(Mark
One)
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ý
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For
the fiscal year ended December 31, 2006
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OR
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o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For
the transition period from
____________to_________________
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PDI,
Inc.
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|||
(Exact
name of registrant as specified in its charter)
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|||
Delaware
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22-2919486
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(State
or other jurisdiction of
incorporation
or organization)
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(I.R.S.
Employer
Identification
No.)
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Saddle
River Executive Centre
1
Route 17 South, Saddle River, NJ 07458
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|||
(Address
of principal executive offices and zip code)
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(201)
258-8450
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(Registrant's
telephone number, including area code)
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Securities
registered pursuant to Section 12(b) of the Act:
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|||
Common
Stock, par value $0.01 per share
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The
Nasdaq Stock Market LLC
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||
(Title
of each class)
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(Name
of each exchange on which registered)
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||
Securities
registered pursuant to Section 12(g) of the Act:
None
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Large
accelerated filer o
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Accelerated
filer ý
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Non-accelerated
filer o
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Page
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PART
I
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|||
Item
1.
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Business
|
5
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Item
1A.
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Risk
Factors
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9
|
|
Item
1B.
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Unresolved
Staff Comments
|
14
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Item
2.
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Properties
|
14
|
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Item
3.
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Legal
Proceedings
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14
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Item
4.
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Submission
of Matters to a Vote of Security Holders
|
16
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PART
II
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|||
Item
5.
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Market
for our Common Equity, Related Stockholder Matters
and
Issuer Purchases of Equity Securities
|
17
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Item
6.
|
Selected
Financial Data
|
18
|
|
Item
7.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
20
|
|
Item
7A.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
38
|
|
Item
8.
|
Financial
Statements and Supplementary Data
|
39
|
|
Item
9.
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosures
|
39
|
|
Item
9A.
|
Controls
and Procedures
|
39
|
|
Item
9B.
|
Other
Information
|
40
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|
PART
III
|
|||
Item
10.
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Directors,
Executive Officers and Corporate Governance
|
41
|
|
Item
11.
|
Executive
Compensation
|
41
|
|
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
41
|
|
Item
13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
41
|
|
Item
14.
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Principal
Accounting Fees and Services
|
41
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PART
IV
|
|||
Item
15.
|
Exhibits
and Financial Statement Schedules
|
42
|
|
Signatures
|
44
|
·
|
Changes
in outsourcing trends and promotional, marketing and sales expenditures
in
the pharmaceutical, biotechnology and life sciences
industries;
|
·
|
Loss
of one or more of our significant customers or a material reduction
in
service revenues from such
customers;
|
·
|
Senior
management’s ability to successfully implement our updated long-term
strategic plan;
|
·
|
Competition
in our industry;
|
·
|
The
ability to attract and retain key employees and management personnel;
|
·
|
Product
liability claims against us; and
|
·
|
Our,
or our customers’, failure to comply with applicable laws and healthcare
regulations.
|
·
|
become
a leading provider of commercialization services to the biopharmaceutical
and life sciences industries; and
|
·
|
regain
leadership in our contract sales
business.
|
·
|
acquire
companies that offer prioritized complementary services that we have
identified in order to expand our portfolio of product and service
offerings to the biopharmaceutical and life sciences industries and
to
strengthen our contract sales offerings; or build these services
in-house;
and
|
·
|
enter
into risk-sharing and/or performance based arrangements on a selective
basis.
|
·
|
assimilate
the operations and services or products of the acquired
company;
|
·
|
integrate
new personnel associated with the
acquisition;
|
·
|
retain
and motivate key employees;
|
·
|
retain
customers; and
|
·
|
minimize
the diversion of management’s attention from other business
concerns.
|
·
|
the
number and types of products covered by these types of
agreements;
|
·
|
the
applicable stage of the drug regulatory process of the products at
the
time we enter into these agreements;
|
·
|
the
incidence of adverse patent and other intellectual property developments
relating to our product portfolio;
and
|
·
|
our
control over the manufacturing, distribution and marketing
processes.
|
·
|
volatility
in the trading markets generally;
|
·
|
significant
fluctuations in our quarterly operating
results;
|
·
|
announcements
regarding our business or the business of our
competitors;
|
·
|
industry
and/or regulatory developments;
|
·
|
changes
in revenue mix;
|
·
|
changes
in revenue and revenue growth rates for us and for our industry as
a
whole; and
|
·
|
statements
or changes in opinions, ratings or earnings estimates made by brokerage
firms or industry analysts relating to the markets in which we operate
or
expect to operate.
|
·
|
commencement,
delay, cancellation or completion of sales and marketing programs;
|
·
|
regulatory
developments;
|
·
|
uncertainty
related to compensation based on achieving performance benchmarks;
|
·
|
mix
of services provided and/or mix of programs, i.e., contract sales,
peer
persuasion programs, medical education, marketing research;
|
·
|
timing
and amount of expenses for implementing new programs and accuracy
of
estimates of resources required for ongoing programs;
|
·
|
timing
and integration of acquisitions;
|
·
|
changes
in regulations related to pharmaceutical companies; and
|
·
|
general
economic conditions.
|
|
|
2006
|
|
2005
|
|
||||||||
|
|
HIGH
|
|
LOW
|
|
HIGH
|
|
LOW
|
|
||||
First
quarter
|
$
|
15.00
|
$
|
9.70
|
$
|
21.45
|
$
|
19.00
|
|||||
Second
quarter
|
$
|
14.59
|
$
|
10.14
|
$
|
20.77
|
$
|
11.27
|
|||||
Third
quarter
|
$
|
15.50
|
$
|
11.01
|
$
|
15.99
|
$
|
12.36
|
|||||
Fourth
quarter
|
$
|
11.57
|
$
|
9.53
|
$
|
15.24
|
$
|
12.38
|
Number
of securities
|
||||||||||
remaining
available for
|
||||||||||
Number
of securities to
|
Weighted-average
|
future
issuance
|
||||||||
be
issued upon exercise
|
exercise
price of
|
(excluding
securities
|
||||||||
Plan
Category
|
of
outstanding options (a)(1)
|
outstanding
options (b)
|
reflected
in column (a)) (1)
|
|||||||
Equity
compensation plans
|
||||||||||
approved
by security holders
|
||||||||||
(2004
Stock Award and
|
||||||||||
Incentive
Plan, 2000 Omnibus
|
||||||||||
Incentive
Compensation Plan,
|
||||||||||
and
1998 Stock Option Plan)
|
807,238
|
$
|
26.03
|
1,028,453
|
||||||
Equity
compensation plans not
|
||||||||||
approved
by security holders
|
-
|
-
|
-
|
|||||||
Total
|
807,238
|
$
|
26.03
|
1,028,453
|
||||||
(1)
Excludes restricted stock and stock-settled stock appreciation
rights.
|
(in
thousands, except per share data)
|
2006
|
2005
|
2004
|
2003
|
2002
|
|||||||||||||||||||||
Continuing
operations data:
|
||||||||||||||||||||||||||
Total
revenues, net
|
$
|
239,242
|
$
|
305,205
|
$
|
345,797
|
(4
|
)
|
$
|
330,547
|
(5
|
)
|
$
|
295,199
|
(5
|
)
|
||||||||||
Gross
profit
|
55,844
|
52,402
|
92,633
|
84,960
|
25,070
|
|||||||||||||||||||||
Operating
expenses
|
49,931
|
(1
|
)
|
65,064
|
(2
|
)
|
58,554
|
65,897
|
73,251
|
(6
|
)
|
|||||||||||||||
Asset
impairment
|
-
|
6,178
|
(3
|
)
|
-
|
-
|
-
|
|||||||||||||||||||
Total
operating expenses
|
49,931
|
71,242
|
58,554
|
65,897
|
73,251
|
|||||||||||||||||||||
Income
(loss) from
|
||||||||||||||||||||||||||
continuing
operations
|
$
|
11,375
|
$
|
(11,407
|
)
|
$
|
20,435
|
$
|
11,931
|
$
|
(29,540
|
)
|
||||||||||||||
Per
share data from continuing operations:
|
||||||||||||||||||||||||||
Income
(loss) per share of common stock
|
||||||||||||||||||||||||||
Basic
|
$
|
0.82
|
$
|
(0.80
|
)
|
$
|
1.40
|
$
|
0.84
|
$
|
(2.11
|
)
|
||||||||||||||
Diluted
|
$
|
0.81
|
$
|
(0.80
|
)
|
$
|
1.37
|
$
|
0.83
|
$
|
(2.11
|
)
|
||||||||||||||
Weighted
average number of shares outstanding:
|
||||||||||||||||||||||||||
Basic
|
13,859
|
14,232
|
14,564
|
14,231
|
14,033
|
|||||||||||||||||||||
Diluted
|
13,994
|
14,232
|
14,893
|
14,431
|
14,033
|
|||||||||||||||||||||
Balance
sheet data:
|
||||||||||||||||||||||||||
Cash
and short-term investments
|
$
|
114,684
|
$
|
97,634
|
$
|
109,498
|
$
|
114,632
|
$
|
72,661
|
||||||||||||||||
Working
capital
|
112,186
|
92,264
|
96,156
|
100,009
|
81,854
|
|||||||||||||||||||||
Total
assets
|
201,636
|
200,159
|
224,705
|
219,623
|
190,939
|
|||||||||||||||||||||
Total
long-term debt
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
Stockholders'
equity
|
149,197
|
135,610
|
165,425
|
138,488
|
123,211
|
(1)
|
Includes
$4.0 million in credits to legal expense related to settlements in
the
Cellegy litigation matter and the California class action lawsuit
and $2.0
million in charges for facilities realignment costs. See Note 9 and
Note
17 to the consolidated financial statements for more details.
|
(2)
|
Includes
$5.7 million for executive severance costs and $2.4 million for facilities
realignment costs. See Notes 16 and 17 to the consolidated financial
statements for more details.
|
(3)
|
Asset
impairment charges include a $3.3 million non-cash charge for the
impairment of the goodwill associated with the Select Access reporting
unit; and a $2.8 million non-cash charge for the impairment of the
Siebel
sales force automation platform. See Notes 4 and 5 to the consolidated
financial statements for more
details.
|
(4)
|
Includes
revenue of $4.9 million associated with the acquisition of Pharmakon
on
August 31, 2004.
|
(5)
|
Includes
product revenue of negative $11.6 million in 2003 for the Ceftin
returns
reserve, which we began selling in the fourth quarter of 2000. For
2002,
it includes product revenue of $6.4 million that related to Ceftin.
See
Note 15 to the consolidated financial statements for more details.
|
(6)
|
Includes
$15.0 million for the initial licensing fee associated with the Cellegy
License Agreement, and $3.2 million associated with our 2002
restructuring.
|
·
|
Performance
Sales Teams; and
|
·
|
Select
Access.
|
¨
|
Marketing
Services:
|
·
|
Vital
Issues in Medicine (VIM)®;
|
·
|
Pharmakon;
and
|
·
|
TVG
Marketing Research and Consulting
(TVG).
|
Years
Ended December 31,
|
||||||||||||||||
Continuing
operations data
|
2006
|
2005
|
2004
|
2003
|
2002
|
|||||||||||
Revenues:
|
||||||||||||||||
Service,
net
|
100.0
|
%
|
100.0
|
%
|
100.4
|
%
|
103.5
|
%
|
97.8
|
%
|
||||||
Product,
net
|
-
|
-
|
(0.4
|
%)
|
(3.5
|
%)
|
2.2
|
%
|
||||||||
Total
revenues, net
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
||||||
Cost
of goods and services:
|
||||||||||||||||
Cost
of services
|
76.7
|
%
|
82.8
|
%
|
73.1
|
%
|
73.9
|
%
|
91.5
|
%
|
||||||
Cost
of goods sold
|
-
|
-
|
0.1
|
%
|
0.4
|
%
|
-
|
|||||||||
Total
cost of goods and services
|
76.7
|
%
|
82.8
|
%
|
73.2
|
%
|
74.3
|
%
|
91.5
|
%
|
||||||
Gross
profit
|
23.3
|
%
|
17.2
|
%
|
26.8
|
%
|
25.7
|
%
|
8.5
|
%
|
||||||
Operating
expenses:
|
||||||||||||||||
Compensation
expense
|
11.7
|
%
|
8.5
|
%
|
8.9
|
%
|
10.6
|
%
|
10.4
|
%
|
||||||
Other
selling, general and administrative
|
9.5
|
%
|
9.6
|
%
|
7.2
|
%
|
8.6
|
%
|
13.3
|
%
|
||||||
Asset
impairment
|
-
|
2.0
|
%
|
-
|
-
|
-
|
||||||||||
Executive
severance
|
0.2
|
%
|
1.9
|
%
|
0.1
|
%
|
-
|
-
|
||||||||
Legal
and related costs, net
|
(1.4
|
%)
|
0.6
|
%
|
0.7
|
%
|
0.7
|
%
|
1.1
|
%
|
||||||
Facilities
realignment
|
0.8
|
%
|
0.8
|
%
|
-
|
-
|
-
|
|||||||||
Total
operating expenses
|
20.9
|
%
|
23.3
|
%
|
16.9
|
%
|
19.9
|
%
|
24.8
|
%
|
||||||
Operating
income (loss)
|
2.5
|
%
|
(6.2
|
%)
|
9.9
|
%
|
5.8
|
%
|
(16.3
|
%)
|
||||||
Gain
(loss) on investments
|
-
|
1.5
|
%
|
(0.3
|
%)
|
-
|
-
|
|||||||||
Interest
income, net
|
2.0
|
%
|
1.0
|
%
|
0.5
|
%
|
0.3
|
%
|
0.7
|
%
|
||||||
Income
(loss) from continuing operations
|
||||||||||||||||
before
income taxes
|
4.5
|
%
|
(3.7
|
%)
|
10.1
|
%
|
6.1
|
%
|
(15.7
|
%)
|
||||||
Income
tax (benefit) expense
|
(0.3
|
%)
|
0.1
|
%
|
4.2
|
%
|
2.5
|
%
|
(5.6
|
%)
|
||||||
Income
(loss) from continuing operations
|
4.8
|
%
|
(3.7
|
%)
|
5.9
|
%
|
3.6
|
%
|
(10.0
|
%)
|
Revenue
(in thousands)
|
|||||||||||||
|
|
|
Change
|
Change
|
|||||||||
|
2006
|
2005
|
($)
|
(%)
|
|||||||||
Sales
services
|
$
|
202,748
|
$
|
270,420
|
$
|
(67,672
|
)
|
(25.0
|
%)
|
||||
Marketing
services
|
36,494
|
34,785
|
1,709
|
4.9
|
%
|
||||||||
PPG
|
-
|
-
|
-
|
-
|
|||||||||
Total
|
$
|
239,242
|
$
|
305,205
|
$
|
(65,963
|
)
|
(21.6
|
%)
|
Cost
of services (in thousands)
|
|||||||||||||
|
|||||||||||||
|
|
|
Change
|
Change
|
|||||||||
|
2006
|
2005
|
($)
|
(%)
|
|||||||||
Sales
services
|
$
|
163,735
|
$
|
231,768
|
$
|
(68,033
|
)
|
(29.4
|
%)
|
||||
Marketing
services
|
19,663
|
21,035
|
(1,372
|
)
|
(6.5
|
%)
|
|||||||
PPG
|
-
|
-
|
-
|
-
|
|||||||||
Total
|
$
|
183,398
|
$
|
252,803
|
$
|
(69,405
|
)
|
(27.5
|
%)
|
Gross
profit (in thousands)
|
|||||||||||||||||||
|
|
%
of
|
|
%
of
|
Change
|
Change
|
|||||||||||||
|
2006
|
revenue
|
2005
|
revenue
|
($)
|
(%)
|
|||||||||||||
Sales
services
|
$
|
39,013
|
19.2
|
%
|
$
|
38,652
|
14.3
|
%
|
$
|
(361
|
)
|
0.9
|
%
|
||||||
Marketing
services
|
16,831
|
46.1
|
%
|
13,750
|
39.5
|
%
|
(3,081
|
)
|
22.4
|
%
|
|||||||||
PPG
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||
Total
|
$
|
55,844
|
23.3
|
%
|
$
|
52,402
|
17.2
|
%
|
$
|
(3,442
|
)
|
6.6
|
%
|
·
|
an
increase in incentive revenue earned - $3.2 million greater in 2006
than
2005;
|
·
|
the
higher margin businesses within marketing services were a greater
portion
of consolidated revenue than they were in the prior period (15.3%
in 2006
vs. 11.4% in 2005)
|
·
|
The
gross profit percentage from our two largest customers was higher
in 2006
than in 2005. The primary reasons for this improvement were: 1) greater
incentive revenue earned; 2) fewer net contractual penalties incurred
for
stated performance benchmarks; and 3) more stable service costs.
In 2005,
the sharp increase in fuel and travel costs was greater than the
rates
specified in our contracts which lowered our gross profit percentages;
whereas in 2006 there was not a large disparity in fuel and travel
costs
when compared to our contractual
reimbursements.
|
Compensation
expense (in thousands)
|
|||||||||||||||||||
|
|
%
of
|
|
%
of
|
Change
|
Change
|
|||||||||||||
|
2006
|
revenue
|
2005
|
revenue
|
($)
|
(%)
|
|||||||||||||
Sales
services
|
$
|
19,410
|
9.6
|
%
|
$
|
18,397
|
6.8
|
%
|
$
|
1,013
|
5.5
|
%
|
|||||||
Marketing
services
|
8,665
|
23.7
|
%
|
7,499
|
21.6
|
%
|
1,166
|
15.5
|
%
|
||||||||||
PPG
|
-
|
-
|
1
|
-
|
(1
|
)
|
(100.0
|
%)
|
|||||||||||
Total
|
$
|
28,075
|
11.7
|
%
|
$
|
25,897
|
8.5
|
%
|
$
|
2,178
|
8.4
|
%
|
Other
SG&A (in thousands)
|
|||||||||||||||||||
|
|
%
of
|
|
%
of
|
Change
|
Change
|
|||||||||||||
|
2006
|
revenue
|
2005
|
revenue
|
($)
|
(%)
|
|||||||||||||
Sales
services
|
$
|
18,109
|
8.9
|
%
|
$
|
23,607
|
8.7
|
%
|
$
|
(5,498
|
)
|
(23.3
|
%)
|
||||||
Marketing
services
|
4,501
|
12.3
|
%
|
5,775
|
16.6
|
%
|
(1,274
|
)
|
(22.1
|
%)
|
|||||||||
PPG
|
-
|
-
|
10
|
-
|
(10
|
)
|
(100.0
|
%)
|
|||||||||||
Total
|
$
|
22,610
|
9.5
|
%
|
$
|
29,392
|
9.6
|
%
|
$
|
(6,782
|
)
|
(23.1
|
%)
|
Operating
income (loss) (in thousands)
|
|||||||||||||||||||
|
|
%
of
|
|
%
of
|
Change
|
Change
|
|||||||||||||
|
2006
|
revenue
|
2005
|
revenue
|
($)
|
(%)
|
|||||||||||||
Sales
services
|
$
|
33
|
0.0
|
%
|
$
|
(17,386
|
)
|
(6.4
|
%)
|
$
|
17,419
|
100.2
|
%
|
||||||
Marketing
services
|
2,798
|
7.7
|
%
|
(1,186
|
)
|
(3.4
|
%)
|
3,984
|
335.9
|
%
|
|||||||||
PPG
|
3,082
|
0.0
|
%
|
(268
|
)
|
0.0
|
%
|
3,350
|
1,250.0
|
%
|
|||||||||
Total
|
$
|
5,913
|
2.5
|
%
|
$
|
(18,840
|
)
|
(6.2
|
%)
|
$
|
24,753
|
131.4
|
%
|
Revenue
(in thousands)
|
|||||||||||||
|
|
|
Change
|
Change
|
|||||||||
|
2005
|
2004
|
($)
|
(%)
|
|||||||||
Sales
services
|
$
|
270,420
|
$
|
313,784
|
$
|
(43,364
|
)
|
(13.8
|
%)
|
||||
Marketing
services
|
34,785
|
29,057
|
5,728
|
19.7
|
%
|
||||||||
PPG
|
-
|
2,956
|
(2,956
|
)
|
(100.0
|
%)
|
|||||||
Total
|
$
|
305,205
|
$
|
345,797
|
$
|
(40,592
|
)
|
(11.7
|
%)
|
Cost
of goods and services (in thousands)
|
|||||||||||||
|
|||||||||||||
|
|
|
Change
|
Change
|
|||||||||
|
2005
|
2004
|
($)
|
(%)
|
|||||||||
Sales
services
|
$
|
231,768
|
$
|
236,681
|
$
|
(4,913
|
)
|
(2.1
|
%)
|
||||
Marketing
services
|
21,035
|
16,352
|
4,683
|
28.6
|
%
|
||||||||
PPG
|
-
|
131
|
(131
|
)
|
(100.0
|
%)
|
|||||||
Total
|
$
|
252,803
|
$
|
253,164
|
$
|
(361
|
)
|
(0.1
|
%)
|
Gross
profit (in thousands)
|
|||||||||||||||||||
|
|
%
of
|
|
%
of
|
Change
|
Change
|
|||||||||||||
|
2005
|
revenue
|
2004
|
revenue
|
($)
|
(%)
|
|||||||||||||
Sales
services
|
$
|
38,652
|
14.3
|
%
|
$
|
77,103
|
24.6
|
%
|
$
|
38,451
|
(49.9
|
%)
|
|||||||
Marketing
services
|
13,750
|
39.5
|
%
|
12,705
|
43.7
|
%
|
(1,045
|
)
|
8.2
|
%
|
|||||||||
PPG
|
-
|
-
|
2,825
|
95.6
|
%
|
2,825
|
(100.0
|
%)
|
|||||||||||
Total
|
$
|
52,402
|
17.2
|
%
|
$
|
92,633
|
26.8
|
%
|
$
|
40,231
|
(43.4
|
%)
|
·
|
A
decrease in incentive payments ($2.6 million) received in 2005 as
compared
to 2004;
|
·
|
Higher
amount of net penalties accrued in 2005 ($2.0 million) as compared
to
2004;
|
·
|
Lower
contractual margins for some of our 2005 contract
renewals;
|
·
|
Market
conditions that led to increases in field compensation and other
field
costs (i.e. gas, travel) that were, in some cases, higher than the
rates
specified in our contracts; and
|
·
|
No
PPG revenues or gross profit earned in 2005 as compared to 2004 when
revenue was $3.0 million and gross profit was $2.8
million.
|
Compensation
expense (in thousands)
|
|||||||||||||||||||
|
|
%
of
|
|
%
of
|
Change
|
Change
|
|||||||||||||
|
2005
|
revenue
|
2004
|
revenue
|
($)
|
(%)
|
|||||||||||||
Sales
services
|
$
|
18,397
|
6.8
|
%
|
$
|
21,826
|
7.0
|
%
|
$
|
(3,429
|
)
|
(15.7
|
%)
|
||||||
Marketing
services
|
7,499
|
21.6
|
%
|
7,367
|
25.4
|
%
|
132
|
1.8
|
%
|
||||||||||
PPG
|
1
|
0.0
|
%
|
1,441
|
48.7
|
%
|
(1,440
|
)
|
(99.9
|
%)
|
|||||||||
Total
|
$
|
25,897
|
8.5
|
%
|
$
|
30,634
|
8.9
|
%
|
$
|
(4,737
|
)
|
(15.5
|
%)
|
Other
SG&A (in thousands)
|
|||||||||||||||||||
|
|
%
of
|
|
%
of
|
Change
|
Change
|
|||||||||||||
|
2005
|
revenue
|
2004
|
revenue
|
($)
|
(%)
|
|||||||||||||
Sales
services
|
$
|
23,607
|
8.7
|
%
|
$
|
20,097
|
6.4
|
%
|
$
|
3,510
|
17.5
|
%
|
|||||||
Marketing
services
|
5,775
|
16.6
|
%
|
3,686
|
12.7
|
%
|
2,089
|
56.7
|
%
|
||||||||||
PPG
|
10
|
0.0
|
%
|
1,244
|
42.1
|
%
|
(1,234
|
)
|
(99.2
|
%)
|
|||||||||
Total
|
$
|
29,392
|
9.6
|
%
|
$
|
25,027
|
7.2
|
%
|
$
|
4,365
|
17.4
|
%
|
Operating
Income (Loss) (in thousands)
|
|||||||||||||||||||
|
|
%
of
|
|
%
of
|
Change
|
Change
|
|||||||||||||
|
2005
|
revenue
|
2004
|
revenue
|
($)
|
(%)
|
|||||||||||||
Sales
services
|
$
|
(17,386
|
)
|
(6.4
|
%)
|
$
|
32,906
|
10.5
|
%
|
$
|
(50,292
|
)
|
(152.8
|
%)
|
|||||
Marketing
services
|
(1,186
|
)
|
(3.4
|
%)
|
1,535
|
5.3
|
%
|
(2,721
|
)
|
(177.3
|
%)
|
||||||||
PPG
|
(268
|
)
|
0.0
|
%
|
(362
|
)
|
(12.2
|
%)
|
94
|
26.0
|
%
|
||||||||
Total
|
$
|
(18,840
|
)
|
(6.2
|
%)
|
$
|
34,079
|
9.9
|
%
|
$
|
(52,919
|
)
|
(155.3
|
%)
|
·
|
net
income of $11.8 million;
|
·
|
depreciation
and other non-cash expense of $10.4 million which included depreciation
expenses of $4.4 million; stock compensation expense of $1.7 million;
decrease in the net deferred tax asset of $2.7 million and facilities’
realignment of approximately $1.3 million offset by recoveries of
doubtful
accounts and notes of $1.0 million;
|
·
|
offset
by a net decrease in other changes in assets and liabilities of $2.6
million which includes a $5.4 million federal tax refund received
in the
fourth quarter of 2006.
|
·
|
Approximately
$63.9 million used in the purchase of short-term investments. Our
investments consist of a laddered portfolio of investment grade debt
instruments such as obligations of the U.S. Treasury and U.S. Federal
Government agencies, municipal bonds and commercial paper. We are
focused
on preserving capital, maintaining liquidity, and maximizing returns,
in
accordance with our investment criteria.
|
·
|
Capital
expenditures for the year ended December 31, 2006 of $1.8 million,
which
consisted primarily of capital expenditures associated with IT and
other
computer-related expenditures. Capital expenditures for the year
ended
December 31, 2005 were $5.8 million, which consisted primarily of
capital
expenditures associated with the relocation of our offices within
the
marketing services group and for costs associated with the rollout
of our
new sales force automation software.
|
Balance
as of December 31, 2004
|
$
|
-
|
||
Facility
realignment charge
|
2,354
|
|||
Payments
|
(19
|
)
|
||
Balance
as of December 31, 2005
|
$
|
2,335
|
||
Accretion
|
51
|
|||
Payments
|
(680
|
)
|
||
Adjustments
|
606
|
|||
Balance
as of December 31, 2006
|
$
|
2,312
|
Less
than
|
1
to 3
|
3
to 5
|
After
|
|||||||||||||
Total
|
1
Year
|
Years
|
Years
|
5
Years
|
||||||||||||
Contractrual
obligations (1)
|
$
|
6,523
|
$
|
4,496
|
$
|
2,027
|
$
|
-
|
$
|
-
|
||||||
Operating
lease obligations
|
||||||||||||||||
Minimum
lease payments
|
30,641
|
3,100
|
6,516
|
6,462
|
14,563
|
|||||||||||
Less
minimum sublease rentals
(2)
|
(1,452
|
)
|
(401
|
)
|
(801
|
)
|
(250
|
)
|
-
|
|||||||
Net
minimum lease payments
|
29,189
|
2,699
|
5,715
|
6,212
|
14,563
|
|||||||||||
Total
|
$
|
35,712
|
$
|
7,195
|
$
|
7,742
|
$
|
6,212
|
$
|
14,563
|
(1)
|
Amounts
represent contractual obligations related to software license contracts,
IT consulting contracts and outsourcing contracts for employee benefits
administration and software system support.
|
(2)
|
On
June 21, 2005, we signed an agreement to sublease approximately 16,000
square feet of the first floor at our corporate headquarters facility
in
Saddle River, New Jersey. The sublease is for a five-year term commencing
July 15, 2005, and provides for approximately $2 million in lease
payments
over the five-year period.
|
For
the Quarters ended
|
|||||||||||||
March
31
|
June
30
|
September
30
|
December
31
|
||||||||||
2006
Quarters:
|
|||||||||||||
Total
revenues, net
|
$
|
77,144
|
$
|
54,951
|
$
|
51,317
|
$
|
55,830
|
|||||
Gross
profit
|
18,704
|
11,958
|
12,403
|
12,779
|
|||||||||
Operating
income (loss) (1)
|
7,504
|
37
|
(611
|
)
|
(1,017
|
)
|
|||||||
Income
from
|
|||||||||||||
continuing
operations
|
5,422
|
707
|
409
|
4,837
|
|||||||||
Income
(loss) from discontinued
|
|||||||||||||
operations,
net of tax
|
199
|
188
|
54
|
(7
|
)
|
||||||||
Net
income
|
5,621
|
895
|
463
|
4,830
|
|||||||||
Income
(loss) per share:
|
|||||||||||||
Basic
|
|||||||||||||
Continuing
operations
|
$
|
0.39
|
$
|
0.05
|
$
|
0.03
|
$
|
0.35
|
|||||
Discontinued
operations
|
0.01
|
0.01
|
0.00
|
(0.00
|
)
|
||||||||
$
|
0.41
|
$
|
0.06
|
$
|
0.03
|
$
|
0.35
|
||||||
Diluted
|
|||||||||||||
Continuing
operations
|
$
|
0.39
|
$
|
0.05
|
$
|
0.03
|
$
|
0.35
|
|||||
Discontinued
operations
|
0.01
|
0.01
|
0.00
|
(0.00
|
)
|
||||||||
$
|
0.40
|
$
|
0.06
|
$
|
0.03
|
$
|
0.35
|
||||||
Weighted
average number of shares:
|
|||||||||||||
Basic
|
13,824
|
13,857
|
13,871
|
13,883
|
|||||||||
Diluted
|
13,914
|
13,953
|
13,987
|
13,995
|
|||||||||
2005
Quarters:
|
|||||||||||||
Total
revenues, net
|
$
|
77,955
|
$
|
76,058
|
$
|
72,854
|
$
|
78,338
|
|||||
Gross
profit
|
16,231
|
13,670
|
10,041
|
12,460
|
|||||||||
Operating
loss (1)
|
(925
|
)
|
(179
|
)
|
(8,333
|
)
|
(9,403
|
)
|
|||||
(Loss)
income from
|
|||||||||||||
continuing
operations
|
(147
|
)
|
4,441
|
(4,278
|
)
|
(11,423
|
)
|
||||||
Income
(loss) from discontinued
|
|||||||||||||
operations,
net of tax
|
85
|
72
|
94
|
(8,298
|
)
|
||||||||
Net
(loss) income
|
(62
|
)
|
4,513
|
(4,184
|
)
|
(19,721
|
)
|
||||||
(Loss)
income per share:
|
|||||||||||||
Basic
|
|||||||||||||
Continuing
operations
|
$
|
(0.01
|
)
|
$
|
0.30
|
$
|
(0.31
|
)
|
$
|
(0.83
|
)
|
||
Discontinued
operations
|
0.01
|
0.00
|
0.01
|
(0.60
|
)
|
||||||||
$
|
(0.00
|
)
|
$
|
0.31
|
$
|
(0.30
|
)
|
$
|
(1.43
|
)
|
|||
Diluted
|
|||||||||||||
Continuing
operations
|
$
|
(0.01
|
)
|
$
|
0.30
|
$
|
(0.31
|
)
|
$
|
(0.83
|
)
|
||
Discontinued
operations
|
0.01
|
0.00
|
0.01
|
(0.60
|
)
|
||||||||
$
|
(0.00
|
)
|
$
|
0.31
|
$
|
(0.30
|
)
|
$
|
(1.43
|
)
|
(1)
|
The quarter ended June 30, 2006 includes facilities realignment costs of $0.3 million. The quarter ended December 31, 2006 includes a $2.5 million credit to expense as a result of the Cellegy litigation settlement; $1.6 million in facilities realignment costs; and $0.6 million in executive severance costs. |
(2)
|
The
quarter ended March 31, 2005 includes a $1.2 million charge for employee
severance costs and a $0.2 million charge for executive severance
costs.
The quarter ended June 30, 2005 includes a $2.8 million charge for
the
impairment of the Siebel sales force automation platform and a $0.4
million charge for executive severance costs; the quarter ended September
30, 2005 includes a $1.7 million charge for executive severance costs.
The
quarter ended December 31, 2005 includes a $3.4 million charge for
executive severance costs; a $2.4 million charge for facilities
realignment costs; and a $3.3 million charge for the impairment of
the
goodwill associated with the Select Access reporting unit.
|
/s/
Ernst &Young LLP
|
|
New
York, NY
|
|
March
15, 2007
|
(a)
|
The
following documents are filed as part of this Form
10-K:
|
Exhibit
No.
|
Description
|
|
3.1
|
Certificate
of Incorporation of PDI, Inc. (1)
|
|
3.2
|
By-Laws
of PDI, Inc . (1)
|
|
3.3
|
Certificate
of Amendment of Certificate of Incorporation of PDI, Inc. (3)
|
|
4.1
|
Specimen
Certificate Representing the Common Stock (1)
|
|
10.1*
|
Form
of 1998 Stock Option Plan (1)
|
|
10.2*
|
Form
of 2000 Omnibus Incentive Compensation Plan (2)
|
|
10.3*
|
Agreement
between the Company and John P. Dugan (1)
|
|
10.4*
|
Form
of Employment Separation Agreement between the Company and Steven
K. Budd,
filed herewith
|
|
10.5*
|
Form
of Amended and Restated Employment Agreement between the Company
and
Stephen Cotugno (3)
|
|
10.6
|
Saddle
River Executive Centre Lease (5)
|
|
10.7*
|
2004
Stock Award and Incentive Plan (4)
|
|
10.8*
|
Form
of Agreement between the Company and Larry Ellberger (5)
|
|
10.9*
|
Form
of Agreement between the Company and Bernard C. Boyle (5)
|
|
10.10*
|
Memorandum
of Understanding between the Company and Bernard C. Boyle (5)
|
|
10.11*
|
Amendment
to Memorandum of Understanding between the Company and Bernard C.
Boyle
(5)
|
|
10.12
|
Saddle
River Executive Centre Sublease Agreement (5)
|
|
10.13*
|
Form
of Agreement between the Company and Michael J. Marquard (6)
|
|
10.14*
|
Form
of Agreement between the Company and Jeffrey E. Smith (6)
|
|
10.15*
|
Form
of Agreement between the Company and Kevin Connolly, filed
herewith
|
|
21.1
|
Subsidiaries
of the Registrant (3)
|
|
23.1
|
Consent
of Ernst & Young LLP filed
herewith.
|
Exhibit
No.
|
Description
|
||
23.2
|
Consent
of PricewaterhouseCoopers LLP filed herewith.
|
||
31.1
|
Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 filed herewith.
|
||
31.2
|
Certification
of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 filed herewith.
|
||
32.1
|
Certification
of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as
adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 filed
herewith.
|
||
32.2
|
Certification
of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as
adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 filed
herewith.
|
||
*
|
Denotes
compensatory plan, compensation arrangement or management
contract.
|
||
(1)
|
Filed
as an exhibit to our Registration Statement on Form S-1 (File No
333-46321), and incorporated herein by reference.
|
||
(2)
|
Filed
as an Exhibit to our definitive proxy statement dated May 10, 2000,
and
incorporated herein by reference.
|
||
(3)
|
Filed
as an exhibit to our Annual Report on Form 10-K for the year ended
December 31, 2001, and incorporated herein by
reference.
|
||
(4)
|
Filed
as an Exhibit to our definitive proxy statement dated April 28, 2004,
and
incorporated herein by reference.
|
||
(5)
|
Filed
as an exhibit to our Form 10-K for the year ended December 31, 2005,
and
incorporated herein by reference.
|
||
(6)
|
Filed
as an exhibit to our Form 10-Q for the quarter ended June 30, 2006,
and
incorporated herein by reference.
|
||
(b)
|
We
have filed, as exhibits to this Form 10-K, the exhibits required
by Item
601 of the Regulation S-K.
|
(c)
|
We
have filed, as financial statements schedules to this annual report
on
Form 10-K, the financial statements required by Regulation S-X, which
are
excluded from the annual report to stockholders by Rule
14a-3(b).
|
PDI,
INC.
|
|
/s/
Michael
J. Marquard
|
|
Michael
J. Marquard
|
|
Chief
Executive Officer
|
|
Signature
|
Title
|
|
/s/
John P. Dugan
|
Chairman
of the Board of Directors
|
|
John
P. Dugan
|
||
/s/
Michael
J. Marquard
|
Chief
Executive Officer and Director
|
|
Michael
J. Marquard
|
(principal
executive officer)
|
|
/s/
Jeffrey E. Smith
|
Chief
Financial Officer and Treasurer
|
|
Jeffrey
E. Smith
|
(principal
accounting and financial officer)
|
|
/s/
John M. Pietruski
|
Director
|
|
John
M. Pietruski
|
||
/s/
Jan Martens Vecsi
|
Director
|
|
Jan
Martens Vecsi
|
||
/s/
Frank Ryan
|
Director
|
|
Frank
Ryan
|
||
/s/
John Federspiel
|
Director
|
|
John
Federspiel
|
||
/s/
Dr. Joseph T. Curti
|
Director
|
|
Dr.
Joseph T. Curti
|
||
/s/
Stephen J. Sullivan
|
Director
|
|
Stephen
J. Sullivan
|
||
/s/
Jack E. Stover
|
Director
|
|
Jack
E. Stover
|
Page
|
||
Report
of Independent Registered Public Accounting Firm
|
F-2
|
|
Report
of Independent Registered Public Accounting Firm
|
F-3
|
|
Financial
Statements
|
||
Consolidated
Balance Sheets at December 31, 2006 and 2005
|
F-4
|
|
Consolidated
Statements of Operations for each of the three years
|
||
in
the period ended December 31, 2006
|
F-5
|
|
Consolidated
Statements of Stockholders’ Equity for each of the three
years
|
||
in
the period ended December 31, 2006
|
F-6
|
|
Consolidated
Statements of Cash Flows for each of the three years
|
||
in
the period ended December 31, 2006
|
F-7
|
|
Notes
to Consolidated Financial Statements
|
F-8
|
|
Schedule
II. Valuation and Qualifying Accounts
|
F-31
|
|
/s/
Ernst &Young LLP
|
|
New
York, NY
|
|
March
15, 2007
|
|
CONSOLIDATED
BALANCE SHEETS
|
|||||||
(in
thousands, except share and per share data)
|
|||||||
December
31,
|
December
31,
|
||||||
2006
|
2005
|
||||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
45,221
|
$
|
90,827
|
|||
Short-term
investments
|
69,463
|
6,807
|
|||||
Accounts
receivable, net of allowance for doubtful accounts of
|
|||||||
$36
and $778, respectively
|
25,416
|
27,148
|
|||||
Unbilled
costs and accrued profits on contracts in progress
|
4,224
|
5,974
|
|||||
Income
tax receivable
|
1,888
|
6,145
|
|||||
Other
current assets
|
10,528
|
14,078
|
|||||
Total
current assets
|
156,740
|
150,979
|
|||||
Property
and equipment, net
|
12,809
|
16,053
|
|||||
Goodwill
|
13,612
|
13,112
|
|||||
Other
intangible assets, net
|
15,950
|
17,305
|
|||||
Other
long-term assets
|
2,525
|
2,710
|
|||||
Total
assets
|
$
|
201,636
|
$
|
200,159
|
|||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable
|
$
|
3,915
|
$
|
5,693
|
|||
Accrued
income taxes
|
1,761
|
4,047
|
|||||
Unearned
contract revenue
|
14,252
|
12,598
|
|||||
Accrued
incentives
|
9,009
|
12,179
|
|||||
Accrued
payroll and related benefits
|
1,475
|
3,709
|
|||||
Other
accrued expenses
|
14,142
|
20,489
|
|||||
Total
current liabilities
|
44,554
|
58,715
|
|||||
Long-term
liabilities
|
7,885
|
5,834
|
|||||
Total
liabilities
|
52,439
|
64,549
|
|||||
Commitments
and contingencies (Note 9)
|
|||||||
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;
|
|||||||
15,096,976
and 14,947,771 shares issued, respectively;
|
|||||||
14,078,970
and 13,929,765 shares outstanding, respectively
|
151
|
149
|
|||||
Additional
paid-in capital
|
119,189
|
118,325
|
|||||
Retained
earnings
|
42,992
|
31,183
|
|||||
Accumulated
other comprehensive income
|
79
|
71
|
|||||
Unamortized
compensation costs
|
-
|
(904
|
)
|
||||
Treasury
stock, at cost (1,018,006 shares)
|
(13,214
|
)
|
(13,214
|
)
|
|||
Total
stockholders' equity
|
149,197
|
135,610
|
|||||
Total
liabilities and stockholders' equity
|
$
|
201,636
|
$
|
200,159
|
|||
The
accompanying notes are an integral part of these consolidated financial
statements
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
||||||||||
(in
thousands, except for per share data)
|
||||||||||
For
The Years Ended December 31,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
Revenues:
|
||||||||||
Service,
net
|
$
|
239,242
|
$
|
305,205
|
$
|
347,318
|
||||
Product,
net
|
-
|
-
|
(1,521
|
)
|
||||||
Total
revenues, net
|
239,242
|
305,205
|
345,797
|
|||||||
Cost
of goods and services:
|
||||||||||
Cost
of services (including related party expense
|
||||||||||
of
$180 for the period ended December 31, 2004)
|
183,398
|
252,803
|
252,910
|
|||||||
Cost
of goods sold
|
-
|
-
|
254
|
|||||||
Total
cost of goods and services
|
183,398
|
252,803
|
253,164
|
|||||||
Gross
profit
|
55,844
|
52,402
|
92,633
|
|||||||
Operating
expenses:
|
||||||||||
Compensation
expense
|
28,075
|
25,897
|
30,634
|
|||||||
Other
selling, general and administrative expenses
|
22,610
|
29,392
|
25,027
|
|||||||
Asset
impairment
|
-
|
6,178
|
-
|
|||||||
Executive
severance
|
573
|
5,730
|
495
|
|||||||
Legal
and related costs, net
|
(3,279
|
)
|
1,691
|
2,398
|
||||||
Facilities
realignment
|
1,952
|
2,354
|
-
|
|||||||
Total
operating expenses
|
49,931
|
71,242
|
58,554
|
|||||||
Operating
income (loss)
|
5,913
|
(18,840
|
)
|
34,079
|
||||||
Gain
(loss) on investments
|
-
|
4,444
|
(1,000
|
)
|
||||||
Interest
income, net
|
4,738
|
3,190
|
1,779
|
|||||||
Income
(loss) before income tax
|
10,651
|
(11,206
|
)
|
34,858
|
||||||
(Benefit)
provision for income tax
|
(724
|
)
|
201
|
14,423
|
||||||
Income
(loss) from continuing operations
|
11,375
|
(11,407
|
)
|
20,435
|
||||||
Income
(loss) from discontinued operations,
|
||||||||||
net
of tax
|
434
|
(8,047
|
)
|
697
|
||||||
Net
income (loss)
|
$
|
11,809
|
$
|
(19,454
|
)
|
$
|
21,132
|
|||
Income
(loss) per share of common stock:
|
||||||||||
Basic:
|
||||||||||
Continuing
operations
|
$
|
0.82
|
$
|
(0.80
|
)
|
$
|
1.40
|
|||
Discontinued
operations
|
0.03
|
(0.57
|
)
|
0.05
|
||||||
$
|
0.85
|
$
|
(1.37
|
)
|
$
|
1.45
|
||||
Assuming
dilution:
|
||||||||||
Continuing
operations
|
$
|
0.81
|
$
|
(0.80
|
)
|
$
|
1.37
|
|||
Discontinued
operations
|
0.03
|
(0.57
|
)
|
0.05
|
||||||
$
|
0.84
|
$
|
(1.37
|
)
|
$
|
1.42
|
||||
Weighted
average number of common shares and
|
||||||||||
common
share equivalents outstanding:
|
||||||||||
Basic
|
13,859
|
14,232
|
14,564
|
|||||||
Assuming
dilution
|
13,994
|
14,232
|
14,893
|
|||||||
The
accompanying notes are an integral part of these consolidated financial
statements
|
PDI,
INC.
|
|||||||||||||||||||
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY
|
|||||||||||||||||||
(in
thousands)
|
|||||||||||||||||||
For
The Years Ended December 31,
|
|||||||||||||||||||
2006
|
2005
|
2004
|
|||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
||||||||||||||
Common
stock:
|
|||||||||||||||||||
Balance
at January 1
|
14,948
|
$
|
149
|
14,820
|
$
|
148
|
14,523
|
$
|
145
|
||||||||||
Common
stock issued
|
-
|
-
|
68
|
1
|
68
|
1
|
|||||||||||||
Restricted
stock issued
|
155
|
2
|
43
|
-
|
98
|
1
|
|||||||||||||
Restricted
stock forfeited
|
(23
|
)
|
-
|
(24
|
)
|
-
|
(14
|
)
|
-
|
||||||||||
SARs
exercised
|
1
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||
Stock
options exercised
|
16
|
-
|
41
|
-
|
145
|
1
|
|||||||||||||
Balance
at December 31
|
15,097
|
151
|
14,948
|
149
|
14,820
|
148
|
|||||||||||||
Treasury
stock:
|
|||||||||||||||||||
Balance
at January 1
|
1,018
|
(13,214
|
)
|
5
|
(110
|
)
|
5
|
(110
|
)
|
||||||||||
Treasury
stock purchased
|
-
|
-
|
1,013
|
(13,104
|
)
|
-
|
-
|
||||||||||||
Balance
at December 31
|
1,018
|
(13,214
|
)
|
1,018
|
(13,214
|
)
|
5
|
(110
|
)
|
||||||||||
Additional
paid-in capital:
|
|||||||||||||||||||
Balance
at January 1
|
118,325
|
116,737
|
109,531
|
||||||||||||||||
Common
stock issued
|
-
|
699
|
1,511
|
||||||||||||||||
Restricted
stock issued
|
(2
|
)
|
533
|
2,626
|
|||||||||||||||
Restricted
stock forfeited
|
(95
|
)
|
(494
|
)
|
(174
|
)
|
|||||||||||||
Stock-based
compensation expense
|
1,755
|
259
|
-
|
||||||||||||||||
Stock
grants exercised
|
87
|
591
|
2,369
|
||||||||||||||||
Tax
benefit on stock-based compensation
|
23
|
-
|
641
|
||||||||||||||||
Acceleration
of stock option vesting
|
-
|
-
|
233
|
||||||||||||||||
Reclassification
of unamortized compensation
|
(904
|
)
|
-
|
-
|
|||||||||||||||
Balance
at December 31
|
119,189
|
118,325
|
116,737
|
||||||||||||||||
Retained
earnings:
|
|||||||||||||||||||
Balance
at January 1
|
31,183
|
50,637
|
29,505
|
||||||||||||||||
Net
income (loss)
|
11,809
|
(19,454
|
)
|
21,132
|
|||||||||||||||
Balance
at December 31
|
42,992
|
31,183
|
50,637
|
||||||||||||||||
Accumulated
other
|
|||||||||||||||||||
comprehensive
income (loss):
|
|||||||||||||||||||
Balance
at January 1
|
71
|
76
|
25
|
||||||||||||||||
Reclassification
of realized (gain) loss, net of tax
|
(33
|
)
|
(49
|
)
|
21
|
||||||||||||||
Unrealized
holding gain, net of tax
|
41
|
44
|
30
|
||||||||||||||||
Balance
at December 31
|
79
|
71
|
76
|
||||||||||||||||
Unamortized
compensation costs:
|
|||||||||||||||||||
Balance
at January 1
|
(904
|
)
|
(2,063
|
)
|
(608
|
)
|
|||||||||||||
Restricted
stock issued
|
-
|
(533
|
)
|
(2,627
|
)
|
||||||||||||||
Restricted
stock forfeited
|
-
|
494
|
137
|
||||||||||||||||
Restricted
stock vested
|
-
|
1,198
|
1,035
|
||||||||||||||||
Reclassification
to additional paid-in capital
|
904
|
-
|
-
|
||||||||||||||||
Balance
at December 31
|
-
|
(904
|
)
|
(2,063
|
)
|
||||||||||||||
Total
stockholders' equity
|
149,197
|
135,610
|
165,425
|
||||||||||||||||
Comprehensive
income (loss):
|
|||||||||||||||||||
Net
income (loss)
|
$
|
11,809
|
$
|
(19,454
|
)
|
$
|
21,132
|
||||||||||||
Reclassification
of realized (gain) loss, net of tax
|
(33
|
)
|
(49
|
)
|
21
|
||||||||||||||
Unrealized
holding gain, net of tax
|
41
|
44
|
30
|
||||||||||||||||
Total
comprehensive income (loss)
|
$
|
11,817
|
$
|
(19,459
|
)
|
$
|
21,183
|
||||||||||||
The
accompanying notes are an integral part of these consolidated financial
statements
|
PDI,
INC.
|
||||||||||
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
||||||||||
(in
thousands)
|
||||||||||
For
The Years Ended December 31,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
Cash
Flows From Operating Activities
|
||||||||||
Net
income (loss) from operations
|
$
|
11,809
|
$
|
(19,454
|
)
|
$
|
21,132
|
|||
Adjustments
to reconcile net income to net cash
|
||||||||||
provided
by operating activities:
|
||||||||||
Depreciation,
amortization and accretion
|
5,764
|
5,820
|
5,916
|
|||||||
Deferred
income taxes, net
|
2,710
|
6,447
|
9,199
|
|||||||
(Recovery
of) provision for bad debt, net
|
(728
|
)
|
730
|
683
|
||||||
(Recovery
of) provision for doubtful notes, net
|
(250
|
)
|
655
|
-
|
||||||
Stock-based
compensation
|
1,660
|
1,457
|
1,232
|
|||||||
Tax
benefit from stock-based compensation
|
(23
|
)
|
-
|
-
|
||||||
Loss
on disposal of assets
|
-
|
269
|
622
|
|||||||
Asset
impairment
|
-
|
14,351
|
-
|
|||||||
Non-cash
facilities realignment
|
1,295
|
-
|
-
|
|||||||
(Gain)
loss on investment
|
-
|
(4,444
|
)
|
1,000
|
||||||
Other
changes in assets and liabilities:
|
||||||||||
Decrease
(increase) in accounts receivable
|
2,460
|
(1,229
|
)
|
15,807
|
||||||
Decrease
(increase) in unbilled costs
|
1,750
|
(2,581
|
)
|
648
|
||||||
Decrease
(increase) in income tax receivable
|
4,257
|
(6,145
|
)
|
-
|
||||||
Decrease
in inventory
|
-
|
-
|
43
|
|||||||
Decrease
(increase) in other current assets
|
336
|
448
|
(33
|
)
|
||||||
Decrease
(increase) in other long-term assets
|
185
|
218
|
(28
|
)
|
||||||
Decrease
in accounts payable
|
(1,778
|
)
|
(41
|
)
|
(3,439
|
)
|
||||
Decrease
in accrued income taxes
|
(2,286
|
)
|
(1,216
|
)
|
(3,529
|
)
|
||||
Increase
in unearned contract revenue
|
1,654
|
5,674
|
507
|
|||||||
Decrease
in accrued incentives
|
(3,170
|
)
|
(4,254
|
)
|
(4,204
|
)
|
||||
Decrease
in accrued payroll and related benefits
|
(2,234
|
)
|
(858
|
)
|
(617
|
)
|
||||
(Decrease)
increase in accrued liabilities
|
(3,969
|
)
|
2,727
|
(17,250
|
)
|
|||||
Increase
in long-term liabilities
|
243
|
4,541
|
1,293
|
|||||||
Net
cash provided by operating activities
|
19,685
|
3,115
|
28,982
|
|||||||
Cash
Flows From Investing Activities
|
||||||||||
(Purchases)
sales of short-term investments, net
|
(63,881
|
)
|
21,686
|
(27,103
|
)
|
|||||
Repayments
from (investments in) Xylos
|
250
|
100
|
(1,500
|
)
|
||||||
Purchase
of property and equipment
|
(1,770
|
)
|
(5,832
|
)
|
(8,104
|
)
|
||||
Cash
paid for acquisition, including acquisition costs
|
-
|
(1,936
|
)
|
(28,443
|
)
|
|||||
Proceeds
from sale of assets and investments
|
-
|
4,507
|
-
|
|||||||
Net
cash (used in) provided by investing activities
|
(65,401
|
)
|
18,525
|
(65,150
|
)
|
|||||
Cash
Flows From Financing Activities
|
||||||||||
Net
proceeds from exercise of stock options
|
110
|
1,291
|
3,880
|
|||||||
Cash
paid for repurchase of shares
|
-
|
(13,104
|
)
|
-
|
||||||
Net
cash provided by (used in) financing activities
|
110
|
(11,813
|
)
|
3,880
|
||||||
Net
(decrease) increase in cash and cash equivalents
|
(45,606
|
)
|
9,827
|
(32,288
|
)
|
|||||
Cash
and cash equivalents - beginning
|
90,827
|
81,000
|
113,288
|
|||||||
Cash
and cash equivalents - ending
|
$
|
45,221
|
$
|
90,827
|
$
|
81,000
|
||||
Cash
paid for interest
|
$
|
2
|
$
|
2
|
$
|
3
|
||||
Cash
paid for taxes
|
$
|
640
|
$
|
1,513
|
$
|
7,389
|
||||
The
accompanying notes are an integral part of these consolidated financial
statements
|
1.
|
Nature
of Business and Significant Accounting
Policies
|
For
the Year Ended December 31,
|
|||||||
2005
|
2004
|
||||||
Net
(loss) income, as reported
|
$
|
(19,454
|
)
|
$
|
21,132
|
||
Add:
Stock-based employee
|
|||||||
compensation
expense included
|
|||||||
in
reported net (loss) income,
|
|||||||
net
of related tax effects
|
974
|
721
|
|||||
Deduct:
Total stock-based
|
|||||||
employee
compensation expense
|
|||||||
determined
under fair value based
|
|||||||
methods
for all awards, net of
|
|||||||
related
tax effects
|
(6,670
|
)
|
(3,946
|
)
|
|||
Pro
forma net (loss) income
|
$
|
(25,150
|
)
|
$
|
17,907
|
||
(Loss)
earnings per share
|
|||||||
Basic—as
reported
|
$
|
(1.37
|
)
|
$
|
1.45
|
||
Basic—pro
forma
|
$
|
(1.77
|
)
|
$
|
1.23
|
||
Diluted—as
reported
|
$
|
(1.37
|
)
|
$
|
1.42
|
||
Diluted—pro
forma
|
$
|
(1.77
|
)
|
$
|
1.20
|
2.
|
Acquisition
|
Year
ended December 31,
|
||||
2004
|
||||
Revenue
|
$
|
358,930
|
||
Income
from continuing operations
|
22,145
|
|||
Earnings
per share
|
$
|
1.48
|
3.
|
Investments
in Marketable Securities
|
December
31,
|
December
31,
|
||||||
2006
|
2005
|
||||||
Cash/money
accounts
|
$
|
332
|
$
|
1,953
|
|||
Certificate
of deposit
|
-
|
2,131
|
|||||
Municipal
securities
|
32,843
|
2,620
|
|||||
US
Treasury obligations
|
1,499
|
987
|
|||||
Government
agency obligations
|
8,394
|
7,742
|
|||||
Other
securities
|
2,879
|
-
|
|||||
Total
|
$
|
45,947
|
$
|
15,433
|
4.
|
Property
and Equipment
|
December
31,
|
|||||||
2006
|
2005
|
||||||
Furniture
and fixtures
|
$
|
3,549
|
$
|
3,925
|
|||
Office
equipment
|
1,461
|
1,663
|
|||||
Computer
equipment
|
8,265
|
7,402
|
|||||
Computer
software
|
9,355
|
9,350
|
|||||
Leasehold
improvements
|
6,698
|
5,730
|
|||||
29,328
|
28,070
|
||||||
Less
accumulated depreciation
|
(16,519
|
)
|
(12,017
|
)
|
|||
$
|
12,809
|
$
|
16,053
|
5.
|
Goodwill
and Other Intangible
Assets
|
Marketing
|
||||
Services
|
||||
Balance
as of December 31, 2005
|
$
|
13,112
|
||
Goodwill
additions
|
500
|
|||
Balance
as of December 31, 2006
|
$
|
13,612
|
2007
|
2008
|
2009
|
2010
|
2011
|
||||
$
1,281
|
|
$
1,281
|
|
$
1,272
|
|
$
1,253
|
|
$
1,253
|
As
of December 31, 2006
|
As
of December 31, 2005
|
||||||||||||||||||
Carrying
|
Accumulated
|
Carrying
|
Accumulated
|
||||||||||||||||
Amount
|
Amortization
|
Net
|
Amount
|
Amortization
|
Net
|
||||||||||||||
Covenant
not to compete
|
$
|
140
|
$
|
65
|
$
|
75
|
$
|
1,634
|
$
|
1,491
|
$
|
143
|
|||||||
Customer
relationships
|
16,300
|
2,536
|
13,764
|
17,371
|
2,491
|
14,880
|
|||||||||||||
Corporate
tradename
|
2,500
|
389
|
2,111
|
2,652
|
370
|
2,282
|
|||||||||||||
Total
|
$
|
18,940
|
$
|
2,990
|
$
|
15,950
|
$
|
21,657
|
$
|
4,352
|
$
|
17,305
|
6.
|
Loans
and Investments in Privately-Held
Entities
|
7.
|
Retirement
Plans
|
8.
|
Deferred
Compensation Arrangements
|
9.
|
Commitments
and Contingencies
|
Less
than
|
1
to 3
|
3
to 5
|
After
|
|||||||||||||
Total
|
1
Year
|
Years
|
Years
|
5
Years
|
||||||||||||
Contractrual
obligations (1)
|
$
|
6,523
|
$
|
4,496
|
$
|
2,027
|
$
|
-
|
$
|
-
|
||||||
Operating
lease obligations
|
||||||||||||||||
Minimum
lease payments
|
30,641
|
3,100
|
6,516
|
6,462
|
14,563
|
|||||||||||
Less
minimum sublease rentals
(2)
|
(1,452
|
)
|
(401
|
)
|
(801
|
)
|
(250
|
)
|
-
|
|||||||
Net
minimum lease payments
|
29,189
|
2,699
|
5,715
|
6,212
|
14,563
|
|||||||||||
Total
|
$
|
35,712
|
$
|
7,195
|
$
|
7,742
|
$
|
6,212
|
$
|
14,563
|
(1)
|
Amounts
represent contractual obligations related to software license contracts,
IT consulting contracts and outsourcing contracts for employee benefits
administration and software system support.
|
(2)
|
On
June 21, 2005, the Company signed an agreement to sublease the first
floor
at its corporate headquarters facility in Saddle River, New Jersey.
(approximately 16,000 square feet) The sublease is for a five-year
term
commencing on July 15, 2005, and provides for approximately $2 million
in
lease payments over the five-year period.
|
10.
|
Preferred
Stock
|
11.
|
Stock-Based
Compensation
|
2006
|
2005
|
2004
|
|||
Risk-free
interest rate
|
4.81%
|
3.79%
|
3.63%
|
||
Expected
life
|
3.5
|
5
years
|
5
years
|
||
Expected
volatility
|
66.12%
|
100%
|
100%
|
Grant
|
Contractual
|
Intrinsic
|
|||||||||||
Shares
|
Price
|
Period
(in years)
|
Value
|
||||||||||
Outstanding
at January 1, 2006
|
1,381,096
|
$
|
26.20
|
6.58
|
$
|
494
|
|||||||
Granted
|
146,047
|
12.40
|
3.71
|
-
|
|||||||||
Exercised
|
(20,167
|
)
|
6.30
|
||||||||||
Forfeited
or expired
|
(490,358
|
)
|
28.64
|
||||||||||
Outstanding
at December 31, 2006
|
1,016,618
|
23.44
|
5.23
|
36
|
|||||||||
Exercisable
at December 31, 2006
|
863,160
|
$
|
25.38
|
5.31
|
$
|
36
|
Shares
|
Weighted-
Average Grant Date Fair Value
|
||||||
Nonvested
at January 1, 2006
|
53,501
|
$
|
8.26
|
||||
Granted
|
146,047
|
6.31
|
|||||
Vested
|
(29,999
|
)
|
7.59
|
||||
Forfeited
|
(19,258
|
)
|
6.18
|
||||
Nonvested
at December 31, 2006
|
150,291
|
$
|
6.76
|
Weighted-
|
Average
|
||||||||||||
Average
|
Remaining
|
Aggregate
|
|||||||||||
Grant
|
Vesting
|
Intrinsic
|
|||||||||||
Shares
|
Price
|
Period
(in years)
|
Value
|
||||||||||
Outstanding
at January 1, 2006
|
112,723
|
$
|
17.49
|
1.08
|
$
|
1,522
|
|||||||
Granted
|
155,418
|
12.31
|
1.73
|
1,806
|
|||||||||
Vested
|
(48,583
|
)
|
14.23
|
||||||||||
Forfeited
|
(22,820
|
)
|
14.38
|
||||||||||
Outstanding
at December 31, 2006
|
196,738
|
$
|
14.57
|
1.31
|
$
|
2,286
|
12.
|
Related
Party Transactions
|
13.
|
Treasury
Stock
|
Average.
Price
|
Shares
|
|||
Period
|
Per
Share
|
Purchased
|
||
September
2001
|
$
22.00
|
5,000
|
||
May
2005
|
$
12.36
|
226,900
|
||
June
2005
|
$
11.92
|
353,330
|
||
July
2005
|
$
13.77
|
315,570
|
||
August
2005
|
$
14.39
|
101,100
|
||
Total
|
$
12.90
|
1,001,900
|
14.
|
Significant
Customers
|
Years
Ended December 31,
|
||||||||||
Customer
|
2006
|
2005
|
2004
|
|||||||
A
|
$
|
68,240
|
$
|
69,452
|
$
|
76,744
|
||||
B
|
43,603
|
107,260
|
153,801
|
|||||||
C
|
-
|
48,051
|
-
|
15.
|
Performance
Based Contracts
|
16.
|
Executive
Severance
|
17.
|
Facilities
Realignment
|
Sales
|
Marketing
|
|||||||||
Services
|
Services
|
Total
|
||||||||
2005:
|
||||||||||
Facility
lease obligations
|
$
|
1,057
|
$
|
1,297
|
$
|
2,354
|
||||
Total
facility realignment charge
|
$
|
1,057
|
$
|
1,297
|
$
|
2,354
|
||||
2006:
|
||||||||||
Facility
lease obligations
|
$
|
803
|
$
|
(146
|
)
|
$
|
657
|
|||
Asset
impairments (1)
|
474
|
821
|
1,295
|
|||||||
Total
facility realignment charge
|
$
|
1,277
|
$
|
675
|
$
|
1,952
|
Balance
as of December 31, 2004
|
$
|
-
|
||
Facility
realignment charge
|
2,354
|
|||
Payments
|
(19
|
)
|
||
Balance
as of December 31, 2005
|
$
|
2,335
|
||
Accretion
|
51
|
|||
Payments
|
(680
|
)
|
||
Adjustments
|
606
|
|||
Balance
as of December 31, 2006
|
$
|
2,312
|
18.
|
Income
Taxes
|
2006
|
2005
|
2004
|
||||||||
Current:
|
||||||||||
Federal
|
$
|
(1,520
|
)
|
$
|
(5,867
|
)
|
$
|
3,320
|
||
State
|
(1,914
|
)
|
(379
|
)
|
1,904
|
|||||
Total
current
|
(3,434
|
)
|
(6,246
|
)
|
5,224
|
|||||
Federal
|
2,592
|
3,662
|
8,039
|
|||||||
State
|
118
|
2,785
|
1,160
|
|||||||
Total
deferred
|
2,710
|
6,447
|
9,199
|
|||||||
Provision
for income taxes
|
$
|
(724
|
)
|
$
|
201
|
$
|
14,423
|
2006
|
2005
|
||||||
Current
deferred tax assets (liabilities)
|
|||||||
included
in other current assets:
|
|||||||
Allowances
and reserves
|
$
|
1,580
|
$
|
2,001
|
|||
Contract
costs
|
31
|
2,394
|
|||||
Compensation
|
835
|
717
|
|||||
Valuation
allowance on deferred tax assets
|
(2,446
|
)
|
(2,402
|
)
|
|||
-
|
2,710
|
||||||
Noncurrent
deferred tax assets (liabilities)
|
|||||||
included
in other long-term assets:
|
|||||||
Property,
plant and equipment
|
(1,133
|
)
|
(1,631
|
)
|
|||
State
net operating loss carryforwards
|
2,048
|
1,955
|
|||||
State
taxes
|
1,016
|
1,731
|
|||||
Intangible
assets
|
(172
|
)
|
3,088
|
||||
Equity
investment
|
505
|
509
|
|||||
Self
insurance and other reserves
|
2,703
|
1,766
|
|||||
Other
accruals
|
(629
|
)
|
-
|
||||
Valuation
allowance on deferred tax assets
|
(4,338
|
)
|
(7,418
|
)
|
|||
-
|
-
|
||||||
Net
deferred tax asset
|
$
|
-
|
$
|
2,710
|
2006
|
2005
|
2004
|
||||||||
Federal
statutory rate
|
35.0
|
%
|
(35.0
|
%)
|
35.0
|
%
|
||||
State
income tax rate, net
|
||||||||||
of
Federal tax benefit
|
(11.0
|
%)
|
17.9
|
%
|
5.7
|
%
|
||||
Meals
and entertainment
|
0.3
|
%
|
0.7
|
%
|
0.2
|
%
|
||||
Valuation
allowance
|
(26.9
|
%)
|
18.4
|
%
|
0.9
|
%
|
||||
Tax
exempt income
|
(6.0
|
%)
|
(2.9
|
%)
|
(0.4
|
%)
|
||||
Other
|
1.8
|
%
|
2.7
|
%
|
-
|
|||||
Effective
tax rate
|
(6.8
|
%)
|
1.80
|
%
|
41.40
|
%
|
19.
|
Historical
Basic and Diluted Net (Loss)/Income per Share
|
Years
Ended December 31,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
(in
thousands)
|
(in
thousands)
|
(in
thousands)
|
||||||||
Basic
weighted average number of common shares
|
13,859
|
14,232
|
14,564
|
|||||||
Dilutive
effect of stock options, SARs, and
|
||||||||||
restricted
stock
|
135
|
-
|
329
|
|||||||
Diluted
weighted average number
|
||||||||||
of
common shares
|
13,994
|
14,232
|
14,893
|
20.
|
Discontinued
Operations
|
For
the Year Ended December 31,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
Revenue,
net
|
$
|
1,876
|
$
|
14,210
|
$
|
18,647
|
||||
Income
(loss) from discontinued
|
||||||||||
operations
before income tax
|
$
|
693
|
$
|
(8,047
|
)
|
$
|
1,112
|
|||
Income
tax expense
|
259
|
-
|
415
|
|||||||
Net
income (loss) from
|
||||||||||
discontinued
operations
|
$
|
434
|
$
|
(8,047
|
)
|
$
|
697
|
21.
|
Segment
Information
|
For
the Year Ended December 31,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
Revenue:
|
||||||||||
Sales
services
|
$
|
202,748
|
$
|
270,420
|
$
|
313,784
|
||||
Marketing
services
|
36,494
|
34,785
|
29,057
|
|||||||
PPG
|
-
|
-
|
2,956
|
|||||||
Total
|
$
|
239,242
|
$
|
305,205
|
$
|
345,797
|
||||
Operating
income (loss):
|
||||||||||
Sales
services
|
$
|
33
|
$
|
(17,386
|
)
|
$
|
32,906
|
|||
Marketing
services
|
2,798
|
(1,186
|
)
|
1,535
|
||||||
PPG
|
3,082
|
(268
|
)
|
(362
|
)
|
|||||
Total
|
$
|
5,913
|
$
|
(18,840
|
)
|
$
|
34,079
|
|||
Reconciliation
of income (loss) from operations to
|
||||||||||
income
(loss) before income taxes:
|
||||||||||
Total
income (loss) from operations
|
||||||||||
for
operating groups
|
$
|
5,913
|
$
|
(18,840
|
)
|
$
|
34,079
|
|||
Gain
(loss) on investments
|
-
|
4,444
|
(1,000
|
)
|
||||||
Interest
income, net
|
4,738
|
3,190
|
1,779
|
|||||||
Income
(loss) before income taxes
|
$
|
10,651
|
$
|
(11,206
|
)
|
$
|
34,858
|
|||
Capital
expenditures: (1)
|
||||||||||
Sales
services
|
$
|
1,508
|
$
|
2,901
|
$
|
7,645
|
||||
Marketing
services
|
262
|
2,881
|
433
|
|||||||
PPG
|
-
|
-
|
-
|
|||||||
Total
|
$
|
1,770
|
$
|
5,782
|
$
|
8,078
|
||||
Depreciation
expense: (1)
|
||||||||||
Sales
services
|
$
|
3,671
|
$
|
3,260
|
$
|
4,132
|
||||
Marketing
services
|
679
|
550
|
627
|
|||||||
PPG
|
-
|
-
|
27
|
|||||||
Total
|
$
|
4,350
|
$
|
3,810
|
$
|
4,786
|
||||
Total
assets
|
||||||||||
Sales
services
|
$
|
157,750
|
$
|
148,642
|
$
|
179,754
|
||||
Marketing
services
|
43,886
|
51,517
|
44,516
|
|||||||
PPG
|
-
|
-
|
435
|
|||||||
Total
|
$
|
201,636
|
$
|
200,159
|
$
|
224,705
|
||||
(1)
Capital expenditures and depreciation expense do not include amounts
for
discontinued operations.
|
Schedule
II
|
|||||||||||||
PDI,
INC.
|
|||||||||||||
VALUATION
AND QUALIFYING ACCOUNTS
|
|||||||||||||
YEARS
ENDED DECEMBER 31, 2004, 2005 AND 2006
|
|||||||||||||
Balance
at
|
Additions
|
(1)
|
Balance
at
|
||||||||||
Beginning
|
Charged
to
|
Deductions
|
end
|
||||||||||
Description
|
of
Period
|
Operations
|
Other
|
of
Period
|
|||||||||
2004
|
|||||||||||||
Allowance
for doubtful accounts
|
$
|
749,341
|
$
|
654,903
|
$
|
(1,330,660
|
)
|
$
|
73,584
|
||||
Allowance
for doubtful notes
|
-
|
500,000
|
-
|
500,000
|
|||||||||
Tax
valuation allowance
|
1,881,851
|
322,436
|
-
|
2,204,287
|
|||||||||
Inventory
valuation allowance
|
817,865
|
-
|
(817,865
|
)
|
-
|
||||||||
Accrued
product rebates, sales
|
|||||||||||||
discounts
and returns
|
22,810,826
|
1,676,000
|
(20,171,058
|
)
|
4,315,768
|
||||||||
2005
|
|||||||||||||
Allowance
for doubtful accounts
|
$
|
73,584
|
$
|
713,669
|
$
|
(8,847
|
)
|
$
|
778,407
|
||||
Allowance
for doubtful notes
|
500,000
|
842,378
|
(100,000
|
)
|
1,242,378
|
||||||||
Tax
valuation allowance
|
2,204,287
|
9,318,890
|
(1,703,076
|
)
|
9,820,101
|
||||||||
Accrued
product rebates, sales
|
|||||||||||||
discounts
and returns
|
4,315,768
|
31,551
|
(4,116,460
|
)
|
230,859
|
||||||||
2006
|
|||||||||||||
Allowance
for doubtful accounts
|
$
|
778,407
|
$
|
35,713
|
$
|
(778,407
|
)
|
$
|
35,713
|
||||
Allowance
for doubtful notes
|
1,242,378
|
38,051
|
(495,837
|
)
|
784,592
|
||||||||
Tax
valuation allowance
|
9,820,101
|
-
|
(3,035,884
|
)
|
6,784,217
|
||||||||
Accrued
product rebates, sales
|
|||||||||||||
discounts
and returns
|
230,859
|
-
|
-
|
230,859
|
|||||||||
(1)
Includes payments and actual write offs, as well as changes in
estimates
in the reserves and
|
|||||||||||||
the
impact of acquisitions.
|