EX-99.1 2 pi2251ex991.htm

Exhibit 99.1

PDI Reports Year End and Fourth Quarter 2004 Financial Results

Full Year 2004 Diluted EPS of $1.42

Fourth Quarter 2004 Diluted EPS of $0.31

          SADDLE RIVER, N.J., March 9 /PRNewswire-FirstCall/ -- PDI, Inc. (Nasdaq: PDII) a diversified sales and marketing services company to the biopharmaceutical and medical devices and diagnostics industries, today announced its fourth quarter and year end 2004 financial results.

          Twelve Months Results
          Revenue for the twelve months ended December 31, 2004 was $364.4 million, 5.8% higher than revenue of $344.5 million for the twelve months ended December 31, 2003.  Operating income was $35.2 million for the twelve months ended December 31, 2004 compared to operating income of $19.6 million for the twelve months ended December 31, 2003.  Net income was $21.1 million for the twelve months ended December 31, 2004 versus net income of $12.3 million for the twelve months ended December 31, 2003.  Diluted net income per share for the twelve months ended December 31, 2004 was $1.42 compared to diluted net income per share of $0.85 for the twelve months ended December 31, 2003.

          Fourth Quarter Results
          Revenue for the quarter ended December 31, 2004 was $87.8 million, 11.5% less than revenue of $99.2 million for the quarter ended December 31, 2003. Operating income was $8.0 million for the quarter ended December 31, 2004, versus operating income of $7.8 million for the quarter ended December 31, 2003.  Net income was $4.6 million for the quarter ended December 31, 2004, compared to net income of $4.5 million in the quarter ended December 31, 2003. Diluted net income per share for the quarter ended December 31, 2004 was $0.31 versus net income per share of $0.31 for the quarter ended December 31, 2003.

          Adjustments for 2004 and 2003 Ceftin Product Returns and 2004 Xylos Write Downs

          In the fourth quarter of 2003, the Company increased its reserve for Ceftin product returns by $12.0 million to cover the cost of estimated Ceftin product returns.  During 2004, the reserve was increased by an additional $1.7 million.

          Also, during the fourth quarter of 2004 the Company wrote down to zero both its $1.0 million investment in and its $0.5 million loan to Xylos Corporation.

          The Company believes a presentation of the 2004 and 2003 financial results without the impact of the payments for Ceftin returns, and without the impact of the Xylos write downs, is useful in viewing the Company’s underlying performance for those years.  Our responsibility for accepting and paying for Ceftin returns expired on December 31, 2004 and the Company terminated its agreement with Xylos effective May 16, 2004.  The table below reconciles the adjustments with the reported financial performance:



Year Ended December 31, 2004
(in thousands except per share data)

 

 

Revenue

 

Gross
Profit

 

Operating
Income

 

Net
Income

 

Diluted
EPS

 

 

 


 


 


 


 


 

As reported

 

$

364,444

 

$

98,830

 

$

35,191

 

$

21,132

 

$

1.42

 

After adjustment for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* Ceftin reserve increase

 

$

366,120

 

$

100,506

 

$

36,867

 

$

22,117

 

$

1.49

 

* Ceftin reserve increase and Xylos write down

 

$

366,120

 

$

100,506

 

$

37,367

 

$

23,411

 

$

1.57

 

Year Ended December 31, 2003
(in thousands except per share data)

 

 

Revenue

 

Gross
Profit

 

Operating
Income

 

Net
Income

 

Diluted
EPS

 

 

 


 


 


 


 


 

As reported

 

$

344,530

 

$

89,081

 

$

19,590

 

$

12,258

 

$

0.85

 

After adjustment for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* Ceftin reserve increase

 

$

356,530

 

$

101,081

 

$

31,590

 

$

19,369

 

$

1.34

 

          *Adjusted amounts are not in accordance with GAAP, but are presented for analytical purposes.

 

After adjusting for the impact of the Ceftin reserve:

 

*

2004 revenue of $366.1 million was 2.7% higher than 2003 revenue of $356.5 million.

 

*

2004 operating income of $36.9 million was 16.6% higher than 2003 operating income of $31.6 million.

 

*

2004 operating income as a percent of revenue was 10.1% versus 8.9% in 2003.

 

*

2004 EPS of $1.49 was 11.2% higher than EPS of $1.34 in 2003.


 

After adjusting for the impact of the Ceftin reserve and Xylos write downs:

 

*

2004 operating income of $37.4 million was 18.3% higher than 2003 operating income of $31.6 million.

 

*

2004 operating income as a percent of revenue was 10.2% versus 8.9% in 2003.

 

*

2004 EPS of $1.57 was 17.2% higher than EPS of $1.34 in 2003.

          Charles T. Saldarini, Vice Chairman and CEO, said, “I am pleased with our 2004 results which marked the first full year we have been focused primarily on our services businesses since deemphasizing our products-based strategy at the end of 2003.  Using a core services driven strategy, we posted an 18% increase in operating income for 2004 after adjusting for Ceftin and Xylos. Our results are dominated by the strong performance of our Sales Teams business, which I believe continues to field the highest quality contract sales teams, owns long term relationships with its key customers and delivers the best renewal rates among our peers.  We do work for a broad range of clients and we continue to support products at all phases in their lifecycle.”

          Mr. Saldarini continued, “I was disappointed with the overall contribution in 2004 from our Marketing Services segment, but I am excited about the momentum we generated from the acquisition of Pharmakon, and the contribution from our marketing research unit at TVG.  Our PDI Ed/Comm unit’s performance in 2004 was a drag on our results following a meaningful contribution in 2003. We expect solid growth from these units in 2005.”



          On growth, Mr. Saldarini said, “I am committed to achieving greater balance for our shareholders by delivering greater organic growth from these units as well as executing targeted acquisitions that will reach more clients and provide innovative products solutions that maximize profitable brand sales growth for our clients.  We remain focused on finding companies that meet both our strategic and financial criteria.”

          Remarking on SG&A, Mr. Saldarini said, “I am also pleased with progress made in continuing to streamline SG&A in 2004 vs. 2003 and I am dedicated to making further reductions for 2005 vs. 2004 while remaining committed to operational excellence and a high level of customer satisfaction.  We will achieve these changes in part by utilizing a more focused, disciplined and business unit driven management team.”

          In concluding, Mr. Saldarini said, “As a result, 2005 efforts are focused on business development, continued cost management and the identification, selection and execution of targeted acquisitions.  I look forward to discussing these results during the course of the year.”

          PDI reiterates its 2005 EPS estimate of $1.35 to $1.45.

          Webcast Information
          PDI will conduct a live conference call and webcast to discuss its fourth quarter and year end 2004 financial results on March 10, 2005 at 9:00 am eastern time.  The conference call can be accessed by dialing 1-877-423-4030 and asking for the PDI fourth quarter and year end 2004 financial results call.  For those calling internationally, the briefing can be accessed by dialing 1-706-634-1929.  The conference call will be accessible via webcast through the “Investor” section of PDI’s website, http://www.pdi-inc.com.  In the IR section of the site, the webcast is accessible in the “Conference calls and webcasts” section.  The webcast will be archived on the website for future on-demand replay.  The conference call will also be available for two weeks by dialing (800) 642-1687 or (706) 645-9291 and entering the conference ID number, 4165538.

          About PDI
          PDI, Inc. (Nasdaq: PDII) is a leading provider of outsourced sales and marketing services to the biopharmaceutical and medical devices and diagnostics industries. PDI’s comprehensive set of next-generation solutions is designed to increase its clients’ strategic flexibility and enhance their efficiency and profitability.  Headquartered in Saddle River, NJ, PDI also has offices in Pennsylvania and Illinois. 

          PDI’s sales and marketing services include dedicated, shared, clinical and combination sales teams; marketing research and consulting; medical education and communications; talent recruitment; and integrated commercial solutions from pre-launch through patent-expiration.  The company’s experience extends across multiple therapeutic categories and includes office and hospital-based initiatives.  PDI’s global presence is maintained through a strategic partnership with In2Focus, a leading U.K. provider of outsourced sales services.

          PDI’s commitment is to deliver innovative solutions, excellent execution and superior results to its clients.  Through strategic partnership and client-driven innovation, PDI maintains some of the longest sales and marketing relationships in the industry.  Recognized as an industry pioneer, PDI continues to innovate today as a thought-starter for the outsourcing of sales and marketing services.



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

          Forward Looking Statement
          This press release contains forward-looking statements regarding future events and financial performance.  These statements involve a number of risks and uncertainties and are based on numerous assumptions involving judgments with respect to future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond PDI’s control.  Some of the important factors that could cause actual results to differ materially from those indicated by the forward-looking statements are general economic conditions, changes in our operating expenses, adverse patent rulings, FDA, legal or accounting developments, competitive pressures, failure to meet performance benchmarks in significant contracts, changes in customer and market requirements and standards, and the risk factors detailed from time to time in PDI’s periodic filings with the Securities and Exchange Commission, including without limitation, PDI’s Annual Report on Form 10-K/A for the year ended December 31, 2003, and PDI’s periodic reports on Forms 10-Q/A, 10-Q, 8-K/A and 8-K filed with the Securities and Exchange Commission since January 1, 2004. The forward looking-statements in this press release are based upon management’s reasonable belief as of the date hereof. PDI undertakes no obligation to revise or update publicly any forward-looking statements for any reason.

PDI, Inc.
Consolidated Balance Sheets

(unaudited)

 

 

December 31,

 

 

 


 

 

 

2004

 

2003

 

 

 


 


 

 

 

(in thousands)

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

96,367

 

$

113,288

 

Short-term investments

 

 

13,131

 

 

1,344

 

Inventory, net of obsolescence reserve of $0 and $818 as of December 31, 2004 and 2003, respectively

 

 

—  

 

 

43

 

Accounts receivable, net of allowance for doubtful accounts of $74 and $749 as of December 31, 2004 and 2003, respectively

 

 

26,662

 

 

40,885

 

Unbilled costs and accrued profits on contracts in progress

 

 

3,393

 

 

4,041

 

Deferred training

 

 

740

 

 

1,643

 

Other current assets

 

 

11,818

 

 

8,847

 

Deferred tax asset

 

 

3,325

 

 

11,053

 

Total current assets

 

 

155,436

 

 

181,144

 

Property and equipment, net

 

 

17,170

 

 

14,494

 

Deferred tax asset

 

 

5,832

 

 

7,304

 

Goodwill

 

 

23,791

 

 

11,132

 

Other intangible assets

 

 

19,548

 

 

1,648

 

Other long-term assets

 

 

2,928

 

 

3,901

 

Total assets

 

$

224,705

 

$

219,623

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

7,217

 

$

8,689

 

Accrued rebates, sales discounts and returns

 

 

4,316

 

 

22,811

 

Accrued incentives

 

 

16,282

 

 

20,486

 

Accrued salaries and wages

 

 

8,414

 

 

9,031

 

Unearned contract revenue

 

 

6,924

 

 

3,604

 

Restructuring accruals

 

 

161

 

 

744

 

Other accrued expenses

 

 

15,966

 

 

15,770

 

Total current liabilities

 

 

59,280

 

 

81,135

 

Long-term liabilities

 

 

—  

 

 

—  

 

Total liabilities

 

$

59,280

 

$

81,135

 

Commitments and Contingencies

 

 

 

 

 

 

 

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; shares issued and outstanding, 2004 - 14,665,945; 2003 - 14,387,126; restricted $.01 par value; shares issued and outstanding, 2004- 154,554; 2003 - 136,178

 

 

148

 

 

145

 

Additional paid-in capital

 

 

116,737

 

 

109,531

 

Retained earnings

 

 

50,637

 

 

29,505

 

Accumulated other comprehensive income (loss)

 

 

76

 

 

25

 

Unamortized compensation costs

 

 

(2,063

)

 

(608

)

Treasury stock, at cost: 5,000 shares at December 31, 2004 and 2003

 

 

(110

)

 

(110

)

Total stockholders’ equity

 

$

165,425

 

$

138,488

 

Total liabilities & stockholders’ equity

 

$

224,705

 

$

219,623

 




PDI, Inc.
Consolidated Statements Of Operations
(In Thousands, Except Per Share Data)

(unaudited)

 

 

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

 

 

 


 


 

 

 

2004

 

2003

 

2004

 

2003

 

 

 


 


 


 


 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

Service

 

$

88,299

 

$

111,031

 

$

365,965

 

$

356,143

 

Product, net

 

 

(487

)

 

(11,810

)

 

(1,521

)

 

(11,613

)

Total revenue

 

 

87,812

 

 

99,221

 

 

364,444

 

 

344,530

 

Cost of goods and services

 

 

 

 

 

 

 

 

 

 

 

 

 

Program expenses (including related party amounts of $0 and $194 for the quarters ended December 31, 2004 and 2003, respectively and $180 and $983 for the years ended December 31, 2004 and 2003, respectively)

 

 

61,690

 

 

71,935

 

 

265,360

 

 

254,162

 

Cost of goods sold

 

 

10

 

 

190

 

 

254

 

 

1,287

 

Total cost of goods and services

 

 

61,700

 

 

72,125

 

 

265,614

 

 

255,449

 

Gross profit

 

 

26,112

 

 

27,096

 

 

98,830

 

 

89,081

 

Compensation expense

 

 

7,776

 

 

9,607

 

 

34,325

 

 

36,901

 

Other selling, general and administrative expenses

 

 

10,224

 

 

9,632

 

 

29,314

 

 

30,347

 

Restructuring and other related expenses

 

 

—  

 

 

413

 

 

—  

 

 

143

 

Litigation settlement

 

 

—  

 

 

—  

 

 

—  

 

 

2,100

 

Total operating expenses

 

 

18,000

 

 

19,652

 

 

63,639

 

 

69,491

 

Operating income

 

 

8,112

 

 

7,444

 

 

35,191

 

 

19,590

 

Other (expense) income, net

 

 

(82

)

 

332

 

 

779

 

 

1,073

 

Income before provision for taxes

 

 

8,030

 

 

7,776

 

 

35,970

 

 

20,663

 

Provision for income taxes

 

 

3,383

 

 

3,290

 

 

14,838

 

 

8,405

 

Net income

 

$

4,647

 

$

4,486

 

$

21,132

 

$

12,258

 

Basic net income per share

 

$

0.32

 

$

0.31

 

$

1.45

 

$

0.86

 

Diluted net income per share

 

$

0.31

 

$

0.31

 

$

1.42

 

$

0.85

 

Basic weighted average number of shares outstanding

 

 

14,641

 

 

14,320

 

 

14,564

 

 

14,231

 

Diluted weighted average number of shares outstanding

 

 

14,922

 

 

14,677

 

 

14,893

 

 

14,431

 




PDI, Inc.
Consolidated Statements Of Cash Flows

(unaudited)

 

 

For The Years Ended December 31,

 

 

 


 

 

 

2004

 

2003

 

2002

 

 

 


 


 


 

 

 

(in thousands)

 

Cash Flows From Operating Activities

 

 

 

 

 

 

 

 

 

 

Net income (loss) from operations

 

$

21,132

 

$

12,258

 

$

(30,761

)

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

5,916

 

 

6,243

 

 

7,374

 

Loss on disposal of asset

 

 

622

 

 

—  

 

 

—  

 

Stock compensation costs

 

 

1,232

 

 

554

 

 

443

 

Deferred taxes, net

 

 

9,199

 

 

(3,117

)

 

8,501

 

Reserve for inventory obsolescence and bad debt

 

 

683

 

 

1,939

 

 

(2,080

)

Loss on other investments

 

 

1,000

 

 

—  

 

 

379

 

Other changes in assets and liabilities, net of acquisitions:

 

 

 

 

 

 

 

 

 

 

Decrease (increase) in accounts receivable

 

 

15,807

 

 

(1,277

)

 

13,991

 

Decrease (increase) in inventory

 

 

43

 

 

(216

)

 

(203

)

Decrease (increase) in unbilled costs

 

 

648

 

 

(681

)

 

3,538

 

Decrease (increase) in deferred training

 

 

903

 

 

(537

)

 

4,463

 

(Increase) decrease in other current assets

 

 

(936

)

 

14,813

 

 

(15,559

)

(Increase) decrease in other long-term assets

 

 

(28

)

 

(2,052

)

 

4,385

 

(Decrease) increase in accounts payable

 

 

(3,439

)

 

3,316

 

 

(4,119

)

(Decrease) increase in accrued rebates, sales discounts and returns

 

 

(18,495

)

 

6,311

 

 

(51,903

)

(Decrease) increase in accrued contract losses

 

 

—  

 

 

—  

 

 

(12,256

)

(Decrease) increase in accrued liabilities

 

 

(3,867

)

 

11,957

 

 

(10,398

)

Increase (decrease) in unearned contract revenue

 

 

507

 

 

(5,869

)

 

(1,404

)

(Decrease) increase in other current liabilities

 

 

(1,362

)

 

1,943

 

 

(3,371

)

(Decrease) in restructuring liability

 

 

(583

)

 

(3,954

)

 

—  

 

Net cash provided by (used in) operating activities

 

 

28,982

 

 

41,631

 

 

(88,980

)

Cash Flows From Investing Activities

 

 

 

 

 

 

 

 

 

 

Sales (net) of short-term investments

 

 

—  

 

 

4,614

 

 

1,532

 

Purchases (net) of short-term investments

 

 

(11,736

)

 

—  

 

 

—  

 

Investments in Xylos, TMX, and iPhysicianNet

 

 

(1,500

)

 

—  

 

 

(1,379

)

Purchase of property and equipment

 

 

(8,104

)

 

(1,829

)

 

(4,012

)

Cash paid for acquisition, including acquisition costs

 

 

(28,443

)

 

—  

 

 

(2,735

)

Net cash (used in) provided by investing activities

 

 

(49,783

)

 

2,785

 

 

(6,594

)

Cash Flows From Financing Activities

 

 

 

 

 

 

 

 

 

 

Net proceeds from employee stock purchase plan and the exercise of stock options

 

 

3,880

 

 

2,045

 

 

2,358

 

Purchase of treasury stock

 

 

—  

 

 

—  

 

 

—  

 

Net cash provided by financing activities

 

 

3,880

 

 

2,045

 

 

2,358

 

Net (decrease) increase in cash and cash equivalents

 

 

(16,921

)

 

46,461

 

 

(93,216

)

Cash and cash equivalents - beginning

 

 

113,288

 

 

66,827

 

 

160,043

 

Cash and cash equivalents - ending

 

$

96,367

 

$

113,288

 

$

66,827

 

Cash paid for interest

 

$

3

 

$

25

 

$

33

 

Cash paid for taxes

 

$

7,675

 

$

9,619

 

$

4,827

 




          Supplemental Segment Information
          During the fourth quarter of 2004, as a result of the Company’s acquisition of Pharmakon, the Company restructured certain management responsibilities and changed its internal financial reporting.  As a result of these changes the Company determined that its reporting segments were required to be amended.  Accordingly, the Company now reports under the following three segments all of which have changed since the Company’s most recently filed financial presentation:

 

*

Sales services segment - includes the Company’s dedicated, shared and medical devices and diagnostics (MD&D) contract sales units and the Company’s MD&D clinical teams.  This segment uses teams to deliver services to a wide customer base; they have similar long-term average gross margins, contract terms, types of clients and regulatory environments. One segment manager oversees the operations of all of these units and regularly discusses the results of operations, forecasts and activities of this segment with the chief operating decision maker;

 

 

 

 

*

Marketing services segment - includes the Company’s marketing research and medical education and communication services. This segment is project driven; the units comprising it have a large number of smaller contracts, share similar gross margins, have similar clients, and have low barriers to entry for competition.  There are many discrete offerings within this segment, including: accredited continuing medical education (CME), content development for CME, promotional medical education, marketing research and communications.  One segment manager oversees the operations of all of these units and regularly discusses the results of operations, forecasts and activities of this segment with the chief operating decision maker; and

 

 

 

 

*

PDI products group (PPG) - includes revenues earned through the Company’s licensing and copromotion of pharmaceutical and MD&D products.




          The segment information below from prior periods has been reclassified to conform to the current period’s presentation.

(unaudited)

 

 

For the Year
Ended December 31,

 

 

 


 

 

 

2004

 

2003

 

2002

 

 

 


 


 


 

 

 

(in thousands)

 

Revenue

 

 

 

 

 

 

 

 

 

 

Sales services

 

$

332,431

 

$

271,210

 

$

185,386

 

Marketing services

 

 

29,057

 

 

29,436

 

 

26,284

 

PPG

 

 

2,956

 

 

43,884

 

 

96,205

 

Total

 

$

364,444

 

$

344,530

 

$

307,875

 

Income (loss) from operations

 

 

 

 

 

 

 

 

 

 

Sales services

 

$

64,737

 

$

48,891

 

$

14,096

 

Marketing services

 

 

3,122

 

 

4,493

 

 

1,083

 

PPG

 

 

(169

)

 

(16,403

)

 

(48,821

)

Corporate charges

 

 

(32,499

)

 

(17,391

)

 

(16,533

)

Total

 

$

35,191

 

$

19,590

 

$

(50,175

)

Corporate allocations

 

 

 

 

 

 

 

 

 

 

Sales services

 

$

(30,719

)

$

(14,000

)

$

(9,351

)

Marketing services

 

 

(1,587

)

 

(926

)

 

(793

)

PPG

 

 

(193

)

 

(2,465

)

 

(6,389

)

Corporate charges

 

 

32,499

 

 

17,391

 

 

16,533

 

Total

 

$

—  

 

$

—  

 

$

—  

 

Income (loss) from operations, less corporate allocations

 

 

 

 

 

 

 

 

 

 

Sales services

 

$

34,018

 

$

34,891

 

$

4,745

 

Marketing services

 

 

1,535

 

 

3,567

 

 

290

 

PPG

 

 

(362

)

 

(18,868

)

 

(55,210

)

Corporate charges

 

 

—  

 

 

—  

 

 

—  

 

Total

 

$

35,191

 

$

19,590

 

$

(50,175

)

SOURCE  PDI, Inc.
          -0-                             03/09/2005
          /CONTACT:  Stephen P. Cotugno, Executive Vice President-Corporate Development of PDI, +1-201-574-8617/
          /Web site:  http://www.pdi-inc.com /