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)
