011, under the terms of the stockholder-approved PDI, Inc. 2004 Stock Award Incentive Plan (the 2004 Plan), the Compensation and Management Development Committee of the Board (the Compensation Committee) approved grants of restricted stock to certain executive officers and members of senior management of the Company. The full Board approved the portion of these grants made to the Company’s Chief Executive Officer. In approving grants under the 2004 plan, the Compensation Committee, and the Board when required, considered, among other things, the overall performance of the Company and the business unit of the Company for which the executive has responsibility, the individual contribution and performance level of the executive, and the need to retain key management personnel. As part of the Company's 2010 long-term incentive plan, these grants aggregated 234,598 shares of restricted stock issued with a grant date fair value of $8.44 per share. The Company recognized $0.5 million and $0.4 million of stock-based compensation expense for the three-month periods ended June 30, 2011 and 2010, respectively and $1.3 million and $0.8 million of stock-based compensation expense for the six-month periods ended June 30, 2011 and 2010, respectively. The grant date fair values of SARs awards are determined using a Black-Scholes pricing model. Assumptions utilized in the model are evaluated and revised, as necessary, to reflect market conditions and experience. The following table provides the weighted average assumptions used in determining the fair value of the non-performance based SARs awards granted during the three- and six-month periods ended June 30, 2010:
The Company did not issue any SARs awards during the six-month period ended June 30, 2011. |
Comprehensive Loss
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COMPREHENSIVE LOSS [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive Income (Loss) Note [Text Block] | COMPREHENSIVE LOSS A reconciliation of net loss as reported in the unaudited interim condensed consolidated statements of operations to comprehensive loss, net of taxes is presented in the table below.
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Basis of Presentation
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Jun. 30, 2011
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BASIS OF PRESENTATION [Abstract] | Â |
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block] | BASIS OF PRESENTATION The accompanying unaudited interim condensed consolidated financial statements and related notes (the interim financial statements) should be read in conjunction with the consolidated financial statements of PDI, Inc. and its subsidiaries (the Company or PDI) and related notes as included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 as filed with the Securities and Exchange Commission (SEC). The interim financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial reporting and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The interim financial statements include all adjustments (consisting of normal recurring adjustments) that, in the judgment of management, are necessary for a fair presentation of such interim financial statements. All significant intercompany balances and transactions have been eliminated in consolidation. Operating results for the three- and six-month periods ended June 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011. On November 3, 2010, the Company acquired 100% of the membership interest in Group DCA, a privately held interactive digital communications company serving the pharmaceutical, biotechnology and healthcare industries. On July 19, 2010, the Company’s Board of Directors (Board) approved closing the TVG Marketing Research & Consulting (TVG) business unit. The Company completed the closure of TVG operations during the period ended September 30, 2010. These interim financial statements reflect the presentation of TVG as a discontinued operation for the three- and six-month periods ended June 30, 2011 and 2010, respectively. See Note 13 to the interim financial statements for additional detail regarding the discontinued operations of TVG. On August 1, 2011 the Company announced the formation of its new business unit, Interpace BioPharma. Interpace BioPharma provides biopharmaceutical clients with full-service product commercialization solutions. These services include full supply chain management, operations, sales, marketing, compliance, and regulatory/medical management. The initial revenue and costs associated with this unit are reflected in the Product Commercialization Services (PC Services) segment for both the three- and six-month periods ended June 30, 2011. |
Goodwill and Other Intangible Assets
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GOODWILL AND OTHER INTANGIBLE ASSETS [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Text Block] | GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill and finite-lived intangible assets recorded as of June 30, 2011 are attributable to the 2010 acquisition of Group DCA and the 2004 acquisition of Pharmakon. As of June 30, 2011 and December 31, 2010, the carrying amount of goodwill was $24.0 million, consisting of $18.9 million and $5.1 million for the Group DCA and Pharmakon business (reporting) units, respectively. The net carrying value of the identifiable intangible assets as of June 30, 2011 and December 31, 2010 is as follows:
Amortization expense was $0.3 million and $0.1 million for the three-month periods ended June 30, 2011 and 2010, respectively and $0.6 million and $0.2 million for the six-month periods ended June 30, 2011 and 2010. Estimated amortization expense for the current and next four years is as follows:
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Facilities Realignment
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FACILITIES REALIGNMENT [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities Disclosure [Text Block] |
Saddle River, New Jersey Facility Prior to December 2009, the Company's corporate headquarters was located in a three-floor facility in Saddle River, New Jersey. In December 2009, the Company relocated its corporate headquarters from its Saddle River, New Jersey facility to a smaller office located in Parsippany, New Jersey. Due to the relocation, the Company recorded a facility realignment charge of approximately $3.9 million in December 2009 and a non-cash impairment charge of approximately $1.5 million related to furniture, leasehold improvements and office equipment in the office space. Effective September 1, 2009, the Company extended the sublease for the first floor of its Saddle River, New Jersey facility through the remainder of the facility lease term. The sublease is expected to provide approximately $2.3 million in sublease income through January 2016, but will not fully offset the Company's lease obligations for this space. As a result, the Company recorded a $0.8 million facility realignment charge in the third quarter of 2009. The Company also recorded a non-cash impairment charge of approximately $0.4 million related to furniture and leasehold improvements in the office space. In 2007, the Company entered into a sublease for the second floor of its Saddle River, New Jersey facility through the end of the facility's lease term, January 2016. This sublease will not fully offset the Company's lease obligations for this space; therefore, the Company recorded a $1.0 million charge for facility realignment and related asset impairment for furniture and leasehold improvements in the office space. Due to continued adverse conditions in the real estate market in 2010, the Company adjusted its assumptions regarding its ability to sublease unoccupied space on the third floor of the Saddle River, New Jersey facility resulting in realignment charges of approximately $0.6 million and $1.4 million during the quarters ended June 30, 2010 and December 31, 2010, respectively. The Company is currently seeking to sublease the approximate 47,000 square feet of remaining space in Saddle River, New Jersey. Dresher, Pennsylvania Facility During the year ended December 31, 2009, the Company continued to right size its operations in Dresher, Pennsylvania and recorded facility realignment charges of $1.4 million and non-cash impairments of furniture and leasehold improvements of $0.7 million. During 2010 the Company discontinued the operations of its TVG business unit and exited the remaining portion of space at the facility, thus recording additional restructuring charges of $0.3 million for facility realignment and $0.6 million for non-cash asset impairments of furniture and leasehold improvements in discontinued operations for the year ended December 31, 2010. See Note 13, Discontinued Operations, for further information regarding the discontinued operations of TVG. In the first quarter of 2011, the Company entered into two separate agreements to sublease substantially all of the remaining space in Dresher, Pennsylvania. These subleases have lease terms that expire on November 30, 2016 in connection with the underlying facility lease. The following table presents a rollforward of the Company’s restructuring reserve from December 31, 2010 to June 30, 2011, of which approximately $2.5 million is included in other accrued expenses and $2.7 million is included in long-term liabilities as of June 30, 2011. The Company recognizes accretion expense in Other (loss) income, net in the Condensed Consolidated Statement of Operations.
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Discontinued Operations
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DISCONTINUED OPERATIONS [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disposal Groups, Including Discontinued Operations, Disclosure [Text Block] | DISCONTINUED OPERATIONS On July 19, 2010, the Board approved closing the TVG business unit and subsequently notified employees and issued a press release announcing this decision. The decision to take this action resulted from an extensive evaluation of the TVG business in the context of the Company's strategy, which is to focus on outsourced promotional services targeted to healthcare providers, as well as TVG's consistently declining revenues over recent years and the shrinking market in which TVG operates. The Company completed the closure of the TVG operations during the quarter ended September 30, 2010, including the completion of all active customer contracts. The financial statements reflect the presentation of TVG as a discontinued operation in all periods presented. The table below presents the significant components of TVG’s results included in Loss from Discontinued Operations in the Condensed Consolidated Statements of Operations for the three- and six-month periods ended June 30, 2011 and 2010, respectively.
The major classes of assets and liabilities included in the Condensed Consolidated Balance Sheet for TVG as of June 30, 2011 and December 31, 2010 are as follows:
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Fair Value Measurement
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FAIR VALUE MEASUREMENTS [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Text Block] |
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various methods including market, income and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated, or generally unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based upon observable inputs used in the valuation techniques, the Company is required to provide information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values into three broad levels as follows: Level 1: Valuations for assets and liabilities traded in active markets from readily available pricing sources for market transactions involving identical assets or liabilities. Level 2: Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third-party pricing services for identical or similar assets or liabilities. Level 3: Valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. The valuation methodologies used for the Company's financial instruments measured on a recurring basis at fair value, including the general classification of such instruments pursuant to the valuation hierarchy, is set forth in the table below.
The fair value of cash and cash equivalents and marketable securities is valued using market prices in active markets (level 1). As of June 30, 2011, the Company did not have any marketable securities in less active markets (level 2). Contingent consideration does not have observable market value and requires a high level of judgment to determine fair value (level 3). In connection with the November 3, 2010, acquisition of Group DCA the Company recorded $1.6 million of contingent consideration. The Company determined the fair value of the contingent consideration based on a probability-weighted income approach derived from revenue estimates and a probability assessment with respect to the likelihood of achieving the various earn-out criteria. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement. During the quarter ended June 30, 2011, the Company determined that a portion of the earn-out was not achievable and reversed the related portion of the contingent consideration within other selling, general and administrative expenses in the condensed consolidated statement of operations. A rollforward of the contingent consideration is as follows:
The Company considers carrying amounts of accounts receivable, accounts payable and accrued expenses to approximate fair value due to the short-term nature of these financial instruments. There is no fair value ascribed to the letters of credit as management does not expect any material losses to result from these instruments because performance is not expected to be required. |
Summary of Significant Accounting Policies
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Significant Accounting Policies [Text Block] | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Accounting Estimates The preparation of the interim financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities reported and disclosure of contingent assets and liabilities at the date of the interim financial statements and the reported amounts of revenues and expenses during the reporting period. Management's estimates are based on historical experience, facts and circumstances available at the time, and various other assumptions that are believed to be reasonable under the circumstances. Significant estimates include incentives earned or penalties incurred on contracts, best estimate of selling price in multiple element arrangements, valuation allowances related to deferred income taxes, self-insurance loss accruals, allowances for doubtful accounts and notes, income tax accruals, acquisition accounting, asset impairments and facilities realignment accruals. The Company periodically reviews these matters and reflects changes in estimates as appropriate. Actual results could materially differ from those estimates. Basic and Diluted Net Loss per Share A reconciliation of the number of shares of common stock used in the calculation of basic and diluted loss per share for the three- and six-month periods ended June 30, 2011 and 2010 is as follows:
The following outstanding stock-based awards were excluded from the computation of the effect of dilutive securities on loss per share for the following periods because they would have been anti-dilutive:
Goodwill and Other Intangible Assets The Company allocates the cost of acquired companies to the identifiable tangible and intangible assets acquired and liabilities assumed, with the remaining amount classified as goodwill. Since the entities the Company has acquired do not have significant tangible assets, a significant portion of the purchase price has been allocated to intangible assets and goodwill. The identification and valuation of these intangible assets and the determination of the estimated useful lives at the time of acquisition, as well as the completion of impairment tests require significant management judgments and estimates. These estimates are made based on, among other factors, consultations with an accredited independent valuation consultant, reviews of projected future operating results and business plans, economic projections, anticipated highest and best use of future cash flows and the market participant cost of capital. The use of alternative estimates and assumptions could increase or decrease the estimated fair value of goodwill and other intangible assets, and potentially result in a different impact to the Company's results of operations. Further, changes in business strategy and/or market conditions may significantly impact these judgments thereby impacting the fair value of these assets, which could result in an impairment of the goodwill. The Company tests goodwill and indefinite lived intangible assets for impairment at least annually (as of December 31) and whenever events or circumstances change that indicate impairment may have occurred. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others: a significant decline in expected future cash flows; a sustained, significant decline in stock price and market capitalization; a significant adverse change in legal factors or in the business climate of the pharmaceutical industry; unanticipated competition; and slower growth rates. Any adverse change in these factors could have a significant impact on the recoverability of goodwill, and indefinite lived intangible assets and our consolidated financial results. At June 30, 2011 no indicators of impairment were identified. Long-Lived Assets The Company reviews the recoverability of long-lived assets and finite-lived intangible assets whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. The Company did not identify any events or changes in circumstances that indicated that the carrying value of such assets may not be recoverable during the six-month period ended June 30, 2011. Reclassifications The Company reclassified certain prior period financial statement balances to conform to the current year presentation. See Note 13, Discontinued Operations, for further information. Forward Looking Accounting Standards Updates In June 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-05, "Presentation of Comprehensive Income" (ASU 2011-05), which requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income, or in two separate but consecutive statements. ASU 2011-05 eliminates the option to present components of other comprehensive income as part of the statement of equity. ASU 2011-05 will be effective for periods beginning after December 15, 2011. The adoption of ASU 2011-05 will not have a material effect on the Company's operating results or financial position. Recently Adopted Accounting Standards Updates In October 2009, the FASB issued Accounting Standards Update No. 2009-13 (ASU 2009-13), “Multiple-Deliverable Revenue Arrangements-a consensus of the FASB Emerging Issues Task Force”. ASU 2009-13 updates the existing multiple-deliverable revenue arrangements guidance included under Accounting Standards Codification 605-25. The revised guidance:
The Company frequently provides promotional services under multiple-deliverable revenue arrangements (Arrangements) through its Pharmakon and Group DCA business units. The significant deliverables in these Arrangements generally include:
ASU 2009-13 became effective for, and was adopted by, the Company beginning January 1, 2011 on a prospective basis. The adoption of ASU 2009-13 as of January 1, 2011 impacted the revenue recognition policies of the Company's marketing segment business units as follows: Prior to the Adoption of ASU 2009-13 Prior to its adoption of ASU 2009-13, the Company separated the deliverables in its Arrangements into separate units of accounting, as required by the applicable revenue recognition accounting guidance in effect at the time, if a) the delivered item(s) had value to the customer on a standalone basis, b) there was objective and reliable evidence of fair value of the undelivered item(s), and c) if an arrangement included a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) was considered probable and substantially in the control of the Company. The application of this guidance resulted in the following accounting treatment at each business unit: Pharmakon In general, prior to January 1, 2011 and the adoption of ASU 2009-13, the Company divided the deliverables within these Arrangements into two units of accounting: Recruitment and Events. Recruitment, which is delivered in advance of the Events, was determined to have standalone value to the customer. The Company was able to establish VSOE for the undelivered item, the Events, based on prices charged to its customers when sold on a standalone basis. Revenue was allocated to the deliverables using the residual value method, and was then recognized in accordance with the revenue recognition policies of the individual units of accounting based on the characteristics of the underlying deliverables. Generally, revenue was recognized as Recruitment mailings were mailed and when Events were conducted. Group DCA The Company acquired Group DCA on November 3, 2010 and upon the acquisition determined that Development and Delivery services provided by Group DCA did not qualify as separate units of accounting due to the lack of objective and reliable evidence, either from VSOE or TPE, of the fair value of the Delivery unit of accounting, which was the undelivered item in the arrangements. As a result, the Company grouped the deliverables under these Arrangements into one unit of accounting and deferred all revenue related to the programs until it had achieved the recognition criteria applicable to the combined single unit of accounting. Generally, all revenue recognition criteria were met and revenue recognition commenced at the inception of a program's hosting period, and revenue was recognized ratably over the period. Group DCA revenues were not material to the Company's consolidated financial statements during the year ended December 31, 2010. For further information on the Company's revenue recognition policy refer to the Revenue & Cost of Services section of Footnote 1 in our 2010 Annual Report on Form 10-K. Impact of the Adoption of ASU 2009-13 Pharmakon Effective January 1, 2011, the residual value method was no longer an allowable method of allocating arrangement consideration. Pharmakon now utilizes the selling price hierarchy, described above. In applying this hierarchy, the Company first determined that both VSOE and TPE continue to be unavailable for establishing the relative selling price of Recruitment. Based on that determination, the Company now utilizes its best estimate to determine the selling price of this deliverable. The Company has determined that the rate card price Pharmakon charges for this service represents the best estimate of selling price of the Recruitment deliverable as the business unit has an established pricing policy and the rate card price is the price Pharmakon would charge its customers for this service if provided on a standalone basis. The rate card price was determined by estimating the average cost incurred by Pharmakon to provide this service to its customers plus an average profit margin per the business unit pricing policy, and is consistent with the pricing on all services provided by Pharmakon. The application of ASU 2009-13 resulted in little to no change in the allocation of consideration when compared to the residual value method and therefore the adoption of ASU 2009-13 did not have a material impact on Pharmakon revenue recognition during the six-month period ended June 30, 2011, and is not expected to have a material impact on subsequent periods. Group DCA Under the guidance in ASU 2009-13, Group DCA is now required to estimate the selling price of a deliverable if it has standalone value to the customer and both VSOE and TPE of the selling price are not available. As a result, the deliverables in Group DCA Arrangements have been determined to be separate units of accounting and consideration is allocated based on relative selling prices. Selling prices are estimated for most deliverables through an analysis of historical selling price as well as estimated internal labor hours and an average billing rate based on employee costs. Revenue is recognized for each unit of accounting depending upon the characteristics of their underlying deliverables. For Development, revenue is recognized as the service is being provided to the customer. Revenue allocated to Delivery is recognized ratably over the hosting period. The adoption of the new guidance did not materially impact Group DCA revenue recognition during the six-month period ended June 30, 2011. |
Income Taxes
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Jun. 30, 2011
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Income Tax Disclosure [Text Block] |
Generally, accounting standards require companies to provide for income taxes each quarter based on their estimate of the effective tax rate for the full year. The authoritative guidance for accounting for income taxes allows use of the discrete method when, in certain situations, the actual interim period effective tax rate may be used if it provides a better estimate of income tax expense. Due to the Company's valuation allowance position and the existence of a deferred tax liability related to indefinite lived intangibles, it is the Company's position that the discrete method provides a more accurate estimate of income tax expense and therefore income tax expense for the current quarter has been presented using the discrete method. As the year progresses, the Company refines its estimate based on the facts and circumstances by each tax jurisdiction. The following table summarizes income tax expense on income from continuing operations and the effective tax rate for the three- and six-month periods ended June 30, 2011 and 2010:
The income tax benefit for the six-month period ended June 30, 2011 was primarily due to the release of reserves related to uncertain tax positions that were reversed in connection with the closing of the Company's IRS examination for the 2003, 2004 and 2008 tax years, partially offset by state taxes and tax expense associated with the tax amortization of indefinite lived intangibles. Income tax expense for the three month period ended June 30, 2011 was primarily due to state taxes and recording a deferred tax liability for tax amortization of goodwill. Income tax expense for the three- and six-month periods ended June 30, 2010 was primarily related to state taxes, as the Company and its subsidiaries file separate income tax returns in numerous state and local jurisdictions. |