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 12, 2002
PDI, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 0-24249 22-2919486
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
10 Mountainview Road,
Upper Saddle River, NJ 07458
(Address of principal executive office) (Zip Code)
(201) 258-8450
Registrant's telephone number, including area code:
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(Former name or former address, if changed since last report)
Item 5. Other Events
On November 12, 2002, the Registrant issued the following press release:
PDI REPORTS THIRD QUARTER 2002 FINANCIAL RESULTS AND
PROVIDES 2003 GUIDANCE
PDI and Lilly mutually agree to terminate Evista(R)
agreement effective December 31, 2002 PDI reduces
SG&A through headcount reductions and facilities consolidation
PDI projects $0.40 to $0.45 per share earnings for 2003
Upper Saddle River, New Jersey (Tuesday, November 12, 2002). PDI, Inc.
(Nasdaq:PDII) a commercial sales and marketing partner to the biopharmaceutical
and medical devices and diagnostics industries, today announced its third
quarter financial results and that it has taken the steps necessary to return
the company to profitability in 2003.
Third Quarter and Nine Months ended September 30, 2002 - Results As Reported
(dollars in millions, except per share data)
Quarter ended September 30, Nine months ended September 30,
--------------------------- -------------------------------
2002 2001 2002 2001
---- ---- ---- ----
Net revenue $ 64.6 $ 115.7 $ 205.0 $ 432.7
Operating (loss) (22.5) (29.5) (41.9) (6.4)
Net (loss) $ (14.3) $ (17.3) $ (25.8) $ (1.9)
(Loss) per share $ (1.02) $ (1.24) $ (1.84) $ (0.14)
Third Quarter Results
Net total revenue for the quarter ended September 30, 2002 was $64.6 million,
44.2% less than net total revenue of $115.7 million for the quarter ended
September 30, 2001. There was an operating loss of $22.5 million for the quarter
ended September 30, 2002 compared to an operating loss of $29.5 million for the
quarter ended September 30, 2001. There was a net loss of $14.3 million for the
quarter ended September 30, 2002 compared to a net loss of $17.3 million for the
quarter ended September 30, 2001. The net loss per share for the quarter ended
September 30, 2002 was $1.02 compared to a net loss per share of $1.24 for the
quarter ended September 30, 2001.
Nine Months Results
Net total revenue for the nine months ended September 30, 2002 was $205.0
million, 52.6% lower than net total revenue of $432.7 million for the nine
months ended September 30, 2001. There was an operating loss of $41.9 million
for the nine months ended September 30, 2002 compared to an operating loss of
$6.4 million for the nine months ended September 30, 2001. There was a net loss
of $25.8 million for the nine months ended September 30, 2002 compared to a net
loss of $1.9 million for the nine months ended September 30, 2001. There was a
net loss per
share of $1.84 for the nine months ended September 30, 2002 compared to a net
loss per share of $0.14 for the nine months ended September 30, 2001.
Third Quarter and Nine Months ended September 30, 2002 - Results Reflecting the
Effect of Special Charges
(dollars in millions, except
per share data) Quarter ended September 30, 2002 Nine months ended September 30, 2002
--------------- -------------------------------- ------------------------------------
Effect of Effect of
As Reported Special Charges As Reported Special Charges
----------- --------------- ----------- ---------------
Net revenue as reported $ 64.6 $ 64.6 $ 205.0 $ 205.0
====== ====== ======= =======
Operating (loss) as reported (22.5) (22.5) (41.9) (41.9)
Special charges:
Restructuring activities 1.2 1.2
Evista unused sales force capacity 2.4 6.2
Evista contract operating activities 6.7 24.4
Evista contract loss reserve 7.8 7.8
Operating (loss) (22.5) (4.4) (41.9) (2.3)
Net (loss) $(14.3) $ (2.6) $ (25.8) $ (0.4)
====== ====== ======= =======
(Loss) per share $(1.02) $(0.18) $ (1.84) $ (0.03)
====== ====== ======= =======
Third Quarter Results
Special charges (see Table above) impacting the operating loss for the quarter
ended September 30, 2002 include restructuring charges, non-recurring charges
and accelerated depreciation totaling $1.2 million (restructuring activities);
$2.4 million of unused Evista sales force capacity; $6.7 million of actual third
quarter Evista operating losses and a $7.8 million reserve for losses estimated
to be incurred through the December 31, 2002 Evista contract termination date.
Excluding these special charges, the third quarter operating loss, net loss and
net loss per share were $4.4 million, $2.6 million and $0.18, respectively.
Nine Months Results
Special charges (see Table above) impacting the operating loss for the nine
months ended September 30, 2002 include restructuring charges, non-recurring
charges and accelerated depreciation totaling $1.2 million (restructuring
activities); $6.2 million of unused Evista sales force capacity; $24.4 million
of actual year-to-date Evista operating losses and a $7.8 million reserve for
losses estimated to be incurred through the December 31, 2002 Evista contract
termination date. Excluding these special charges, the nine-month operating
loss, net loss and net loss per share were $2.3 million, $0.4 million and $0.03,
respectively.
Termination of Evista Agreement
On November 11, 2002, PDI and Eli Lilly and Company mutually agreed to
terminate, as of December 31, 2002, the agreement whereby PDI provides sales
support for Evista.
Charles T. Saldarini, vice chairman and chief executive officer of PDI, said,
"We held the belief that the joint promotional efforts of PDI and Lilly would
boost Evista sales sufficiently for us to realize our revenue and profit goals,
but that has clearly not occurred. In addition we were unsuccessful in fully
leveraging the sales force. We are very pleased to put this agreement behind us
and to focus our organization and our investors on our improving outlook and
long term business strategy."
Reduction of SG&A and Forward-Looking Guidance
PDI further announced that it has effected a corporate restructuring in response
to the ongoing contraction in demand for its sales and marketing services. As a
result, PDI will incur an aggregate of $6.4 million of restructuring charges,
non-recurring charges and accelerated depreciation spread between the third and
fourth quarters of 2002 and a minimal amount in the second quarter of 2003.
These charges consist of headcount reduction and facilities consolidation,
including $3.6 million in severance costs, $1.7 million in facilities
consolidation costs, $0.3 million in fixed asset write-offs and $0.8 million of
accelerated depreciation related to the planned disposals of fixed assets.
Giving effect to its restructuring and cost savings measures, PDI announced the
following projected revenue, earnings per share and selected balance sheet
information:
(dollars in millions, except Quarter ending Year ending
per share data) December 31, 2002 December 31, 2003
--------------- ----------------- -----------------
Revenue $65 to $70 $250 to $260
Earnings per share $0.08 to $0.10 * $0.40 to $0.45
Cash and cash equivalents $75 to $80 $85 to $90
Working capital $90 to $95 $100 to $105
* Excluding restructuring charges
"We have eliminated the uncertainties surrounding the Evista program that have
adversely impacted 2002 results, and we are again able to provide visibility on
our future financial performance and look forward to rewarding our shareholders
with a return to profitability. After giving effect to the fourth quarter
charges announced today, we expect to make $0.08 to $0.10 per share in the
fourth quarter of 2002 and $0.40 to $0.45 per share in 2003," stated Saldarini.
"We have carefully analyzed our cost infrastructure in light of our evolving
business model and have implemented cost saving initiatives that we believe will
result in projected SG&A savings in 2003 of approximately $14 million. We have
accomplished this without adversely affecting our business model and growth
strategy." He added, "PDI maintains a strong balance sheet which will be a
valuable asset in successfully implementing our 2003 business plan".
Webcast and Conference Call
PDI will conduct a live webcast of its Earnings Release Briefing at 9:00 AM EDT
on Wednesday, November 13, 2002. The live webcast of the event will be
accessible through PDI's website, www.pdi-inc.com and will be archived on the
website for future on-demand replay. For those without Internet access, the call
can be accessed by dialing 1-877-423-4030 and asking for the PDI Earnings
Release Conference Call.
About PDI
PDI is a commercial partner providing sales and marketing solutions to the
biopharmaceutical and medical devices and diagnostics industries. PDI provides
customized solutions for our clients, but can also license, acquire or develop
products.
PDI's services include marketing research, medical education and communications,
managed markets and trade relations, and after sales support, along with sales
teams, both dedicated and shared.
For more information, visit the Company's website at www.pdi-inc.com.
This press release contains forward-looking statements regarding the timing and
financial impact of the Company's ability to implement its business plan,
expected revenues, earnings per share and success during the fourth quarter of
2002 and calendar 2003. These statements involve a number of risks and
uncertainties and are based on 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 or FDA developments, competitive pressures,
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 for the year ended December 31, 2001. The forward looking-statements in
this press release are based upon management's reasonable belief as of the date
hereof. PDI disclaims any obligation to update these statements.
PDI, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
September 30, December 31,
2002 2001
----------- ----------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents ....................................... $ 83,941 $ 160,043
Short-term investments .......................................... 1,869 7,387
Inventory, net .................................................. -- 442
Accounts receivable, net of allowance for doubtful accounts of
$986 and $3,692 as of September 30, 2002 and December 31,
2001, respectively .......................................... 24,245 52,640
Unbilled costs and accrued profits on contracts in progress ..... 9,333 6,898
Deferred training ............................................... 3,193 5,569
Other current assets ............................................ 17,504 8,101
Deferred tax asset .............................................. 24,041 24,041
--------- ---------
Total current assets ............................................... 164,126 265,121
Net property, plant & equipment .................................... 19,951 21,044
Other long-term assets ............................................. 14,396 16,506
--------- ---------
Total assets ....................................................... $ 198,473 $ 302,671
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................................ $ 4,685 $ 9,493
Accrued returns, rebates and sales discounts .................... 17,590 68,403
Accrued contract losses ......................................... 7,781 12,256
Accrued incentives .............................................. 15,319 22,213
Accrued salaries and wages ...................................... 5,472 7,167
Unearned contract revenue ....................................... 8,026 10,878
Other accrued expenses .......................................... 11,477 21,026
--------- ---------
Total current liabilities .......................................... 70,350 151,436
--------- ---------
Long-term liabilities:
Deferred tax liability ........................................ 950 300
--------- ---------
Total long-term liabilities ........................................ 950 300
--------- ---------
Total liabilities .................................................. $ 71,300 $ 151,736
--------- ---------
Stockholders' equity:
Common stock, $.01 par value, 100,000,000 shares authorized:
shares issued and outstanding, September 30, 2002 - 14,063,438,
December 31, 2001 - 13,968,097; restricted shares
issued and outstanding, September 30, 2002 - 44,325,
December 31, 2001 - 15,388 .................................... $ 141 $ 140
Preferred stock, $.01 par value, 5,000,000 shares authorized, no
shares issued and outstanding ................................. -- --
Additional paid-in capital ......................................... 104,252 102,757
Additional paid-in capital, restricted ............................. 1,547 954
Retained earnings .................................................. 22,236 48,008
Accumulated other comprehensive loss ............................... (141) (79)
Unamortized compensation costs ..................................... (752) (735)
Treasury stock, at cost: 5,000 shares .............................. (110) (110)
--------- ---------
Total stockholders' equity ......................................... $ 127,173 $ 150,935
--------- ---------
Total liabilities & stockholders' equity ........................... $ 198,473 $ 302,671
========= =========
PDI, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- --------------
2002 2001 2002 2001
---- ---- ---- ----
(unaudited)
Revenue
Service, net ............................................. $ 64,353 $ 71,129 $ 198,546 $ 214,005
Product, net ............................................. 215 44,544 6,438 218,676
-------- --------- --------- ---------
Total revenue, net .................................... 64,568 115,673 204,984 432,681
-------- --------- --------- ---------
Cost of goods and services
Program expenses (including related party amounts of
$4 and $100 for the quarters ended September 30, 2002
and 2001, and $109 and $685 for the nine months
ended September 30, 2002 and 2001, respectively) ....... 67,475 59,529 200,473 168,245
Cost of goods sold ....................................... -- 51,823 -- 167,561
-------- --------- --------- ---------
Total cost of goods and services ...................... 67,475 111,352 200,473 335,806
-------- --------- --------- ---------
Gross (loss) profit ......................................... (2,907) 4,321 4,511 96,875
Operating expenses
Compensation expense ..................................... 9,157 9,282 26,210 29,459
Other selling, general & administrative expenses ......... 9,433 24,560 19,207 73,833
Restructuring and other non-recurring charges ............ 972 -- 972 --
-------- --------- --------- ---------
Total operating expenses ............................... 19,562 33,842 46,389 103,292
-------- --------- --------- ---------
Operating loss .............................................. (22,469) (29,521) (41,878) (6,417)
Other income, net ........................................... 459 999 1,704 4,407
-------- --------- --------- ---------
Loss before tax benefit ..................................... (22,010) (28,522) (40,174) (2,010)
Benefit for income taxes .................................... (7,696) (11,266) (14,403) (85)
-------- --------- --------- ---------
Net loss .................................................... $(14,314) $ (17,256) $ (25,771) $ (1,925)
======== ========= ========= =========
Basic net loss per share .................................... $ (1.02) $ (1.24) $ (1.84) $ (0.14)
======== ========= ========= =========
Diluted net loss per share .................................. $ (1.02) $ (1.24) $ (1.84) $ (0.14)
======== ========= ========= =========
Basic weighted average number of shares outstanding ......... 14,063 13,876 14,012 13,858
======== ========= ========= =========
Diluted weighted average number of shares outstanding ....... 14,063 13,876 14,012 13,858
======== ========= ========= =========
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/ Charles T. Saldarini
Charles T. Saldarini, Vice Chairman
and Chief Executive Officer
Date: November 13, 2002