Exhibit 99.1
Diluted EPS of $0.31 in the Quarter
SADDLE RIVER, N.J., Aug. 8 /PRNewswire-FirstCall/ -- PDI, Inc. (Nasdaq: PDII) today announced its financial results for the quarter ended June 30, 2005.
Second Quarter Results
Revenue for the quarter ended June 30, 2005 was $79.6 million, 12.9% lower than revenue of $91.4 million for the quarter ended June 30, 2004. Gross profit for the quarter ended June 30, 2005 was $15.3 million, 29.9% lower than gross profit of $21.8 million for the quarter ended June 30, 2004. The operating income was $4,000 for the quarter ended June 30, 2005, compared to operating income of $8.2 million for the quarter ended June 30, 2004. The Company had net income of $4.5 million for the quarter ended June 30, 2005, compared to net income of $5.0 million in the quarter ended June 30, 2004. The net income per diluted share for the quarter ended June 30, 2005 was $0.31 versus net income per diluted share of $0.34 for the quarter ended June 30, 2004.
First Six Months Results
Revenue for the six months ended June 30, 2005 was $161.6 million, 12.2% lower than revenue of $184.0 million for the six months ended June 30, 2004. Gross profit for the six months ended June 30, 2005 was $33.3 million, 31.0% lower than gross profit of $48.3 million for the six months ended June 30, 2004. The operating loss was $771,000 for the six months ended June 30, 2005, compared to operating income of $18.0 million for the six months ended June 30, 2004. The Company had net income of $4.5 million for the six months ended June 30, 2005, compared to net income of $11.0 million in the six months ended June 30, 2004. Net income per diluted share for the six months ended June 30, 2005 was $0.30 versus net income per diluted share of $0.74 for the six months ended June 30, 2004.
Segment Revenue Analysis
Revenue from the sales services segment for the quarter ended June 30, 2005 was $70.1 million, 17.1% less than revenue of $84.6 million from that segment for the comparable prior year period. Revenue from the sales services segment for the six month period ended June 30, 2005 was $142.8 million, 15.8% less than revenue of $169.6 million from that segment for the comparable prior year period. The decrease in revenue, both in the quarter and six month period ended June 30, 2005, was attributable to the previously announced reduction of the AstraZeneca sales force. This reduction is expected to result in a $60.0 million revenue decrease for all of 2005 when compared with 2004. The effect of this reduction was approximately $17.0 million in the quarter and $32.6 million in the six month period.
Revenue for the marketing services segment was $9.5 million in the quarter, 31.7% more than $7.2 million in the comparable prior year period. The revenue for the marketing services segment was $18.8 million in the six months ended June 30, 2005, 51.9% more than the $12.4 million in the comparable prior year period. The increase in both periods can be attributed to the revenue generated by Pharmakon, which was acquired in August of 2004. The increases due to Pharmakon are partially offset by lower revenues in our other marketing services businesses.
Events in the Quarter
Affecting operations (see table)
Due to the migration of our sales force automation platform to the Dendrite ForceMobile(TM) and Analyzer(TM) sales force automation systems, the Company made a determination during the second quarter of 2005 that our Siebel sales force automation software asset was impaired and a write-down was necessary. The amount of the write-down was approximately $2.8 million and is included in the Sales Services segment.
On April 12, 2005, the Company announced that it had settled its lawsuit against Cellegy Pharmaceuticals, Inc. regarding an exclusive license agreement entered into in 2002 with Cellegy for Cellegy’s Fortigel (TM) product in the North American markets. The settlement agreement provided that Cellegy pay us $2.0 million in cash, and issue us a $3.0 million secured promissory note and a $3.5 million senior convertible note. We received the cash payment on April 12, 2005. On May 18, 2005 the Company received an additional $100,000 payment from Cellegy under the secured promissory note. The $2.1 million received is included as an offset to legal expenses in other SG&A in the PDI Products Group segment. Legal expenses were $2.3 million in the first quarter of 2005 and $29,000 in the second quarter 2005.
Additionally, the Company established a $750,000 allowance against our loans to TMX Interactive. The allowance was recorded in SG&A and included in the Sales Service segment.
The effect of the above actions on operating income is as follows:
| | Three months ended
June 30, | | Six months ended
June 30, | |
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(in 000’s) | | 2005 | | 2004 | | 2005 | | 2004 | |
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Operating income (loss), as reported | | $ | 4 | | $ | 8,235 | | $ | (771 | ) | $ | 18,044 | |
Effect of asset impairment | | | 2,833 | | | — | | | 2,833 | | | — | |
Effect of Cellegy litigation | | | (2,071 | ) | | 84 | | | 242 | | | 389 | |
Effect of TMX allowance | | | 750 | | | — | | | 750 | | | — | |
Operating income (loss), as adjusted | | $ | 1,516 | | $ | 8,319 | | $ | 3,054 | | $ | 18,433 | |
Affecting Other Income
On June 6, 2005, the Company announced the sale of its interest in In2Focus Sales Development Services Limited (In2Focus), a U.K. based contract sales organization. PDI acquired a minority interest in In2Focus in 2000 for $1.9 million, which was written off in 2001. The net sale proceeds to PDI are approximately $4.4 million after transaction expenses and are included in Other Income in the quarter ended June 30, 2005. The In2Focus transaction will be treated as a capital gain, which will be offset by capital loss carryforwards that were not previously recognized. The effect on EPS in the second quarter was a positive $0.30.
Share Buy Back Program Update
The Company continues to make stock purchases under our previously announced share repurchase program. Through Monday, August 8th we have purchased almost 1 million shares out of the 2 million authorized.
2005 Outlook Update
Given our performance in the first half of 2005, the lack of clear visibility for the second half of the year and beyond, the fact that we are in various stages of negotiations with respect to potential new business, the potential revision of a significant current contract, as well as the investments we have spoken about, we are withdrawing all previous earnings and financial estimates and are unable to provide revised estimates at this time, except to caution that investors should not expect our previous 2005 estimates of $0.40 - $0.50 per share to be met.
Charles T. Saldarini, Vice Chairman and CEO, said, “The year 2005 is clearly shaping up as a challenging one for us and our shareholders. However, we are acting in accordance with our strategy and are making the operational changes required to ensure that we move into 2006 with strong momentum. The demand for our services remains strong and our balance sheet gives us the wherewithal to make investments and to pursue strategic acquisitions.”
Conference Call Information
PDI will conduct a briefing of its results via conference call and webcast on Tuesday, August 9, 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 Second 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 8037491.
About PDI, Inc.
PDI, Inc. (Nasdaq: PDII) is a diversified sales and marketing services provider 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 contract sales, Select Access(TM), our targeted sales solution that leverages an existing infrastructure, 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 financial viability of certain companies whose debt and equity securities we hold, 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 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 BALANCE SHEETS
(in thousands, except share data)
| | June 30,
2005 | | December 31,
2004 | |
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ASSETS | | | | | | | |
Current assets: | | | | | | | |
Cash and cash equivalents | | $ | 96,734 | | $ | 81,000 | |
Short-term investments | | | 10,695 | | | 28,498 | |
Accounts receivable, net of allowance for doubtful accounts of $113 and $74 at June 30, 2005 and December 31, 2004, respectively | | | 26,708 | | | 26,662 | |
Unbilled costs and accrued profits on contracts in progress | | | 5,407 | | | 3,393 | |
Deferred training and other program costs | | | 975 | | | 740 | |
Other current assets | | | 11,338 | | | 11,818 | |
Deferred tax asset | | | 4,651 | | | 3,325 | |
Total current assets | | | 156,508 | | | 155,436 | |
Net property and equipment | | | 16,217 | | | 17,170 | |
Deferred tax asset | | | 1,113 | | | 5,832 | |
Goodwill | | | 23,744 | | | 23,791 | |
Other intangible assets | | | 18,600 | | | 19,548 | |
Other long-term assets | | | 2,816 | | | 2,928 | |
Total assets | | $ | 218,998 | | $ | 224,705 | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | |
Current liabilities: | | | | | | | |
Accounts payable | | $ | 4,213 | | $ | 7,217 | |
Accrued returns | | | 1,187 | | | 4,316 | |
Accrued incentives | | | 10,338 | | | 16,282 | |
Accrued salaries and wages | | | 9,918 | | | 8,414 | |
Unearned contract revenue | | | 12,795 | | | 6,924 | |
Income taxes and other accrued expenses | | | 15,924 | | | 16,127 | |
Total current liabilities | | | 54,375 | | | 59,280 | |
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: 14,920,035 and 14,820,499 shares issued at June 30, 2005 and December 31, 2004, respectively; 14,334,805 and 14,815,499 shares outstanding at June 30, 2005 and December 31, 2004, respectively | | | 149 | | | 148 | |
Additional paid-in capital | | | 117,935 | | | 116,737 | |
Retained earnings | | | 55,089 | | | 50,637 | |
Accumulated other comprehensive income | | | 124 | | | 76 | |
Unamortized compensation costs | | | (1,520 | ) | | (2,063 | ) |
Treasury stock, at cost: 585,230 and 5,000 shares at June 30, 2005 and December 31, 2004, respectively | | | (7,154 | ) | | (110 | ) |
Total stockholders’ equity | | | 164,623 | | | 165,425 | |
Total liabilities & stockholders’ equity | | $ | 218,998 | | $ | 224,705 | |
PDI, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
| | Three Months Ended
June 30, | | Six Months Ended
June 30, | |
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| | 2005 | | 2004 | | 2005 | | 2004 | |
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| | (Unaudited) | | (Unaudited) | | (Unaudited) | | (Unaudited) | |
Revenue: | | | | | | | | | | | | | |
Service, net | | $ | 79,615 | | $ | 92,519 | | $ | 161,639 | | $ | 185,066 | |
Product, net | | | — | | | (1,131 | ) | | — | | | (1,030 | ) |
Total revenue, net | | | 79,615 | | | 91,388 | | | 161,639 | | | 184,036 | |
Cost of goods and services: | | | | | | | | | | | | | |
Program expenses (including related party amounts of $0 for the three months ended June 30, 2005 and 2004, respectively; $0 and $180 for the six months ended June 30, 2005 and 2004, respectively) | | | 64,328 | | | 69,483 | | | 128,308 | | | 135,471 | |
Cost of goods sold | | | — | | | 89 | | | — | | | 233 | |
Total cost of goods and services | | | 64,328 | | | 69,572 | | | 128,308 | | | 135,704 | |
Gross profit | | | 15,287 | | | 21,816 | | | 33,331 | | | 48,332 | |
Compensation expense | | | 6,533 | | | 7,924 | | | 15,537 | | | 18,140 | |
Other selling, general and administrative expenses | | | 5,917 | | | 5,657 | | | 15,732 | | | 12,148 | |
Asset impairment | | | 2,833 | | | — | | | 2,833 | | | — | |
Total operating expenses | | | 15,283 | | | 13,581 | | | 34,102 | | | 30,288 | |
Operating income (loss) | | | 4 | | | 8,235 | | | (771 | ) | | 18,044 | |
Other income, net. | | | 5,125 | | | 313 | | | 5,794 | | | 631 | |
Income before provision for taxes | | | 5,129 | | | 8,548 | | | 5,023 | | | 18,675 | |
Provision for income taxes | | | 616 | | | 3,505 | | | 571 | | | 7,657 | |
Net income | | $ | 4,513 | | $ | 5,043 | | $ | 4,452 | | $ | 11,018 | |
Net income per share of common stock: | | | | | | | | | | | | | |
Basic | | $ | 0.31 | | $ | 0.35 | | $ | 0.30 | | $ | 0.76 | |
Assuming dilution | | $ | 0.31 | | $ | 0.34 | | $ | 0.30 | | $ | 0.74 | |
Weighted average number of common shares and common share equivalents outstanding: | | | | | | | | | | | | | |
Basic | | | 14,605 | | | 14,533 | | | 14,640 | | | 14,497 | |
Assuming dilution | | | 14,695 | | | 14,918 | | | 14,761 | | | 14,843 | |
PDI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| | Six Months Ended June 30, | |
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| | 2005 | | 2004 | |
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Cash Flows From Operating Activities: | | | | | | | |
Net income | | $ | 4,452 | | $ | 11,018 | |
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | | | | | | | |
Depreciation and amortization | | | 2,860 | | | 2,911 | |
Provision for bad debt and credit losses | | | 739 | | | 39 | |
Asset impairment | | | 2,833 | | | — | |
Loss on disposal of assets | | | 308 | | | — | |
Provision for deferred taxes | | | 3,393 | | | 4,220 | |
Stock compensation costs | | | 584 | | | 844 | |
Other changes in assets and liabilities: | | | | | | | |
(Increase) decrease in accounts receivable | | | (35 | ) | | 9,998 | |
Decrease in inventory | | | — | | | 43 | |
(Increase) in unbilled costs | | | (2,014 | ) | | (949 | ) |
(Increase) in deferred training | | | (235 | ) | | (1,394 | ) |
(Increase) in other current assets | | | (270 | ) | | (2,985 | ) |
Decrease in other long-term assets | | | 112 | | | 71 | |
(Decrease) in accounts payable | | | (2,890 | ) | | (3,527 | ) |
(Decrease) in accrued returns | | | (3,129 | ) | | (11,429 | ) |
(Decrease) in accrued liabilities | | | (4,524 | ) | | (6,264 | ) |
Increase in unearned contract revenue | | | 5,871 | | | 11,793 | |
(Decrease) in income taxes and other accrued expenses | | | (1,027 | ) | | (1,776 | ) |
Net cash provided by operating activities | | | 7,028 | | | 12,613 | |
Cash Flows From Investing Activities | | | | | | | |
Sales (purchases) of short-term investments | | | 17,851 | | | (43,711 | ) |
Cash paid for acquisition, including acquisition costs | | | (67 | ) | | — | |
Purchase of property and equipment | | | (4,102 | ) | | (5,002 | ) |
Net cash provided by (used in) investing activities | | | 13,682 | | | (48,713 | ) |
Cash Flows From Financing Activities | | | | | | | |
Net proceeds from employee stock purchase plan and the exercise of stock options | | | 1,241 | | | 3,064 | |
Cash paid for repurchase of shares | | | (6,217 | ) | | — | |
Net cash (used in) provided by financing activities | | | (4,976 | ) | | 3,064 | |
Net increase (decrease) in cash and cash equivalents | | | 15,734 | | | (33,036 | ) |
Cash and cash equivalents at beginning of period | | | 81,000 | | | 113,288 | |
Cash and cash equivalents at end of period | | $ | 96,734 | | $ | 80,252 | |
CONTACT: Stephen P. Cotugno, Executive Vice President-Corporate Development of PDI, Inc., +1-201-574-8617/
Web site: http://www.pdi-inc.com/
