Exhibit 99.1
PDI Announces Financial Results for First Quarter 2005
SADDLE RIVER, N.J., May 10 /PRNewswire-FirstCall/ -- PDI, Inc. (Nasdaq: PDII) today announced its financial results for the quarter ended March 31, 2005.
First Quarter Results
Revenue for the quarter ended March 31, 2005 was $82.0 million, 11.5% lower than revenue of $92.6 million for the quarter ended March 31, 2004. Gross profit for the quarter ended March 31, 2005 was $18.0 million, 32% lower than gross profit of $26.5 million for the quarter ended March 31, 2004. The operating loss was $775,000 for the quarter ended March 31, 2005, compared to operating income of $9.8 million for the quarter ended March 31, 2004. The Company had a net loss of $62,000 for the quarter ended March 31, 2005, compared to net income of $6.0 million in the quarter ended March 31, 2004. The net loss per diluted share for the quarter ended March 31, 2005 calculated to $0.00 versus net income per diluted share of $0.40 for the quarter ended March 31, 2004.
The reduction in consolidated revenue in the first quarter of 2005 versus the first quarter of 2004 was mainly attributable to a $13 million decrease in revenue from AstraZeneca, who reduced the number of sales representatives under contract near the end of 2004. This reduction was partially offset by an increase from the marketing services segment. The reduction in gross profit was attributed to a reduction in incentive payments and a decrease in margin on some of our 2005 contract renewals.
Litigation expenses of approximately $2.3 million in the first quarter of 2005 were incurred in pursuit of our lawsuit against Cellegy Pharmaceuticals, Inc. This lawsuit was settled on April 12, 2005. The settlement provided a payment by Cellegy of $2 million on April 12, 2005 plus the issuance to us of a secured promissory note for $3 million and a $3.5 million principal amount of a senior convertible note. The Company also incurred costs associated with non-field based employee severance of approximately $1.1 million. The earnings per diluted share impact of the litigation and severance expense in the first quarter of 2005 is approximately $0.13.
Charles T. Saldarini, Vice Chairman and CEO, said, “The first quarter is clearly a disappointment. During the quarter we did resolve our litigation with Cellegy, arriving at a solution that is in the best interests of our shareholders. Also, in the quarter we implemented streamlining measures we had articulated at the outset of the year, notably with respect to creating more independent operating units. Much of the severance related expense incurred in the quarter was related to implementing that approach. As we most recently announced, we will be increasing investment in a variety of areas including business development, account management, information technology, communications, training and sales management. We believe these investments, coupled with making adjustments within our existing sales teams’ programs, will continue to allow us to deliver the caliber of services our clients and prospects are demanding, at a time when their emphasis is increasingly focused on cost efficiency and short term flexibility. These are likely to be important drivers in the near term and because we expect teams prospects to scrutinize these, we will be adjusting appropriately.”
Mr. Saldarini continued, “Our strategy remains to pursue leadership in our sales teams’ businesses based on our historic track record of performance, our long standing relationships, and our fundamental ability to deliver profitable brand sales growth for our clients. In addition, we expect that our ability to offer a broad array of solutions, including both dedicated teams and shared teams for bio-pharmaceutical manufacturers as well as solutions for medical device and diagnostic manufacturers, will provide us with a strong value proposition. In our Marketing Services segment, we will continue to drive for markedly improved contributions from our medical education, medical promotion and marketing research units. We continue to pursue acquisitions which augment these services and which will broaden our presence in these markets, so that we achieve our longer term goals for improved contribution mix and reduced client concentration. Our balance sheet supports this strategy. At this time, it is clear we have significant work to do in order to achieve these objectives and regain investor confidence and so we are concentrating on the required investments, talent acquisitions and market strategies we feel will deliver these outcomes.”
Conference Call Information
PDI will not be conducting a conference call with regard to the first quarter results, as originally announced on April 21, 2005 in light of last week’s conference call.
About PDI, Inc.
PDI, Inc. (Nasdaq: PDII) is a leading provider of outsourced sales and marketing services 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, Select Access, clinical and combination sales teams; marketing research and consulting; medical education and communications; talent recruitment; and integrated commercial solutions from pre-launch through patent-expiration. The company’s experience extends across multiple therapeutic categories and includes office and hospital-based initiatives. PDI’s global presence is maintained through a strategic partnership with In2Focus, a leading U.K. provider of outsourced sales services.
PDI’s commitment is to deliver innovative solutions, excellent execution and superior results to its clients. Through strategic partnership and client-driven innovation, PDI maintains some of the longest sales and marketing relationships in the industry. Recognized as an industry pioneer, PDI continues to innovate today as a thought-starter for the outsourcing of sales and marketing services.
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, 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. This press release concerns payments that Cellegy is obligated to make in the future. There is no assurance that these payments will be made and that Cellegy will remain financially viable and able to make the required payments. 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)
(unaudited)
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March 31, |
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December 31, |
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ASSETS |
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Current assets: |
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Cash and cash equivalents. |
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$ |
82,364 |
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$ |
81,000 |
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Short-term investments |
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12,959 |
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28,498 |
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Accounts receivable, net of allowance for doubtful accounts of $116 and $74 as of March 31, 2005 and December 31, 2004, respectively |
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27,551 |
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26,662 |
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Unbilled costs and accrued profits on contracts in progress |
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8,179 |
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3,393 |
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Deferred training and other program costs |
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1,244 |
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740 |
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Other current assets |
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11,888 |
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11,818 |
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Deferred tax asset |
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8,067 |
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3,325 |
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Total current assets. |
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152,252 |
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155,436 |
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Net property and equipment |
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17,788 |
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17,170 |
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Deferred tax asset |
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802 |
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5,832 |
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Goodwill |
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23,820 |
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23,791 |
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Other intangible assets |
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19,074 |
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19,548 |
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Other long-term assets |
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2,920 |
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2,928 |
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Total assets |
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$ |
216,656 |
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$ |
224,705 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
4,805 |
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$ |
7,217 |
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Accrued returns |
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1,659 |
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4,316 |
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Accrued incentives |
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7,997 |
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16,282 |
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Accrued salaries and wages |
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8,929 |
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8,414 |
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Unearned contract revenue |
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8,255 |
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6,924 |
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Restructuring accruals |
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79 |
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161 |
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Income taxes and other accrued expenses |
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18,962 |
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15,966 |
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Total current liabilities |
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50,686 |
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59,280 |
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Total long-term liabilities |
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— |
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— |
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Total liabilities |
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50,686 |
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59,280 |
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Stockholders’ equity: |
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Preferred stock, $.01 par value, 5,000,000 shares authorized, no shares issued and outstanding |
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— |
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— |
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Common stock, $.01 par value, 100,000,000 shares authorized: shares issued and outstanding, March 31, 2005 - 14,696,341 and December 31, 2004 - 14,665,945; 147,894 and 154,554 restricted shares issued and outstanding at March 31, 2005 and December 31, 2004, respectively |
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148 |
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148 |
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Additional paid-in capital |
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117,082 |
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116,737 |
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Retained earnings |
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50,575 |
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50,637 |
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Accumulated other comprehensive income |
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25 |
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76 |
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Unamortized compensation costs |
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(1,750 |
) |
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(2,063 |
) |
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Treasury stock, at cost: 5,000 shares |
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(110 |
) |
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(110 |
) |
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Total stockholders’ equity |
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165,970 |
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165,425 |
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Total liabilities & stockholders’ equity |
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$ |
216,656 |
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$ |
224,705 |
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PDI, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
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Three Months Ended March 31, |
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2005 |
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2004 |
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Revenue |
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Service |
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$ |
82,024 |
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$ |
92,547 |
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Product, net |
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— |
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101 |
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Total revenue |
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82,024 |
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92,648 |
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Cost of goods and services |
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Program expenses (including related party amounts of $0 and $180 for the periods ended March 31, 2005 and 2004, respectively) |
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63,981 |
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65,988 |
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Cost of goods sold |
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— |
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145 |
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Total cost of goods and services |
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63,981 |
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66,133 |
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Gross profit |
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18,043 |
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26,515 |
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Operating expenses |
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Compensation expense |
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9,004 |
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10,216 |
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Other selling, general and administrative expenses |
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9,814 |
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6,490 |
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Total operating expenses |
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18,818 |
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16,706 |
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Operating (loss) income |
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(775 |
) |
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9,809 |
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Other income, net |
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669 |
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318 |
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(Loss) income before (benefit) provision for taxes |
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(106 |
) |
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10,127 |
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(Benefit) provision for income taxes |
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(44 |
) |
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4,152 |
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Net (loss) income |
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$ |
(62 |
) |
$ |
5,975 |
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Basic net (loss) income per share |
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$ |
(0.00 |
) |
$ |
0.41 |
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Diluted net (loss) income per share |
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$ |
(0.00 |
) |
$ |
0.40 |
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Basic weighted average number of shares outstanding |
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14,675 |
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14,461 |
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Diluted weighted average number of shares outstanding |
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14,849 |
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14,767 |
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PDI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
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Three Months Ended March 31, |
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2005 |
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2004 |
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Cash Flows From Operating Activities |
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Net (loss) income |
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$ |
(62 |
) |
$ |
5,975 |
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Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: |
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Depreciation and amortization |
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1,486 |
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1,512 |
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Reserve for inventory obsolescence and bad debt |
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42 |
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505 |
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Loss on disposal of assets |
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91 |
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— |
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Deferred taxes, net |
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288 |
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7 |
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Stock compensation costs |
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269 |
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651 |
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Other changes in assets and liabilities: |
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(Increase) decrease in accounts receivable |
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(930 |
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12,376 |
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Decrease in inventory |
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— |
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43 |
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Increase in unbilled costs |
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(4,786 |
) |
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(14,562 |
) |
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Increase in deferred training |
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(504 |
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(457 |
) |
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Increase in other current assets |
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(220 |
) |
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(233 |
) |
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Decrease in other long-term assets |
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8 |
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— |
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(Decrease) increase in accounts payable |
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(2,412 |
) |
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28 |
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Decrease in accrued returns |
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(2,657 |
) |
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(288 |
) |
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Decrease increase in accrued liabilities |
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(7,770 |
) |
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(4,755 |
) |
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Decrease in restructuring liability |
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(82 |
) |
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(164 |
) |
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Increase in unearned contract revenue |
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1,331 |
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|
6,695 |
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Increase (decrease) in income taxes and other accrued expenses |
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2,996 |
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(1,058 |
) |
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Net cash (used in) provided by operating activities |
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(12,912 |
) |
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6,275 |
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Cash Flows From Investing Activities |
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Sales (purchases) of short-term investments |
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15,488 |
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(48,036 |
) |
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Cash paid for acquisition, including acquisition costs |
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(29 |
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— |
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Payment on TMX loan |
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150 |
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— |
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Purchase of property and equipment |
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(1,721 |
) |
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(2,588 |
) |
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Net cash provided by (used in) investing activities |
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13,888 |
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(50,624 |
) |
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Cash Flows From Financing Activities |
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Net proceeds from exercise of stock options |
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|
388 |
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|
524 |
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Net cash provided by financing activities |
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|
388 |
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|
524 |
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Net increase (decrease) in cash and cash equivalents |
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1,364 |
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(43,825 |
) |
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Cash and cash equivalents - beginning |
|
|
81,000 |
|
|
113,288 |
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Cash and cash equivalents - ending |
|
$ |
82,364 |
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$ |
69,463 |
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SOURCE PDI, Inc.
05/10/2005
/CONTACT: Stephen P. Cotugno, Executive Vice President-Corporate Development, PDI, Inc., +1-201-574-8617/
/Web site: http://www.pdi-inc.com /