EX-99.1 2 pi4029ex991.htm EXHIBIT 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)