8-K

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): November 3, 2005

PDI, INC.

(Exact name of Registrant as specified in its charter)

DELAWARE	0-24249	22-2919486
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

Saddle River Executive Centre

1 Route 17 South,

Saddle River, NJ 07458

(Address of principal executive offices and zip Code)

(201) 258-8450

Registrant’s telephone number, including area code:

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.  Results of Operations and Financial Condition

          On November 3, 2005, PDI, Inc. issued a press release announcing its results of operations and financial condition for the quarter ended September 30, 2005.  The full text of the press release is set forth as Exhibit 99.1 attached hereto and incorporated herein by reference.

Item 9.01.  Financial Statements and Exhibits

(c) Exhibits.

Exhibit 99.1   Press Release dated November 3, 2005

* * * * * * *

SIGNATURE

          Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	PDI, INC.
	By:	/s/  Larry Ellberger
		Interim Chief Executive Officer
Date: November 4, 2005

EXHIBIT INDEX

Exhibit No.	Description of Exhibit
99.1	Press Release dated November 3, 2005

EX-99.1

Exhibit 99.1

PDI Announces Financial Results for Third Quarter 2005

          SADDLE RIVER, N.J., Nov. 3 /PRNewswire-FirstCall/ -- PDI, Inc. (Nasdaq: PDII) today announced its financial results for the quarter ended September 30, 2005. 

          Third Quarter Results

          Revenue for the quarter ended September 30, 2005 was $76.5 million, 17.4% lower than revenue of $92.5 million for the quarter ended September 30, 2004. Gross profit for the quarter ended September 30, 2005 was $12.6 million, 48.5% lower than gross profit of $24.4 million for the quarter ended September 30, 2004. The operating loss was $8.3 million for the quarter ended September 30, 2005, compared to operating income of $9.0 million for the quarter ended September 30, 2004.  The Company had a net loss of $4.2 million for the quarter ended September 30, 2005, compared to net income of $5.5 million in the quarter ended September 30, 2004.  The net loss per share for the quarter ended September 30, 2005 was $0.30 versus net income per diluted share of $0.37 for the quarter ended September 30, 2004. 

          First Nine Months Results

          Revenue for the nine months ended September 30, 2005 was $238.1 million, 13.9% lower than revenue of $276.6 million for the nine months ended September 30, 2004.  Gross profit for the nine months ended September 30, 2005 was $45.9 million, 36.9% lower than gross profit of $72.7 million for the nine months ended September 30, 2004. The operating loss was $9.0 million for the nine months ended September 30, 2005, compared to operating income of $27.1 million for the nine months ended September 30, 2004.  The Company had net income of $268,000 for the nine months ended September 30, 2005, compared to net income of $16.5 million in the nine months ended September 30, 2004.  Net income per diluted share for the nine months ended September 30, 2005 was $0.02 versus net income per diluted share of $1.11 for the nine months ended September 30, 2004.

          Larry Ellberger, PDI’s interim CEO, said, “We are greatly disappointed with the third quarter results. PDI’s performance thus far in 2005 is clearly unacceptable, and we do not anticipate a significant improvement in the fourth quarter of 2005. We are taking action to improve 2006 performance, including adding business development resources in the contract sales unit, TVG and Pharmakon, planning appropriate reductions of corporate overhead costs, and making timely decisions regarding unprofitable business units. We are also continuing to seek accretive acquisitions of complimentary businesses that will also bolster our ability to compete and win new contract sales engagements, especially with small and emerging pharmaceutical companies who are responsible for an increasing number of new drug approvals.”

          Mr. Ellberger continued, “We are committed to maintaining our leadership position in contract sales and believe that market conditions are favorable for an increased use of outsourced sales forces in the pharmaceutical industry.  We are taking the steps necessary to get the business back to profitability without compromising the high level of service our clients expect from PDI.” 

          Events in the Quarter

          The Company accrued severance for certain employees in the quarter totaling approximately $1.68 million.  This does not include the severance for Charles T. Saldarini, PDI’s former CEO who resigned from the Company in the fourth quarter of 2005.  Mr. Saldarini’s severance of approximately $2.8 million will be recognized in the fourth quarter.

          On September 26, 2005, a purported class action lawsuit was served upon the Company regarding a suit that was filed in the San Francisco County Superior Court on behalf of certain current and former employees alleging violations of certain sections of the California Labor Code.  On October 26, 2005, the Company filed an answer to the complaint. Although this purported class action is in its early stages and the Company intends to defend the action vigorously, the Company believes it has taken an adequate reserve of $3.3 million. 

          Conference Call Information

          PDI will conduct a briefing of its results via conference call and webcast on Friday, November 4, 2005 at 9:00 AM eastern time.  The webcast of the event will be accessible through the Investor Relations section of PDI’s website, http://www.pdi-inc.com.  The webcast will be archived on the website for future on-demand replay.

          For those without internet access, the briefing can be accessed by dialing 1-877-423-4030 and asking for the PDI Third Quarter 2005 Financial Results Call.  The call play back will be available for two weeks by calling 1-800-642-1687 and entering the call number 1347014. 

          About PDI, Inc.

          PDI, Inc. (Nasdaq: PDII) is a diversified sales and marketing services provider to the pharmaceutical industry.  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 contract sales, Select Access(TM), clinical sales teams, marketing research and consulting, medical education and communications and integrated commercial solutions for products from pre-launch through patent-expiration.  The company’s experience extends across multiple therapeutic categories and includes office and hospital-based initiatives.

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

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

          Forward Looking Statements

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

PDI, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Revenue:
Service, net	$	76,486		$	92,525		$	238,125		$	277,666
Product, net		—			(3	)		—			(1,034	)
Total revenue, net		76,486			92,522			238,125			276,632
Cost of goods and services:
Program expenses (including related party amounts of $0 and $0 for the three months ended September 30, 2005 and 2004, respectively; $0 and $180 for the nine months ended September 30, 2005 and 2004, respectively)		63,926			68,127			192,234			203,670
Cost of goods sold		—			10			—			244
Total cost of goods and services		63,926			68,137			192,234			203,914
Gross profit		12,560			24,385			45,891			72,718
Compensation expense		9,426			8,409			24,963			26,549
Other selling, general and administrative expenses		7,759			6,686			23,151			17,946
Asset impairment		—			—			2,833			—
Legal and related costs		3,625			255			3,965			1,143
Total operating expenses		20,810			15,350			54,912			45,638
Operating (loss) income		(8,250	)		9,035			(9,021	)		27,080
Other income, net		1,368			231			7,162			860
(Loss) income before (benefit) provision for taxes		(6,882	)		9,266			(1,859	)		27,940
(Benefit) provision for income taxes		(2,698	)		3,799			(2,127	)		11,455
Net (loss) income	$	(4,184	)	$	5,467		$	268		$	16,485
Net (loss) income per share of common stock:
Basic	$	(0.30	)	$	0.37		$	0.02		$	1.13
Assuming dilution	$	(0.30	)	$	0.37		$	0.02		$	1.11
Weighted average number of common shares and common share equivalents outstanding:
Basic		13,867			14,621			14,379			14,538
Assuming dilution		13,985			14,933			14,505			14,873

PDI, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

	September 30, 2005			December 31, 2004
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	93,771		$	81,000
Short-term investments		4,323			28,498
Accounts receivable, net of allowance for doubtful accounts of $314 and $74 at September 30, 2005 and December 31, 2004, respectively		26,054			26,662
Unbilled costs and accrued profits on contracts in progress		9,024			3,393
Federal income tax refund receivable		8,031			—
Other current assets		10,480			12,558
Deferred tax asset		4,218			3,325
Total current assets		155,901			155,436
Net property and equipment		15,591			17,170
Deferred tax asset		—			5,832
Goodwill		24,244			23,791
Other intangible assets		18,127			19,548
Other long-term assets		2,815			2,928
Total assets	$	216,678		$	224,705
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	4,193		$	7,217
Accrued returns		728			4,316
Accrued incentives		11,518			16,282
Accrued salaries and wages		9,016			8,414
Unearned contract revenue		13,144			6,924
Accrued settlements and legal costs		3,488			1,140
Income taxes and other accrued expenses		18,929			14,987
Total current liabilities		61,016			59,280
Deferred tax liability		683			—
Total liabilities		61,699			59,280
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: 14,915,844 and 14,820,499 shares issued at September 30, 2005 and December 31, 2004, respectively; 13,913,944 and 14,815,499 shares outstanding at September 30, 2005 and December 31, 2004, respectively		149			148
Additional paid-in capital		117,850			116,737
Retained earnings		50,905			50,637
Accumulated other comprehensive income		180			76
Unamortized compensation costs		(1,132	)		(2,063	)
Treasury stock, at cost: 1,001,900 and 5,000 shares at September 30, 2005 and December 31, 2004, respectively		(12,973	)		(110	)
Total stockholders’ equity		154,979			165,425
Total liabilities & stockholders’ equity	$	216,678		$	224,705

PDI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

	Nine Months Ended 2005			September 30, 2004
	(unaudited)			(unaudited)
Cash Flows From Operating Activities:
Net income	$	268		$	16,485
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		4,256			4,272
Provision for bad debt and credit losses		971			54
Asset impairment		2,833			—
Gain on sale of investment		(4,444	)		—
Loss on disposal of assets		266			264
Provision for deferred taxes		5,622			7,660
Stock compensation costs		1,114			1,135
Other changes in assets and liabilities:
Decrease in accounts receivable		368			19,665
Decrease in inventory		—			43
(Increase) decrease in unbilled costs		(5,631	)		1,599
(Increase) in federal income tax refund receivable		(8,031	)		—
Decrease (increase) in other current assets		1,347			(470	)
Decrease in other long-term assets		113			68
(Decrease) in accounts payable		(1,541	)		(5,779	)
(Decrease) in accrued returns		(3,588	)		(18,208	)
(Decrease) in accrued liabilities		(4,473	)		(3,471	)
Increase in unearned contract revenue		6,220			3,392
Increase (decrease) in income taxes and other accrued expenses		6,290			(2,016	)
Net cash provided by operating activities		1,960			24,693
Cash Flows From Investing Activities
Sales (purchases) of short-term investments		24,279			(22,572	)
Cash paid for acquisition, including acquisition costs		(1,936	)		(28,394	)
Proceeds from sale of investment		4,444			—
Purchase of property and equipment		(4,415	)		(7,774	)
Proceeds from sale of assets		60			—
Net cash provided by (used in) investing activities		22,432			(58,740	)
Cash Flows From Financing Activities
Net proceeds from employee stock purchase plan and the exercise of stock options		1,242			3,136
Cash paid for repurchase of shares		(12,863	)		—
Net cash (used in) provided by financing activities		(11,621	)		3,136
Net increase (decrease) in cash and cash equivalents		12,771			(30,911	)
Cash and cash equivalents at beginning of period		81,000			113,288
Cash and cash equivalents at end of period	$	93,771		$	82,377

SOURCE  PDI, Inc.
          -0-                                                  11/03/2005
          /CONTACT:  Stephen P. Cotugno, Executive Vice President-Corporate Development of PDI, Inc., +1-201-574-8617/
          /Web site:  http://www.pdi-inc.com /
          (PDII)