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): February 13, 2003
PDI, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 0-24249 22-2919486
(State or other jurisdiction of (Commission File (IRS Employer
incorporation) Number) 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:
N/A
(Former name or former address, if changed since last report)
Item 5. Other Events
On February 13, 2003 the Registrant issued the following press release:
"PDI REPORTS FOURTH QUARTER AND YEAR END 2002 FINANCIAL RESULTS
Incentive Payments Boost Fourth Quarter Results - Fourth Quarter EPS of $0.38
excluding special items
Fourth Quarter and Twelve Months ended December 31, 2002 - Results Reflecting
the Effect of Special Items
Upper Saddle River, New Jersey (Thursday, February 13, 2003). PDI, Inc.
(Nasdaq:PDII) a commercial sales and marketing provider to the biopharmaceutical
and medical devices and diagnostics industries, today announced its fourth
quarter and full year 2002 financial results.
Fourth Quarter and Twelve Months ended December 31, 2002 - Results As Reported
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(dollars in millions, except per share data)
Quarter ended December 31, Twelve months ended December 31,
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2002 2001 2002 2001
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Net revenue $ 79.0 $ 263.9 $ 284.0 $ 696.6
Operating (loss) income (8.3) 19.1 (50.2) 12.7
Net (loss) income $ (5.0) $ 8.3 $ (30.8) $ 6.4
======== ========= ========= =========
(Loss) income per share $ (0.35) $ 0.59 $ (2.19) $ 0.45
======== ========= ========= =========
Fourth Quarter Results
Net total revenue for the quarter ended December 31, 2002 was $79.0 million,
70.1% less than net total revenue of $263.9 million for the quarter ended
December 31, 2001. The decline in revenue was caused by the discontinuation of
PDI's sales, marketing and distribution agreement with GlaxoSmithKline (GSK) for
Ceftin in February 2002. There was an operating loss of $8.3 million for the
quarter ended December 31, 2002 compared to operating income of $19.1 million
for the quarter ended December 31, 2001. The $8.3 million operating loss
included a $15.0 million payment made to Cellegy Pharmaceuticals, Inc. (Cellegy)
for the exclusive licensing agreement for their testosterone gel product. There
was a net loss of $5.0 million for the quarter ended December 31, 2002 compared
to net income of $8.3 million for the quarter ended December 31, 2001. The net
loss per share for the quarter ended December 31, 2002 was $0.35 compared to
diluted net income per share of $0.59 for the quarter ended December 31, 2001.
Twelve Months Results
Net total revenue for the twelve months ended December 31, 2002 was $284.0
million, 59.2% lower than net total revenue of $696.6 million for the twelve
months ended December 31, 2001. The decline in revenue was predominantly caused
by the discontinuation of PDI's sales, marketing and distribution agreement with
GSK for Ceftin in February 2002. There was an operating loss of $50.2 million
for the twelve months ended December 31, 2002 compared to operating income of
$12.7 million for the twelve months ended December 31, 2001. The $50.2 million
operating loss included a $15.0 million payment made to Cellegy. Approximately
$35.1 million of the reported operating loss is directly attributable to unused
Evista salesforce capacity and Evista contract operating losses. There was a net
loss of $30.8 million for the twelve months ended December 31, 2002 compared to
net income of $6.4 million for the twelve months ended December 31, 2001 and a
net loss per share of $2.19 for the twelve months ended December 31, 2002
compared to diluted net income per share of $0.45 for the twelve months ended
December 31, 2001.
Fourth Quarter and Twelve Months ended December 31, 2002 - Results Reflecting
the Effect of Special Items
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(dollars in millions, except
per share data) Quarter ended December 31, 2002 Twelve months ended December 31, 2002
---------------------------------------------------------------------------------------------------------------------------
**Excluding **Excluding
As Reported Special Items As Reported Special Items
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Net revenue $ 79.0 $ 79.0 $ 284.0 $ 284.0
-----------------------------------------------============================================================================
Operating (loss) (8.3) (8.3) (50.2) (50.2)
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Special items:
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Restructuring activities 4.9 6.1
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Cellegy licensing fee 15.0 15.0
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Evista unused sales force capacity -- 6.2
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Evista contract operating activities (3.3) 28.9
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Operating (loss) income (8.3) 8.3 (50.2) 6.0
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Net (loss) income $ (5.0) $ 5.3 $ (30.8) $ 5.1
-----------------------------------------------============================================================================
(Loss) income per share $ (0.35) $ 0.38 $ (2.19) $ 0.36
-----------------------------------------------============================================================================
**Adjusted amounts are not in accordance with GAAP, but are presented for
analytical purposes.
Fourth Quarter Results
Special items (see Table above) impacting the operating loss for the quarter
ended December 31, 2002 include:
o Restructuring activities, comprised of restructuring charges,
non-recurring charges and accelerated depreciation totaling $4.9
million, which were undertaken in an attempt to reduce our costs on
a going forward basis;
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o A $15.0 million payment we made in the fourth quarter to Cellegy for
exclusive North American license rights for a testosterone gel
product which has not yet received FDA approval and therefore the
payment was expensed; and
o Operating results related to the Evista contract and the Evista
unused salesforce capacity which are included in this table because
the contract was terminated effective December 31, 2002 and will not
affect 2003. In the fourth quarter $3.3 million in revenue was
recognized on this contract because Evista sales for the year
exceeded the annual baseline. Through the first nine months of 2002,
sales of Evista were above the year to date baseline and we could
have recorded revenue of $2.9 million; however, we reserved against
this $2.9 million at September 30, 2002, because its retention was
dependant on our exceeding the full year baseline, a result that was
uncertain as of the end of the third quarter.
Twelve Months Results
Special items (see Table above) impacting the operating loss for the twelve
months ended December 31, 2002 include:
o Restructuring activities, comprised of restructuring charges,
non-recurring charges and accelerated depreciation totaling $6.1
million, which were undertaken in an attempt to reduce our costs on
a going forward basis;
o A $15.0 million payment we made in the fourth quarter to Cellegy for
exclusive North American license rights for a testosterone gel
product which has not yet received FDA approval and therefore the
payment was expensed; and
o The $35.1 million net loss on the Evista contract, which was
terminated December 31, 2002, comprised of $6.2 million of unused
Evista sales force capacity and $28.9 million of actual Evista
operating losses. 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.
Excluding these special items, twelve-month operating income, net income and net
income per share were $6.0 million, $5.1 million and $0.36, respectively.
Vice Chairman and CEO, Chuck Saldarini, stated, "2002 was a pivotal year for
PDI. We were successful in maintaining profitability in our core contract sales
business during a challenging market environment while at the same time
retaining our leading market share position within the CSO industry. Our
restructuring is virtually completed, resulting in an infrastructure that aligns
with current market conditions. Concurrently, we accelerated our products based
business by executing two long-term agreements in 2002; one with Cellegy for the
exclusive marketing rights to their testosterone gel product, and the other with
Xylos, Corp., who selected PDI as their exclusive sales, marketing and
distribution partner for their XCell(TM) Cellulose Wound Dressing."
"The year began on a challenging note as we mutually agreed with GSK to
terminate our sales, marketing and distribution agreement for Ceftin due to an
earlier than expected generic entry",
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added Mr. Saldarini. "This caused a large fall off in product revenue for 2002
versus 2001, as we did not replace over $400 million in Ceftin product revenue
that we booked in 2001."
"On the positive side, while I mentioned the two long-term product-based
agreements we executed in 2002, the efforts of our sales and marketing teams
within the Pharmaceutical Products Group resulted in larger than anticipated
incentive payments. Our fourth quarter earnings per share of $0.38, excluding
restructuring activities and the Cellegy payment, considerably exceed the
guidance of $0.08 to $0.10 in earnings per share we projected in our press
release dated November 12, 2002," concluded Mr. Saldarini.
Webcast and Conference Call
PDI will conduct a live webcast of its Earnings Release Briefing at 9:00 AM EDT
on Friday, February 14, 2003. 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 an innovative commercial sales and marketing provider to the
biopharmaceutical and medical devices & diagnostics industries. Its three
business units offer service and product-based capabilities for companies
seeking to maximize profitable brand sales growth. The three units include the
PDI Pharmaceutical Products Group, the PDI Sales and Marketing Services Group
and the PDI Medical Devices and Diagnostics Group.
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, FDA or legal 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
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management's reasonable belief as of the date hereof. PDI disclaims any
obligation to update these statements.
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PDI, INC.
CONSOLIDATED BALANCE SHEETS
December 31,
-----------------------------
2002 2001
--------- ---------
ASSETS (in thousands)
Current assets:
Cash and cash equivalents ..................................................... $ 66,827 $ 160,043
Short-term investments ........................................................ 5,834 7,387
Inventory, net ................................................................ 646 442
Accounts receivable, net of allowance for doubtful
accounts of $1,063 and $3,692 as of December 31, 2002
and 2001, respectively ...................................................... 40,729 52,640
Unbilled costs and accrued profits on contracts
in progress ................................................................. 3,360 6,898
Deferred training ............................................................. 1,106 5,569
Prepaid income tax ............................................................ 18,856 --
Other current assets .......................................................... 4,804 8,101
Deferred tax asset ............................................................ 7,420 24,041
--------- ---------
Total current assets ............................................................. 149,582 265,121
Net property, plant & equipment .............................................. 18,295 21,044
Deferred tax asset ........................................................... 7,820 --
Other long-term assets ....................................................... 15,242 16,506
--------- ---------
Total assets ..................................................................... $ 190,939 $ 302,671
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .............................................................. $ 5,374 $ 9,493
Accrued rebates, sales discounts and returns .................................. 16,500 68,403
Accrued contract losses ....................................................... -- 12,256
Accrued incentives ............................................................ 11,758 22,213
Accrued salaries and wages .................................................... 6,617 7,167
Unearned contract revenue ..................................................... 9,473 10,878
Other accrued expenses ........................................................ 18,006 21,026
--------- ---------
Total current liabilities ........................................................ 67,728 151,436
--------- ---------
Long-term liabilities:
Deferred tax liability ........................................................ -- 300
--------- ---------
Total long-term liabilities ...................................................... -- 300
--------- ---------
Total liabilities ................................................................ $ 67,728 $ 151,736
--------- ---------
Stockholders' equity:
Common stock, $.01 par value; 100,000,000 shares authorized; shares
issued and outstanding, 2002 - 14,165,881; 2001 - 13,968,097;
restricted $.01 par value; shares issued and outstanding, 2002,- 44,325;
2001 - 15,388 ............................................................... $ 142 $ 140
Preferred stock, $.01 par value; 5,000,000 shares authorized, no
shares issued and outstanding ............................................... -- --
Additional paid-in capital ....................................................... 105,126 102,757
Additional paid-in capital, restricted ........................................... 1,547 954
Retained earnings ................................................................ 17,247 48,008
Accumulated other comprehensive loss ............................................. (100) (79)
Unamortized compensation costs ................................................... (641) (735)
Treasury stock, at cost: 2002 - 5,000 shares;
2001 - 5,000 shares ............................................................. (110) (110)
--------- ---------
Total stockholders' equity ....................................................... $ 123,211 $ 150,935
--------- ---------
Total liabilities & stockholders' equity ......................................... $ 190,939 $ 302,671
========= =========
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PDI, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
Three Months Ended December 31, Twelve Months Ended December 31,
------------------------------- --------------------------------
2002 2001 2002 2001
-------- --------- --------- --------
(unaudited) (unaudited) (unaudited)
Revenue
Service, net .......................................... $ 79,029 $ 67,264 $ 277,575 $281,269
Product, net .......................................... -- 196,637 6,438 415,314
-------- --------- --------- --------
Total revenue, net ................................. 79,029 263,901 284,013 696,583
-------- --------- --------- --------
Cost of goods and services
Program expenses ...................................... 53,667 63,926 254,140 232,171
Cost of goods sold .................................... -- 161,068 -- 328,629
-------- --------- --------- --------
Total cost of goods and services ................... 53,667 224,994 254,140 560,800
-------- --------- --------- --------
Gross profit ............................................. 25,362 38,907 29,873 135,783
Operating expenses
Compensation expense .................................. 6,459 9,804 32,670 39,263
Other selling, general & administrative expenses ...... 24,956 9,981 44,163 83,815
Restructuring and other non-recurring charges ......... -- 2,243 -- 3,215
-------- --------- --------- --------
Total operating expenses ............................ 33,658 19,785 80,048 123,078
-------- --------- --------- --------
Operating (loss) income .................................. (8,296) 19,122 (50,175) 12,705
Other income (expense), net .............................. 263 (2,132) 1,967 2,275
-------- --------- --------- --------
(Loss) income before (benefit) provision for taxes ....... (8,033) 16,990 (48,208) 14,980
(Benefit) provision for income taxes ..................... (3,044) 8,711 (17,447) 8,626
-------- --------- --------- --------
Net (loss) income ........................................ $ (4,989) $ 8,279 $ (30,761) $ 6,354
======== ========= ========= ========
Basic net (loss) income per share ........................ $ (0.35) $ 0.59 $ (2.19) $ 0.46
======== ========= ========= ========
Diluted (loss) net income per share ...................... $ (0.35) $ 0.59 $ (2.19) $ 0.45
======== ========= ========= ========
Basic weighted average number of shares outstanding ...... 14,097 13,968 14,033 13,886
======== ========= ========= ========
Diluted weighted average number of shares outstanding .... 14,097 14,010 14,033 14,113
======== ========= ========= ========
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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: February 14, 2003
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