September
15, 2006
VIA
EDGAR
Ms.
Linda
van Doorn
Senior
Assistant Chief Accountant
Division
of Corporate Finance
U.S.
Securities and Exchange Commission
100
F
Street, N.E.
Washington,
DC 20549
Re: PDI,
Inc.
Form
10-K for
the year ended December 31, 2005
Filed
March 17, 2006
File
No.
0-24249
Dear
Ms.
Van Doorn:
On
behalf
of PDI, Inc. (the “Company”), I am writing in response to the comments made by
the staff (the “Staff”) of the Securities and Exchange Commission (the “SEC”) in
its letter dated August 28, 2006 (the “Comment Letter”) with respect to the
Company’s annual report on Form 10-K for the year ended December 31, 2005
(the “Form 10-K”).
For
your
convenience, the Staff’s comments are set forth below in bold, numbered to
correspond to the comment numbers used in the Comment Letter and followed by
our
responses thereto.
Form
10-K
Item
9A Controls and Procedures
(a)
Disclosure Controls and Procedures, page 36
| 1. |
The
indication is that the company has determined that its disclosure
controls
and procedures were sufficiently effective. Please clarify to us
whether
the conclusion was that the disclosure controls and procedures were
effective as indicated in Item 307 of Regulation
S-K.
|
Response:
The
Company confirms that as of the end of the period covered by its Annual Report
on Form 10-K for the year ended December 31, 2005, an evaluation was carried
out
under the supervision and with the participation of the Company’s management,
including our Interim Chief Executive Officer (“CEO”) and Chief Financial
Officer (“CFO”), of the effectiveness of the design and operation of the
Company’s disclosure controls and procedures, pursuant to Rule 13a-15 under the
Securities Exchange Act of 1934, as amended
(the
“Act”). Based upon this evaluation, the CEO and CFO have concluded that the
Company’s disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in reports it filed under
the Act is (i) recorded, processed, summarized, and reported within the time
periods specified in the SEC rules and forms; and (ii) accumulated and
communicated to management, including the CEO and CFO, as appropriate, to allow
timely decisions regarding required disclosure. The CEO and CFO are principally
responsible for establishing and maintaining disclosure controls and procedures
as defined in the Act and internal control as defined in the Act over financial
reporting for the Company
Notes
to Consolidated Financial Statements
Note
1 Nature of Business and Significant Accounting
Policies
Revenue
Recognition and Associated Costs. page F-8
| 2. |
In
future filings, in a separate note please disclose the dollar amount
of
each of the components of program
expenses.
|
Response:
The
financial statements and related disclosures in our Form 10-K were prepared
on
the basis of U.S. generally accepted accounting principles (“GAAP”). Regulation
S-X Rule 5-03.2 also requires separate disclosure of “the amount of (a) cost of
tangible goods sold, (b) operating expenses of public utilities or others,
(c)
expenses applicable to rental income, (d) cost of services, and (e) expenses
applicable to other revenues.” Additionally, Rule 5-03 states that “if income is
derived from more than one of the subcaptions described under Rule 5-03.1,
each
class which is not more than 10 percent of the sum of the items may be combined
with another class. If these items are combined, related costs and expenses
as
described under Rule 5-03.2 shall be combined in the same manner.” As required,
the Company separately discloses revenue from services and products and related
cost of services (program expenses) and cost of goods sold, respectively. There
are no other classes of revenue in excess of 10%. The Company believes that
additional disclosure of the components of cost of services is not a requirement
under GAAP or SEC regulations.
In
future
filings, to avoid any confusion, the Company will label costs and expenses
applicable to revenues from services as “cost of services” rather than “program
expenses”.
Note
5 Goodwill and Other Intangible Assets. page F-17
| 3. |
We
note the termination of a material contract with AstraZeneca for
services
on February 10, 2006. Please tell us if any portion of the customer
relationships intangible asset relates to AstraZeneca and if so how
this
development affected your impairment assessment and consideration
of the
appropriateness of the useful lives assigned to customer relationships
in
2006.
|
Response:
The
termination of the contract sales force arrangement with AstraZeneca will affect
operating results in our sales services segment only. The customer relationships
intangible asset resulted from the acquisition of Pharmakon, LLC (Note 2
Acquisition in our Form 10-K) which is included in our marketing services
segment. None of the customer relationships intangible asset relates to
AstraZeneca. The loss of the contract with AstraZeneca has no impact on the
operating results of our marketing services segment and therefore does not
represent an indicator of impairment of the customer relationships intangible
asset.
The
Company acknowledges its responsibility for the adequacy and accuracy of the
disclosure in the filing; staff comments or changes to disclosures in response
to staff comments do not foreclose the SEC from taking any action with respect
to the filing; and the Company may not assert staff comments as a defense in
any
proceeding initiated by the SEC or any person under the federal securities
laws
of the United States. The Company also understands that the Division of
Enforcement has access to all information we provide to the staff of the
Division of Corporation Finance in connection with your review of our filing
or
in response to your comments on our filing.
Please
contact me (phone: (201) 258-8451; facsimile: (201) 258-8541; email:
jesmith@pdi-inc.com) if you have any further comments or require additional
information.
Executive
Vice-President and
Chief
Financial Officer
